DEVELOPING A MULTI-DIMENSIONAL STANDARD OF LEGITIMACY FOR
THE WORLD TRADE ORGANIZATION DISPUTE SETTLEMENT SYSTEM
By
Navid Rahbar Sato
Submitted to the
Faculty of the Washington College of Law
of American University
in Partial Fulfillment of the Requirements for the Degree
of Doctor of Juridical Science
In
Law
Chair:
Dean Claudio Grossman s /J.. /11 Date 2011
American University
Washington, D .C. 20016
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Box 1346 Ann Arbor, Ml 48106-1346 ©COPYRIGHT by Navid Rahbar Sato 2011 ALL RIGHTS RESERVED Dedicated to Ikuko and Bahram, my parents, for their love and support Special thanks to Amir Hossein, Franak, and Mahyar Amirsaleh 11 DEVELOPING A MULTI-DIMENSIONAL STANDARD OF LEGITIMACY FOR THE WORLD TRADE ORGANIZATION DISPUTE SETTLEMENT SYSTEM by Navid Rahbar Sato ABSTRACT The goal of this dissertation is to show how some of the problems of legitimacy faced by the WTO in the 21st century have been addressed through the increasing utilization, success, and legitimacy of its dispute settlement mechanism and how this process has resulted in what this dissertation calls: a multi-dimensional standard of legitimacy. Integral to this new standard of legitimacy is increased participation of developing countries. The dissertation analyzes the notion of legitimacy and its sources in contemporary international law and within the context of globalization. Specifically, it analyzes three perspectives of legitimacy that work in tandem: (1) source based legitimacy, (2) procedure based legitimacy, and (3) result based legitimacy. The findings of this complex model of legitimacy will be supplemented and expanded through interviews with public officials of nineteen WTO Members. The purpose of these interviews was to provide a comprehensive analysis of the notion of legitimacy that cannot readily be ascertainable through statistical data. lll ACKNOWLEDGMENTS I would like to sincerely thank my advisers Padideh Ala'i, Daniel Bradlow, David A. Gantz for their guidance, support, and encouragement. Padideh supported and guided me with her deep understanding of development of international law and evolution of international organizations. I owe a debt of gratitude to Maria J. Pereyra for providing me an opportunity to conduct research as a doctoral visiting researcher at the Economic Research and Statistics of the WTO as well as her valuable insights and comments on the research. To Yujin Kim, I wish to convey my deep appreciation and thanks for editing and discussing the dissertation, as well as for her friendship and support. I would also like to extend my gratitude to Robert Howse, George Abi-Saab, Werner Zdouc, Petros Mavroidis, Hakan Nordstrom, Hector Torres, Janos Volkai, Cherise M. Valles, Keith Rockwell, Joost Pauwelyn, Peter Van den Bossche, Hiromi Yano and Ambassador Ronald Sanorio Soto who provided me with helpful comments and insights to develop the research. iv TABLE OF CONTENTS ABSTRACT ...... ii ACKNOWLEDGEMENTS ...... iii LIST OF FIGURES ...... xii LIST OF TABLES ...... xiv LIST OF ABBREVIATIONS ...... xv 1. INTRODUCTION ...... 1 1.1 Role of the Dispute Settlement System ...... 5 1.2 Hypothesis and Research Questions ...... 7 1.3 How Can WTO Dispute Settlement System Achieve its Goal? ...... 8 1.4 Scope of Legitimacy in the Dissertation ...... 9 1.5 Methodology ...... 10 2 BACKGROUND, HISTORY, AND NOTION OF LEGITIMACY ...... 12 2.1 Emergence oflnternational Organizations in an Interconnected World ...... 12 2.1.1 Establishment of the WTO, "the Lost Pillar of the Post-World War II Economic Order," as a Response to Globalization ...... 16 2.2 Global Governance, WTO and Rise of Legitimacy Concerns ...... 19 2.2.1 Global Governance in Contemporary International Law and its Impacts on Legitimacy ...... 22 v 2.3 Historical and Theoretical Origins of the WTO Legitimacy Crisis ...... 29 2.3.1 "Club Model" of Negotiations ...... 29 2.3 .2 Was Liberalization of Trade as Beneficial to Developing Countries as Expected? ...... 32 2.3.3 Current Changes in International Law Due to Globalization and Its Impact on Legitimacy ...... 35 2.3 .3 .1 Proliferation of International Lawmakers and Changes in Addressees of International Law and Its Impacts on Legitimacy (Multilayer Governance) ...... 37 2.3.3.2 Rise ofNon-Trade Concerns within the WTO's Mandate ...... 44 2.3.3.3 Asymmetrical Institutional Structure of the WTO ...... 48 2.4 The WTO as a Global Governance Institution ...... 57 2.5 History and Notion of Legitimacy ...... 67 2.5.1 History of Legitimacy ...... 68 2.5.2 Characteristics and Definition oflegitimacy ...... 69 2.5 .2.1 Characteristics of Legitimacy ...... 70 2.5.2.1.1 Multifaceted Nature of Legitimacy and its Examination within its Context ...... 71 2.5.2.1.2 Gradual Formation of Legitimacy and its Dynamic Nature ...... 74 2.5.2.1.3 Legitimacy as a Matter of Degree ...... 75 2.5.2.2 Definition of Legitimacy in a Normative and Sociological Sense ...... 75 2.5.2.2. l Legitimacy in a Normative Sense ...... 76 2.5.2.2.2 Legitimacy in a Sociological Sense ...... 78 3 FROM ITO TO GATT TO WTO ...... 80 3.1 History of ITO/GATT/WTO: Economic and Political Context ...... 80 3.1.1 Bretton Woods Conference ...... 82 Vl 3 .1.2 Havana Charter ...... 84 3 .2 Evolution of the GATT 194 7 ...... 87 3.2.1 Purpose of the GATT 1947 ...... 87 3.2.2 Interim Commission for the International Trade Organization (ICITO) ...... 89 3.2.3 GATT Rounds ...... 90 3.2.3.1 Shift from Tariff Negotiations to Non-Tariff Negotiations ...... 92 3 .2.3 .2 Was the Uruguay Round a "Grand Bargain" for Developing Countries, LDCs, and Developed Countries? ...... 100 3.2.4 Doha Round as Doha Development Agenda ...... 102 3.2.4.1 Subjects Covered by Negotiations ...... 103 3.2.4.2 Failure ofNegotiations ...... 106 3.3 Evolution of Dispute Settlement ...... 108 3.3.1 Dispute Settlement in ITO and Havana Charter...... 108 3.3.2 The GATT 1947 Provisions of Dispute Settlement ...... 113 3.3.2.1 Chairman Rulings in 1948 ...... 114 3.3.2.2 Working Parties ...... 116 3 .3 .2.3 The Panel on Complaints ...... 117 3.3.2.4 Revival of Disputes in 1970s ...... 120 3.3.2.5 Rise of Disputes in 1980s and Creation of Office of Legal Affairs ...... 122 3.3.2.6 Uruguay Round Negotiations on Dispute Settlement ...... 125 3.3.2.6.1 Changes in the Uruguay Round ...... 126 3.3.2.6.1.1 Single Set of rules and procedures with a broader scope ...... 127 3.3.2.6.1.2 Automatic procedure for establishment of panels or the adoption of a report ...... 127 Vll 3.3.2.6.1.3 Appellate Review and Surveillance ...... 129 4 WTO DISPUTE SETTLEMENT PROCESS ...... 132 4.1 WTO Bodies Involved in the Dispute Settlement Process ...... 133 4.1. l Dispute Settlement Body (DSB) ...... 134 4.1.2 The Director-General and the WTO Secretariat...... 137 4.1.3 Panels ...... 138 4.1.3.1 Administrative and legal support to panels ...... 139 4.1.3 .2 Composition of Panels ...... 141 4.1.4 The Appellate Body ...... 143 4.1.4.1 Composition and Structure of the Appellate Body ...... 144 4.1.4.2 The Appellate Review ...... 146 4.1.4.3 Appellate Body Secretariat ...... 148 4.1.5 Arbitrators ...... 149 4.1.6 Experts ...... 149 4.2 Legal Basis of Disputes ...... 151 4.3 Stages of Dispute Settlement ...... 152 4.4 Legal Effect of Panel and the Appellate Body Rulings ...... 154 4.4. l Precedent and the Legal Status of Adopted/Unadopted Reports in Other Disputes ...... 154 4.5 Participation in dispute settlement proceedings ...... 157 4.5.l Parties and Third Parties and Principle of Confidentiality ...... 157 4.5.2 Legal Representation ...... 159 4.5.3 Amicus Curiae Submissions ...... 160 4.5.3.l Briefs Appended to Submissions of Participants ...... 163 Vlll 4.5.3.2 Briefs Submitted by a WTO Member not Party to a Dispute ...... 164 4.5.3.3 Briefs Submitted by Non-Governmental Entities ...... 165 4.6 Important Legal Issues in the WTO Dispute Settlement Proceedings ...... 165 4.6.1 Avoidance of Issues ...... 166 4.6.1.1 Judicial Economy ...... 167 4.6.1.2 Arguendo Assumption ...... 169 4.6.2 Opening Panels or Appellate Body Oral Hearing to the Public ...... 171 4.6.2. l Opening Panel Meetings to the Public ...... 173 4.6.2.2 Opening Appellate Body Meetings to the Public ...... 175 4.6.3 Scope of Appeal ...... 177 4.6.4 Completion of Legal Analysis and Remand ...... 179 4.6.4.1 Completion of Analysis by the Appellate Body ...... 180 4.6.4.2 Remand ...... 183 4.6.5 Concurring and Dissenting Opinions in Appellate Body Reports ...... 184 4.7 Obstacles to Participation in the WTO Dispute Settlement System faced by Developing Countries and LDCs ...... 185 5 LEGITIMACY IN THE WTO DISPUTE SETTLEMENT SYSTEM ...... 190 5.1 Multi-Dimensional Standard of Legitimacy ...... 192 5.1.1 Source Based Legitimacy ...... 195 5.1.1.1 Relationship between Legality and Legitimacy ...... 195 5 .1.1.2 State Consent as a Source of Legitimacy ...... 199 5 .1.1.3 Consent to Dynamic vs. Static Obligations ...... 201 5.1.1.4 Scope of Consent within the WTO ...... 203 5.1.1.4.1 Secondary Rule Making Function within the WTO ...... 203 lX 5.1.1.4.1.1 Expressed Authority for Secondary Rule Making ...... 204 5.1.1.4.1.2 Implied Authority for Secondary Rule Making ...... 207 5.1.1.4.2 Interpretative Function within the WTO ...... 209 5.1.1.4.2.1 General Council ...... 210 5 .1.1.4.2.2 Dispute Settlement System ...... 213 5.1.1.4.3 Treaty Interpretation in the WTO Dispute Settlement System ...... 215 5.1.1.4.3.1 Clarification vs Law Making ...... 218 5.1.1.4.3.2 Silence ofWTO Law and Secondary Rule Making Under the WTO Dispute Settlement System ...... 220 5.1.1.4.3.2.l Lack of Procedural Rules ...... 222 5.1.1.4.3.2.2 Absence of Substantive Rules ...... 224 5.1.1.4.3.3 Vagueness in WTO Laws and Various Stages of Interpretatio ...... 227 5.1.1.4.3.3.1 Textual Approach ...... 229 5.1.1.4.3.3.2 Contextual Approach ...... 231 5.1.1.4.3.3.3 Object and Purpose Approach ...... 233 5 .1.1.4.3 .3 .4 Subsequent Practice and Relevant Rules of International Law...... 234 5.1.1.4.3.3.5 Supplementary Means of Interpretation ...... 243 5.1.1.4.3.4 Treaty Interpretation and its Impact on Legitimacy ...... 244 5.1.1.5 Why Consent Cannot Be the Only Source of Legitimacy in the WT0 ..247 5.1.2 Procedure Based Legitimacy ...... 249 5.1.2.1 Accountability ...... 250 5.1.2.1.1 Models of Accountability in Domestic Legal Systems ...... 252 5.1.2.1.2 Models of Accountability in International Institutions ...... 255 5.1.2.1.3 Accountability in and of the WTO Dispute Settlement System ..... 259 x 5.1.2.2 Transparency ...... 263 5.1.2.2.1 Internal and External Transparency in the WTO Dispute Settlement Mechanism ...... 268 5 .1.2.2.1.1 Internal Transparency ...... 268 5. l.2.2.1.1.1 Access to Documents ...... 270 5.1.2.2.1.1.2 Enhanced Third Party Rights ...... 273 5.1.2.2.2 External Transparency ...... 275 5.1.2.3 Due Process ...... 278 5.1.2.3.1 Due Process in the WTO Dispute Settlement System ...... 279 5 .1.2.4 Expertise ...... 281 5.1.2.4.1 Rules of Conduct for Panelists, Appellate Body and Secretariat, Experts ...... 283 5.1.2.4.2 Resort to Experts in WTO Dispute Settlement ...... 286 5.1.2.4.3 Expertise and Move from Ad hoc to Permanent Panel ...... 290 5.1.2.5 Institutional Integrity ...... 291 5.1.2.5.l Neutrality ...... 291 5.1.2.5.2 Integrity and Coherency ...... 292 5.1.2.5.2.1 The Role of the Appellate Body on Coherency ...... 293 5.1.2.5.2.2 Secretariat as an Integral Part oflnstitutional Memory ...... 296 5.1.2.6 Participation ...... 298 5.1.2.6.1 Capacity to Participate in WTO Dispute Settlement System ...... 299 5.1.2.6.2 Impediment to Access to the Dispute Settlement System ...... 300 5.1.3 Result Based Legitimacy ...... 303 5 .1.4 Overall Perception of Legitimacy ...... 306 6 CONCLUSION ...... 308 xi BIBLIOGRAPHY ...... 311 Articles in Law Reviews and Other Periodicals ...... 311 Books ...... 313 Chapters in Books ...... 316 GATT Documents and Decisions ...... 322 WTO Documents ...... 323 WTO Dispute Settlement Decisions ...... 325 Treaties and Conventions ...... 329 Newspaper Articles ...... 330 Websites and Online Materials ...... 331 Other Documents ...... 334 ANNEX 1: LIST OF INTERVIEWEES ...... 336 ANNEX 2: LIST OF INTERVIEW QUESTIONS ...... 338 XU LIST OF FIGURES Figure 1: Level of Participation of Interviewees in the WTO Dispute Settlement System (August 2010) Figure 2: Growth oflnternational Organizations 1950-2007 Figure 3: Opinion of Interviewees on Conclusion of the Doha Round Figure 4: Disputes between LDCs and Developed Countries under Article XXIII of the GATT 1947 Figure 5: Adoption Process of the Findings of Panels and the AB Figure 6: Composition of Panels Figure 7: Upholding, Modification, and Reversal of Panel Decisions by the AB (AB Decisions from 1995-April 2010) Figure 8: Stages of WTO Dispute Settlement Figure 9: WTO Complaints Grouped by Income Classification Figure 10: Components of the Notion of Legitimacy Figure 11: Multi-Dimensional Standard of Legitimacy Figure 12: Overreaching in Procedural and Substantive Matters Figure 13: General Principle of International Law as Applicable Law or Interpretative Tool Figure 14: Interpretative Approaches Figure 15: One World Trust Transparency Capability Analysis of the WTO in 2006 Figure 16: Transparency in the WTO Dispute Settlement System Xlll Figure 17: AB Decisions from 1995-April 2010 Figure 18: Total Number of Complainants and Respondents by Income Classification Figure 19: Relationship between Number of Staff in Geneva and Number of Disputes as Third Party XlV LIST OF TABLES Table 1: GATT Trade Rounds Table 2: Uruguay Round Key Dates Table 3: WTO Agreements Table 4: Key Dates after Doha Round Table 5: Number of Disputes and Reports in the WTO Table 6: List of Current AB Members as of October 2010 Table 7: Participation of WTO Members in Dispute Settlement Table 8: Special and Differential Treatment in the DSU Table 9: Two General Models of Accountability for Nation-Sates Table 10: Seven Mechanisms of Accountability in World Politics Table 11: Internal Transparency in Dispute Settlement Meetings Table 12: Internal Transparency in Access to Documents Table 13: Current AB Members and their Educational Background Table 14: Former AB Members and their Educational Background xv LIST OF ABBREVIATIONS Advisory Centre on WTO Law (ACWL) Alternative Dispute Resolution (ADR) Appellate Body (AB) Bank for International Settlements (BIS) Dispute Settlement Body (DSB) Dispute Settlement Understanding (DSU) General Agreement on Trade in Services (GATS) General Agreement on Tariffs and Trade (GATT) Generalized System of Preferences (GSP) International Labor Organization (ILO) International Organization for Standardization (ISO) International Trade Organization (ITO) Least Developed Countries (LDCs) Legal Affairs Division (LAD) Non Governmental Organization (NGO) Subsidies and Countervailing Measures (SCM) Sanitary and Phytosanitary (SPS) Technical Barriers to Trade (TBT) Turtle Excluder Device (TED) Trade Policy Review Mechanism (TPRM) XVI Trade-Related Aspects of Intellectual Property Rights (TRIPS) World Trade Organization (WTO) World War II (WWII) 1 CHAPTER ONE 1. INTRODUCTION Despite the successful achievements of the World Trade Organization (WTO) in reducing tariffs and non-tariff barriers in international trade, the WTO has continued to face a legitimacy crisis. New changes in the structure of international law coupled with historical, theoretical, structural reasons pertaining to establishment and evolution of the General Agreement on Tariffs and Trade (GATT) and subsequently the WTO have raised serious concerns about the legitimacy of the WTO. Globalization has brought about with it new challenges for international organizations as their mandate expands and infringes on what has always been seen as matters of internal domestic sovereignty. 1 The rise of democratic principles has challenged the broad authority afforded to some international organizations and has called into question the accountability of those international organizations to their stakeholders. 1 Globalization stands for "a state of the world involving networks of interdependence at multicontinental distances. These networks can be linked through flows and influences of capital goods, information and ideas, people and force as well as environmentally and biologically relevant substance." See Robert 0. Keohane and Joseph S. Nye Jr. Governance in a Globalizing World, in POWER AND GOVERNANCE IN PARTIALLY GLOBALIZED WORLD, 194 (Robert 0. Keohane ed. Routledge, 2002) (Keohane and Nye, Governance in a Globalizing World); For detailed information on globalization see Chapter Two, § 2.3.3. 2 The WTO was established with legitimacy deficits rooted in its management and decision-making process and institutional structure as well as a general sense of skepticism towards the benefits of trade liberalization. For instance, the GATT negotiations - and to a degree those under the WTO - were conducted based on a "club model" behind closed doors.2 Such closed door negotiations were criticized by the public, non-governmental organizations (NGOs), and scholars. Protests against the WTO Ministerial Conference such as the Seattle protects in 1999 sent strong signals to public officials that this kind of club model negotiations "no longer represents ... a viable management structure for the international economic system."3 The club model of negotiations was under considerable criticism because of the occurrence of some significant changes at the national and international level. First, due to the increase in the volume of trade and its impact on people, the public became "more sensitive [for] further concessions."4 Second, developing countries began to ask for "more participation" and transparency in the decision-making process. 5 Third, many non- governmental entities and agents including NGOs, labor unions, business associations, business firms, as well as private citizens were impacted by decisions of international 2 See Robert 0. Keohane and Joseph S. Nye Jr. Between Centralization and Fragmentation: The Club Model ofMultilateral Cooperation and Problems ofDemocratic Legitimacy, in POWER AND GOVERNANCE IN PARTIALLY GLOBALIZED WORLD, 219-244 (Robert 0. Keohane ed. Routledge, 2002) (Keohane and Nye, The Club Model ofMultilateral Cooperation). 3 Daniel C. Esty, The World Trade Organization's Legitimacy Crisis, 1: 1 WORLD TRADE REV. 11-12 (2002) (Esty, WTO 's Legitimacy Crisis). 4 Keohane and Nye, The Club Model ofMultilateral Cooperation, 223. 3 organizations and were demanding participation in the decision-making process.6 Fourth, the rise of "democratic" principles challenged the club model negotiations, requiring participation of all stakeholders in the decision-making process.7 Finally, an increasing skepticism toward the mandate of the WTO with regards to the benefits of trade liberalization was also one of the factors undermining the legitimacy of the WTO. Trade liberalization through the WTO Agreements has not always been beneficial to developing countries as much as it has for developed countries, or at least to the extent that developing countries have expected to gain from the WT0.8 There is no doubt that linearization of trade "create[s] losers as well as winners. "9 Developing countries have increasingly expressed their frustration and dissatisfaction with "what they perceive as an imbalance in the sharing of the benefits from the Uruguay Round negotiations as well as the increasing number of complex issues under negotiation in the WT0."10 In particular, developing countries have not been satisfied that developed and industrialized countries have removed the trade barriers in the areas of agriculture and textile in equal exchange for considerable commitments developing countries have taken in areas such as intellectual property and services. 11 Meanwhile, developed countries have also been 6 Id. 224.s 7 Id. 225-226; See also Chapter Two, § 2.2. 8 Fritz Breuss, Does the 'Development Round' Foster Development?, in AT THE CROSSROADS: THE WORLD TRADING SYSTEM AND THE DOHA ROUND, 231-314 (Stefan Griller ed. Springer, 2008) (Breuss, Does the 'Development Round' Foster Development?). 9 Esty, WTO 's Legitimacy Crisis, 8. IO DOHA AND BEYOND: THE FUTURE OF THE MULTILATERAL TRADING SYSTEM vii (Mike More ed. Cambridge University Press, 2004) (More ed. DOHA AND BEYOND). 11 Id. vii-viii. 4 dissatisfied with the level of implementation of WTO obligations with regard to services and intellectual property by developing countries. If the WTO cannot deliver its mission to deliver greater economic efficiency and prosperity through economic liberalization for all Members, its institutional integrity would be jeopardized that in tum undermines the legitimacy of the system as a whole. 12 Furthermore, the divergence between developing and developed countries created because the lack of economic and "cultural affinity and understanding stands in judgment on the [WTO]" has created an asymmetrical institutional structure within the WTO. Such asymmetrical structure has negated the efficiency of the organization and has negatively impacted its legitimacy. 13 Since 1995, many changes have been made within the structure of the WTO in an effort to overcome these existing legitimacy challenges. One should keep in mind, however, that the perception of WTO Members and the public towards the WTO has been built 12 Allen Buchanan and Robert 0. Keohane, The Legitimacy ofGlobal Governance Institutions, in LEGITIMACY IN INTERNATIONAL LAW, 48-49 (Rudiger Wolfrum and Volker Rohen eds. Springer, 2008) (Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions) (expressing that ifthere would be contradictions between practice and goal of an institution, then the institution is "presumptively illegitimate." Buchanan referring to Randall Stone's research recalls the IMF's contradictory practice in 1990s. In regard to the WTO he states that "[s]imilarly ifthe WTO claims to provide the benefits of trade liberalization to all of its members, but consistently develops politics that exclude its weaker members from the benefits of liberalization, this undermines its claims to legitimacy."); See also DOUGLAS A. IRWIN, AGAINST THE TIDE: AN INTELLECTUAL HISTORY OF FREE TRADE (Princeton University Press 1996) (IRWIN, AGAINST THE TIDE) (see generally part two of the book entitled "controversies about the free trade doctrine"). 13 Esty, WTO 's Legitimacy Crisis, 12 ("[i]n the past, only the close-knit trade community united by a common vision of a world of open markets, a commitment to a well-defined set of core principles (for example, non-discrimination), and common traditions of education (particularly a belief in the centrality of economics) paid attention to the work of the WTO. Today, a broader community that does not share this cultural affinity and understanding stands in judgment on the organization. Different standards of efficacy are being applied. As a result, the WTO's marks are coming in much lower, eroding the organization's legitimacy."); For more information on the asymmetrical institutional structure of the WTO see Chapter Two, § 2.3.3.3. 5 upon these historical, theoretical, and structural factors. Such perceptions do not appear nor do they vanish overnight. Therefore, improving the legitimacy of the WTO is a long process that requires fundamental reforms in the organization. 14 In response to criticisms after the Seattle Ministerial in 1999 more attention was given to the needs of developing countries at the "Doha Development Round."15 However, one can patently observe that the complexity of the WTO mandate in the Doha Round as well as the divergence between developing and developed countries have plagued the trade negotiations in the Doha Round. As a result, the focus for the continued sustainability of the system has been shifted to the WTO dispute settlement system. 1.1 Role of the Dispute Settlement System The failure to reach a consensus on how to reform and balance the existing system through renegotiation of the WTO agreements, has shifted the spotlight to the most dynamic organ of the WTO, its dispute settlement system. The WTO's dispute settlement system established as a result of the Marrakesh Agreement, 16 constituted a substantial transformation from the previous GATT dispute settlement system. The evolution of dispute settlement from the GATT 194 7 to the WTO 14 The institutional reform taking place in the WTO is a broad topic that extends beyond the scope of this dissertation. 15 World Trade Organization, Ministerial Declaration of 14 November 2001, 'if 2, WT/MIN(Ol)/DEC/l, 41 l.L.M. 746 (2002) (stating that "[t]he majority of WTO members are developing countries. We seek to place their needs and interests at the heart of the Work Programme adopted in this Declaration."). 16 See Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S. 154 (WTO or Marrakesh Agreement). 6 signified a shift from "the hall mark of diplomacy" to a specific "legal process" and established a completely restructured judicial or quasi-judicial organ within the WTO, bringing about the most fundamental changes since the conclusion of the Uruguay Round. 17 The new changes stipulated in the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) 18 were the result of frustrations of Contracting Parties with the GA TT dispute settlement system. These frustrations essentially resulted from the absence of an appellate review mechanism, the exercise of voluntary judicial jurisdiction, the lack of established timelines to resolve the disputes, and the high possibility of blockage at the adoption and implementation stages of GATT dispute settlement. 19 The negotiators addressed many of the drawbacks of the GATT dispute settlement system during the Uruguay Round, and were able to transform the GATT dispute settlement system into a powerful legal apparatus by which WTO Members could effectively enforce their rights. The WTO dispute settlement system is granted with the authority to "clarify the existing provisions"20 of WTO Agreements and "to secure a positive solution to a dispute."21 Such authority has been expanded significantly due to the broad array of subject matters 17 Joseph H.H. Weiler, The Geology ofInternational Law: Governance, Democracy and Legitimacy, 64 ZAORV 550 (2004) (Weiler, Geology ofInternational Law); See also Robert Howse, The Most Dangerous Branch? WTO Appellate Body Jurisprudence on the Nature and Limits ofthe Judicial Power, in THE ROLE OF THE JUDGE IN INTERNATIONAL TRADE REGULATION: EXPERIENCE AND LESSONS FOR THE WTO, 11-42 (Cottier, Thomas, and Mavroidis, Petros C. eds. Ann Arbor: The University of Michigan Press, 2003). 18 Understanding on Rules and Procedures Governing the Settlement of Disputes, Apr. 15, 1994, 1869 U.N.T.S. 401 (DSU). 19 See Chapter Three, § 3.2.3. 20 DSU, Article 3:2. 21 Id. Article 3:7. 7 that have been raised in disputes22 and the quasi-automatic mechanism for adoption of reports by the Dispute Settlement Body (DSB).23 This allows the dispute settlement system to make changes within the system with less rigidity compared to other organs within the WT0.24 The dissertation examines the structure of the WTO dispute settlement system and inherent powers of panels and the Appellate Body (AB) to develop mechanisms contributing to the legitimacy of the dispute settlement system. 1.2 Hypothesis and Research Questions The dissertation aims at defining a multi-dimensional standard of legitimacy that can be utilized in WTO dispute settlement system in order to enhance its internal institutional legitimacy, and subsequently ensure more compliance with its decisions. "Internal legitimacy" in this dissertation refers to legitimacy from the point of view of principal stakeholders of the WTO dispute settlement system, i.e., WTO Members and their delegates to the organization, the WTO secretariat, panelists, arbitrators and the AB members. This dissertation attempts to answer to the following questions: 22 See generally Index ofDisputes Issues, WTO.org, http://www.wto.org/english/tratop_e/dispu_e/dispu_subjects_index_e.htm (last visited Mar. 17, 2011). 23 Since the establishment of the WTO almost 424 cases have been disputed in the dispute settlement mechanism of the WTO. See generally Chronological List ofDisputes Cases, WTO.org, http://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm (last visited Apr. 25, 2011). 24 I will discuss inherent powers of panelist and the Appellate Body (AB) members and Dispute Settlement Body (DSB) in Chapters Four and Five of the dissertation. I will, particularly, discuss the role of adopted and unadopted decisions within the WTO legal system. For more information see Chapter Four, § 4.4.1. 8 • What standard of legitimacy should be applied within the WTO dispute settlement system in order to make the dispute settlement mechanism most effective and thereby more legitimate? • How does the proposed standard help promote legitimacy in the eyes of "internal" actors? 1.3 How Can WTO Dispute Settlement System Achieve its Goal? The WTO dispute settlement system is inherited with significant authority to provide "security and predictability to the multilateral trading system."25 The dispute settlement system also serves to preserve the rights and obligations of Members and to clarify the existing provisions of the covered agreements.26 This authority that has been granted to the WTO dispute settlement system has evolved since 1995.27 The assumption is that the WTO is an organic institution that develops a life of its own over time as it addresses a variety of issues. 28 The treaty signed and consented to by the WTO Members was granted with an authority to create new rules by means of bodies and organs within the system. Of course, the institution does not have unlimited discretion to deviate from its charter. As I will explain through the proposed multi-dimensional standard of legitimacy 25 DSU, Article 3:2. 26 Id. 27 For more information see Chapter Five. 28 See Chapter two, § 2.4. 9 in the dissertation, there are principles that restrain such unlimited discretion and meanwhile have positive effects on the legitimacy of the system. After analyzing the capacity of the dispute settlement system and its limitations, the dissertation aims to examine the means available to enhance its internal legitimacy. 1.4 Scope of Legitimacy in the Dissertation This study only examines legitimacy of the WTO within the scope of its dispute settlement system by focusing on the actors and principal stakeholders of WTO dispute settlement, i.e., WTO Members and their delegates to the organization, the WTO secretariat, panelists, arbitrators and the AB members. There are other mechanisms and organs within the WTO other than the dispute settlement system that contribute to the legitimacy of the WTO. For instance WTO's Trade Policy Review Mechanism (TPRM) aims at facilitating the functions of the multilateral trading system by enhancing the transparency of WTO Members' trade policies and transparency is an integral factor of WTO legitimacy. However, due to the boundless implications that such a broad scope of legitimacy would entail, the dissertation only focuses on the notion of legitimacy in the WTO dispute settlement system. In addition, the research did not focus on external legitimacy, i.e., the attitudes of domestic governmental and non-governmental intuitions such as parliaments or academics and citizens toward the WTO in its examination of the acceptability of WTO rules and decisions. One might prudently inquire about the link between the enhanced internal legitimacy within the dispute settlement system and legitimacy of the WTO system as a whole. 10 Although these two concepts are relevant, it is not within the capacity of this dissertation to examine this relationship, or to examine the contribution of other organs within the WTO to the legitimacy of the system as a whole. 1.5 Methodology In order to measure and analyze the internal institutional legitimacy of the WTO dispute settlement system, a series of interviews was conducted with ambassadors or officials primarily responsible for settlement of WTO disputes in Geneva, as listed in Annex 1.29 Due to time limitations for conducting interviews, it was not feasible to inquire into every detailed aspect of the proposed model of legitimacy.30 Therefore, priority was given to the most important factors contributing to the multi-dimensional standard of legitimacy. The interviewees consist ofrepresentative of both developed and developing countries that are Members of the WT0.31 The interviewees were selected among countries that have been most actively involved in the WTO disputes. The interviewees include Ambassadors, head of Missions, First and Second Secretary, Counsellor, and Attache. However, due to confidentiality rules, names and ranks of interviewees cannot be disclosed.32 As of August 2010, the countries of the interviewees were involved in more 29 The views portrayed in the interviews reflect only the personal views of the interviewees and not necessarily those of their government. 30 Approximate time for each interview was 90 minutes. 31 The interviewees do not include representatives from LDCs, as LDCs have rarely been either complainants or respondents of a WTO dispute. 32 For the list of question proposed to the interviewees see Annex 2. 11 that 88% of all WTO disputes. The following Figure demonstrates the level of contribution that the countries of the interviewees had on the WTO dispute settlement system. The level of participation was highest among developing country interviewees. 600 500 400 •Developing 300 Countries Ill Developed Countries 200 100 0 As Complainant As Respondent As Third Party Figure 1: Level of Participation oflnterviewees in the WTO Dispute Settlement System (August 2010) Developing Countries: As Complainant 112 As Respondent 107 As Third Party 323 Developed Countries: As Complainant 250 As Respondent 234 As Third Party 478 Total: As Complainant 362 As Respondent 341 As Third Party 801 12 CHAPTER TWO 2 BACKGROUND, HISTORY, AND NOTION OF LEGITIMACY This Chapter examines the status of the WTO as a Global Governance Institution33 under contemporary international law by first, looking at the legitimacy crises that the WTO is facing and its theoretical, historical, and institutional roots, and second, examining the history, characteristics, and definition of "legitimacy". 2.1 Emergence of International Organizations in an Interconnected World The attack on the World Trade Center in New York on September 11, 2001 brought to light the interconnectivity and interdependence of our globalized world on a more profound scale than ever before. More recently, the global financial crisis in late 2008 - 34 or "the great trade collapse" - as well as the lingering aftermath of the crisis demonstrate our interdependence on the one hand, and the inevitability of engaging in transnational cooperation to tackle global challenges on the other. Countries today are dealing with daunting national and transnational issues such as global terrorism, climate 33 The term "Global Governance Institution" is borrowed from Allen Buchanan and Robert 0. Keohane; See Allen Buchanan and Robert 0. Keohane, The Legitimacy ofGlobal Governance Institutions. 34 See THE GREAT TRADE COLLAPSE: CAUSES, CONSEQUENCES AND PROSPECTS (Richard Baldwin ed. A VoxEU.org Publication, 2009). 13 change, and financial crises, and have come face to face with the impossibility of successfully defeating these challenges without transnational cooperation.35 One of the most common forms of transnational cooperation among countries is the establishment of international organizations. Since World War II many international organizations, including both intergovernmental and non-governmental organizations, have been established. The proliferation of international organizations, coupled with the broad scope of their mandates in dealing with global challenges and active participation by countries, has brought international organizations to the forefront of international law.36 By 2007, the number of intergovernmental organizations that fell into the category of "conventional international bodies" had reached 240. 37 35 See generally MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION: PUBLIC GOODS AND THE THEORY OF GROUPS 1 (Harvard University Press, 1971) (OLSON, THE LOGIC OF COLLECTIVE ACTION) (developing the "group theory" and arguing that "groups of individuals with common interests are expected to act on behalf of their common interests much as single individuals are often expected to act on behalf of their personal interest."). 36 See generally, JOSEE ALY AREZ, INTERNATIONAL ORGANIZATIONS AS LAW-MAKERS (Oxford University Press, 2005) (JOSEE ALVAREZ, INTERNATIONAL ORGANIZATIONS AS LAW-MAKERS). 37 YEARBOOK OF INTERNATIONAL ORGANIZATIONS: GUIDE TO GLOBAL CIVIL SOCIETY NETWORKS, VOL. FIVE 2008-09, 33 (Union oflnternational Association ed. 2008) (YEARBOOK OF INTERNATIONAL ORGANIZATIONS, VOL. FIVE) (intergovernmental organizations consist offederations of international organizations, universal membership organizations, intercontinental membership organizations, and regionally oriented membership organizations. As of 2007, 14.17% of intergovernmental organizations were universal membership organizations, 13.33% intercontinental membership organizations, and %72.08 regionally oriented membership organizations. It is notable that the number of organizations of special form, known as "unconventional international bodies," was 724). 14 ------ Growth in international organizations: 1950·2007 2.5000 "c i .l:!c 20 000 ~ f!' 0 0 15 000 ,,~ e 10 000 ~ 2 5 000 ~"~11""- ;;; Figure 2: Growth oflnternational Organizations 1950-2007 Source38 The broad-based participation of countries - developing countries and least developed countries (LDCs) in particular - has been instrumental in molding the institutional structure and decision-making process of international organizations.39 Such participation, inter alia, has provided international institutions with more power and influence in the international stage, and countries are being increasingly affected by the decisions made by international organizations. In particular, the growing participation of countries from Asia, the Americas, Europe, Africa, and Australia/Oceania in intergovernmental and non-governmental international organizations is very significant.40 38 Id 36 (see figure 1.2. l (b )). 39 See generally YEARBOOK OF INTERNATIONAL ORGANIZATIONS: GUIDE TO GLOBAL CIVIL SOCIETY NETWORKS, VOL. Two 2008-09 (Union oflntemational Association ed. 2008) (YEARBOOK OF INTERNATIONAL ORGANIZATIONS, VOL. Two). 40 See generally YEARBOOK OF INTERNATIONAL ORGANIZATIONS, VOL. FIVE, 5 (see figure 2.2.1.(a)). 15 For example, while the number of intergovernmental organizations with participation by African countries was 274 in 1960,41 this number increased to 2344 in 2007.42 Furthermore, the scope of mandates covered by international organizations has expanded, leading to more subjects and activities being regulated by international organizations. International organizations now have the authority to set rules and standards that regulate a wide range of products and services.43 Additionally, international organizations have acquired a quasi-legislative and adjudicatory function on the international stage. Such functions are exemplified by the enforcement mechanisms that a few international organizations have established for implementing their decisions. For example, member states can bring disputes to the WTO dispute settlement system or International Tribunal for the Law of the Sea to enforce international obligations that the member state believes to have been violated by other members of the organization.44 Rulemaking and adjudication of disputes are functions that have traditionally resided in the realm of nation-states. In this light, international regulatory bodies engaging in these functions have effectively established a nuanced concept of "global governance," creating a departure from the notion of governance as a function exclusively exercised by 41 YEARBOOK OF INTERNATlONAL 0RGANIZATlONS: GUIDE TO GLOBAL CIVIL SOCIETY NETWORKS, VOL. ONE 1984-85, 203 (Union oflntemational Association ed. 1984) (see table 19). 42 YEARBOOK OF INTERNATlONAL ORGANIZATlONS, VOL. FIVE, 5 (see figure 0.2.2.). 43 Id. 216-231 (see figure 4.2.1.(d) on number of international organizations by subject group: 1992-2007; The Yearbook categorizes subjects into "cosmosphere/geosphere", "biosphere", "social action (structure)," "social action (context)," "concept formation (structure)," "concept formation (context)," "innovative change (structure)," "innovative change (context)," "experiential (values)," and "modes of awareness"). 44 See Chapter Four for more details; See also United Nations Convention on the Law of the Sea, Dec. 10, 1982, 1833 U.N.T.S. 397. 16 nation states.45 Such global governance can be characterized as "the international practice of management and a new form of international legal command" as practiced by international regulatory bodies.46 One of the main features of global governance is that international regulatory bodies are not governments in the traditional sense, nor do they "attempt to perform anything approaching a full range of governmental functions."47 Rather, they regulate specific matters that used to be within the scope of nation states' sovereign authority. In essence, although such Global Governance Institutions set up rules "like governments" and "attach significant consequences to compliance or failure to comply with them," they cannot be considered to be "governments."48 2.1.1 Establishment of the WTO, "the Lost Pillar of the Post-World War II Economic Order," as a Response to Globalization On April 15, 1994, the Uruguay Round of Multilateral Trade Negotiations was concluded after eight years of negotiation, culminating in the establishment of the WTO on January 45 For detailed discussion on global governance See Chapter Two, § 2.2.1; See generally James N. Rosenau, overnance in the Twenty-first Century, 1 GLOBAL GOVERNANCE 13 (1995); See generally Keohane and Nye, Governance in a Globalizing World. 46 Weiler, Geology ofInternational Law, 550. 47 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 27. 48 Id.; See also GOVERNANCE WITHOUT GOVERNMENT: ORDER AND CHANGE IN WORLD POLITICS (James N. Rosenau, and Ernst Otto Czempiel eds. Cambridge University Press, 1992); See also Pascal Lamy, The WTO's Contribution to Global Governance, in THE WTO AND GLOBAL GOVERNANCE : FUTURE DIRECTIONS 41 (Gary P. Sampson ed. United Nations University Press, 2008) (noting that '"governance' is not 'government.' Governance is a decision-making process based on permanent negotiations, an exchange of agreements and the rule of law .... [G]overnance generates common rules, whereas government commands political will."). 17 1, 1995 as the world's leading Global Governance Institution.49 The creation of the WTO as the "lost pillar" of the post-World War II economic order after almost fifty years since the Bretton Woods Conference is considered one of the most significant developments in the international legal regime. 50 The compound structure of the WTO is the result of a massive treaty consisting of more than 27,000 pages affecting not only governments, but also individuals all over the world. The Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement) comprises the institutional framework of the organization and encompasses several multilateral and plurilateral trade agreements.51 The multilateral trade agreements included in Annexes 1, 2 and 3 are integral parts of the Marrakesh Agreement and bind all WTO member states (Members).52 Plurilateral trade agreements are listed in Annex 4 of the Marrakesh Agreement and are binding on "those Members that have accepted them."53 The broad scope of the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations in regulating international trade, the complex institutional structure of the WTO, and most importantly, the existence of a binding dispute settlement 49 See Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, Apr.15, 1994, 1867 U.N.T.S. 14 (Final Act); See Chapter Two,§ 2.4. (explaining the structure and the enforcement mechanisms of the WTO that have made the WTO a leading Global Governance Institution). 50 The other two pillars regulating international economic law established during the Bretton Woods Conference were the International Bank for Reconstruction and Development (IBRD), known today as the World Bank Group, and the International Monetary Fund (IMF). 51 See Marrakesh Agreement. 52 Id. Article 11:2. 53 Id. Article 11:3. 18 system have established the institution into one the most important, and perhaps the most effective and authoritative, international institutions in international law. The WTO's dispute settlement system, which was established through the Marrakesh Agreement, signified a substantial reform of the previous GA TT dispute settlement mechanism. The evolution of dispute settlement from the GATT 1947 to the WTO and the shift from "the hall mark of diplomacy" to a specific "legal process" which led to the establishment of a completely restructured judicial or quasi-judicial organ within the WTO is, in itself, a fascinating subject. 54 The negotiators of the Uruguay Round endeavored to bring about a change in the dispute settlement system and resolve problems and frustrations plaguing the GATT system. The DSU reflected those changes and created a dispute settlement mechanism that was exceptional in the history of international trade. 55 The frustrations essentially emanated from the power of the GATT Contracting Parties to block the dispute settlement process in establishing panels or adopting their decisions. 56 To date, the WTO has 153 Members accounting for almost 90 percent of world trade in goods, services and intellectual property. 57 Moreover, since the establishment of the 54 Weiler, Geology ofInternational Law, 550. 55 See Chapter Three,§ 3.3.2.6. for more information on the negotiation history of the WTO dispute settlement system. 56 Id. § 3.3.2. 57 WTO Annual Report 2009, WTO.org, http://www.wto.org/english/res_e/publications_e/anrep09_e.htm (last visited Mar. 17, 2011); For list of WTO Members, see Members and Observers, WTO.org, http://www. wto. orglenglish/thewto _ e/whatis _ e/tif_ e/org6 _ e .htm (last visited Mar. 17, 2011). 19 WTO, more than 420 cases have been initiated in the dispute settlement mechanism of the WT0.58 2.2 Global Governance, WTO and Rise of Legitimacy Concerns Despite the success of the WTO in reducing tariffs and non-tariff barriers to international trade, the WTO has faced serious criticism. The legitimacy concerns regarding the WTO emanate from various sources. Globalization59 and new changes in the structure of international law coupled with historical, theoretical, and structural challenges pertaining to the establishment and evolution of the GATT/WTO are among factors contributing to the WTO legitimacy crisis. 60 58 See generally Chronological List ofDisputes Cases, WTO.org, http://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm (last visited Mar. 17, 2011); See also Index ofDisputes Issues, WTO.org, http://www.wto.org/english/tratop_e/dispu_e/dispu_subjects_index_e.htm (last visited Mar. 17, 2011). 59 Some authors have used the term "globalism". In their definition, globalism includes both the concept of globalization and de-globalization. See Keohane and Nye, Governance in a Globalizing World, 194; See Jan Aart Scholte, Globalization, in ROUTLEDGE ENCYCLOPEDIA OF INTERNATIONAL POLITICAL ECONOMY: VOL. Two, 613 (R. J. Barry Jones ed. Routledge, 2001) (Scholte, Globalization) (noting that the term "globalization" was utilized for the first time in 1961 in a treatise). In the dissertation, the term "globalization" is used to refer to both notions of globalization and de-globalization. 60 In short, legitimacy is a nuanced notion referring to "justification of authority" on one hand, and the "perception of acceptability" and "a pull toward compliance" on the other. See Daniel Bodansky, The Legitimacy ofInternational Governance: A Coming Challenge for International Environmental Law?, 93 AM. J. INT'L L. 601 (1999) (Bodansky, The Legitimacy ofInternational Governance); Tullio Treves, Aspects ofLegitimacy ofDecisions ofInternational Courts and Tribunals, in LEGITIMACY IN INTERNATIONAL LAW, 169 (Rlidiger Wolfrum and Volker Rohen eds. Springer, 2008) (Treves, Aspects of Legitimacy ofDecisions ofInternational Courts and Tribunals); THOMAS M. FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 16 (Oxford University Press, 1990) (FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS); For detailed explanation of the notion of legitimacy see Chapter Two,§ 2.5.2. 20 On November 30, 1999, police sprayed tear gas, pepper spray and rubber pellets at the mob of protestors who had gathered in Seattle to protest against the WT0.61 The demonstrators were mostly members of labor unions, national and international NGOs (in particular those concerned with the environment, labor issues, and consumer protection), students, as well as anarchists protesting the third WTO Ministerial Conference. They were of the view that "the [WTO] is a handmaiden of corporate interests whose rulings undermine health, labor and environmental protections around the world."62 The major criticisms against the WTO were, inter alia, issues of legitimacy, democratic deficits, conflict of free trade with environmental and labor standards, as well as the lack of transparency within the institutional structure of the WT0.63 Developing countries in Seattle also expressed their deep discontent with the negotiations process, which was carried out behind closed doors under "club model" negotiations.64 Additionally, developing countries expressed dissatisfaction that they had not received the expected benefits of participating in the WTO, and voiced concern that the United States aimed to "use its enormous economic power to benefit Amazon.com and Boeing and the United Steelworkers, at the expense of weaker nations."65 61 Sam H. Verhovek and Steven Greenhouse, National Guard Is Called to Quell Trade-Talk Protests; Seattle Is Under Curfew After Disruptions, N.Y. TIMES, Dec. 2, 1999 at A34. 62 Id. 63 Editorial, Lessons From Seattle, WASH. POST, Dec. 1, 1999, at A42; See also Eric Stein, International Integration and Democracy: No Love at First Sight, 95 AM. J. lNT'L L. 504 (2001) (Stein, International Integration and Democracy). 64 See generally Keohane and Nye, The Club Model ofMultilateral Cooperation, 219-244. 65 David E. Sanger, The Shipwreck in Seattle, N.Y. TIMES, Dec. 5, 1999. 21 The collapse of the Seattle Ministerial Meeting sent critical "warning signals" 66 that the WTO could not provide satisfactory responses to its stakeholders - governments, communities and individuals affected by its decisions. Even before the Seattle Meeting, however, the workings of the GATT/WTO in general, and the decisions of their dispute settlement mechanisms in particular, had been brought to light in two important disputes:67 GATT panel report on US-Tuna (Mexico}6 8 and WTO dispute on US- Shrimp. 69 These disputes garnered widespread interest, particularly due to their implications for environmental disputes.70 After the 1999 Seattle protest, similar anti-globalization demonstrations took place against other international conferences for international economic integration, including the International Monetary Fund (IMF) and the World Bank in April 2000,71 the 66 John H. Jackson, International Economic Law in Times That Are Interesting, 3 J. INT'L ECON. L. 4 (2000). 67 Stein, International Integration and Democracy, 504 (emphasizing the publicity of the two disputes). 68 Report of the Panel, United States -Restrictions on Imports of Tuna (Sept. 3, 1991), GATT B.I.S.D. (35th Supp.) (1992) (The U.S. Marine Mammal Protection Act set dolphin protection standards for fishing boats catching tuna and required the US government to ban all imports of fish from any tuna exporting country that could not prove to US authorities that it had complied with the protection standards). 69 Panel Report, United States - Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R and Corr.I (Nov. 6, 1998) (as modified by AB Report WT/DS58/AB/R) (Panel Report US-Shrimp) and AB Report, United States -Import Prohibition ofCertain Shrimp and Shrimp Products, WT/DS58/AB/R (Nov. 6, 1998) (AB Report US - Shrimp). 70 Don Mayer, and David Hoch, International environmental protection and the GATT: The tuna/dolphin controversy, 31 AM. Bus. L.J. 18 8 ( 1993) (noting the systemic conflicts between free trade and environmental protection). 71 John Kifner and David E. Sanger, Financial Leaders Meet as Protests Clog Washington, N.Y. TIMES, Apr. 4, 2000, at A 1. 22 European Union's 2000 Summit Meeting in Gothenburg,72 and the 2001 Summit of the Americas in Quebec City discussing a proposed Free Trade Area of the Americas, 73 and the G-20 London summit in 2009.74 2.2.1 Global Governance in Contemporary International Law and its Impacts on Legitimacy One of the main impacts of globalization is its influence on the notion of governance and national sovereignty as a main source oflegitimacy. 75 During the Westphalian era when nation states were the sole actors of international law, the sovereignty of nation states was recognized as one of the main sources oflegitimacy. However, globalization has created additional layers of governance, which impact the sources of authority and legitimacy in contemporary international law. Therefore, it is important to analyze the impacts of globalization on the notion of governance. In general, governance refers to "the processes and institutions, both formal and informal, that guide and restrain the collective activities of a group."76 Governance at the national level differs in capacity with governance at the international stage, and one cannot expect 72 Stephan Castle, Economy Slumps, but It's a Bull Market for Protesters, N.Y. TIMES, Apr. 3, 2009, available at http://www.nytimes.com/2009/04/04/world/europe/04iht-protest.html (re-citing the significant protest of anti-globalization demonstrators in the Swedish city of Gothenburg during an E.U. summit). 73 Anthony DePalma, In the Streets, Fervor, Fears and a Gamut ofIssues, N.Y. TIMES, Apr. 22, 2001, § 1, at 14. 74 See Sarah Lyall, Critics Assail British Police for Harsh Tactics During the G-20 Summit Meeting, N.Y. TIMES, May 31, 2009, at A6. 75 See Chapter Two,§ 2.3.3. for discussion on the notion of legitimacy and changes incurred by globalization. 76 Keohane and Nye, Governance in a Globalizing World, 202. 23 to find the same structure of governance in a nation state as would be found in international law. Weiler, recognizing such difference, describes international law in "different co-existing 'command' modes ... : [i]nternational law as Transaction, international law as Community, and international law as Regulation."77 According to Weiler, a definition of governance in international law can be derived within the context of these three different types of "commands" as a concept resulting from "[coupling] the regulatory layer of treaties with the international practice of management and a new form of international legal command."78 Global governance is a complex, evolving, and "expanding" 79 concept "[referring] on the one hand to international regimes and international (interstate) organizations, and on the other hand to transnational arrangements which directly involve non-state actors in rule-setting, rule-implementation, and service provision."80 77 Weiler, Geology ofInternational Law, 552 (explaining that transactional international law, as "the predominant command mode," is "dyadic and represented best by bilateral transaction treaty."); See id. 553. (noting that in the mode of international law as community we see emergence of international organizations and "in the appropriation or definition of common assets."); See id. 556-559 (introducing the regulatory layer as "Governance without Government." [footnote omitted]); See also R. J. Barry Jones, Global Governance, in ROUTLEDGE ENCYCLOPEDIA OF INTERNATIONAL POLITICAL ECONOMY: VOL. TWO 627-630 (R. J. Barry Jones ed. Routledge, 2001) (Barry Jones, Global Governance) (regarding the "collective goods" - or as Weiler states, "common assets" - noting that "[g]overnance concerns the authoritative development and maintenance of those arrangements that ensure the provision of valued [collective goods] for any collectivity (that is, collection of affected individuals or organizations). Such collective goods are those desirable conditions that are best provided by collective efforts or indeed can only be provided effectively on such a basis."). 78 Weiler, Geology ofInternational Law, 550. 79 Daniel C. Esty, Good Governance at the Supranational Scale: Globalizing Administrative Law, 115 YALE L.J. 1495 (2006) (Esty, Good Governance at the Supranational Scale) (noting expansion of scope of supranational governance). 80 Thomas Risse, Transnational Governance and Legitimacy, in GOVERNANCE AND DEMOCRACY COMPARING NATIONAL, EUROPEAN AND INTERNATIONAL EXPERIENCES, 184 (Arthur Benz and Yannis Papadopoulos eds. Routledge, 2006); See also COMMISSION ON GLOBAL GOVERNANCE, OUR GLOBAL NEIGHBOURHOOD: THE REPORT OF THE COMMISSION ON GLOBAL GOVERNANCE 2-3 (Oxford University Press 1995) (defining global governance broadly as "the many ways individuals and institutions, public and 24 The notion of governance has evolved since the predominance of the Westphalian model of international law. Under the classical and Westphalian model of international law, nation-state governments were the sole international lawmakers. In the course of the evolution of international law and globalization, other non-state actors, i.e., NGOs, experts, private firms, and private citizens, have acquired an increasingly important role in the norm-making process. This, however, does not mean that nation states are no longer the most important norm-makers in international law. Rather, the involvement of non-governmental actors in international law as a result of globalization has "disaggregated" the role of nation states. 81 private, manage their common affairs." Moreover adding that "[a]t the global level, governance has been viewed primarily as intergovernmental relationships, but it must now be understood as also involving ... NGOs, citizens' movement, multinational corporations, and the global capital market. Interacting with these are global mass media of dramatically enlarged influence."); See A. Claire Cutler, Global Governance, in ENCYCLOPEDIA OF GLOBALIZATION, VOL. TWO, 515 (Roland Robertson and Jan Aart Scholte eds. Routledge, 2007) (Cutler, Global Governance) (explaining transition from international governance to global governance and its characteristics. "Conceived initially in efforts to regulate war, governance is totally multifaceted concern that includes a variety of economic, social, and cultural dimensions. There is increasing linkage between local and global events and conditions through the globalization of trade, production, investment, and culture, which broadens the interest in the mechanisms of global governance. Global governance continues to be bureaucratized, institutionalized, and juridified, although through a multiplicity of sites and agents. The increasing heterogeneity and pluralism of global governance also reflects a greater contestation over the purpose of governance. Civil society groups, [transnational corporations], [international organizations], and states in different levels of development have very different visions of the purposed to be served by global governance."); For more on global governance see James N. Rosenau, Governance, Order, and Change in World Politics, in GOVERNANCE WITHOUT GOVERNMENT: ORDER AND CHANGE IN WORLD POLITICS, 1-29 (James N. Rosenau and Ernst Otto Czempiel eds. 1992); James N. Rosenau, Governance in the Twenty-first Century, 1 Global Governance 13-43 (1995); See also Barry Jones, Global Governance, 628 (defining global governance as "an imperfect mosaic of unilateral, bilateral and multilateral inter-state actions and institutions, and essentially private arrangements between individuals, organizations and business enterprises."); In showing the difficulty in defining the concept of global governance, Finkelstein stated that "[g]lobal governance appears to be virtually anything." See Finkelstein, Lawrence S. What ls Global Governance?, 1 GLOBAL GOVERNANCE 368 (1995); See also Mattias Kumm, The Legitimacy ofInternational Law: A Constitutionalist Framework ofAnalysis, 15 EUR. J. INT'LL. 915 (2004) (Kumm, The Legitimacy of International Law) (explaining how international law can function as a framework for global governance). 81 ANNE-MARIE SLAUGHTER, A NEW WORLD ORDER 18 (Princeton University Press 2004) (SLAUGHTER, A NEW WORLD ORDER). 25 As noted, one should not expect the same structure of governance found within a nation- state to exist at the international level. Separation of powers, i.e., in the form of an executive, legislature, and judiciary, is not as distinct in international systems as would be expected in domestic legal systems, nor can it be. This is because separation of powers in the domestic sense is not feasible at a transnational level when "there is no power (or rather centralized power) to divide in the first place."82 To illustrate, Professor Abi Saab, in his Cours General of 1987 at the Hague Academy, 83 criticized the application of "the tripartite division" in international law based on his belief that "this division" does not exist in international law. "84 Distinguishing the notion of "power" from that of "function,"85 Abi Saab explained that "[a] legal system can only manifest itself and prove its existence by performing certain types of activities or functions. "86 In other words, because legal systems under international law are not inherently vested with "power" in the same way as domestic systems, such authority can only be recognized by virtue of the "function" that is being performed. 82 Georges Abi-Saab, The Security Council as Legislator and as Executive in Its Fight Against Terrorism and Against Proliferation of Weapons ofMass Destruction: The Question ofLegitimacy, in LEGITIMACY IN INTERNATIONAL LAW 109 (Ri.idiger Wolfrum and Volker Roben eds. Springer, 2008) (Abi-Saab, The Security Council as Legislator and as Executive); See also Alain Pellet, Legitimacy ofLegislative and Executive Actions ofInternational Institutions, in LEGITIMACY IN INTERNATIONAL LAW, 69 (Ri.idiger Wolfrum and Volker Roben eds. Springer, 2008) (Pellet, Legitimacy ofLegislative and Executive Actions ofInternational Institutions) ("at the international level, there is no separation of power"). 83 Abi-Saab, The Security Council as Legislator and as Executive, 109 (citing Recuiel des Cours, Vol. 207 (1987 VII), chap. VI-VII, pp- 127 ss.) 84 Id. 85 Id. 109-110. 26 One should keep in mind the "impermissibility of analogies to domestic laws" when analyzing notions in international law.87 Notions developed and utilized in domestic legal systems do not necessarily carry the same meaning at an international level. From a methodological point of view, therefore, an analogy of the notion of governance will inevitably be wrought with "less plausibility" and non-accuracy when transformed from a domestic to international concept. 88 One should not strive to examine the concept of global governance by seeking the same structure of governance and separation of power, i.e., legislative, executive and judiciary - or even functions - that one would expect to find in a nation state. 89 While some Global Governance Institutions "are endowed with quasi-legislative and judicial functions,"90 it is a very rare instance that an international organization has all three functions. For example, the WTO is well recognized for its strong quasi-judicial and 87 Weiler, Geology ofInternational Law, 550 (emphasizing on impermissibility of analogies to domestic law and noting that "[a]nalogies to domestic law are impermissible, though most of us are habitual sinners in this respect."). 88 See Keohane and Nye, The Club Model ofMultilateral Cooperation, 227 (stating that "domestic analogy is less plausible for global regimes" in context of democratic deficits); See also ERIKA DE WET, THE INTERNATIONAL CONSTITUTIONAL ORDER (Vossiuspers UvA, 2005) (DE WET, THE INTERNATIONAL CONSTITUTIONAL ORDER) (stating inaccuracy of assumption that "there is one national model of democratic governance which can set threshold conditions for the legitimacy of international governance"); Erika De Wet, The Legitimacy of United Nations Security Council Decisions in the Fight Against Terrorism and the Proliferation of Weapons ofMass Destruction: Some Critical Remarks, in LEGITIMACY IN INTERNATIONAL LAW, 135 (Rildiger Wolfrum and Volker Rohen eds. 2008) (De Wet, The Legitimacy of United Nations Security Council) (criticizing the use of"national democratic governance as a model for international governance"); See also Jose E. Alvarez, Multilateralism and its discontents, 11 EUR. J. INT'L L. 410 (2000) (Alvarez, Multilateralism and its discontents) (noting that "we should not fall into the opposite error of mythologizing domestic democratic governance"). 89 Abi-Saab, The Security Council as Legislator and as Executive, 111. 90 Id. 27 legislative functions, but has a markedly weak executive function. Some other organizations, on the other hand, do not have a judiciary function at all. As part of globalization, many Global Governance Institutions were established by states, the most notable of which include the United Nations Security Council, and those established after the Bretton Woods Conference such as the WTO and IMF. The Global Governance Institutions set norms at an international level and enforce them on their members.91 At times, the decisions of Global Governance Institutions may significantly restrain state sovereignty, which is the main source from which legitimacy is derived.92 Therefore, "both a change in sensibility towards the legitimation of power generally and the turn to governance of international law create a considerable normative challenge to the international legal order. "93 Such change can be attributed to the "broad mandate"94 of some Global Governance Institutions and their involvement in areas that used to be within the realm of domestic authorities such as regulation of trade, labor, and 91 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 27 (noting that "[Global Governance] institutions are like governments in that they issue rules and publicly attach significant consequences to compliance or failure to comply with them - and claim the authority to do so. Nonetheless, they are not government ...."); See also Wolfrum, Rudiger, Legitimacy in International Law from a Legal Perspective: Some Introductory Considerations LEGITIMACY IN INTERNATIONAL LAW, 1-24 (Wolfrum, Rudiger and Rohen, Volker eds. Berlin, Heidelberg, New York: Springer, 2008) (Wolfrum, Legitimacy in International Law From a Legal Perspective); For more information on governance without government, see also GOVERNANCE WITHOUT GOVERNMENT: ORDER AND CHANGE IN WORLD POLITICS (James N. Rosenau, and Ernst Otto Czempiel eds. Cambridge University Press, 1992). 92 Buchanan and Keohane, Legitimacy of Global Governance Institutions, 27-28 (explaining how, for example, the United Nations by its decisions affected East Timor or Bosnia in the 1990s or how the WTO AB "can make judgments binding on members in international law"). 93 Weiler, Geology ofInternational Law, 561 (emphasizing that "normative challenge" faces both classical and modern international legal order.); See also Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 37 (explaining possible conflict between "the right of self-determination" and decisions of Global Governance Institutions). 94 Wolfrum, Legitimacy in International Law From a Legal Perspective, 17. 28 environment, as well as their significant impact on individuals that do not participate directly in the decision-making process.95 It has become clear that even countries such as the United States, which enjoy vast global influence and resources, cannot solve certain global problems relating to climate change, terrorism, and financial crisis without international coordination and cooperation. The "group theory" developed by Mancur Olson demonstrates the efficiency of such collective action.96 Olson's group theory asserts that solving transnational challenges requires an established framework for continuous negotiation, creation of a series of positive international norms and obligations, implementation and surveillance, and an effective enforcement mechanism. Allen Buchanan further supports Olson's theory, recognizing Global Governance Institutions as an established framework for continuous negotiations which "can reduce costs, create opportunities for states and other actors to demonstrate credibility, thereby overcoming commitment problems, and provide public goods, including rule-based, peaceful resolution conflicts."97 Global challenges cannot be solved effectively without Global Governance Institutions. However, the inevitable restraints on the sovereignty of governments that are imposed by such institutions have created legitimacy concerns. 95 Id. 12. 96 OLSON, THE LOGIC OF COLLECTIVE ACTION 1. 97 Allen Buchanan and Robert 0. Keohane, The Legitimacy ofGlobal Governance Institutions, in HUMAN RIGHTS, LEGITIMACY, AND THE USE OF FORCE, 107 (Allen Buchanan ed. Oxford University Press, 2010). 29 2.3 Historical and Theoretical Origins of the WTO Legitimacy Crisis The challenges facing the legitimacy of the WTO as a Global Governance Institution stem from several historical, theoretical, and structural reasons. This section will study first, the problem with the club model of negotiations utilized after the Bretton Woods Conference and how it has been detrimental to legitimacy of the WTO. Second, the dissatisfaction of WTO Members with the trade liberalization process is examined along with the negative impact of such attitudes on legitimacy. Third, the impact of globalization on legitimacy is discussed with respect to the proliferation of international lawmakers and addressees of international law as well as the rise of non-trade concerns within the WTO's mandate. Lastly, the section examines the asymmetrical structure of the WTO and its negative impact on legitimacy of the system as a whole. 2.3.1 "Club Model,, of Negotiations The Seattle Meeting marked the first time in the history of post-World War II international economic reform that a round of trade negotiations failed because "the legitimacy of the trading system itself' was called into question.98 The rounds of negotiations under the Bretton Woods Conference, which eventually led to "the creation of the GATT, were conducted by diplomats behind closed doors "in secret"99 98 Jeffery J. Schott, The WTO After Seattle, in THE WTO AFTER SEATTLE, 5 (Jeffery J. Schott ed. Institute for International Economics, 2000). 99 See Keohane and Nye, The Club Model ofMultilateral Cooperation, 220 (stating that "[b ]eginning with the Bretton Woods [C]onference of 1944, key regimes for governance operated like clubs. Cabinet ministers or the equivalent, working in the same issue-area, initially from a relatively small number of relatively rich countries, got together to make rules. Trade ministers dominated GATT; finance ministers ran the IMF; defense and foreign ministers met at the headquarters of NATO (the North Atlantic Treaty 30 in "Green Rooms." Ioo Subsequently, the results of the secret closed-door negotiations were dispatched to national legislators and the public for approval. IOI It was the closed nature of the negotiations that made it possible for negotiators to keep "outsiders" - including the public, "protectionist interests"I 02 and other governmental officials - out of the negotiations and finalize the package deal with less hassle. 103 This feature of "the trade regime's clubbishness, low profile, and obscure working" was the reason for the success of post-war negotiations and was considered "as a virtue."Io4 Organization); central bankers at the Bank for International Settlements (BIS). They negotiated in secret, then reported their agreements to national legislatures and publics. Until recently, they were largely unchallenged.") (emphasis added). 100 John H. Jackson, The Evolution ofthe World Trading System - the Legal and Institutional Context, in THE OXFORD HANDBOOK OF INTERNATIONAL TRADE LAW, 40 (Daniel Bethlehem, Donald McRae, Rodney Neufeld and Isabelle Van Damme eds. Oxford University Press, 2009) (Jackson, The Evolution ofthe World Trading System) (noting that "[t]he so-called 'Green Room' meetings (a small conference room at the WTO headquarters, which is adjacent to the Director-General's office) were also resented as following only selected Members to participate in some crucial decisions and negotiations preparations."); See also Richard Blackhurst, Reforming WTO Decisionmaking: Lessons From Singapore and Seattle, in THE WORLD TRADE ORGANIZATION MILLENNIUM ROUND: FREER TRADE IN THE TWENTY-FIRST CENTURY, 295- 310, 296-299 (Kalus G. Deutsch and Bernhard Speyer eds. Routledge, 2001) (referring to reaction of countries left out of"Green Room" meetings and press releases issued by such countries); See also Esty, WTO 's Legitimacy Crisis, 14 (referring to exclusion of developing countries and NGOs in the WTO decision-making process and its impact on Seattle incident); See also for instance Article XXVIII of GATT 1947 (stating that "[T]he [Contracting Parties] and each [C]ontracting [P]arty concerned should arrange to conduct the negotiations and consultations with the greatest possible secrecy in order to avoid premature disclosure of details of prospective tariff changes.). 101 Keohane and Nye, The Club Model ofMultilateral Cooperation, 220 102 Esty, WTO 's Legitimacy Crisis, 11 (citing THE WORLD TRADING SYSTEM: CHALLENGES AHEAD (Jeffery J. Schott ed. Institute for International Economics, 1996) stating that "[t]he closed and secretive nature of the regime isolated - and insulated - the trade policymaking process from day-to-day politics, keeping at bay the protectionist interests that are active in many countries.") (emphasis added.); Id ("Under the Club Model, governments operating behind closed doors can cut deals to lower tariff barriers and to open markets for the benefit of the general public out of sight of rent seekers, protectionists, and other special interests.") (footnote omitted). 103 Keohane and Nye, The Club Model ofMultilateral Cooperation, 221. 104 Esty, WTO 's Legitimacy Crisis, 11. 31 Although the exclusion of stakeholders from negotiations was "a key to political efficacy"105 that proved to be an effective method of negotiation, such practice raised serious legitimacy concerns in the post-GATT world. The club model of multilateral negotiations continued throughout the existence of the GA TT including the Uruguay Round negotiations that ultimately resulted in the establishment of the WTO. By 1999 however .the dynamics had begun to change and countries excluded from "Green Room" meetings voiced grave concern regarding the lack of participation and transparency within the WTO negotiations round. 106 This change in attitude towards the club model was the result of some significant changes in domestic and international law, specifically the incredible scope and impact of the Uruguay Round negotiations. 107 These changes undermined the legitimacy of club model of negotiations. First, due to the growing impact that increased global trade volume was having on people, the public became "more sensitive for further concessions" for liberalization of trade through negotiations which were closed to 105 Keohane and Nye, The Club Model ofMultilateral Cooperation, 221 (expressing that "[p ]rotected by lack of transparency, ministers could make package deals that were difficult to disaggregate or even sometimes to understand. For instance, after the United States Congress deconstructed the trade agreements made during the Kennedy Round (1967), implementing unilateral modifications to bargains that had been reached, America's trade partners demanded modifications in internal U.S. practices as a condition for the next trade round. The political response in the United States was a 'fast-track' procedure, agreed to by Congress, that limited congressional power to pick apart agreements. In effect, Congress agreed to 'tie itself to the mast' as it sailed past specific protectionist sirens."); See also Sylvia Ostry, in describing the legitimacy and efficiency in negotiations, considers the "green rooms" to be an "essential" factor. See Sylvia Ostry, the WTO, Global Governance and Policy Options, in THE WTO AND GLOBAL GOVERNANCE: FUTURE DIRECTION, 71-72 (Sampson, Gary P. ed. Tokyo: United Nations University Press, 2008) (Ostry, the WTO, Global Governance and Policy Options). 106 Jackson, The Evolution ofthe World Trading System, 40. 107 In Chapter Two, § 2.3.3. I will explain more about the current changes in international law and its impact on the legitimacy of the WTO. 32 them. 108 Second, developing countries and LDCs emerged as the majority constituents of international organizations, and were significantly affected by the decisions of the international organizations. Therefore, developing countries and LDCs began to demand "more participation" and transparency in the decision-making process of international organizations. 109 Third, rise of international civil society, including many NGOs and "agents"110 who were impacted by decisions of international organizations and who also demanded participation in the decision-making process. 111 Fourth, the rise of "democratic" principles posed a challenge to the legitimacy of club model negotiations. 112 2.3.2 Was Liberalization of Trade as Beneficial to Developing Countries as Expected? Skepticism toward the WTO's mandate to liberalize trade also contributed to undermining the legitimacy of the WTO. Trade liberalization through the WTO Agreements has not always been as beneficial for developing countries as it has been for developed countries, or at least to the extent that developing countries expected to gain from the WTO .113 108 Keohane and Nye, The Club Model ofMultilateral Cooperation, 223. 109 Id. 110 Id. 224 (including NGOs, labor unions, business associations, business firms, and private citizens). "'Id. 112 Id. 225-226. Democratic principles, inter alai, require participation of stakeholders in decision making process. 113 Breuss, Does the 'Development Round' Foster Development?, 231-314. 33 There is no doubt that liberalization of trade "creates losers as well as winners."114 Developing countries have increasingly expressed their frustration and dissatisfaction with "what they perceive as an imbalance in the sharing of the benefits from the Uruguay Round negotiations as well as the increasing number of complex issues under negotiation in the WT0."115 Developing countries remain disgruntled at developed and industrialized countries' failure to remove trade barriers in the areas of agriculture and textiles in exchange for considerable commitments undertaken by developing countries in areas such as intellectual property and services. 116 Particularly, developing countries and LDCs have been concerned about economic obstacles to implementing WTO obligations. 117 If the WTO cannot deliver on its mission to achieve greater economic efficiency and prosperity through economic liberalization for all Members, its institutional integrity will be jeopardized, subsequently undermining the legitimacy of the system as a whole. 118 114 Esty, WTO 's Legitimacy Crisis, 8. 115 More ed. DOHA AND BEYOND vii. 116 Id vii-viii. 117 Ostry, the WTO, Global Governance and Policy Options, 59 (describing how institutional and infrastructure changes in order to comply with WTO laws create burdens for developing countries). 118 Buchanan and Keohane, Legitimacy of Global Governance Institutions, 48-49 (expressing that ifthere are contradictions between practice and goal of an institution, then institution is "presumptively illegitimate." Buchanan referring to Randall Stone's research recalls IMF's contradictory practice in 1990s. In regard to WTO he states that "Similarly if the WTO claims to provide the benefits of trade liberalization to all of its members, but consistently develops politics that exclude its weaker members from the benefits of liberalization, this undermines its claims to legitimacy."); See generally IRWIN, AGAINST THE TIDE (see generally part two of the book entitled "Controversies About the Free Trade Doctrine"); In Chapter Five, § 5.2.4. I have introduced an overall perception oflegitimacy standard that explains various historical, institutional and theoretical factors contribute to legitimacy of the WTO dispute settlement system. 34 In response to these concerns, the Doha Ministerial Declaration has focused on developing countries and paid more attention to their interests as reflected in its designation of the round as the "Doha Development Round."119 The Doha Ministerial Declaration expressly states that: Recalling the Preamble to the Marrakesh Agreement, we shall continue to make positive efforts designed to ensure that developing countries, and especially the least-developed among them, secure a share in the growth of world trade commensurate with the needs of their economic development. 120 During my interviews, I raised the question of whether membership at the WTO has been beneficial to their countries. Although the interviewees were not economists and were expressing their personal views, 100 percent of interviewees were of the view that membership to the WTO has been beneficial to the development of their countries. However, most of the interviewees emphasized that trade liberalization, per se, cannot bring development to a country. Other substantial reforms to guarantee a sound investment climate, sufficient regulatory framework, and political and economic stability are required. Put differently, they noted that trade liberalization is a tool rather than the ultimate goal itself. 119 World Trade Organization, Ministerial Declaration of 14 November 2001, if 2, WT/MIN(Ol)/DEC/1, 41 I.L.M. 746 (2002) (stating that "[t]he majority of WTO members are developing countries. We seek to place their needs and interests at the heart of the Work Programme adopted in this Declaration."). 120 Id. 35 2.3.3 Current Changes in International Law Due to Globalization and Its Impact on Legitimacy The concept of globalization is "contentious and contested."121 globalization stands for "a state of the world involving networks of interdependence at multicontinental distances. These networks can be linked through flows and influences of capital goods, information and ideas, people and force as well as environmentally and biologically relevant substance."122 The impact that globalization has had on international law in recent decades is undeniable. Globalization has caused new challenges that compel international law to change "both as an empirical social phenomenon and as a normative concept."123 While a new revolution in information technology and communication has accelerated the speed of such changes, international law has not been successful in keeping pace with current challenges. As a result, wide criticism has emerged regarding the inefficiency and 121 DEBORAH Z. CASS, THE CONSTITUTIONALIZATION OF THE WORLD TRADE ORGANIZATION: LEGITIMACY, DEMOCRACY, AND COMMUNITY IN THE INTERNATIONAL TRADING SYSTEM 61 (Oxford University Press 2005) (CASS, THE CONSTITUTIONALIZATION OF WTO) (explaining that the concept of globalization has been characterized in different contexts such as "capitalist globalization" or "contesting global governance." Citing to Held, McGrew, Goldblatt, and Perraton, he introduces three school of thoughts toward globalization: "Hyberglobalists, sceptics, and transformationalists."); Scholte, Globalization, 613 (noting that concept of globalization is "highly elusive and deeply contested."). 122 Keohane and Nye, Governance in a Globalizing World 194; Globalization has been used in different contexts: First, globalization has been considered to refer to "internationalization" or "international independence". See for example REGIONAL INTEGRATION AND DEMOCRACY: EXPANDING ON THE EUROPEAN EXPERIENCE, 5-7 (Jeffrey J. Anderson ed. Rowman & Littlefield Publishers, Inc, 1999); See also Scholte, Globalization, 613; Second, globalization has been used to explain "the emergence of a single worldwide society." See id. at 613. Third, globalization "highlights a transformation of world geography that occurs when a host of social conditions become less tiled to [territoriality]." See id. at 613-614. For definition of globalization from an economic perspective see GLOBALIZATION IN HISTORICAL PERSPECTIVE (Michael D. Bordo, Alan M. Taylor, and Jeffrey G. Williamson eds. The University of Chicago Press, 2003) (defining globalization as international integration of commodity and labor market); See also MIKE MOORE, A WORLD WITHOUT WALLS: FREEDOM, DEVELOPMENT, FREE TRADE AND GLOBAL GOVERNANCE 18-42 (Cambridge University Press, 2003) (defining globalization by what globalization is not). 123 Weiler, Geology ofInternational Law, 548 (noting that international law is not "static and has changed - both as an empirical social phenomenon and as a normative concept"). 36 inadequacy of international law in adopting new changes brought about by globalization. 124 Globalization has also strengthened the impact that information technology and communication have on public attitudes toward various global challenges. The revolution of information technology and communication brought about by globalization has facilitated the trans-boundary flow of information and has affected public perception regarding the theory of free trade. 125 Such facilitation has also significantly influenced public attitudes/perceptions toward various notions such as the impact of globalization on the welfare of people, the role of international organizations in globalization, and the legitimacy of decisions made by international organizations. 126 "Misunderstanding" and "distrust" of globalization and the WTO's function, that have been disseminated as a result of information technology and communication, can significantly impact the degree of acceptability of decisions made by the institution and negatively impact its legitimacy. 127 124 Esty, WTO 's Legitimacy Crisis, 7 (noting that "the international trading system has not adapted to a rapidly changing global scene - and now faces a serious legitimacy crisis"); See also Kumm, The Legitimacy ofInternational Law, 908, footnote 2 (categorizing critiques of international law to "critiques of the structure of legal discourse," "feminist critiques of international law," and "post-colonial critiques"). 125 See WTO Trade Policy Review Body, Overview ofDevelopments in the International Trading Environment, Annual Report by the Director-General; Part B; Shaping/actors for Trade; Looking to the Future, if 26, WT/TPR/OV/12 (Nov. 18, 2009) (describing that "[g]lobalization influences public perceptions through its effects on the distribution of income and on economic uncertainty. Changes in both of these variables may be responsible for the gradual rise in anti-trade attitudes particularly in countries where welfare programmes are weak or non-existent."). 126 Ostry, the WTO, Global Governance and Policy Options, 57 (explaining importance of information technology and communication in "penetrating public awareness"). 127 Peter Van den Bossche, and Iveta Alexovicova, Effective Global Economic Governance by the World Trade Organization, 8 J. INT'L ECON. L. 667 (2005) (summarizing comments of panelists to Sutherland report). 37 Globalization has affected the Westphalian notion of governance and sovereignty. It has also significantly expanded the scope of the mandate of international organizations and contributed to the proliferation and participation of addressees of international law, including non-state actors, on the transnational stage. Lastly, the rise of democratic norms among the international community is another consequence of globalization. 2.3.3.1 Proliferation of International Lawmakers and Changes in Addressees of International Law and Its Impacts on Legitimacy (Multilayer Governance) The Westphalian nation-state model no longer adequately represents the current structure of the international norm-setting process. 128 This is due to the developments in international law discussed above, in which states are no longer the only actors and norm- makers, but are joined by other non-state bodies in setting rules and standards. 129 The post-Westphalian era can be described as one in which the notion of the nation-state "is not disappearing, but it is disaggregating into its component institutions, which are increasingly interacting principally with their foreign counterparts across borders."130 128 Stein, International Integration and Democracy 492 (stating that "[t]he state ... has changed greatly from its original post-Westphalian form."); See also Pascal Lamy, The WTO's Contribution to Global Governance, in THE WTO AND GLOBAL GOVERNANCE: FUTURE DIRECTIONS, 40 (Gary P. Sampson ed. United Nations University Press, 2008) (Lamy, The WTO's Contribution to Global Governance) (describing that Westphalian structure is "insufficient to respond to the global challenges"). 129 Keohane and Nye, Governance in a Globalizing World, 210 (noting role of private firms, NGOs and subunits of governments along with states in the global network). 130 SLAUGHTER, A NEW WORLD ORDER 18; See also DAVID HELD, DEMOCRACY AND THE GLOBAL ORDER: FROM THE MODERN STATE TO COSMOPOLITAN GOVERNANCE 78 (Stanford University Press, 1995) (David Held lists the essential features of the Westphalian era: The world consists of, and is divided by, sovereign states which recognize no superior authority. 38 Governance in the globalizing world is a "multilevel"131 or "multilayered" concept. 132 Wessel and Wouters define "multilevel" as "a variety of forms of decision making, authority, policy making, regulation, organization, ruling, steering, etc., which are characterized by a complex interweaving of actors operating at different levels of formal jurisdictional or administrative authority, ranging from the local level, via the national level, to the macro-regional and global level."133 Cottier and Hertig, depicting multilayered governance as a "five-story house," distinguished five layers of governance which include local, sub-national, national, and in some instances, regional, and global rules. 134 The processes of law-making, the settlement of disputes and law enforcement are largely in the hands of individual states. International law is oriented to the establishment of minimal rules of coexistence; the creation of enduring relationships among states and people is an aim, but only to the extent that it allows national political objectives to be met. All states are regard as equal before the law: legal rules do not take account of asymmetries of power. Differences among states are ultimately settled by force; the principle of effective power holds away. Virtually no legal fetters exist to curb the resort to force; international legal standards afford minimal protection ....); See also Stein, International Integration and Democracy, 492 (considering state as "a privileged actor" in international law). 131 Ramses A. Wessel and Jan Wouters, The Phenomenon ofMultilevel Regulation: Interactions between Global, EU and National Regulatory Spheres, 4 INT'L ORG. L. REV. 261 (2007) (Wessel and Wouters, The Phenomenon ofMultilevel Regulation) (explaining how governance is "multilevel"). 132 Thomas Cottier, The Legitimacy of WTO, in THE LAW AND ECONOMICS OF GLOBALISATION: NEW CHALLENGES FOR A WORLD IN FLUX, 19 (Linda Yueh ed. Edward Elgar Publishing Ltd, 2009) (referring to doctrine ofMultilayered Governance). 133 Wessel and Wouters, The Phenomenon ofMultilevel Regulation, 261. 134 Thomas Cottier and Maya Hertig, The Prospects of21st Century Constitutionalism, in 7 MAx PLANCK Y.B.U.N.L. 261 (2003). 39 In addition to intergovernmental organizations, transnational entities and experts as well as NGOs have also begun engaging in the activities of setting rules, standards, and procedures that impact the rights and obligations of governments and individuals. 135 For example, the United Nations Security Council and its committees can render binding decisions that are not only enforceable against governments, but also individuals. 136 Other examples of intergovernmental organizations functioning as international lawmakers include the World Health Organization in assessing global health risk, the International Labor Organization (ILO) in setting international labor standards through the adoption of conventions and recommendations, and the World Bank in setting standards of good governance. One is not hard pressed to find other examples of transnational entities that have resulted from cooperation between NGOs and governments. Those entities often set international standards that are adopted by governments or international organizations. For example the Codex Alimentarius Commission137 sets standards in food safety, while the Internet Corporation for Assigned Names and Numbers138 creates rules regarding the assignment 135 See generally JOSEE ALVAREZ, INTERNATIONAL 0RGANIZA TIONS AS LAW-MAKERS; See also SLAUGHTER, A NEW WORLD ORDER. 136 S.C. Res. 1373, U.N. Doc. S/RES/1373 (Sept. 28, 2001) (on threats to international peace and security caused by terrorist acts). For example, pargraph l(C) of the resolution orders to "(f]reeze without delay funds and other financial assets or economic resources of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities owned or controlled directly or indirectly by such persons; and of persons and entities acting on behalf of, or at the direction of such persons and entities, including funds derived or generated from property owned or controlled directly or indirectly by such persons and associated persons and entities."). 137 Understanding the Codex Alimentarius, CODEX ALIMENT ARIUS COMMISSION, ftp://ftp.fao.org/codex/Publications/understanding/Understanding_EN.pdf (last visited Mar. 17, 2011 ). 138 About, INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS, http://www.icann.org/en/about (last visited Mar. 17, 2011 ). 40 of domain names and IP addresses. Another example is the Basel Committee on Banking Supervision, an institution comprised of central bank governors of select countries. The Basel Committee establishes broad supervisory standards and guidelines on capital adequacy, core principles for effective banking supervision, and concordat on cross border banking supervision. 139 Another NGO that has significantly impacted the creation of international standards is the International Organization for Standardization (ISO). The ISO, as the world's largest developer and publisher of international standards, has developed over 18,000 international standards that harmonize product and process rules in a variety of fields. 140 Modem international law requires a process of creating rules, standards and principles that does not necessarily follow the norm-setting patterns of the "representative democracy" that characterized classical international law. For example, rulings and recommendations of the WTO AB Secretariat after a quasi-automatic adoption of the Dispute settlement body in the WTO are enforceable. The prevailing Member can, in some instances, suspend its obligatory concessions and, for example, impact private exporters by setting a border tax on imports from the losing Member. In this respect, one 139 See About, BANK FOR INTERNATIONAL SETTLEMENT, http://www.bis.org/about/index.htm (last visited Mar. 17, 2011). 140 About ISO, INTERNATIONAL ORGANIZATION FOR STANDARDIZATION, http://www.iso.org/iso/about.htm (last visited Mar. 17, 2011); ISO Standards, INTERNATIONAL ORGANIZATION FOR STANDARDIZATION, http://www.iso.org/iso/iso_catalogue (last visited Mar. 17, 2011 ). 41 can perceive that states are not the only authoritative body that can make rules and impose them on their citizens.141 This trend of "growing internationalization of decision making" has undermined the "internal and external sovereignty" of states. 142 Proliferation of non-state actors in international norm-setting has significantly challenged the applicability of a classical "representatives democracy" in international law. Esty suggests that "the theory that a small set of trade officials and representatives - even if appointed by legitimately elected national governments - can appropriately 'represent' the diverse global public has come under strain."143 141 Wolfrum, Legitimacy in International Law From a Legal Perspective, 13 (stating "[t]hat international law increasingly limits the competences of States is particularly true for economic law, where international law increasingly prescribes to what extent national borders have to be permeable."). 142 Stein, International Integration and Democracy, 492 (noting that "the state's traditional 'external sovereignty' has been eroded by the growing internationalization of decision-making I described earlier, giving rise to new actors, including the [Intergovernmental Organizations] and even individuals and legal persons (companies) with legal rights under the new international and regional human rights systems. At the same time, the state's 'internal sovereignty' is undermined by public and private networks often extending across national frontiers."); Id. (citing Jean-Marie Guehenno, La fin de la democratie (1993) noting that "representative democracy no longer exists, that it has been replaced by the polyarchy of bureaucracy and organized interests in an administrative state, with massive official bodies, 'independent' agencies, and central banks."). 143 Esty, WTO's Legitimacy Crisis, 15 (noting that "[n]ational governments simply cannot mediate all global-scale politics .... Even duly elected national governments cannot fully represent all of the voices that should be heard in the global-scale policymaking process .... The diversity of views is simply too great. Moreover, some of the regimes of WTO members are not fully democratic. Even where elections are held, corruption and elite domination may result in less than fully representative leadership. Derivative legitimacy built on the popular sovereignty of unelected Trade Ministries in distant national governments is simply no longer adequate.") footnotes omitted; See also Daniel C. Esty, Good Governance at the World Trade Organization: Building a Foundation ofAdministrative Law, 10 J. lNT'L ECON. L. 509, 513 (2007) (Esty, Good Governance at the World Trade Organization) ("[w]henever policy-making authority is delegated to unelected officials, questions arise about whether the decision makers are tracking the needs and advancing the wishes of the public."); See also Robert Howse, Globalization, Transatlantic Regulatory Cooperation, and Democratic Values, in TRANSATLANTIC REGULATORY COOPERATION: LEGAL PROBLEMS AND POLITICAL PROSPECTS, 4 71 (George A. Bermann, Matthias Herdegen, Peter L. Lindseth. eds. Oxford University Press, 2000) (describing problem of "information asymmetries" between "democratic principals" and "direct participants in regulatory cooperation" that makes representative democracy insufficient for legitimacy of system). 42 This challenge is further exacerbated by the structure of the WTO and the adoption of international standards set by relevant international entities without the participation of those affected by such decisions. Specifically, international organizations are often endowed with the authority to adopt standards that have been developed by a non- governmental entity, which are in tum enforced on individuals without their direct or indirect participation. For example, the Preamble of the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) 144 states that: Desiring to further the use of harmonized sanitary and phytosanitary measures between Members, on the basis of international standards, guidelines and recommendations developed by the relevant international organizations, including the Codex Alimentarius Commission, the International Office of Epizootics, and the relevant international and regional organizations operating within the framework of the International Plant Protection Convention, without requiring Members to change their appropriate level of protection of human, animal or plant life or health. As exemplified in the above text, the SPS Committee operates in close coordination with the international organizations that adopt international standards. 145 WTO panels and the AB have referred to these international standards as sources that impact the obligations of WTO Members. 146 It follows therefore, that even assuming a full democracy in all Member governments, individuals are subject to standards that have been created without 144 Agreement on the Application of Sanitary and Phytosanitary Measures, Apr. 15, 1994, 1867 U.N.T.S. 493 (SPS Agreement). 145 See for example WTO, Committee on Sanitary and Phytosanitary Measures, Existing International Standards: Codex Alimentarius Commission, G/SPS/W/18 (June 16, 1995) (the Codex Alimentarius Commission provided the SPS Committee with a list of adopted standards). 146 See for example Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), Complaint by the United States, if 11.2, WT/DS26/R/USA (Feb. 13, 1998) (as modified by AB Report WT/DS26/AB/R, WT/DS48/AB/R) (Panel Report EC - Hormones (US)); AB Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R (Feb. 13, 1998) (AB Report EC - Hormones); AB Report, European Communities - Trade Description ofSardines, WT/DS23 l/AB/R (adopted Oct. 23, 2002) (AB Report EC-Sardines). 43 their participation due to the structure of the organization. It is often the case that many states that adopt such standards do not even have an assigned representative in those international institutions. 147 Historically, nation states were the only "subjects of international law."148 Thus, it was the nation states that set the norms to which they were themselves obliged. Globalization, however, has broadened the coverage of international law, and non-state actors such as individuals and corporations are increasingly becoming the addressees of rulings and decisions of Global Governance Institutions and transnational entities. 149 In line with "the capacity to bear rights and duties under the international legal system"150 that is granted to all addressees under international law, decisions of Global Governance Institutions can affect all individuals. For example, the United Nations Security Council calling on governments to work together to act against terrorism exemplifies an international organization functioning as an "international legislator."151 Additionally, 147 See generally Anne-Marie Slaughter, Agencies on the Loose?: Holding Government Networks Accountable, in TRANSATLANTIC REGULATORY COOPERATION: LEGAL PROBLEMS AND POLITICAL PROSPECTS, 521-546 (George A. Bermann, Matthias Herdegen, Peter L. Lindseth. eds. Oxford University Press, 2000) (Slaughter, Agencies on the Loose?) (depicting criticisms against accountability of "government networks" as "invisibility/lack of access, inferior decisions, and legitimacy"). 148 See generally Bin Cheng, Introduction to Subjects ofInternational Law, in INTERNATIONAL LAW: ACHIEVEMENTS AND PROSPECTS, 23-40 (Mohammed Bedjaoui ed. UNESCO and Martinus Nijhoff, 1991) (Cheng, Introduction to Subjects ofInternational Law) (definition and characteristics of"subjects of international law" or "international persons"). 149 Wolfrum, Legitimacy in International Law From a Legal Perspective, 20; See also Abi-Saab, The Security Council as Legislator and as Executive, 111 (noting how international governance regimes addresses "more or less directly, individuals within those states, and affect their daily lives as well as their rights and obligations"). 15°Cheng, Introduction to Subjects ofInternational Law, 24. 151 S.C. Res. 1373, U.N. Doc. S/RES/1373 (Sept. 28, 2001); See also Wolfrum, Legitimacy in International Law From a Legal Perspective, 15 (referring to UnitedNations Security Council as "intentional legislator"). 44 one can note how the decision of the WTO panel decision in US - Shrimp, 152 if it had not been reversed by the AB, 153 could have resulted in a requirement for all shrimp trawl vessels to use Turtle Excluder Devices (TEDs) if they wanted to import shrimp to the United States. Such lack of participation by addressees in the decision-making process naturally leads to the question of whether the classical representative theory of democracy can effectively respond to this legitimacy concern. 2.3.3.2 Rise of Non-Trade Concerns within the WTO's Mandate Globalization brings about interconnection and interdependence in our world. Dialectic interaction between trade and climate change, trade and labor standards, and trade and sustainable development has drastically increased in our globalizing world. The US Shrimp dispute in the WTO is a remarkable example showing the interconnection of trade and environment. In 1987 the United States, pursuant to the Endangered Species Act of 1973, 154 required all US shrimp trawl vessels to utilize approved TEDs to protect sea turtles during shrimp harvesting. 155 Subsequently in 1996, the scope of the ban was expanded to all countries. 156 India, Malaysia, Pakistan, and Thailand brought the dispute to the WTO, 152 AB Report US - Shrimp. 153 Panel Report US - Shrimp. 154 Endangered Species Act, 16 U.S.C. 1531. 155 AB Report US - Shrimp, ii 5. 156 Id. ii 6, 45 contending that the measure was in violation of GA TT Article XI (quantitative restrictions). The AB found that although the US regulation was related to the conservation of exhaustible natural resources, and therefore covered by the Article XX(g) exception of the GATT, the measure could not be justified under the chapeau of Article XX because the import ban was applied in an "arbitrary and unjustifiable" manner. 157 Exclusion of non-trade issues from the scope of the WTO in our globalized world is impossible. Before the establishment of the WTO, the GATT 1947 was established to lower trade barriers in goods "with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods."158 Thus, the focus of the GATT was primarily on economic and trade factors. When the WTO was established, however, Members sought to include into the mandate "sustainable development seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development."159 Article XX of the GATT 194 7 was adopted into the WTO legal regime with a prospect to include non-trade issues in the regulation of trade. Article XX provides an exception to 157 At the implementation statge, the implementation panel and the AB rulled that the United States should make serious "good faith" efforts to negotiate such an agreement. See United States - Import Prohibition ofCertain Shrimp and Shrimp Products -Recourse to Article 21.5 ofthe DSU by Malaysia, if 133, WT/DS58/AB/RW, (Nov. 21, 2001) (AB Report US-Shrimp (Article 21.5 -Malaysia)). 158 See GATT 1947, preamble. 159 See WTO Agreement (emphasis added); See also different committees such as Committee on Trade and Environment (CTE) that has been established within the WTO to deal with non-trade issues. The Committee on Trade and Environment ("regular" CTE), WTO.org, http://www.wto.org/english/tratop_ e/envir_ e/wrk_committee_ e.htm (last visited Mar. 17, 2011 ). 46 the GATT obligations if a measure is necessary to protect public morals, human or animal health, or relates to prison labor or the conservation of exhaustible natural resources. 160 160 Article XX of the GATT 1947 under the title of General Exceptions provides that: Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Contracting Party of measures: (a) necessary to protect public morals; (b) necessary to protect human, animal or plant life or health; ( c) relating to the importations or exportations of gold or silver; (d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices; ( e) relating to the products of prison labour; (f) imposed for the protection of national treasures of artistic, historic or archaeological value; (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption; (h) undertaken in pursuance of obligations under any intergovernmental commodity agreement which conforms to criteria submitted to the Contracting Parties and not disapproved by them or which is itself so submitted and not so disapproved; (i) involving restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry during periods when the domestic price of such materials is held below the world price as part of a governmental stabilization plan; Provided that such restrictions shall not operate to increase the exports of or the protection afforded to such domestic industry, and shall not depart from the provisions of this Agreement relating to non-discrimination; G) essential to the acquisition or distribution of products in general or local short supply; Provided that any such measures shall be consistent with the principle that all Contracting Parties are entitled to an equitable share of the international supply of such products, and that any such measures, which are inconsistent with the other provisions of the Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist. The Contracting Parties shall review the need for this sub-paragraph not later than 3 0 June 1960. 47 Other agreements within the WTO also recognize non-trade values as "legitimate" exceptions to WTO commitments. For example, Article 2.2 of the Technical Barrier to Trade Agreement (TBT Agreement) 161 provides a similar and non-exclusive list of non- trade exceptions that Members have recognized under various agreements. 162 Interestingly, the very effectiveness of WTO dispute settlement has in some ways negatively impacted the legitimacy of the organization. While there are many intergovernmental organizations that deal with a wide range of issues such as labor standards (International Labor Organization), international public health (World Health Organization), environment (United Nations Environment Programme), poverty alleviation (World Bank), or rural development (Afro-Asian Rural Development Organization), Members have heavily resorted to WTO dispute settlement because of its unique enforcement mechanism in terms of both the binding nature of its decisions as well as its surveillance and monitoring mechanism. Thus, compulsory jurisdiction and the binding decisions of the WTO dispute settlement system have provoked governments 161 Agreement on Technical Barriers to Trade, Apr. 15, 1994, 1867 U.N.T.S. 3. (TBT Agreement). 162 Article 2:2 ofTBT Agreement states: Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating urmecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-uses of products; See also Annex A and Article 3(3) and 5 of SPS Agreement. 48 and non-governmental entities to try to reach their non-trade goals by raising such non- trade related disputes in the WTO system. 163 The dispute settlement system of the WTO has been under significant pressure from both WTO Members and non-governmental entities. 164 Some governments are of the view that NGOs and scholars are not part of the WTO and should not be involved in decision- making and dispute settlement process. Meanwhile, NGOs and scholars criticize the WTO system, and specifically its dispute settlement, because they are excluded from the process. 2.3.3.3 Asymmetrical Institutional Structure of the WTO When the GATT 1947 was negotiated during the United Nations Conference on Trade and Employment, and finally came into force, the 23 original Contracting Parties 165 could not possibly predict that the agreement they were creating would six decades later evolve into an organization with more than 150 countries that would come to enforce trade 163 Roger B. Porter, Efficiency, Equity, and Legitimacy: The Global Trading System in the Twenty-First Century, in EFFICIENCY, EQUITY, AND LEGITIMACY: THE MULTILATERAL TRADING SYSTEM AT THE MILLENNIUM, 5 (Roger B. Porter, Pierre Sauve, Arvind Subramanian and Americo Beviglia Zampetti eds. Brookings Institution Press, 2001) (noting how WTO has become "a victim of its own success" and mentioning how non-economic objectives are being pursued in current societies). 164 See generally Bert Koenders, Enhancing the Role ofthe WTO in Global Governance, in THE WTO AND GLOBAL GOVERNANCE: FUTURE DIRECTIONS, 78-111 (Gary P. Sampson ed. United Nations University Press, 2008) (discussing how non-trade issues have been raised in WTO and examining capacity of WTO to deal with new issues). 165 The Governments of the Commonwealth of Australia, the Kingdom of Belgium, the United States of Brazil, Burma, Canada, Ceylon, the Republic of Chile, the Republic of China, the Republic of Cuba, the Czechoslovak Republic, the French Republic, India, Lebanon, the Grand-Duchy of Luxemburg, the Kingdom of the Netherlands, New Zealand, the Kingdom of Norway, Pakistan, Southern Rhodesia, Syria, the Union of South Africa, the United Kingdom of Great Britain and Northern Ireland, and the United States of America. See preamble ofGATT 1947. 49 obligations through one of the most unique and powerful dispute settlement mechanisms in the history of trade. Ostry has thoughtfully described the increase in number of WTO Members and their divergent expectations: The "bicycle theory of trade liberalization . . . is a metaphor based on the past. The cyclist was the US and, perhaps, a bicycle built for two could accommodate the EU on the back seat. The WTO today, is like a crowded bus full of noisy passengers who can't (or won't) agree on the instructions for the poor, beleaguered driver."166 The diplomatic branch of the WTO that is in charge of conducting negotiation rounds is the main mechanism for setting new norms in the WTO. In principle, the adjudicatory branch's role is to clarify existing rules negotiated by the diplomatic branch. Since the conclusion of Uruguay Round, however, the diplomatic branch of the WTO has been mired in a deadlock over the Doha Development Round. In contrast, the adjudicatory organ of the WTO has continued to evolve since the establishment of the WTO. As a result, the dispute settlement system has become the most dynamic organ within the WTO system, hearing more than 410 cases since its inception in 1995. The development of the dispute settlement mechanism stands in stark contrast with the current state of stagnation that has plagued the political decision-making branch of the WTO since after the Uruguay Round. Such imbalance between the legal and diplomatic branches of the WTO is among factors that have undermined the legitimacy of the WTO. 167 As 166 Sylvia Ostry, The Uruguay Round North-South Grand Bargain: Implications for Future Negotiations, in THE POLITICAL ECONOMY OF INTERNATIONAL TRADE LAW: ESSAYS IN HONOR OF ROBERT E. HUDEC 299- 300 (Daniel L. M. Kennedy and James D. Southwick eds. Cambridge University Press, 2002) (Ostry, The Uruguay Round North-South Grand Bargain). 167 John H. Jackson, The Future Scope of WTO - Issues as seen in the Sutherland Report, http://www.rieti.go.jp/en/events/bbl/06032301.html (last visited Mar. 17, 2011) (noting the tension between judicial and political braches of the WTO); See also Kamala Dawar and Peter Holmes, Negotiation Or Litigation? The Curiously Evolving Governance ofthe WTO, in THE LAW AND ECONOMICS OF 50 expressed by Cass, "the relationship between law and politics in the WTO is awry and there is no self-correcting political mechanism to act as a counterweight to judicial activity."168 As a result of this imbalance between the judicial and political branches, WTO Members that have not been able to reach their goals through a diplomatic process have attempted to take advantage of the judicial process for advancing their purposes. Such approach has only widened the gap between the two branches. Moreover, the imbalance in the political organ of the WTO per se is an important factor contributing to the legitimacy deficit of the organization. Although the consensus rule and one-country-one-vote principle are often followed in the decision-making process of the WTO, inequality and disparity in economic and political power between WTO Members have had a significant impact on the legitimacy of the organization. Over 75 percent of WTO Members are developing countries, economies in transition, and least developed countries (LDCs). 169 These countries have levels of development and expectations from the multilateral trading system that are not only different from developed countries, but differ amongst themselves as well. Due to various problems arising from such disparities, the developing world has been unable to achieve the development objectives that they expected from the Uruguay Round Negotiations. 170 GLOBALISATION: NEW CHALLENGES FOR A WORLD IN FLUX 93-117 (Linda Yueh ed. Edward Elgar Publishing Ltd, 2009). 168 CASS, THE CONSTITUTIONALIZATION OF WTO 185. 169 See WTO Annual Report 2010, WTO.org, http://www.wto.org/english/res _ e/publications_e/anrep 10 _ e.htm (last visited Mar. 17, 2011 ). 170 In Chapter Two, § 2.3.2. I will discuss the dissatisfaction of developing countries and least developed countries with the results of the Uruguay Rounds. 51 Such issues pertaining to whether the WTO is a tool for trade liberalization or a tool for development remain a principal concern of many developing countries. Historically, the GATT 1947 was created to lower trade barriers. Although the Preamble notes that the Contracting Parties recognize "that their relations in the field of trade and economic [endeavor] should be conducted with a view to raising standards of living, [and] ensuring full employment," there was no direct emphasis on the notion of non- economic development. When the WTO was established under the Uruguay Round, the same vagueness was inherited. The concept of development was not at the top of the list of priorities compared to liberalization of trade in goods, services and intellectual property. Finally, in the Doha Round negotiations, many developing countries insisted on placing "sustainable development" in the Doha Ministerial Declaration. As a result, Paragraph 6 of the Declaration "strongly reaffirm[s] [WTO Members"] commitment to the objective of sustainable development, as stated in the Preamble to the Marrakesh Agreement."171 The Declaration further emphasized that WTO Members were "convinced that the aims of upholding and safeguarding an open and non-discriminatory multilateral trading system, and acting for the protection of the environment and the promotion of sustainable development can and must be mutually supportive."172 Another notable win for the development agenda was the creation of the Committee on Trade and Development and the Committee on Trade and Environment "as a forum to identify and 171 World Trade Organization, Ministerial Declaration of 14 November 2001, WT/MIN(Ol)/DEC/1, 41 I.L.M. 746 (2002), if 6. m Id. 52 debate developmental and environmental aspects of the negotiations, in order to help achieve the objective of having sustainable development appropriately reflected."173 Some developing countries want to see the WTO used as a development tool while others believe that the purposes of development would be better served by the WTO adhering to its trade liberalization agenda. The perception that the liberalization of trade is both a necessary and sufficient requirement of development, however, has not been a successful approach to achieving development. WTO Director General Pascal Lamy emphasizes that "trade liberalization and the overall [g]lobalization are good and necessary for universal sustainable development and the eradication of poverty but they are not sufficient."174 Countries should take other necessary steps in order to reap the full benefits of trade liberalization. Lamy is of a view that "[s ]uch trade liberalization policies must be accompanied with programmes that take into account the victims of trade opening. If one wants to prioritize development, relative weight has to be given to economic liberalization, international official aid, and the finalizing of multilateral rules."175 This divergence has created some tension between WTO Members in terms of what to expect from the WTO. Some WTO Members expect accession to the WTO to bring development to their countries, a view that impacts their expectation regarding what they can gain from the organization both in terms of trade negotiations and dispute settlement. 173 Id. if 51. 174 Pascal Lamy, Towards global governance? available at http://www.wto.org/english/news_e/sppl_e/sppl12_e.htm (last visited Mar. 17, 2011). 175 Id. 53 For instance, if a panel's conclusions and recommendations err on the side of trade liberalization in shutting down a program protecting a domestic industry that is vital for the development of that country, the losing WTO Member is led to question the legitimacy of the institution as a whole. Furthermore, the nature of obligations under the WTO legal regime has "shifted from the GATT model of negative regulation - what governments must not do - to positive regulations - what governments must do."176 This transformation has been costly for developing countries and LDCs. Implementation of positive obligations under the WTO "would require a major institutional upgrading and change in the infrastructure of most Southern countries. Such changes take time and cost money."177 Furthermore, without the required changes, developing countries and LDCs would not be able to obtain the benefits they had expected to gain by acceding to the organization. This matter also contributes to the division between developed and developing countries in WTO. As illustrated in Esty's observation that today's trade community which lacks "cultural affinity and understanding stands in judgment on the [WTO]," a deviation from the shared values of traditional "close-knit trade communit[ies]" has also negatively 176 Sylvia Ostry, World Trade Organization: Institutional Design for Better Governance in Efficiency, Equity, and Legitimacy: The Multilateral Trading System At the Millennium, 363 (Roger B. Porter, Pierre Sauve, Arvind Subramanian and Americo Beviglia Zampetti eds. Brookings Institution Press, 2001 ). 177 Ostry, the WTO, Global Governance and Policy Options, 59; See also Sylvia Ostry, The WTO: Post Seattle and Chinese Accession, in CHINA AND THE LONG MARCH TO GLOBAL TRADE: THE ACCESSION OF CHINA TO THE WORLD TRADE ORGANIZATION 11 (Alan S. Alexandroff, Sylvia Ostry, and Rafael Gomez eds. Routledge, 2003). 54 impacted the legitimacy of the organization by wedging a divide between developed and developing countries. 178 This divide is further exacerbated by the imbalance created by what some scholars consider a "bum deal" that some southern hemisphere countries ultimately ended up with. 179 The single undertaking nature of accession to the WTO further contributed to the imbalance. Weiler stresses that "[i]t is the imbalance between the overall normative, organizational and administrative umbrella provided by the [s]ingle WTO [u]ndertaking accepted by all Members, developed and developing, which extends to, legitimates with the aura of multilateralism, and enforces a series of often mean spirited, ungenerous package of bilateral tariff agreements."180 Moreover, democratic deficits in the system and lack of political accountability in the structure of the WTO are among the factors that have impacted its legitimacy. 181 Due to globalization, many matters that used to be in the realm of national sovereignty are now 178 Esty, WTO's Legitimacy Crisis, 1: 1 World Trade Review 12 (2002) (noting that "[i]n the past, only the close-knit trade community united by a common vision of a world of open markets, a commitment to a well-defined set of core principles (for example, non-discrimination), and common traditions of education (particularly a belief in the centrality of economics) paid attention to the work of the WTO. Today, a broader community that does not share this cultural affinity and understanding stands in judgment on the organization. Different standards of efficacy are being applied. As a result, the WTO's marks are coming in much lower, eroding the organization's legitimacy."). 179 See generally Ostry, The Uruguay Round North-South Grand Bargain, 285-300; See also Ostry, the WTO, Global Governance and Policy Options, 58-59 (describing how "Grand Bargain turned out to be a Bum Deal" for developing countries after conclusion of Uruguay Round and how developed countries did not open their market to Agriculture as expected). 180 Weiler, Geology ofInternational Law, 545-555. 181 Howse, Robert, How to Begin to Think About the 'Democratic Deficit' at the WTO, in INTERNATIONAL ECONOMIC GOVERNANCE AND NON-ECONOMIC CONCERNS, 57-76 (Griller, Stefan ed. New York: Springer, 2003). 55 regulated by international organizations and transnational entities. 182 This process of "denationalization"183 in favor of "internationalization" has caused some legitimacy concerns. Stein points out that "[t]he 'de-parliamentization of political processes in the member states combined with lack of democracy in [inter-governmental organizations]' law lawmaking is aid to accentuate the progressive democracy-legitimacy deficit."184 Lack of political accountability is one of the major critiques against the structure of international organizations in general, and the WTO in particular. In the framework of a domestic legal system, assuming that a government is elected democratically, public officials are accountable to their constituents. Keohane and Nye are of the view that "[i]nternational institutions lack the essential feature that make democracy possible and that, in democracies, facilitates accountability: an acknowledged public operating within a political community in which there is a general consensus on what makes public decisions legitimate."185 As the decision-makers in the WTO are not elected, the "electoral accountability" theory cannot sufficiently respond to the political accountability deficits. 186 The issue of political accountability becomes even more complex when considering the "uncertainty" and "disagreement" that exist regarding the role and function of international 182 Wolfrum, Legitimacy in International Law From a Legal Perspective, 12 (discussing how international law now regulates matters relevant to human rights, environmental law and economic law). 183 Kumm, The Legitimacy ofInternational Law, 913. 184 Stein, International Integration and Democracy, 493 (footnote omitted). 185 Keohane and Nye, The Club Model ofMultilateral Cooperation, 234. 186 Id. 235. 56 organizations. 187 To clear up such discord regarding its role and function, it is necessary to determine whether or not the WTO is a 100 percent Member-driven organization. The WTO has been criticized for lack of both internal and external transparency in its political and adjudicative bodies. As previously explained, the old GATT system proceeded under the "club model" and closed-door negotiations. 188 Although such secrecy and non-transparency in the negotiation process was considered "a key to political efficacy,"189 it left many Contracting Parties excluded from the decision-making process. This approach continued to an extent in the current WTO system. However, during the Seattle and Cancun Ministerial Conference, many WTO Members voiced their dissatisfaction with such a diplomatic model. After the Cancun Ministerial Conference, many actions were taken by the WTO to overcome the transparency problems, which resulted in enhanced transparency in many areas of the WTO. Different WTO Members established different negotiations groups and took measures to increase participation in the political decision-making process. 190 However, the negative perception more or less persists, and continues to impact the legitimacy of the system as a whole. 187 Wolfrum, Legitimacy in International Law From a Legal Perspective, 46 (discussing how international law now regulates matters relevant to human rights, environmental law and economic law). 188 See Chapter Two,§ 2.3.1. 189 Keohane and Nye, Governance in a Globalizing World, 221. 19°For more information about the participation of WTO Members in various negotiation groups see Groups in Negotiations, WTO.org, http://www.wto.org/english/tratop_ e/dda_ e/negotiating_groups _ e.htm (last visited Mar. 17, 2011). 57 2.4 The WTO as a Global Governance Institution The WTO, as part of the global governance system, plays an important role in creating and shaping the structure of global governance. Even as some scholars have noted, the WTO has become one the most powerful and "dominant"191 institutions in the world because of its institutional structure, i.e. its norm-setting and dispute settlement mechanisms. 192 First, the single under taking method of acceding to the WTO Agreements has created profound "authorities and precise rules"193 in the regulation of goods, services, and intellectual property for WTO Members. Furthermore, a "relatively good record of eventual compliance with those rules by govemments"194 has increased the authoritativeness of the institution. More importantly, the enforcement mechanism of the WTO through its dispute settlement system has conferred the institution with significant authority as a Global Governance Institution. 195 Compulsory jurisdiction of the dispute settlement system, quasi-automatic adoption of rulings and recommendation of WTO tribunals, and its enforcement mechanism have made the WTO one of the most effective 191 Andrew T. Guzman, Global Governance and the WTO, 45 HARV. INT'L L.J. 303 (2004). 192 Keohane and Nye, The Club Model ofMultilateral Cooperation, 228 (comparing "the WTO-centered trade regime" with other "international regimes" such as labor and environment. The authors discusses that the WTO's "weak bureaucracy" comparing to other international institutions is one of the reasons for its "relative strength"); See also Id. 227 ("[a]mong international organizations, the WTO stands out as having quite authoritative and precise rules, and a relatively good record of eventual compliance with those rules by governments."). 193 Id. 227. 194 Id. 195 Id. 228 (noting that "[t]he success of the WTO is not due to its organizational strength but to the fact that its dispute settlement procedures provide space for both diplomatic settlements and national democratic processes while still protecting the system of world trade."). 58 and most powerful international organizations in the world. It is these characteristics that have led many scholars to characterize the WTO as a Global Governance Institution based on its institutional structure, function, and role at a transnational level. 196 In order to examine the status of the WTO as a Global Governance Institution, it is necessary to analyze the fundamental issue of whether the global governance characteristic of the WTO contradicts the "Member-driven" feature of the organization. Put differently, as Hudec noted, we must ponder the question of "whether the WTO really does exercise power of its own - that is, power that is outside the control of the governments upon which it is employed."197 If the answer is positive, the next analytical step is to examine the scope of the WTO's governance and analyze whether there is paradox between the governance of the organization and its Members. The GATT was established as a forum for removing trade barriers through negotiations. Contracting Parties were the only actors involved in creating rights and obligations under the trade regime, which led to the consideration of the GATT as a Member-driven process. When the WTO was established in 1995, this perception that the WTO is a fully 196 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 27 (stating that "[g]lobal governance institutions cover a diversity of multilateral entities, including the World Trade Organization (WTO), the International Monetary Fund (IMF), various environmental institutions ... , judges' and regulators' networks, the UN Security Council, and the new International Criminal Court (ICC)."); See also Peter Sutherland, John Sewell and David Weiner, Challenges Facing the WTO and Policies to Address Global Governance, in THE ROLE OF THE WORLD TRADE ORGANIZATION IN GLOBAL GOVERNANCE, 81 (Gary P. Sampson ed. The United Nations University Press, 2001) (introducing WTO as "the most important tool of global economic management and development"); Ngaire Woods, Global Governance and the Role ofInstitutions, in GOVERNING GLOBALIZATION: POWER, AUTHORITY AND GLOBAL GOVERNANCE, 25-45 (David Held and Anthony McGrew eds. Polity, 2002). 197 Robert E. Hudec, Comment, in EFFICIENCY, EQUITY, AND LEGITIMACY: THE MULTILATERAL TRADING SYSTEM AT THE MILLENNIUM 298 (Pierre Sauve Roger B. Porter, Arvind Subramanian, and Americo Beviglia Zampetti ed. Brookings Institution Press, 200 I) (Hudec, Comment). 59 Member-driven organization was inherited from the old GATT system in that "Members control everything."198 The WTO's staff and officials have also frequently underlined the "Member-driven" feature of the WT0.199 For instance, as advocated in the WTO website under the "10 Common Misunderstandings about the WTO," the first misunderstanding emphasizes that "the WTO does NOT tell governments what to do .... Rather, it's a "Member-driven" organization. "200 198 Georges Abi-Saab, The Appellate Body and Treaty interpretation, in THE WTO AT TEN: THE CONTRIBUTION OF THE DISPUTE SETTLEMENT SYSTEM 462 (Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes eds. Cambridge University Press, 2006) (Abi-Saab, The Appellate Body and Treaty interpretation); See also Thomas Cottier, Preparing for Structural Reform in the WTO, 10 EUR. J. INT'L L. 499 (2007) (Cottier, Preparing for Structural Reform in the WTO) (noting that WTO "is still perceived as a member-driven organization with little attention paid to the role of the organization itself in driving the process"); Debra Steger classifies WTO experts into two categories based on their view of the scope of the WTO. First, there are experts such as Robert Wolfe, Richard Blackhurst, Petros Mavroidis, Robert Lawrence, Allan Sykes and most trade economists that are of the view that the mandate of the WTO is "fundamentally focused on trade liberalization" and believe that "the WTO is functioning effectively as it is, as a Member-driven organization." Second, there are experts such as John Jackson, Thomas Cottier, Marco Bronckers, Ernst-Ulrich Petersmann, Deborah Cass, Pieter-Jan Kuijper and mainly lawyers that take the view that "the WTO should have a broader mandate in the future as the organization responsible for international economic regulation in the global economy.") See Debra P. Steger, The Future ofthe WTO: The Case for Institutional Reform, 12 J. INT'L ECON. L. 805 (2009); See also John H. Jackson, The WTO 'Constitution' and Proposed Reforms: Seven 'Mantras' Revisited, 4 J. INT'L ECON. L. 72 (2001) (Jackson, The WTO 'Constitution' and Proposed Reforms) (noting that Member-driven feature means that Members "do not want to giver the Secretariat or the officials or the Directo-General any power"); See also Pascal Lamy, Strengthening Multilateral Cooperation on IP and Public Health, http://www.wipo.int/meetings/en/2009/ip_gc _ge/presentations/lamy.html (last visited Mar. 17, 2011) (describing WTO as Member-driven organization and discussing limitations on the authority of Director General); See also Sutherland Report, if 338 (noting that "in a 'Member-driven organization,' the Secretariat's role must be solely one of support, not of initiative or even institutional defense of the WTO system." The report then analyzes the negative impacts of such point of view). 199 Mike Moore, Speech Notes to Legislators Assembly, http://www.wto.org/english/news_ e/spmm_ e/spmml 8 _ e.htm (last visited Mar. 17, 2011) ("[t]he WTO is member driven, thus driven by Governments, Congresses and Parliaments. Every two years our Ministers meet to give us guidance. Our agreements must be agreed and ratified by members and Parliaments."). 200 JO Common Misunderstandings about the WTO, WTO.org, http://www.wto.org/english/thewto_ e/whatis_ e/1 Omis _ e/l OmOO _ e.htm (last visited Mar. 17, 2011 ); See also Peter Sutherland, Jagdish Bhagwati, Kwesi Botchwey, Niall FitzGerald, Koichi Hamada, John H. Jackson, Celso Lafer, and Thierry De Montbrial, The Future ofthe WTO: Addressing Institutional Challenges in the New Millennium: Report by the Consultative Board to the Director-General Supachai Panitchpakdi, ifif 359-364 available athttp://www.wto.org/english/thewto_ e/l Oanniv _ e/future_ wto _ e.pdf 60 The main issue to be examined with regard to the governance role of the WTO is whether the WTO has "a separate institution of governance" other than the governance of its Members.201 Before seeking a response to this question, four considerations should be highlighted. First, as discussed above, it is necessary to consider the "impermissibility of analogies to domestic laws" when analyzing notions in international law.2°2 Second, in examining the governance of the WTO, it should be noted that the existence of global sovereignty or demos (the common people) is still far from reality, and the global governance of the WTO is not directed towards the concept of the "world government." In reality, global demos and sovereignty cannot be established in the current international legal order, nor should we expect to observe its advent in the near future. Immanuel Kant notes in his treatise on perpetual peace that although forming "an international state (civitas gentium)" is the necessary outcome of human history, "the positive idea of a world republic cannot be reali[z]ed."203 He reiterates that: There is only one rational way in which states coexisting with other states can emerge from the lawless condition of pure warfare. Just like individual men, they must renounce their savage and lawless freedom, adopt themselves to public coercive laws, and thus form an international state (civitas gentium), which would necessarily continue to grow until it embraced all the peoples of the earth. But since this is not the will of the nations, according to their present conception (last visited Mar. 17, 2011) (addressing role of the Secretariat in a Member-driven organization and possible tension between the needs of WTO Members and the role of Secretariat). 201 Hudec, Comment, 298. 202 Weiler, Geology ofInternational Law, 550 (discussing the impermissibility of analogies to domestic law. He states "[a]nalogies to domestic law are impermissible, though most of us are habitual sinners in this respect."). 203 Immanuel Kant, Perpetual Peace: A Philosophical Sketch, in KANT'S POLITICAL WRITINGS, 105 (Hans Reiss ed. H.B. Nisbet Trans. Cambridge University Press, 1971). 61 of international right (so that they reject in hypothesis what is true in thesi), the positive idea of a world republic cannot be reali[z)ed.204 Scholars have strongly criticized the adoption of such notions at an international level.205 Such global sovereignty, or "world government," has been considered as a "doomed" or "horrible" concept.206 Although the existence of a world government is not feasible under current circumstances, it is not difficult to recognize that some form of governance has been established at a transnational level in which non-governmental actors have some degree of participation.2°7 Third, an analysis of Global Governance Institutions without consideration of their association with the domestic concept of governance would not be comprehensive. Nation-states are still the principal players in international law, and due to globalization, they are not "disappearing," but rather, "disaggregating."208 204 Id. 205 FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 21 (denoting non-applicability of Austinian theory in international level because of"the absence ofa global sovereign with worldwide coercive enforcement power"); See also Weiler, Geology ofInternational Law, 559; For scholarship on lack of existence of global demos see Bodansky, The Legitimacy ofInternational Governance, 600 (considering concept of global demos as "unwise"). 206 For general information of the idea of world government see World Government, STANFORD ENCYCLOPEDIA OF PHILOSOPHY, http://plato.stanford.edu/entries/world-government (last visited Mar. 17, 2011). For critical view on world government see FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 22; See also Weiler, Geology ofInternational Law, 559 (describing "world government" as a "horrible thought in itself'); See also Esty, Good Governance at the World Trade Organization, 510-511 (2007) ("Despite occasional calls for a 'parliament of man' or a global legislature, direct election of international officials seems some distance off - and may not be a good idea in any case.") (footnote omitted); For views supporting global parliament see generally Richard Falk, and Andrew Strauss, Toward Global Parliament, 80 FOREIGN AFF. 212 (2001); See also PAUL KENNEDY, THE PARLIAMENT OF MAN: THE PAST, PRESENT, AND FUTURE OF THE UNITED NATIONS (Random House, 2006); See also DEMOCRACY AND THE GLOBAL ORDER 279 (describing short term and long term objectives of "cosmopolitan model of democracy." "Global parliament (with limited revenue-raising capacity) connected to regions, nations and localities" is identified as one of the long term objectives of the model.). 207 Wolfrum, Legitimacy in International Law From a Legal Perspective, 10 (arguing that "at least in some respects - international law has developed into some form of international governance"). 208 SLAUGHTER, A NEW WORLD ORDER 18. 62 Fourth, the concept of "change" or "transition" in the context of international law is a matter of "layering" rather than a complete "shift" from the governance of nation states to global or transnational governance.209 In this light, transformation from nation state governance to global governance involves the creation of different layers of governance that are interconnected. Mindful of these considerations, we return to the primary question of whether the global governance characteristic of the WTO is in conflict with the "Member-driven" feature of the organization. As Abi-Saab noted, this perception requires the assumption that the WTO legal regime is completely "self-sufficient, constituting a hermetic or 'self- contained regime'."210 In reality, however, the institution has taken a different approach. As Pascal Lamy noted with regard to the creation of "secondary treaty legislation," or "droit derive," "there are some cases where WTO bodies are able to adopt effective decisions that ensure pragmatic responses to specific needs. "211 He refers to the authority of the General Council to adopt amendments, waivers, authorities' interpretations, and accession protocols.212 Such actions "do not necessarily require any additional ratification by Members."213 For example, the accession protocol of the People's Republic of China regarding private "right to trade" states that "[w ]ithout prejudice to 209 Weiler, Geology ofInternational Law, 551 (explaining why Weiler uses the term "geology" in order to describe changes in international law. He states that "geology allows us to speak not so much about transformations but of layering, of change which is part of continuity, of new strata which do not replace earlier ones, but simply layer themselves alongside"). 210 Abi-Saab, The Appellate Body and Treaty interpretation, 462. 211 Lamy, The WTO 's Contribution to Global Governance, 44. 212 Id. 213 Id. 63 China's right to regulate trade in a manner consistent with the WTO Agreement, China shall progressively liberalize the availability and scope of the right to trade, so that, within three years after accession, all enterprises in China shall have the right to trade in all goods throughout the customs territory of China."214 Although this obligation is not mentioned in the WTO Agreements, the General Council is granted the authority to impose its terms on China. These secondary treaty legislations create obligations for WTO Members that are enforceable through the dispute settlement system. Pascal Lamy, in the context of secondary treaty legislation, also refers to the SPS Agreement and the Agreement on Subsidies and Countervailing Duties (SCM Agreement).215 Article 12 of the SPS Agreement states that: A Committee on Sanitary and Phytosanitary Measures is hereby established to provide a regular forum for consultations. It shall carry out the functions necessary to implement the provisions of this Agreement and the furtherance of its objectives, in particular with respect to harmonization. As implied in the above text, when WTO Members consent under the SPS Agreement to allow the committee to "carry out the functions necessary to implement the provisions of this Agreement," the committee is endowed with the authority to create new detailed rules that are not initially mentioned in the agreement established by the WTO, as long as the committee acts within its mandate. As a result, the committee is granted the authority 214 World Trade Organization, Accession of the People's Republic of China, p.4, WT/L/432, Nov. 23, 2001. 215 Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, 1867 U.N.T.S. 14 (SCM Agreement); Lamy, The WTO 's Contribution to Global Governance, 44. 64 to adopt decisions that impact the rights and obligations of the WTO Members, with the 216 Members controlling only the initiation of the process. • The dispute settlement system is another organ of the WTO that has expanded its mandate under the WTO. The dispute settlement system has obtained exceptional power due to the implementation of a "reverse consensus" in the adoption of the rulings and recommendations of panelists and the AB in the DSB. Under the reverse consensus system, decisions of the WTO tribunals are automatically adopted in DSB meetings, excepting the unlikely situation in which all parties, including the prevailing party, objects to the results. For example, decisions of the AB members allowing public observation of oral hearings,217 accepting amicus curiae briefs from non-state actors in adjudicative process,218 and carrying out preliminary rulings219 are some of the decisions that have been developed through adjudications without expressed reference in the DSU.220 Moreover, adopted ruling and recommendations establish "legitimate expectation" among WTO Members by directing WTO Members to design or modify 216 See for example, WTO Committee on Sanitary and Phytosanitary Measures, Decision on the Implementation ofArticle 4 ofthe Agreement on the Application ofSanitary and Phytosanitary Measures, G/SPS/19 (Oct. 26, 2001). 217 See Procedural ruling of 10 July to allow public observation of the oral hearing in AB Report, United States - Continued Suspension of Obligations in the EC- Hormones Dispute, WT/DS320/AB/R (Nov. 14, 2008) (see Annex IV) (AB Report US - Continued Suspension); See also AB Report, Canada - Continued Suspension ofObligations in the EC-Hormones Dispute, WT/DS321/AB/R (Nov. 14, 2008) (see Annex IV) (AB Report Canada - Continued Suspension). 218 AB Report US - Shrimp. 219 AB Report, European Communities - Regime for the Importation, Sale and Distribution ofBananas, WT/DS27/AB/R (Sept. 25, 1997) (AB Report EC-Banana Ill). 220 See Thomas Cottier, DSU Reform: Resolving Underlying Balance-ofPower Issues, The WTO at Ten: the Contribution of the Dispute Settlement System, 261 (Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes eds. Cambridge University Press, 2006) (Cottier, DSU Reform) (stating that "[d]ispute resolution ... is the prime arena where bodies of the Organization are starting to play a role in their own right, no longer exclusively dependent on the will of individual Members."). 65 their laws and regulations to be consistent with a certain interpretation of a WTO provision. 221 Common perception of the WTO Secretariat as a "purely supportive instrument"222 does not accurately reflect the reality of how the institution functions. As Jackson states "[a] totally Member-driven" organization is, in many cases, counterproductive, and most certainly inefficient."223 Nonetheless, this does not mean that WTO Secretariat can exceed its mandate and the scope of rights and obligation of WTO Members. The process of decision making in the WTO takes place within a multilayered regulatory framework. The organization has different and distinct functional components, such as an institutional framework for continuous negotiations, dispute settlement system, implementations and surveillance, and day-to-day administrative work. Under the previous GATT system, the Member-driven characteristic of the GATT was essential and evident, as it was the Contracting Members who negotiated and made decisions in lowering trade barriers. However, with the establishment of the WTO came an expansion 221AB Report, Japan- Taxes on Alcoholic Beverages, at 108, WT/DS8/AB/R, WT/DSlO/AB/R, WT/DSl 1/AB/R (Nov. 1, 1996) (AB Report Japan- Taxes on Alcoholic Beverages!/); See also Panel Report, United States -Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand, WT/DS383/R, adopted Feb. 18, 2010, ~~ 7:20 and 7:21 (Panel Report US -Anti-Dumping Measures on PET Bag) (explaining that while the panel was "not bound by the reasoning in prior AB and/or panel reports, adopted Reports create legitimate expectations among WTO Members, and 'following the Appellate Body's conclusions in earlier disputes is not only appropriate, but is what would be expected from panels, especially where the issues are the same."'); See also Panel Report, European Communities -Anti-Dumping Measure on Farmed Salmon from Norway,~ 7.69, WT/DS337/R (Jan. 15, 2008) (Panel report EC-Salmon (Norway)) (noting that the panel "nonetheless consider[s] it appropriate to review those decisions to assess the similarities and differences in the underlying facts, and determine[s] whether the analysis of those Panels is helpful in our assessment of Dthe arguments in this case."). 222 Cottier, Preparing for Structural Reform in the WTO, 502 (noting that such "perception does not adequately reflect the real functions and position of the Secretariat in terms of institutional memory, policy advice and policy-making"). 223 See also Jackson, The WTO 'Constitution' and Proposed Reforms, 72 (noting that Member-driven feature in some circumstances "undermines the integrity of the adjudicative process of the system"). 66 of its institutional functions, which made a purely Member-driven organizational structure inadequate to carry out the objectives declared in its mandate. Therefore, due to the multilayer regulatory characteristic of governance at the WTO, a conclusion regarding whether an organ within the organization is Member-driven must inevitably be based on the function of the organ within the entire organization. One also should keep in mind the distinction between "political and judicial governance"224 in determining the extent that Member-driven characteristic should be applied to the WTO. Petersmann notes that "[w]hereas trade diplomats tend to view the WTO as a 'Member-driven framework' for intergovernmental bargaining, WTO judges ... tend to view WTO law as part of an international 'rule of law system' that is , like any domestic legal system, increasingly confronted with claims for justice and for more effective protection of citizen's rights.''225 Global governance is a multilayer system under which WTO Members may conduct negotiations under the Doha Round, while granting another body of the WTO the authority to set norms or create binding decisions. It does not follow from this stratification that there is a contradiction between the WTO as a Member-driven organization and a Global Governance Institution. Rather, the multilayer nature of global 224 Ernst-Ulrich Petersmann, From "Member-Driven Governance" to Constitutionally Limited "Multilevel Trade Governance," in The WTO at Ten: the Contribution of the Dispute Settlement System, 92 (Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes eds. Cambridge University Press, 2006). 225 Id. 86-11 O; See generally Joseph H.H. Weiler, The Rule ofLawyers and the Ethos ofDiplomats: Reflections on the Internal and External Legitimacy of WTO Dispute Settlement, in EFFICIENCY, EQUITY, AND LEGITIMACY: THE MULTILATERAL TRADING SYSTEM AT THE MILLENNIUM, 334-350 (Roger B. Porter, Pierre Sauve, Arvind Subramanian and Americo Beviglia Zampetti eds. Brookings Institution Press, 2001) (Weiler, The Rule ofLawyers and the Ethos ofDiplomats) (analyzing structure of WTO and relationship between political and legal organs). 67 governance enables the WTO to remain primarily a Member-driven organization in core areas (i.e. tariff negotiations), while at the same time departing from its Member-driven feature when making decisions pertaining to the expanded mandate of the WT0.226 2.5 History and Notion of Legitimacy The notion of legitimacy is a complex and nuanced concept in international law that has drawn the attention of governments, private sector, civil societies, and scholars particularly after WWII. As explained in Chapter one, globalization has profoundly impacted the foundations of legitimacy in the post-Westphalian era. Therefore, it is essential to examine the notion of legitimacy in contemporary international law in the light of globalization. In addition to historical factors that impact the perception of legitimacy, one should also take into account other components such as different sources and procedures which can be incorporated into the analysis of legitimacy within the context of the WTO legal and political regime. This section briefly discusses the rise of the issue of legitimacy from a historical perspective, and then explains the particular characteristics of legitimacy in the context of the WTO. 226 In Chapter Five, § 5.2.1.3. I will explain how the notion of"dynamic consent" can answer this dilemma. 68 2.5.1 History of Legitimacy A review of post-WWII literature on international law reveals a dearth of academic research on the notion of legitimacy in international law, and in particular, in the area of international organizations.227 It was not until the end of the Cold War and the fall of the Berlin Wall that scholars began to shift their focus towards the notion of legitimacy in international law.228 Specifically, when the member states of The North Atlantic Treaty Organization (NATO) conducted military action against Serbian forces in Kosovo in 1999, the issue of legitimacy of international law became a central concern for the international community. 229 Kumm explained the history of legitimacy in the context of post-WWII as follows: After [WWII] the positivist stranglehold on legal and political thought gradually loosened. The Nuremburg and Tokyo Trials and the Universal Declaration of Human Rights adopted by the General Assembly in December 1948 signalled a return to a more normatively focused jurisprudence in the service of anti-Nazism. New constitutions in Western Europe typically contained judicially enforceable constitutional rights. With the maturation of national courts' rights jurisprudence in many jurisdictions, jurisprudential theories became more strongly engaged with issues of principle, justice and legitimacy. Furthermore, rights-based political morality was a liberal political morality. It morally distinguished the West from Communism and provided normative significance to the Cold War that went beyond the idea of a competitive struggle for military, technological and economic superiority. By the 1980s the focus of normative theorizing had expanded from jurisprudential accounts of rights and questions of legal reasoning to constitutional theory more generally. Not only were legal rights embedded in a rights-based conception of liberal justice, but the national constitution, as a 227 See generally FRANCK, THE POWER OF LEGITIMACY AMONG NATION (Thomas Franck is one of the authors that for the first time focused on this concept); For more information on historical evolution of legitimacy see IAN CLARK, INTERNATIONAL LEGITIMACY AND WORLD SOCIETY 33-151 (Oxford University Press, 2005) (describing the concept of legitimacy in a historical perspective in the context of international society). 228 Kumm, The Legitimacy ofInternational Law, 907. 229 Hanspeter Neuhold, Legitimacy: A Problem in International Law and for International Lawyers?, in LEGITIMACY IN INTERNATIONAL LAW, 338-339 (Rudiger Wolfrum and Roben,Volker eds. Springer, 2008) (discussing historical dimension oflegitimacy in international law). 69 whole, was reconceived as embodying a commitment to a coherent ideal of constitutional justice, the specifics of which remain very much in dispute. But there is a consensus today that legitimacy of domestic law is predicated on it being justifiable in terms of a commitment to liberal constitutional democracy, properly understood.230 Specifically within the context of international organizations, supranational entities immediately after the WWII did not enjoy the authority and strength that they do today and their decisions were not binding on various addressees, including private citizens and non-governmental entities. Consequently, the legitimacy of their authority was not of serious concern.231 The authority of international organizations finally came into question as a result of various changes in the international legal landscape, including the advent of globalization, the rise of international non-governmental lawmakers such as Global Governance Institutions, the proliferation of addressees of international law, and the spread of democratic principles.232 2.5.2 Characteristics and Definition of legitimacy The concept of legitimacy is a complex notion that has been used in "such various and nebulous ways."233 In different contexts, legitimacy has different meanings and capacities. The notions of legitimacy and authority are intrinsically intertwined and it is essential to examine the notion of legitimacy within its structure of authority and specific 23°Kumm, The Legitimacy ofInternational Law, 909-910 (footnotes omitted). 231 Bodansky, The Legitimacy ofInternational Governance, 597; Id. 911 (noting that international law in the past was "ineffective and unreliable."). 232 Id. 597 (noting that "until recently international institutions have generally been so weak - they have exercised so little authority- that the issue of their legitimacy has barely arisen."). 233 Id. 600 (footnote omitted). 70 context. For instance, the notion of legitimacy is different at a national and international level in that there is a distinction between legitimacy in a democratic legal system and an international organization that does not wield enforcement power. For that reason, drawing analogies to domestic legal systems would not be a proper tool to fully understand and examine the notion of legitimacy at an international level, despite an indispensible temptation to do so. As Weiler noted, when examining international law, "analogies to domestic law are impermissible, though most of us are habitual sinners in this respect."234 Nevertheless, this should not deter us from resorting to components impacting the notion of legitimacy that are common at both a domestic and international level. In introducing the multi-dimensional standard of legitimacy in this dissertation, many domestic notions will be borrowed to better examine the concept of legitimacy in the context of the WTO dispute settlement system. 2.5.2.1 Characteristics of Legitimacy The following features, inter alia, are among important characteristics of the notion of legitimacy in contemporary international law: • The nature of legitimacy is multifaceted and should be examined within its specific context in the light of the relevant structure of authority; • The formation of legitimacy is an evolutionary process rather than an incidental event; • Legitimacy is a dynamic concept that is constantly changing; and 234 Weiler, Geology ofInternational Law, 550. 71 • Legitimacy is a matter of degree. 2.5.2.1.1 Multifaceted Nature of Legitimacy and its Examination within its Context Thomas Franck recognized that the notion of legitimacy "is really a bracketing of many integral factors, which are related but different and which must be investigated by reference to different social date."235 Franck addressed various matters that contribute to the concept of legitimacy in an internal and national context, noting that "this matrix of date compasses the procedures by which power is delegated to governing elites; the procedures by which elites inform themselves before making rules and deciding specific controversies between citizens; the procedures by which legislative decisions are taken, explicated and ventilated; the probity and 'integrity' of a specific law or decision, that is, how it fits into the coherent principles underlying a network of specific commands; its social utility, that is, its distributive fairness and instrumental effectiveness; the quality with which the same rule is applied in various situations; the validation of a community by its members' acceptance of ultimate rules of recognition that not otherwise validated but which define the essence of the community."236 In Franck's point of view, much of the mentioned factors "can be adopted for use in understanding legitimacy in the international community."237 235 FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 18. 236 Id. 18-19. 237 Id. 19. 72 Because of the multitude of factors that "can contribute to or detract from a regime's legitimacy," the notion is not easy to conceptualize.238 Bodansky described the complexities surrounding normative and sociological legitimacy, stating that [t]he bases of social legitimacy may not be universal. They may differ between actors along a number of different lines. Governmental actors, for example, may have different views about legitimacy than members of civil society. They may put a much greater premium on sovereignty and consent, while civil society organizations may place much greater emphasis on participation and transparency. As a result, factors that may help to legitimi[z]e an institution in the eyes of non-state actors may help to delegitimi[z]e it in the eyes of state actors.239 Another factor contributing to the complexity of deliberating the notion of legitimacy is the cultural discrepancy among stakeholders in a legal regime. This complexity reaches its zenith at the international stage, where cultural differences between developing and developed nations are among many factors that impact the perception oflegitimacy.240 For example, the issue of internal and external transparency in the WTO dispute settlement process is an area of contention among WTO Members.241 Moreover, a difference of views exists also among developing countries or developed countries. Although some countries such as the United States assert that heightening transparency 238 Bodansky, The Legitimacy ofInternational Governance, 623. 239 Daniel Bodansky, The Concept ofLegitimacy in International Law, in LEGITIMACY IN INTERNATIONAL LAw, 314 (Riidiger Wolfrum and Roben, Volker eds. Springer, 2008) (Bodansky, The Concept of Legitimacy in International Law) (Bodansky, The Concept ofLegitimacy in International Law). 240 Id. (noting that "[a]ttitudes about legitimacy may also differ along cultural grounds"). 241 See Chapter Five, § 5.2.2.2. for more details on internal and external transparency and different attitude of WTO members toward it. 73 and opening dispute settlement hearings to non-state actors will enhance the legitimacy of the WTO, other developed countries may not share this view.242 This matrix of legitimacy and the factors contributing to it are also not identical in every transnational legal regime. For instance, the concept of legitimacy in the WTO legal system, which is equipped with an efficient enforcement mechanism, must be distinguished from that of the ILO, which does not have a comparably effective enforcement mechanism for its labor standards. Similarly, legitimacy in a domestic legal system, which derives its authority from a different source, must be distinguished from legitimacy of an international organization. Additionally, legitimacy cannot be assessed in an abstract model, but must be examined within the reality of its context. Differences in legal regimes also affect the components of legitimacy deficits within those regimes. In the case of domestic and international legal systems, the fundamental difference in the roots from which such deficiencies arise may render a direct comparison invalid. For instance, one cannot say with certainty whether the notion of democracy embodies the same meaning in international and domestic legal systems.243 This difference is illustrated in international agreements that normally require parliamentary 242 See WTO, Dispute Settlement Body Special Session, Further Contribution ofthe United States to the Improvement ofthe Dispute Settlement Understanding ofthe WTO Related to Transparency- Revised Legal Drafting, TN/DS/W/86 (Apr. 21, 2006). 243 Erika De Wet, The Legitimacy of United Nations Security Council Decisions in the Fight Against Terrorism and the Proliferation of Weapons ofMass Destruction: Some Critical Remarks, in LEGITIMACY IN INTERNATIONAL LAW, 131, 137-138 (Rudiger Wolfrum and Volker Rohen eds. 2008) (De Wet, The Legitimacy of United Nations Security Council) (referring to the structural difference between the composition of the international community and national communities and issue of democracy). 74 approval but nonetheless are not produced with the same democratic standards appreciate. d.m domestlc . 1ega 1 systems. 244 2.5.2.1.2 Gradual Formation of Legitimacy and its Dynamic Nature The formation of legitimacy within a legal regime does not occur overnight. Bodansky explained that building the legitimacy of an institution is an "incremental process."245 The range of factors that contribute to the formation of legitimacy and the complexity of the matrix act as speed bumps in the formation process. The complexity of the matrix is further amplified at an international level, where the establishment or deterioration of legitimacy is liable to occur at an even more incremental pace. Legitimacy in a legal regime, inter alia, relies heavily on acceptance and perception of its stakeholders. In other words, legitimacy is incrementally established when stakeholders gradually develop dependency and confidence in the regime based on its efficiency and fairness. Furthermore, legitimacy is a dynamic concept. For example, a matter that was legitimate in the view of its stakeholders throughout a certain period of time may not retain its legitimacy indefinitely. Particularly in the international stage, the authority of a Global Governance Institution tends to fluctuate with expanding membership and the varying degrees of reliance exercised by its stakeholders. With regards to dynamic nature of international law and the international legal system, Weiler noted that "the understanding 244 Wolfrum, Legitimacy in International Law From a Legal Perspective, 20-21. 245 Daniel Bodansky, Discussion Following Presentations By Helen Keller, Armin Von Bogdandy and Daniel Bodansky, in LEGITIMACY IN INTERNATIONAL LAW, 329 (Riidiger Wolfrum and Volker Roben eds. Springer, 2008). 75 of legitimacy over the exercise of normative power has not been static and has changed - both as an empirical social phenomenon and as a normative concept." 246 2.5.2.1.3 Legitimacy as a Matter of Degree Thomas Franck, emphasizing the compliance aspect of legitimacy, asserted that legitimacy is "a matter of degree."247 In other words, it is usually not a matter of whether legitimacy does or does not exist within a legal regime, but rather, to what degree it exists compared to other legal regimes. Bodansky examined the notion of legitimacy from the perspective of its correlation with "authority," He stated that "[t]he greater the authority an institution exercises, for example, the greater the legitimacy concems."248 Concurring with Franck, he was of the view that legitimacy "is a matter not of all or nothing, but of more or less."249 2.5.2.2 Definition of Legitimacy in a Normative and Sociological Sense Various definitions of legitimacy have been proposed in different contexts. Political scientists and theorists have different approaches toward the definition of legitimacy and perceive the notion of legitimacy from different perspectives. Accordingly, the concept 246 Weiler, Geology ofInternational Law, 548. 247 FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 27; See also Id 41-49. 248 Bodansky, The Concept ofLegitimacy in International Law, 316. 249 Bodansky, The Legitimacy ofInternational Governance, 623 (footnote omitted). 76 of legitimacy bears different meanings in a legal and political context. The way that lawyers perceive legitimacy is not as the same as political scientists. Examination of the notion of legitimacy within the WTO would not be comprehensive, if one does not examine the notion of legitimacy from both legal and political perspective. As explained in previous Chapters, the WTO is an institution with a multilayered structure of governance. Within the WTO, both diplomatic and legal organs contribute to the notion of legitimacy and the interaction between them requires that the concept of legitimacy be examined from both perspectives.250 2.5.2.2.1 Legitimacy in a Normative Sense There are some theorists that focus on the notion of legitimacy in a normative sense. The normative concept of legitimacy "both explains why the use of political power by a particular body - a state, a government, or a democratic collective, for example - is permissible and why there is a pro tanto moral duty to obey its commands."251 250 Buchanan and Keohane, Legitimacy of Global Governance Institutions, 25 (describing legitimacy as having both a normative and a sociological meaning); See also Bodansky, The Concept ofLegitimacy in International Law, 313; Some authors have categorized the notion oflegitimacy into objective and subjective legitimacy. See for example Treves, Aspects ofLegitimacy ofDecisions ofInternational Courts and Tribunals, 170. 251 Political Legitimacy, STANFORD ENCYCLOPEDIA OF PHILOSOPHY, http://plato.stanford.edu/entries/legitimacy (last visited Mar. 17, 2011) (introducing two other theories on normative sense of legitimacy: On one widely held narrower view, legitimacy is linked to the moral justification-not the creation---of political authority. Political bodies such as states may be effective, or de facto, authorities, without being legitimate. They claim the right to rule and to create obligations to be obeyed, and as long as these claims are met with sufficient acquiescence, they are authoritative. Legitimate authority, on this view, differs from merely effective or de facto authority in that it actually holds the right to rule and creates political obligations .... 77 In short, legitimacy, in normative sense, means justification of "the right to rule."252 Buchanan and Keohane asserted that "[t]o say that an institution is legitimate in the normative sense is to assert that it has the right to rule - where ruling is promulgating rules and attempting to secure compliance with them by attaching costs to noncompliance and/or benefits to compliance."253Joseph Raz pointed out that institutions have "legitimate authority only if and to the extent that their claim [to have a right to rule] is justified and they are owed a duty of obedience."254 Legitimacy in a normative sense defines legitimacy from an "ex ante perspective."255 Bodansky explained that this approach focuses on "procedural requirements for legitimate authority [i.e.,] factors such as transparency and accountability"256 and "procedures that will help produce good outcomes, factors such as expertise or participation or getting good information."257 On another often held narrow view, even legitimate authority is not sufficient to create political obligations. The thought is that a political authority (such as a state) may be permitted to issue commands that citizens are not obligated to obey. Based on a view of this sort, some have argued that legitimate authority only gives rise to political obligations if additional normative conditions are satisfied. (footnote omitted) 252 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 25; See also Bodansky, The Legitimacy ofInternational Governance, 601 (referring to legitimacy as "justification of authority"); See also Wolfrum, Legitimacy in International Law From a Legal Perspective, 6 (stating that "although it mostly means to refer to the justification of authority, this notion being understood as the equivalent of having the power to take binding decisions or to prescribe binding rules"). 253 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 25. 254 Joseph Raz, Authority and Justification, 14 PHIL. & PUB. AFF. 5 (1985). 255 Bodansky, The Concept ofLegitimacy in International Law, 314. 256 Id. 257 Id. 315. 78 2.5.2.2.2 Legitimacy in a Sociological Sense Legitimacy in sociological sense aims at examining the notion of legitimacy as a "factual issue" and in a manner that can be "empirically" studied. 258 Buchanan and Keohane noted that "an institution is legitimate in the sociological sense when it is widely believed to have the right to rule."259 The legitimacy in the sociological sense is as an ex post factor,260 and it relies on the perception of addressees of the rules and decisions.261 Franck defined legitimacy in an international context as "the perception of those addressed by a rule or a rule-making institution that the rule or institution has come into being and operates in accordance with generally accepted principles ofright process."262 In his view legitimacy is "the capacity 258 Id. 313. 259 Buchanan and Keohane, Legitimacy a/Global Governance Institutions, 25 (referring to Fritz Scharpf on the issue of input and output legitimacy) (footnote omitted). 260 Bodansky, The Concept ofLegitimacy in International Law, 315 (addressing legitimacy as ex post, ad hoc matter). 261 In the context oflegitimacy in a sociological sense and issues that impact stakeholders' belief, some theorists have referred to input and output legitimacy. On the normative level, the legitimacy of private governance may be considered to rest on two pillars: 'input' and 'output' legitimacy. Input legitimacy, for present purposes, we may generally define as the participatory quality of private governance. It implies that those concerned, i.e. the stakeholders, ought to have an input in the drafting processes leading to the adoption of a code of conduct. Output legitimacy refers to questions of effectiveness and efficiency. (footnote omitted). Keller, Codes a/Conduct, 269 (citing FRITZ SCHARPF, REGIEREN IN EUROPA. EFFEKTIV UND DEMOKRATISCH? (Campus Fachbuch, 1999)); See also Buchanan and Keohane, Legitimacy a/Global Governance Institutions, 25-26, footnote 1. 262 FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 19 (emphasis omitted); See also De Wet, The Legitimacy of United Nations Security Council, 135 (defining the issue oflegitimacy in the context of international organizations as a matter that is "accepted as being representative of the opinion of those affected by it"); See also Treves, Aspects ofLegitimacy ofDecisions ofInternational Courts and Tribunals, 170 (referring to legitimacy as "perception of acceptability"). 79 of a rule to pull those to whom it is addressed toward consensual compliance."263 The scope of addressees at an international level is broader than that at a domestic stage and includes "nations, international organizations, leadership elites, and, on occasion, multinational corporations and the global populace."264 In the international stage, the addressees of Global Governance Institutions extend from individuals to governments, making the legitimacy of rules and decisions an issue that is more complex than at a national level. A decision of a Global Governance Institution addressing an individual or government does not necessarily fully guarantee the interest of the addressees. Indeed, one should bear in mind that "[t]o say that an institution is legitimate is to imply that it has the right to rule even if its ruling is not in accordance with the best interests of everyone who is subject to its rule."265 263 Thomas M. Franck, The Power ofLegitimacy and the Legitimacy ofPower: International Law in an Age ofPower Disequilibrium, 100 AM. J. INT'L L. 93 (2006). 264 FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 16. 265 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 31. 80 CHAPTER THREE 3 FROM ITO TO GATT TO WTO The evolution of international organizations as a process of "human institutional development"266 has been one of the most fascinating subjects in contemporary international law. A study of the history of negotiations of the old GATT and the WTO system is significant in understanding the geology of the current organization. In this Chapter, we will review the history of the GATT and WTO negotiations, focusing mainly on matters impacting the structure and legitimacy of the system. One should keep in mind that a specific historical factor impacting the legitimacy of the WTO - if it exists at all - may not exist in its original form, but may change throughout the evolution of the WTO. It is unquestionable that these factors influence the perception of stakeholders both inside and outside of the WTO, and such historical examination assists us in better analyzing the perceptions and expectations of WTO Members toward the organization. 3.1 History of ITO/GATT/WTO: Economic and Political Context The rise of protectionism after World War I and its impeding effect on the free flow of international trade exacerbated the pre-existing tension emanating from the fascism 266 Jackson, The Evolution ofthe World Trading System, 50. 81 prevalent among countries at the time. The full-blown implications of this tension revealed itself years later in the form of WWII and the ensuing devastation of the world economy.267 Gilbert Winham depicted the trade environment of the 1920s and 1930s as follows: The impact of raising tariffs and implementing other protectionist measures was devastating, as world trade declined by approximately two-thirds from 1929 to 1934. Actions in the trading system helped deepen the harmful effects of the world depression, which was underway in full force following the global stock market crash of 1929 [footnote omitted]. These economic circumstances, combined with the rise of fascism and nationalism is Europe, helped to make the ... World War [II] a nearly inevitable occurrence. War completed the destruction o f a cooperative. mtematlona . . l tra d e regime.. ,,268 One of the best examples of the rise of protectionism and tariff barriers after WWII is the U.S. Smoot-Hawley Tariff Act (the Tariff Act of 1930), which was signed into law in June 1930. The Smoot-Hawley Tariff Act raised the average tariff from 38.2 % in 1930 to 55 .3 % in 1931 to protect US industries after the onset of the Great Depression.269 In this context, the theory of economic security appeared as a solution for tackling the political and economic instability, which led many leaders to support the notion.270 In 1941 a study was initiated to address the "possibility of international cooperation on a 267 See id. 32 (emphasizing "[c]onsiderable thinking about post-World War II institutions occurred during the early 1940s, and an important part of this thinking (apart from the United Nations (UN) idea) focused on international economic institutions. There was a strong feeling that economic policy failures after World War I were a significant cause of the Second World War, and that the depression as well as other factors shared that responsibility."). 268 Gilbert R. Winham, The Evolution ofthe World Trading System - the Economic and Policy Context, in THE OXFORD HANDBOOK OF INTERNATIONAL TRADE LAW, 13 (Daniel Bethlehem, Donald McRae, Rodney Neufeld and Isabelle Van Damme eds. Oxford University Press, 2009). 269 JAE WAN CHUNG, THE POLITICAL ECONOMY OF INTERNATIONAL TRADE: U.S. TRADE LAW, POLICY, AND SOCIAL COST 14 (Lexington Books, 2006); For detailed explanation of history of Hawley-Smoot Tariff see JOHN AC CONYBEARE, TRADE WARS: THE THEORY AND PRACTICE OF INTERNATIONAL COMMERCIAL RIVALRY (Columbia University Press, 1987). 27°CORDELL HULL, THE MEMOIRS OF CORDELL HULL, VOL. Two 88 (Macmillan Co, 1948). 82 multilateral basis as a means of establishing a stable and orderly system of international currency relationship and to revive international investment."271 The study resulted in the Atlantic Charter. US President Franklin D. Roosevelt and British Prime Minister Winston Churchill signed the Atlantic Charter at the Atlantic Conference, laying a foundation for future international cooperation. Paragraph 5 of the Charter states that signatories of the Charter "desire to bring about the fullest collaboration between all nations in the economic field with the object of securing, for all, improved labor standards, economic advancement and social security."272 As displayed in the spirit of the Charter, leaders of the Allied countries perceived the need for international cooperation to restore their economy and employment. 3.1.1 Bretton Woods Conference The meeting that was held in Bretton Woods, New Hampshire during the period July 1- 22, 1944 marked the advent of a new form of supranational governance. The implications of the meeting were significant, with representatives from 45 countries gathering to establish transnational institutions to deal with economic devastation after the war and high unemployment. 271 United Nations Monetary and Financial Conference: Final Act and Related Documents, 3 (Department of State: United States Government Printing Office, 1944) (United Nations Monetary and Financial Conference: Final Act and Related Documents) (see the address by the Honorable Henry Morgenthau, Jr.). 272 See Joint Declaration ofthe President of United States ofAmerica and the Prime Minister ofthe United Kingdom ofGreat Britain and Northern Ireland dated August 14, 1941 (The Atlantic Charter) in THE PUBLIC PAPERS AND ADDRESSES OF FRANKLIN D. ROOSEVELT, VOL. TEN, 314 (Samuel I. Rosenman ed. New York: Harper, 1950). 83 The United Nations Monetary and Financial Conference, known at the Bretton Woods Conference, was inaugurated by President Franklin's speech focusing on cooperation between countries.273 As self-evident as the concept may seem, the signatories did not appreciate the notion of global governance in 1944 to the extent that we do today and the negotiations were largely based on the Westphalian model of governance. The president of the Conference, recognizing the importance of sovereignty of the participating governments, noted: "we are not asked to make definitive agreements binding on any nation, but that proposals here formulated are to be referred to our respective governments for acceptance or rejection. Our task, then, is to confer, and to reach understanding and agreement, upon certain basic measures which must be recommended to our governments for the establishment of a sound and stable economic relationship among us." 274 However, as a result ofBretton Woods Conference supranational institutions were ultimately established that vastly impacted the sovereignty of the signatories. The signing of the Bretton Woods agreement in 1944 confirmed establishment of two economic institutions: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank).275 Though contemplated, the Conference failed to establish an International Trade Organization (IT0).276 This was in part due to the absence of trade ministers to the Conference, which was comprised of 273 United Nations Monetary and Financial Conference: Final Act and Related Documents, 1-2 (see the statement by President Roosevelt). 274 See United Nations Monetary and Financial Conference: Final Act and Related Documents, 3 (see the address by the Honorable Henry Morgenthau, Jr., at the Inaugural Plenary Session). 275 See generally John H. Jackson and Alan 0. Skyes, Introduction and Overview, in IMPLEMENTING THE URUGUAY ROUND, 1-23 (John H. Jackson and Alan 0. Skyes eds. Oxford University Press, 1997) (explaining creation of the post World War II institutions). 276 See Chapter Three, § 3.2.4.2. 84 finance ministers. 277 Instead countries agreed to subsequently establish the ITO. As discussed later, the United States government did not support the ITO and without the United States, the ITO could not come into existence. 3.1.2 Havana Charter In February 1946, on the motion of the representative of the United States, the United Nations Economic and Social Council resolved to establish the Preparatory Committee of the International Conference on Trade and Employment for the purpose of "promoting the expansion and production, exchange and consumption of goods. ,ms "The Proposals for Expansion of World Trade and Employment" were submitted to the Council by the United States Department of State in 1945,279 proposing the establishment of an international trade organization to fulfil the "need for international economic cooperation." The United States was of the view that "[i]n all countries high and stable employment is a main condition for the attainment of satisfactory level of living," and that "[t]he attainment of approximately full employment by the major industrial and trading nations, and its maintenance on a reasonably assured basis, are essential to the expansion of international trade on which the full prosperity of these and other nations depend; to the full realization of the objectives of all liberal international agreement in such fields as commercial policy, commodity problems, 277 Jackson, The Evolution ofthe World Trading System, 32 (stating that "the Bretton Woods Conference was directed and organized by financial ministers of governments concerned, and they felt that they did not have the appropriate authority to address trade concerns which tended to be under the jurisdiction of ministers of commerce or similar other departments of governments."); See also, DAVID PALMETER AND PETROS C. MAVROIDIS, DISPUTE SETTLEMENT IN THE WORLD TRADE ORGANIZATION: PRACTICE AND PROCEDURE 1 (Cambridge University Press, 2004) (noting that negotiators were from finance ministry). 278 U.N. CONF. TRADE & EMP., Report ofthe First Session ofthe Preparatory Committee, Part I, U.N. Doc. EIPC/T/33 (Oct. 1946) (London Draft Charter). 279 U.S. DEPT ST., Proposals for Expansion of World Trade and Employment, Commercial Policy Series 79, Publication 2411 (Washington D.C., Nov. 1945). 85 restrictive business practice, monetary stabilization, and investment; and, therefore, to the preservation of world peace and security."280 (emphasis added) The United States' proposals called for the establishment of the United Nations Economic and Social Council for the purpose of negotiating the creation of the Intentional Trade Organization (ITO). They also proposed draft articles for the organization.281 The Economic and Social Council considered it essential "that the co-operative economic measures already taken be supplemented by further international measures dealing directly with trade barriers and discriminations which stood in the way of an extension of multilateral trade and by an undertaking on the part of nations to seek full employment. "282 The Preparatory Committee of the International Conference on Trade and Employment established various working committees, and later adopted the "suggested charter" that the United States prepared in September 1946 "as a basis" for discussion.283 The Committee drafted the Charter of the ITO as a specialized body of the United Nations with an emphasis on full employment.284 The final product of this meeting was a 280 Id. part B. 281 Id. part C. 282 London Draft Charter, Part I. 283 Id Annexure 11 (stating that "[i]n preparation for the conference, the Government of the United States has prepared an elaboration of its Proposals in the form of a suggested Charter for the International Trade Organization. Copies of the suggested Charter have been transmitted to the Secretary-General of the United Nations and to the other governments named by the Economic and Social Council to serve on the Preparatory Committee. The suggested Charter is the work of many persons of competence and experience in the departments and agencies of the United States Government. It is put forward, however, as a basis for discussion and not as a document expressing the fixed or final views of this Government. The draft should clarify possible obscurities and remove any misunderstandings to which the condensed language of the Proposals may have given rise."). 284 Id 27. 86 document called "Preliminary Copy of Redraft of a Charter for an International Trade Organization." The second session of the Preparatory Committee convened in Geneva from April to October 1947 for the purpose of finalizing the draft charter of the ITO. Furthermore, in order to achieve the objective of the ITO, members of the Preparatory Committee decided "to enter into reciprocal negotiations directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of preferences on a mutually advantageous basis."285 The result of these tariff negotiations, combined with other provisions, became the "General Agreement on Tariffs and Trade" (GATT).286 Anticipating the finalization of the ITO Charter, the GATT was signed in Geneva in October 1947 by all participants of the preparatory agreement, and came into effect on January 1, 1948.287 Although the GATT was intended to be provisional and subsequently replaced by the Havana Charter of the ITO, the latter course of events never transpired for reasons explained above. The International Conference on Trade and Employment was held from November 21, 194 7 to March 24, 1948 at Havana. The Conference finalized the Havana World Trade Charter (Havana Charter) establishing the backbone of the ITO as the third pillar of the 285 U.N. CONF. TRADE & EMP., Report ofthe Second Session ofthe Preparatory Committee, p. 6, U.N. Doc. E/PC/T/186 (Sept. 10, 1947); Id 70 ("Preparatory Committee adopted a Resolution at its First Session regarding carrying out of tariff negotiations under its sponsorship in connection with, and as part of, the Second Session."); See also Simon Reisman, The Birth ofa World Trading System: ITO and GATT, in THE BRETTON WOODS-GATT SYSTEM: RETROSPECT AND PROSPECT AFTER FIFTY YEARS, 84 (Orin Kirshner ed. M.E. Sharpe Inc., 1996). 286 General Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. A-11, 55 U.N.T.S. 194 (GATT 1947). 287 Protocol of Provisional Application of General Agreement on Tariffs and Trade, Oct. 30, 1947, 55 U.N.T.S. 308 (in force Jan. 1, 1948) (Protocol of Provisional Application). 87 Bretton Woods institutions. The Havana Charter was presented to legislators of the signatories for ratification, including the U.S. House Committee on Foreign Affairs in April 1949. Several meetings failed to produce any positive results, and the Department of State finally concluded in 1950 that it would not resubmit the Charter to Congress.288 3.2 Evolution of the GATT 1947 The GATT 1947 was designed to be an integral part of the ITO. Due to the failure to establish the ITO, however, the GATT 1947 remained in force provisionally for more than 45 years. Numerous rounds of negotiations conducted since 1947 brought about a gradual expansion of the scope of the GATT system. To understand how the evolution of the GATT system took on a life of its own and deviated from the original expectation of its negotiators, it is necessary to take a brief look at the history of the GATT negotiations. 3.2.1 Purpose of the GATT 1947 When the GATT 1947 was established, the Contracting Parties perceived the agreement as a legal mechanism for the reduction of tariffs, rather than as an institution in and of itself. This was largely due to widespread expectation that the ITO would soon follow as an institution equipped to carry out its institutional functions. 288 See U.S. DEPT. OF ST., U.S. DEPT. OF STATE, Future Administration ofGATT, 23 DEPT. ST. BULL. 977 (1950) (see press release of Dec. 6, 1950); For detailed history see RICHARD N. GARDNER, STERLING DOLLAR DIPLOMACY IN CURRENT PERSPECTIVE: THE ORIGINS AND THE PROSPECTS OF OUR INTERNATIONAL ECONOMIC ORDER (Columbia University Press, 1980) (discussing the history and failure of the ITO). 88 Tariff reductions were achieved through tariff negotiations authorized under Article XXVIII bis of the GATT 1947. Paragraph 1 of the Article provides that: The [C]ontracting [P]arties recognize that customs duties often constitute serious obstacles to trade; thus negotiations on a reciprocal and mutually advantageous basis, directed to the substantial reduction of the general level of tariffs and other charges on imports and exports and in particular to the reduction of such high tariffs as discourage the importation even of minimum quantities, and conducted with due regard to the objectives of this Agreement and the varying needs of individual [C]ontracting [P]arties, are of great importance to the expansion of international trade. The [C]ontracting [P]arties may therefore sponsor such negotiations from time to time. Tariff negotiations, along with application of general Most Favored Nation (MFN) treatment stipulated in Article I and National Treatment in Article III of the GATT 1947, successfully laid the foundation for tariff reduction between the GATT Contracting Parties. In addition to the intent of negotiators to apply the GA TT 194 7 provisionally, 289 the intended temporary nature of the agreement is expressed in Paragraph 2 Article XXIX of the GA TT 194 7, which reiterates the message in Part II of the agreement that the main and substantive part of rights and obligations "shall be suspended on the day on which the Havana Charter enters into force."290 Unobstructed by the requirement for congressional approval that hindered the adoption of the Havana Charter, the Protocol of Provisional Application of the GATT (Protocol of 289 Protocol of Provisional Application, ~ 1. 290 GATT 1947, Article XXIX (the title of the Article is "the Relation of this Agreement to the Havana Charter."); Part II ofGATT 1947 consists of Article III to Article XXIII. It includes all the obligations pertinent to National Treatment on Internal Taxation and Regulation, Special Provisions relating to Cinematograph Films, Freedom of Transit, Anti-dumping and Countervailing Duties, Valuation for Customs Purposes, Fees and Formalities connected with Importation and Exportation, Marks of Origin, Publication and Administration of Trade Regulations, General Elimination of Quantitative Restrictions, Subsidies, General Exceptions, Dispute Settlement etc. 89 Provisional Application) was enforced through the ratification of the Executive branch of the United States government.291 Such flexibility contributed to the implementation of the GATT 194 7 as it "allowed most governments which would otherwise have needed to submit the GATT for legislative approval to approve the [Protocol of Provisional Application] by executive or administrative authority without going to the legislature."292 Another factor in the GA TT 194 7 agreement that facilitated its implementation without fundamental changes in the domestic legal system of Contracting Parties was the inclusion of a "grandfather clause." Paragraph l(b) of the Protocol of Provisional Application expressed that that the obligations in Part II of the GATT 194 7 were applicable "to the fullest extent not inconsistent with existing legislation" of Contracting Parties when they acceded to the GATT.293 3.2.2 Interim Commission for the International Trade Organization {ICITO} The existence of a secretariat in an international organization is an important factor that can impact the efficiency of the organization. In the context of the WTO, studying the evolution of the structure of the GATT secretariat from an agreement to an institution is 291 It is important to note that the Executive power was authorized to negotiate the GATT and it was not necessary for Congress to approve the outcome of negotiations. In contrast the ITO needed to be submitted to Congress for approval. For more information on status of the GATT in the United States domestic legal system see JOHN H. JACKSON, THE JURISPRUDENCE OF GATT AND THE WTO: INSIGHTS ON TREATY LAW AND ECONOMIC RELATIONS 198-259 (Cambridge University Press, 2000) (JACKSON, THE JURISPRUDENCE OF GATT AND THE WTO). 292 JOHN H. JACKSON, RESTRUCTURING THE GATT SYSTEM 14 (Council on Foreign Relations Press, 1990) (JACKSON, RESTRUCTURING THE GATT SYSTEM). 293 See JOHN H. JACKSON, THE WORLD TRADING SYSTEM: LAW AND POLICY OF INTERNATIONAL ECONOMIC RELATIONS 40 (The MIT Press, 1997) (JACKSON, THE WORLD TRADING SYSTEM) (noting that the clause provided an opportunity for Contracting Parties to report to '"grandfather rights' for any provision of its legislation that existed when it became a party, and that was inconsistent with a GATT ... obligation."). 90 helpful in better understanding one of the most important characteristics of the GA TT and WTO: the "Member-driven" feature. Contrary to the IMF or World Bank, the design of the GATT did not include a secretariat, as the GATT was not envisioned to be an institution. Rather, the International Conference on Trade and Employment, considering "pending" establishment oflTO, provided for an Interim Commission for the ITO (ICITO) in the Havana Charter.294 A small group of staff members constituted the ICITO, and as Jackson noted, that staff "became de facto the GA TT secretariat."295 As we will see, the GATT secretariat played a key role in establishing the institutional framework of the GA TT and WTO. 296 3.2.3 GAIT Rounds Examining the GATT Rounds of negotiations provides useful insight into the role of negotiators in creating of the GATT, and subsequently the WTO. By analyzing the rounds of negotiations, it is possible to perceive the different expectations that signatories had of the system. These expectations are crucial in this study as such expectations impact the signatories' point of view towards the legitimacy of the system as a whole. 294 See Resolution Establishing an Interim Commission for the International Trade Organization in Final Act of the United Nations Conference on Trade and Employment, Havana Charter for an International Trade Organization, 1948, U.N. Doc. ICIT0/1/4 (Havana Charter); Id. Annex (describing obligations of the Interim Commission); See JOHN H. JACKSON, WORLD TRADE AND THE LAW OF GATT: A LEGAL ANALYSIS OF THE GENERAL AGREEMENT ONTARIFFS AND TRADE 145-151 (The Bobbs-Merrill Company, Inc., 1969) (describing function of the GATT Secretariat). 295 JACKSON, RESTRUCTURING THE GATT SYSTEM 15 (explaining that the GATT Secretariat "was sort of leased group, whereby the GATT reimbursed the I CITO for the costs of the Secretariat."). 296 In Chapter Three,§ 3.3.2.5. I will explain that how the Legal Affairs in GATT and WTO evolved. Furthermore, I will discuss the role of the secretariat on institutional stability, integrity, and legitimacy. 91 For instance, the expectation of WTO Members towards the organization and its organs would be different depending on whether they viewed the main goal of the WTO as sustainable development or as limited to trade liberalization. To understand how the expectations of WTO Members have changed since the establishment of the GATT in 194 7, it is necessary to examine the evolution of the GA TT and WTO Rounds, and to analyze the expansion of the GA TT and WTO mandate from removing tariffs to non-tariff barriers. This part, however, is not intended to be a broad discussion on all the historical aspects of GATT Rounds. Rather, it focuses on issues that impact the perception of negotiators of the system. More specifically, this part will address developing countries' points of view towards the system. Eight rounds of negotiations took place from 1948 to 1994. The purpose of these rounds was to lower trade barriers. The first five rounds focused exclusively on tariff negotiations, and led to very successful tariff reductions. The average tariff cut in the first eight Rounds of negotiations was between 35 percent to 38 percent.297 Table 1: GATT Trade Rounds Subjects Covered , 297 JACKSON, THE WORLD TRADING SYSTEM 74 92 Source WTO Website 3.2.3.1 Shift from Tariff Negotiations to Non-Tariff Negotiations The Kennedy Round, which was the sixth round of GATT negotiations, opened a new chapter of the GATT system and marked a turning point in the evolut10n of the trade negotiations. In Kennedy Round, Contracting Parties amended the GA TT 194 7 and added Part IV entitled "Trade and Development" to the agreement. 299 Part IV required developed countries "to accord high priority to the reduction of trade barriers to products of developing countries."300 Paragraph 8 of Article XXXVI in Part IV contains one of the most important changes for developing countries, providing that "[t]he developed [C]ontracting [P]arties do not 298 Understanding the WTO The GATT Years from Havana to Marrakesh, WTO org, http //www wto org/enghsh/thewto_e/whatis_e/tJf_e/fact4_e htm#rounds (last VlSlted Mar 17, 2011) 299 Protocol Amendmg the GATT to Introduce a Part IV on Trade and Development, Feb 8, 1965, 572 UNT S 320 300 Golden Jubilee ofthe Multilateral Trading System, WTO org, http //www wto org/enghsh/news_e/pres98_e/pr88_e htrn (last v1s1ted Mar 17, 2011) 93 expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade ofless-developed [C]ontracting [P]arties." In practice, however, developing countries have not reaped meaningful benefits from the tariff reductions. 301 During the Kennedy Round, agricultural products were included into the trade negotiations for the first time. Although the Kennedy Round was successful in reducing tariffs on industrial goods,302 it was not as successful in concluding negotiations on non- tariff measures. Nonetheless, the negotiations resulted in various agreements on grains, chemical products and the 1967 Antidumping (AD) Code.303 The 1960s negotiations were under significant influence of the United States and the European Economic Community (EEC), "with a little bit of help from some of their industrialized-country friends."304 Osrty mentions, regarding the participation of developing countries in 1960s, that "[t]he developing countries were largely ignored as players (although this began to change in the 1970s, largely as a consequence of the OPEC oil shock)." 301 World Trade Report 2007, 185 (noting that "[t]he application of the principle was reflected in the fact that developing countries generally offered very few tariffs cuts and left the vast majority of tariffs unbound."). 302 The tariff cuts was "amounting to an average cut of 38 per cent covering two-thirds of developed countries' tariff-bound industrial imports, worth some $40 billion. The tariff reductions for textiles products, however, remained much below the average cuts for industrial products." See id. 184. 303 Agreement on the Implementation ofArticle VI ofthe General Agreement on Tariffe and Trade (1968), GATT B.l.S.D (15th. Supp.) at 74 (Later on, the AD Code was replaced by the second AD Code in Tokyo Round); See Agreement on the Implementation ofArticle VI ofthe General Agreement on Tariffe and Trade (1980). GATT B.I.S.D (26th Supp.) at 171. 304 Ostry, the WTO, Global Governance and Policy Options, 58. 94 The Tokyo Round followed the Kennedy Round in 1973 and lasted until 1979. Throughout this round, more developing countries were joining the GATT, and were "eager to shape the trading system in a way that would open up new export opportunities for them. "305 The negotiations resulted in "an average one-third cut in customs duties in the world's nine major industrial markets, bringing the average tariff on industrial products down to 4.7%."306 With the participation of 102 countries, the Tokyo Round developed agreements or "codes" dealing with non-tariff barriers including anti-dumping practices, customs valuation procedures, import licensing practices, technical standards for products, subsidies and countervailing measures, and government procurement. The negotiation on agricultural products was still one of the most challenging topics not only for developing countries, but for the developed economies of the United States and the EEC as well.307 The Tokyo Round ultimately "did not tackle some non-tariff measures in areas of interest to developing countries. It left intact the [non-tariff measures] on imports of agricultural goods and foodstuffs, textiles and clothing products, iron and steel products, consumer electronics, and shipbuilding. These barriers were 305 World Trade Report 2007, WTO.org, http://www. wto. org/english/res _ e/booksp_ e/anrep _ e/world_trade _report07 _ e. pdf (last visited Mar. 17, 2011). 306 Understanding the WTO: The GATT Years from Havana to Marrakesh, WTO.org, http://www.wto.org/english/thewto_ e/whatis_ e/tif_ e/fact4 _ e.htm#rounds (last visited Mar. 17, 2011 ). 307 World Trade Report 2007, 186 (noting that "[t]he negotiations on agriculture presented the greatest difficulty from the beginning. Attempts to reconcile the positions of the United States and the EEC failed during 1975 and 1976 and held up progress in almost every other area of the negotiations. In July 1977 both parties agreed to drop most substantive questions dividing them, such as market access and subsidies. This at least allowed the negotiations to go forward. At the end of the round, the negotiations in the Group on Agriculture resulted in two agreements (bovine meat and dairy products) and a proposal to establish a multilateral agricultural framework. Agriculture had, once again, proved intractable."). 95 substantial in the majority of developed countries and impeded considerably the exports of developing countries. The emerging economies in Asia were especially hurt by these measures "308 The bargain between the United States and EEC states was essential in concluding the Tokyo Round. 309 In spite of the significant number of developing countries represented compared to previous GATT Rounds, developing countries could not fully participate in the negotiations because the one country-one vote system adhered to by the GATT was used exceptionally in the Tokyo Round.310 After the Tokyo Round, the world began witnessing "increased protectionism" and a divide between northern and southern countries. 311 Under this backdrop, the first Ministerial meeting was held in Geneva almost three years after the conclusion of the Tokyo Round.312 However, the new negotiations were stalled due to "foot dragging by 308 Id. 188 (stating that "[t]he spokesman for the developing countries at the thirty-fifth session of the Contracting Parties held at the end of the Tokyo Round in Nov. 1979 expressed this frustration, stating that "it was difficult for the developing countries to determine what additional benefits were obtained in the negotiations, since the results did not correspond to their aspirations as expressed in the Tokyo Declaration." (footnote omitted)). 309 William Diebold Jr., From the ITO to GATT-And Back?, in THE BRETTON WOODS-GA TT SYSTEM: RETROSPECT AND PROSPECT AFTER FIFTY YEARS, 159 (Orin Kirshner ed. M.E. Sharpe Inc., 1996) (emphasizing on the role of the bargain between United States and EEC in conclusion of Kennedy and Tokyo rounds). 310 Id. (stating that "GATT is a one country- one vote body that is supposed to make decisions by majority of its many members, but the obvious difficulties of that process were avoided because, as two highly qualified witnesses put it, 'the practice developed early whereby the [Contracting Parties] do not proceed to a formal vote in reaching decisions' except in a few cases." footnote omitted.). 3JJ World Trade Report 2007, 189. 312 For detailed explanation of historical background of Tokyo and Uruguay rounds see JOHN CROOME, RESHAPING THE WORLD TRADING SYSTEM: A HISTORY OF THE URUGUA y ROUND (Kluwer Law International, 1999). 96 [E]EC, aided by a small group of developing countries led by Brazil and India" on "new" issues such services, intellectual property, and agriculture.313 In 1986 the declaration of Punta del Este launched a new round of negotiations, designated as the Uruguay Round. 314 At the beginning of the Uruguay Round, Contracting Parties determined "to develop a more open, viable and durable multilateral trading system."315 Many deficiencies had been identified in the GA TT system before the launching of the Uruguay Round. Those deficiencies were, inter alia, a weak and slow dispute settlement system, exsitence of GA TT grandfathered practices, voluntary export restraints, exclusion of subjects like agriculture and textiles, and the exclusion of many developing countries from meaningful participation in the negotiations. Reflecting the fact that the majority of participants were comprised of developing countries, the Punta del Este declaration outlining the "general principles governing negotiations" emphasized the need to pay special attention to LDCs and developing countries.316 The mandate of the Punta Del Este declaration was very broad and covered various subjects including tariffs, non-tariff measures, tropical products, natural resource- based products, textiles and clothing, agricultural products, safeguards, subsidies and countervailing duties, dispute settlement, trade related aspects of intellectual property, 313 The Uruguay Round, WTO.org, http://www.wto.org/trade_resources/history/wto/urug_round.htm (last visited Mar. I 7, 20 I I); See also Ostry, the WTO, Global Governance and Policy Options, 58. 314 GATT, Ministerial Declaration on the Uruguay Round of20 Sept. I986, MIN.DEC, at 6 (1987) (Punta Del Este declaration). 315 Id. Part I. 316 Id. Part I, § B:iv-vii. 97 trade-related investment measures, and trade in services. The following table illustrates the chronology of negotiations from September 1986 to January 1995. The scope of the WTO covered agreements expanded significantly in the Uruguay Round compared to previous rounds. The WTO covered agreements that emerged from the rounds include about 60 agreements, annexes, decisions, and understandings. The agreements can be separated into six parts: an umbrella agreement (the Agreement 317 The "QUAD countries" included the United States, EU, Japan, and Canada. 318 Understanding the WTO: The Agreements Overview: a navigational guide, WTO.org, http://www. wto. org/english/thewto _ e/whatis_ e/tif_ e/agrm 1_ e.htm (last visited Mar. 17, 2011). 98 Establishing the WTO); agreements for goods, services, and intellectual property, respectively; dispute settlement mechanism; and reviews of governments' trade policies. Table 3: WTO Agreements Umbrella Basic principles GATS 319 Addit10nal detai • 111 ls ,. 1!frvje ,. ~< 1111 'fp 11 Market access 1 Cou~tries' '""4 tlft ~ ¥ 1.. ~ commitments scnedeiles 1 of \ c~m'i'1 i 1tments (~hd MFN1 ,uxerJipti The achievements of the Uruguay Round were beyond comparison to the previous rounds in terms of the scope of subjects covered in trade negotiations and the design of an institutional structure to deal with dispute settlement. First, the Uruguay Round succeeded in bringing agricultural products and textiles into the multilateral trading rule-based system. Despite meaningful advancements, however, negotiation on market access, domestic support, and export subsidies on agricultural and textile products remains a difficult and sensitive trading subject among WTO Members. 319 General Agreement on Trade m Services, Apr 15, 1994, 1869 UN TS 183 (GATS) 320 Agreement on Trade-Related Aspects oflntellectual Property Rights, Apr 15, 1994, 1869 UN TS 299 (TRIPS Agreement) 321 The Uruguay Round, WTO org, http //www wto org/trade_resources/h1story/wto/urug_round htm (last VlSlted Mar 17, 2011) 99 The comparative advantage of developing countries resides in the export of agricultural and textile products as well as cheap labor. To take advantage of this, developing countries and LDCs negotiated for more market access and less domestic support and subsidies by developed countries. However, developed countries were unwilling to cut subsidies to their domestic producers. 322 Second, services and intellectual property rights were included in the Uruguay Round, significantly expanding the scope of the WTO. GATS and TRIPS set out principles, rules, and procedures for liberalization of trade in these two fastest growing sectors of the global economy. Third, the Uruguay Round made substantial improvements to some deficiencies of the GATT 1947. For example, Article VI of the GATT 1947 allows countries to take action against dumping. The Anti-Dumping Agreement that was incorporated into the GATT 1947 during the Uruguay Round clarified and expanded the scope of the Article VI. Another example is the Agreement on Subsidies and Countervailing Measures (SCM Agreement), which expanded Article XVI of the GATT 1947. Fourth, the Uruguay Round finally created an international organization to replace the GATT. This resulted in the creation of the most efficient international dispute settlement system lauded my many scholars and practitioners as "the jewel in the crown" of the trading system.323 322 Moreover, developed countries have applied the Generalized System of Preferences (GSP) in a discriminatory manner among developing countries and LDCs. See generally AB Report, European Communities - Conditions for the Granting of Tari.ff Preferences to Developing Countries, WT/DS246/AB/R (Apr. 20, 2004) (AB Report EC - Tari.ff Preferences). 323 See JOHN H. JACKSON, SOVEREIGNTY, THE WTO AND CHANGING FUNDAMENTALS OF INTERNATIONAL LAW 135 (Cambridge University Press, 2006) (JACKSON, SOVEREIGNTY, THE WTO AND CHANGING FUNDAMENTALS OF INTERNATIONAL LAW); See also Roderick Abbott, WTO Disputes: The Battles in the Trade Wars - a Win-Win Game? Or a Lottery?, in EUROPEAN INTEGRATION AND INTERNATIONAL Co- 100 3.2.3.2 Was the Uruguay Round a "Grand Bargain" for Developing Countries, LDCs, and Developed Countries? The Marrakesh Agreement was signed in April 1994 by ministers from 123 countries. Most of the signatories were from developing countries and LDCs. While reaching a consensus among the vast number and diverse backgrounds of the signatories was a monumental achievement, this did not mean that all countries were in alignment about the various terms of the agreement. Market access for agriculture and textile products remained a serious issue for developing countries and LDCs throughout the Uruguay Round. Meanwhile, many domestic stakeholders and constituents of developed countries, including big multinational corporations, were pushing their governments to include agreements on services and protection of intellectual property rights into the WTO system. 324 Sylvia Ostry describes a deal between developing and developed countries in the 325 Uruguay Round as the "North-South Grand Bargain" - "an implicit deal: the opening of OECD markets to agriculture and labor-intensive manufactured goods, especially textiles and clothing, for the inclusion into the trading system of trade in services (GATS), intellectual property (TRIPS) and (albeit to a lesser extend than originally demanded) investment (TRIMS). And also - as a virtually last minute piece of the deal - ORDINATION: STUDIES IN TRANSNATIONAL ECONOMIC LAW IN HONOUR OF CLAUS-DIETER EHLERMANN 1- 38 (Armin von Bogdandy, Petros C. Mavroidis and Yves Meny eds. Kluwer Law International, 2000) (Abbott, WTO Disputes); See also Chapter Four, § 4.1. explaining the WTO dispute settlement system bodies in details. 324 Ostry, the WTO, Global Governance and Policy Options, 59-60 (explaining the role of the US multinational enterprises and corporations in the Uruguay rounds). 325 Sylvia Ostry, The Uruguay Round North - South Grand Bargain: Implications for Future Negotiations, in THE POLITICAL ECONOMY OF INTERNATIONAL TRADE LAW, 285-300 (Daniel L. M. Kennedy and James D. Southwick eds. Cambridge University Press, 2002). 101 the creation of a new institution, the [WTO], with the strongest dispute settlement mechanism in the history of international law."326 Osrty quotes one of the negotiators from a southern country as saying "TRIPS was part of a package in which we got agriculture. "327 In practice, however, developing countries were not given the level of developed countries market access in agricultural products and textiles that they had expected. Osrty mentions that the Grand Bargain became a "Bum Deal" and "[t]here was far less opening in agriculture than expected and the reduction of restrictions on textile and clothing was back-loaded and more than offset by the impact of China."328 The result was a negative perception against what developing countries can gain from these rounds of negotiations. Furthermore, expanding the scope of trade negotiations from border and tariff measures to non-tariff measures not only in the goods sector but also in services and intellectual property has been a significant burden for developing countries and LDCs. These changes "would require a major institutional upgrading and change in the infrastructure of most Southern countries. Such changes take time and cost money."329 Moreover, the single undertaking mechanism implemented during the Uruguay Round created imbalance in the system. Negotiators at the beginning of Uruguay Round 326 Id. 287. 327 Ostry, the WTO, Global Governance and Policy Options, 60 (citing Peter Drahos with John Braithwaite, Who Owns the Knowledge Economy? Political Organizing Behind TRIPS, Comer House: Briefing 32, 2004). 328 Id. 58-59. 329 Id. 59. 102 negotiation emphasized in the Punta Del Este declaration that "[t]he launching, the conduct and the implementation of the outcome of the negotiations shall be treated as parts of a single undertaking."330 Single undertaking means that "all participants in the negotiation who wished at the end to become members of the new organization ... would be required to accept all the obligations of the massive treaty complex."331 Weiler describes the imbalance created by the single undertaking as follows: It is the imbalance between the overall normative, organizational and administrative umbrella provided by the [s Jingle WTO [u ]ndertaking accepted by all Members, developed and developing, which extends to, legitimates with the aura of multilateralism, and enforces a series of often mean spirited, ungenerous package of bilateral tariff agreements. This imbalance is com~ounded of course by the huge economic differentials among the parties. 32 This made it very burdensome for developing countries and LDCs not to join the WT0.333 3.2.4 Doha Round as Doha Development Agenda Some provisions of the Uruguay Round agreements have provided for further negotiations on various subjects including agricultural products, services, and intellectual property. 334 330 See Punta Del Este Declaration, Part I, B:ii. 331 JACKSON, SOVEREIGNTY, THE WTO AND CHANGING FUNDAMENTALS OF INTERNATIONAL LAW 100 (describing the difference between GATT a la carte and single undertaking feature of the Uruguay round). 332 Weiler, Geology ofInternational Law, 554-555. 333 Id. 557-558 (noting that "[o]ne cannot afford to be out, and one cannot afford to leave."). 334 For example see Article 20 Agreement on Agriculture, Article 19 ofGATS, or Article 23.4 of TRIPS Agreement. 103 The General Council in December 2000 made a decision to initiate negotiations on implementation issues and concerns regarding the Agreement on Agriculture, SPS and TBT Agreements, Agreement on the Implementation of Article VII of the GATT 1994, Agreement on Rules of Origin, and the SCM Agreement.335 In November 2001, the Ministerial Conference in Doha, Qatar launched the first multilateral trade negotiations specifically dedicated to the needs of developing countries. The Doha Declaration explicitly notes that the majority of WTO Members are developing countries, and that WTO Members "seek to place [developing countries'] needs and interests at the heart of the Work Programme adopted in this Declaration."336 The Declaration further states that WTO Members "shall continue to make positive efforts designed to ensure that developing countries, and especially the least-developed among them, secure a share in the growth of world trade commensurate with the needs of their economic development. "33 7 3.2.4.1 Subjects Covered by Negotiations The Doha Declaration lists a number of subjects for negotiation under the Doha Round. These subjects include implementation-related issues and concerns, 338 agriculture, 339 335 WTO, General Council, Decision on Implementation Issues and Concerns, WT/L/384 (Dec. 19, 2000). 336 World Trade Organization, Ministerial Declaration of 14 November 2001, WT/MIN(Ol)/DEC/l, 41 I.L.M. 746 (2002). 337 Id. 338 Doha Declaration, if 12. 339 Id. ifif 13-14. 104 services,340 market access for non-agricultural products,341 trade-related aspects of intellectual property rights (TRIPS),342 relationship between trade and investment,343 interaction between trade and competition policy,344 transparency in government procurement,345 trade facilitation,346 WTO rules: anti-dumping and subsidies,347 WTO rules: regional trade agreements,348 Dispute Settlement Understanding,349 trade and environment,350 electronic commerce, 351 small economies,352 trade, debt and finance, 353 340 Id. if 15. 341 Id. if 16. 342 Id. iii! 17-19. 343 Id. iii! 20-22. 344 Id. ifif 23-25. 345 Id. if 26. 346 Id. if 27. 347 Id. if 28. 348 Id. ir 29. 349 Id. if 30. 350 Id. irir 31-33. 351 Id. if 34. 352 Id. if 35. 353 Id. if 36. 105 trade and technology transfer,354 technical cooperation and capacity building,355 LDCs,356 and special and differential treatment. 357 Table 4: Key Dates after Doha Round Place/Name Subjects Covered . ~ - 354 Id. ir 37. 355 Id. ifif 3 8-41. 356 Id. iii! 42-43. 351 Id. if 44. 106 Source WTO Website 358 3.2.4.2 Failure of Negotiations So far, the Doha Round negotiations have missed several deadlines and have yet to be concluded.359 It is not clear as to whether it is even possible for 153 countries to reach to a consensus that will lead to the conclusion of the Doha Round negotiations. The wide variety of subjects covered by the round may render the possibility of a consensus unrealistic. Despite the uncertainties, examining the special circumstances that existed at the conclusion of the Uruguay Round is helpful in providing a framework for contemplating the outcome of the Doha Round. First, negotiators were not aware of the exact dimension of the organization that they were establishing. Second, the historical and political environment of 1994 was much different from that of 2010 in that countries had much lower expectations of the WTO. Considering these circumstances it is possible to conclude that a conclusion of the Doha Round in near future is unlikely unless WTO Members lower their expectations or limit the scope of the negotiation agenda. 358 Doha Development Agenda Negotrat1ons, lmplementatwn and Development, WTO org, http //www.wto org/enghsh/tratop_e/dda_e/negotiations_summary_e htm (last v1s1ted Mar 17, 2011). 359 The origmal deadline was 1 Jan 2005 and since then the deadlmes are being missed. 107 Some diplomats and scholars have not been very optimistic about future of the Doha Round.360 The result of my interviews with delegates at the WTO demonstrates that 37% of interviewees were "uncertain" about the future of the Doha Round. 70 60 so 40 II Near Future (less than 5 , 30 years) 20 •Uncertain 10 0 - - l Near Future (less than 5 Uncertain years) Figure 3: Opinion of Interviewees on Conclusion of the Doha Round The possible failure of the Doha Round of negotiations is important to our study as the deadlock in the political decision-making body of the WTO will have an impact on the role of the adjudicative body of the WTO. First, a failed Doha Round would impede the application of new changes to improve the dispute settlement system, which, consequently, would not be able to function efficiently. 360 Ostry, the WTO, Global Governance and Policy Options, 68 (stating that "I think the Doha Round ... is unlikely to be a success."); See also Simon Crean, Protectionism and the Global Economic Crisis - the Role of Trade in the Response, in THE GREAT TRADE COLLAPSE: CAUSES, CONSEQUENCES AND PROSPECTS, 16- 17 (Richard Baldwin and Simon Evenett eds. A VoxEU.org Publication, 2009); See also News Summary for WTO Reference Centres and Non-resident Missions, WTOCENTER.ORG. tw,http://www.wtocenter.org. tw/SmartKMS/do/www/readDoc?document_id= l 07089 (last visited Mar. 17, 2011) (quoting Canada trade minister: "[w]e're firmly committed to Doha, we'd like to see progress there, but we also have to be realistic. Realistically, an agreement is not imminent there."). 108 Meanwhile, issues that have not been resolved in the political organ of the WTO will be brought into the disputes settlement system by WTO Members. For example, ifthe issue of defining "developing countries" under the special and differential treatment provision or disputes regarding climate change were to be raised before the WTO adjudicative body, panelists or the AB would be left to rule on subjects that have not been negotiated among WTO Members, negatively impacting the legitimacy of the WTO. 3.3 Evolution of Dispute Settlement The dispute settlement system of the WTO has continued to evolve since the establishment of the GATT 194 7. In this part, the historical evolution of the dispute settlement system from a diplomatic practice to a rule-based system will be examined. An examination of the process in which the dispute settlement system was detached from the political organ of the WTO is important in understanding the current dispute settlement process. 3.3.1 Dispute Settlement in ITO and Havana Charter Chapter VIII of the Havana Charter (Article 92 to 97) has been devoted to "settlement of differences."361 Although the ITO never came into force, the dispute settlement mechanism that was built into the Havana Charter provides useful insight into the history of interaction between the diplomatic and legal branches of the WTO. Not only is an 361 See Havana Charter, Chapter VIII. It is interesting to note that drafters of the ITO Charter did not use the term "dispute settlement" and rather they used "settlement of differences." 109 understanding of how drafters of the Havana Charter envisioned the ITO dispute settlement system provide a useful lens through which the GATT and WTO dispute settlement system should be perceived, but the negotiators who drafted the ITO Charter more or less constituted the same group that drafted the GA TT dispute settlement mechanism. 362 The Havana Charter prohibited ITO members from resorting to dispute settlement mechanisms other than the ITO for settlement of ITO disputes.363 This compulsory jurisdiction has been inherited in the WTO dispute settlement system. Prohibition of "recourse to unilateral economic measures of any kind contrary to the provisions of' Chapter VIII of the Havana Charter was another important feature of the ITO dispute settlement mechanism. 364 The Charter provided four stages for the settlement of disputes "if any benefit ... directly or indirectly, implicitly or explicitly, under any of the provisions of this Charter other than Article 1, is being nullified or impaired."365 The stages consisted of consultation and arbitration, reference to the Executive Board,366 reference to the Conference,367 and finally, reference to the International Court of Justice (ICJ). 362 ROBERT HUDEC, ESSAYS ON THE NATURE OF INTERNATIONAL TRADE LAW 35 (Cameron May, 1999) (HUDEC, ESSAYS ON THE NATURE OF INTERNATIONAL TRADE LAW) 363 Havana Charter, Article 92: 1. 364 Id. Article 92:2 365 Id. Article 93: 1. 366 Id. Article 78: 1 ("[t]he Executive Board shall consist of eighteen Members of the Organization selected by the Conference."). 367 Id. Article 74:1 ("[t]he Conference shall consist of all the Members ofthe Organization."). 110 • T'"le Co,,..plaiant may make \Ailritten representations or proposals to ~uch other Member or Members as it considers to be coneerried1 and the Members receiving them sl-1all gh1e sympathetic col'\sideration thereto (Art. 93:1) • Tne Mernbers concerned may submrt the matter arisino under JJ.af'digrii1ph 1 to arbitr.rti-:>n llpoli terrrs agreed between them; Pro\11ded that tl"ie dectsion of the arbitrat.:)r shall not be binding for any pt.ri:ose upon the Orpn12ation or tipon any Member other th:an the Member.$ partidpating in the arbitration. {Art. 93:2) • If the re!.Ult i~ not stisfctor•1, the matter may be refel"red by ary IVleml>er concered to the Executive Uo::u-d 1;Art 94) • Tne Exerntwe lloard shall 1ale o~e cf the following steps: (•I ~ecide that the matter doe• - call for •nv action, (b) recorrimend further oonsultahon to the Members concerned; (cl refer the matter to arbitration upon such term! as mai-y be agreed bEtween the Exerutive Board and the Members concerned; (d) n any mattt•r arising under p~1rairaph 1 (a) of A~cl:! 931 request the Member concern:!d to take such action as may he n·~c~ssar"; for the Meniberto conform tc tile provisions oftnis Charter; (e) in any matter arislng under sub~parasrnph ~b) or (c) of para&raJ:h 1 of Article 93, ma~.e such recommendations ta Members ii$ wil beit assist the Memb·~rs concerned and contribute to a satisfactory adjustment. •The Executive Board can deode aboJt the matter or in some cases release the Member affected from the obligation ortt'le grant of concassill>r.s to al"ly ether Member (Art. 94:3) • The Executive Board shalt If requested to do so within thirt'/ days by a Member concerned. refer to the Conference to review anv action, decistcn or rerommenda~on by the E.teeutive Board (Art 9Sl • Tne Co'l·'erence shall confirm, modify or reverse such action .. decision or rec.omrr.e'lc!atlon referred t:o It under thlS paragraph. (Art. 95:1) • Tne Con1l!rence also may release the Member or Membe~ affected from obisations or the grant of concessicns to any oilier Member orMemberstnder or pursuant tc tllis Charte- fArt, 95;3) •Any cec:i$ion of the Conferere:e undertt.is cn.arter sh.all, at the instan~ of any Member who>einter~sts are prejudict!d by the decision, be sub;eetto review by the International Ccurt of Jus.tice by mean.sot a l'equest, in approprlote form, for an advisory opinion ?Ur>u•nt to the Statute of the Court. (Art. 9li) Figure 4: Settlement of Differences under the Havana Charter368 368 Pursuant to Article 78: 1, the Executive Board shall consist of eighteen Members of the Organization selected by the Conference. Under Article 74: l, the Conference shall consist of all the Members of the Organization. 111 The Conference, as a "political appellate review mechanism,"369 was assigned to review decisions of the Executive Board. Similar to the AB in the WTO system, the ICJ was able to review "legal questions arising within the scope of the activities of the Organization."370 However, the results were not to be binding, but considered "advisory."371 The Havana Charter also foresaw an opportunity to withdraw from the ITO in certain specified circumstances. Article 95:4 of the Havana Charter states: When any Member or Members, in accordance with the provisions of paragraph 3, suspend the performance of any obligation or the grant of any concession to another Member, the latter Member shall be free, not later than sixty days after such action is taken, or if an opinion has been requested from the International Court of Justice pursuant to the provisions of Article 96, after such opinion has been delivered, to give written notice of its withdrawal from the Organization. Such withdrawal shall become effective upon the expiration of sixty days from the day on which such notice is received by the Director-General. As discussed previously, the ITO Charter was drafted by the United States and accepted as a basis for further discussions. 372 It is important to note the concept of "reciprocity" in bilateral trade agreements adhered to by the United States that significantly impacted the structure of the GATT 1947 and the ITO Charter.373 Hudec explains the importance of the concept of reciprocity: 369 THOMAS A. ZIMMERMANN, NEGOTIATING THE REVIEW OF THE WTO DISPUTE SETTLEMENT UNDERSTANDING 40 (Cameron May, 2005) (ZIMMERMANN, NEGOTIATING THE REVIEW OF THE WTO DSU). 370 Havana Charter, Article 96: 1. 311 Id. 372 See Chapter Three, § 3 .1. 373 HUDEC, ESSAYS ON THE NATURE OF INTERNATIONAL TRADE LAW 18. 112 The Core of the typical U.S. trade agreement was a schedule of tariff reductions to be made by each of the parties. The tariff reductions were treated as a bargained-for exchange, one country's tariff reductions being paid for, in theory, by the reductions on the other side. In order to protect this "reciprocity," the tariff reductions themselves were encased in a larger agreement setting out a number of other obligations meant to insure that the commercial value of the lower tariffs would not be frustrated by trade restrictions of another kind.374 The concept of reciprocity extended not only to tariff concessions, but also to the dispute settlement mechanism that was designed into the Havana Charter. Zimmermann identifies "the preservation of the balance of rights (or benefits) and obligations" as "the core concept" Of the Havana Charter.375 He adds that use of a broad concept of "nullification or impairment" of trade benefits to cover "all potential restrictions" and permitting a party to withdraw from the ITO were "considered sufficiently protective of reciprocity."376 In the evolution of dispute settlement in the GATT and the WTO, one can perceive the concept of "reciprocity" and "balance" as one of the main goals in the WTO dispute settlement system as well as a limiting factor in the scope of the enforcement mechanism. For instance, the prevailing party in a dispute at the WTO can suspend its concessions equal to the amount that has been determined by arbitrators under Article 22.6 of the DSU, preferably in the same sector, i.e. goods, services, intellectual property. Hudec points out that in designing the dispute settlement mechanism in the Havana Charter, the focus was more on ensuring available remedies rather than establishing "any 374 Id. 18-19; See also ZIMMERMANN, NEGOTIATING THE REVIEW OF THE WTO DSU 42 (noting the importance ofreciprocity U.S. trade agreement). 375 ZIMMERMANN, NEGOTIATING THE REVIEW OF THE WTO DSU 42. 376 Id. 113 sort of export tribunals."377 Such approach was inherited in the GATT and subsequently in the WTO. The ITO never came into existence, and therefore, Chapter VIII of the Havana Charter did not become enforceable. 3.3.2 The GATT 1947 Provisions of Dispute Settlement As noted, the Protocol of Provisional Application of the GATT was enforceable only "provisionally." Additionally, the existence of grandfather rights allowed the GATT signatories to maintain laws inconsistent with the GATT provisions. 378 The survival of the GATT 194 7 can be attributed largely to these two characteristics. There were two provisions in the GATT system that dealt with dispute settlement: Article XXII: Consultation I. Each [C]ontracting [P]arty shall accord sympathetic consideration to, and shall afford adequate opportunity for consultation regarding, such representations as may be made by another [C]ontracting [P]arty with respect to any matter affecting the operation of this Agreement. 2. The [C]ontracting [P]arties may, at the request of a [C]ontracting [P]arty, consult with any [C]ontracting [P]arty or parties in respect of any matter for which it has not been possible to find a satisfactory solution through consultation under paragraph 1. Article XXIII: Nullification or Impairment l. If any [C]ontracting [P]arty should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of (a) the failure of another [C]ontracting [P]arty to carry out its obligations under this Agreement, or 377 HUDEC, ESSAYS ON THE NATURE OF INTERNATIONAL TRADE LAW 28-29; The discussion of suspension of obligations and monetary compensation also came up in the ITO negotiations. 378 Id. 37; See also JACKSON, THE WORLD TRADING SYSTEM 40. 114 (b) the application by another [C]ontracting [P]arty of any measure, whether or not it conflicts with the provisions of this Agreement, or ( c) the existence of any other situation, the [C]ontracting [P]arty may, with a view to the satisfactory adjustment of the matter, make written representations or proposals to the other [C]ontracting [P]arty or parties which it considers to be concerned. Any [C]ontracting [P]arty thus approached shall give sympathetic consideration to the representations or proposals made to it. 2. If no satisfactory adjustment is effected between the [C]ontracting [P]arties concerned within a reasonable time, or if the difficulty is of the type described in paragraph 1 (c) of this Article, the matter may be referred to the [C]ontracting [P]arties. The [C]ontracting [P]arties shall promptly investigate any matter so referred to them and shall make appropriate recommendations to the [C]ontracting [P]arties which they consider to be concerned, or give a ruling on the matter, as appropriate. The [C]ontracting [P]arties may consult with [C]ontracting [P]arties, with the Economic and Social Council of the United Nations and with any appropriate inter-governmental organization in cases where they consider such consultation necessary. If the [C]ontracting [P]arties consider that the circumstances are serious enough to justify such action, they may authorize a [C]ontracting [P]arty e or parties to suspend the application to any other [C]ontracting [P]arty or [P]arties of such concessions or other obligations under this Agreement as they determine to be appropriate in the circumstances. If the application to any [C]ontracting [P]arty of any concession or other obligation is in fact suspended, that [C]ontracting [P]arty shall then be free, not later than sixty days after such action is taken, to give written notice to the Executive Secretary to the Contracting Parties of its intention to withdraw from this Agreement and such withdrawal shall take effect upon the sixtieth day following the day on which such notice is received by him. Designed for implementation in the ill-fated ITO, these two provisions nevertheless became the basis of the GATT dispute settlement process for almost 50 years. Based on these provisions, the evolution of the GATT dispute settlement mechanism has proceeded in various stages since 194 7. 3.3.2.1 Chairman Rulings in 1948 In the early years of the GATT 1947, rulings on disputes between [C]ontracting [P]arties were made by the Chairman of the GATT Council. In 1948, three cases were initiated, of 115 which the Chairman decided the first two. The first case was Cuba - Consular Taxes,379 a dispute by the Netherlands against Cuba, and the second case was India - Tax Rebates,380 a dispute raised by Pakistan against India. It is interesting to note that the length of both decisions is all of one paragraph. For example, in India - Tax Rebates the report states in its entirety: In response to a request for an interpretation of paragraph 1 of Article I with respect to rebates of excise duties, the Chairman ruled to the effect that the most favoured-nation treatment principle embodied in that paragraph would be applicable to any advantage, favour, privilege or immunity granted with respect to internal taxes. One cannot help but notice the stark contrast with recent panel reports such as EC and certain member States - Large Civil Aircraft, which was 1050 pages excluding its annexes.381 The panel was composed on October 17, 2005 and the report was circulated five years later. The extended length of the reports as well as the longer timeframe for circulation shows how the adjudication process has evolved and that settlement of disputes is no longer a purely diplomatic process. 379 Ruling by the Chairman, The Phrase "Charges ofany Kind" in Article I: 1 in Relation to Consular Taxes (Aug. 24, 1947), GATT B.l.S.D. 11/12. 380 Ruling by the Chairman, Application ofArticle I: 1 to Rebates on Internal Taxes (Aug. 24, 1948), GATT B.l.S.D. 11/12. 381 See Panel Report, European Communities and Certain Member States - Measures Affecting Trade in Large Civil Aircraft, WT/DS316/R (circulated to WTO Members June 30, 2010) (appeal in progress); However, one should note that the EC and certain member States - Large Civil Aircraft panel report is an exceptional report in the history of the WTO dispute settlement system. 116 3.3.2.2 Working Parties After 1948, disputes were referred to "working parties." Working parties were composed of representatives from all interested Contracting Parties, including the parties to the dispute.382 In addition to the disputing parties, "major powers" and developing countries also participated in the working parties, 383 which operated in the form of ad hoc negotiations.384 The reports were adopted by consensus.385 Cuba - Textiles f3 86 was the first dispute that was referred to the working parties. At the end of the report the working party emphasized that the ruling "will not in any way impair the rights or obligations of the Government of Cuba or of the Government of the United States under the General Agreement on Tariffs and Trade."387 The working parties continued to negotiate disputes until 1951. From September 1948 until 1951, five cases were handled by working parties. 388 Eventually, contracting 382 Historic Development ofthe WTO Dispute Settlement System, WTO.org, http:llwww.wto.org/english/tratop _ eldispu_eldisp _settlement_cbt_ elc2s Ip 1_ e.htm (last visited Mar. 17, 2011). 383 ROBERT E. HUDEC, ENFORCING INTERNATIONAL TRADE LAW: THE EVOLUTION OF THE MODERN GATT LEGAL SYSTEM 30 (Butterworth Legal Publishers, 1993) (HUDEC, ENFORCING INTERNATIONAL TRADE LAW). 384 Id. 29-30. 385 Historic Development ofthe WTO Dispute Settlement System, WTO.org, http :Ilwww.wto.org/ english/tratop _el dispu _eldisp _settlement_cbt _el c2s Ip I_e.htm (last visited Mar. 17, 2011). 386 Working Party Report, Report of Working Party 7 on the Cuban Schedule, GATTICP.2143, Sept. 13, 1948 (unadopted). 387 Id.; It is interesting to note that the Working Party emphasized that its decisions do not impair the rights and obligations of Governments. Such concern was reflected in the GATT and the WTO. See for example Article 3:2 the DSU. 388 GATT Panel Reports, Working Party Reports, Arbitrations and Decisions, WORLDTRADELAW.NET, http:/lwww. worldtradelaw.netlreportslgattpanelslgattpanels.asp (last visited Mar. 17, 2011 ). 117 members decided to have their disputes settled by a third party panel of experts. A revival of the working parties can be seen between 1996 and 1975, during which time some cases were decided by working parties.389 Resolving disputes by a third party panel of experts emphasized both on neutrality and expertise of the dispute settlement system. 3.3.2.3 The Panel on Complaints In 1952, the Contracting Parties established "the panel on complaints."390 Panels on complaints were composed of "diplomats from neutral countries, few of whom had formal legal training."391 The panel was to be comprised of three to five independent experts "unrelated to the parties of the dispute."392 After writing the reports which included the recommendations and rulings of the panel, the reports were sent to the GATT Council. If the GATT Council approved the reports by consensus, they would become binding on the parties.393 The GATT Council was composed of all GATT 389 See for example Working Party Report, Greece-Preferential Tariff Quotas to the USSR, L/3447 (Dec. 2, 1970), GATT B.I.S.D. 18Sll79. 390 HUDEC, ENFORCING INTERNATIONAL TRADE LAW 30. 391 Id. 392 Historic Development ofthe WTO Dispute Settlement System, WTO.org, http :Ilwww.wto.org/ english/tratop _el dispu _el 393 Historic Development ofthe WTO Dispute Settlement System, WTO.org, http :Ilwww.wto.org/ english/tratop _el dispu _el Contracting Parties.394 The Council was provided with broad power to deal with "such other matters with which the [Contracting Parties] may deal at their sessions."395 These panels were considered "informal institution[s]."396 In fact, the GATT Secretariat did not even have a legal office. However, "the GATT Secretariat happened to have some skillful senior officials who were assigned to manage panel proceedings and who were adept at writing brief, low-visibility legal opinions that said just enough to dispose of the case."397 Moving toward a neutral group of experts was a turning point in the evolution of the GATT dispute settlement mechanism. Settling disputes in political negotiations is by nature different from adjudicating disputes through a neutral group of experts. This shift illustrates the gradual divergence of political and legal branches in the structure of the GATT. However, this does not mean that the two branches would not influence each other. One of the results of this divergence can be exemplified in the interpretative methods used by current panels and the AB in referring to the weight of the negotiation history of provisions as well as the textual and contextual meaning of provisions of the WTO agreements. 394 WTO, DISPUTE SETTLEMENT REPORTS 2000: VOL. FOUR 1822 (CAMBRIDGE UNIVERSITY PRESS, 2000) (WTO, DISPUTE SETTLEMENT REPORTS 2000). 395 Id. 1822 and 1823 (footnote omitted). 396 HUDEC, ENFORCING INTERNATIONAL TRADE LAW 30. 397 Id. (Hudec explains that in early years Jean Royer, Deputy Executive Secretary was in charge oflegal opinion. Later Finn Gundelach of Denmark succeeded his role. Later Sir Eric Wyndham - White, the Executive Secretary of the Secretariat, did not participate directly in legal rulings and he was a "strong proponent" of having legal office at the GATT Secretariat.). 119 Contrary to the procedures followed by the working parties, the panel on complaints deliberated disputes and drafted reports in the absence of the disputing parties.398 During the 1950s, 53 cases were brought to the GATT system. Among those, the panel ruled on 21, of which 15 violations were found. 399 The number of disputes dropped significantly in the 1960s, with only seven disputes brought throughout the entire decade.400 The "anti-legalism"401 or decrease in the GATT legal activity, at least in Hudec's view, was the result of two changes: first, creation of the EEC and second, the increase of developing countries' membership to the WT0.402 On April 5, 1966, during the Kennedy Round, the Contracting Parties of the GATT made a decision on procedures under Article XXIII. 403 Specifically, the Contracting Parties agreed to recognize the importance of "prompt dispute settlement" and its impact on economic development404 by providing for a multi-stage dispute settlement process for disputes between LDCs and developed countries: 398 ZIMMERMANN, NEGOTIATING THE REVIEW OF THE WTO DSU 47. 399 See HUDEC, ENFORCING INTERNATIONAL TRADE LAW 289 (see Table 11.9). 400 Id. 401 Robert E. Hudec, The Role ofthe GAIT Secretariat in the Evolution ofthe WTO Dispute Settlement Procedure, in THE URUGUAY ROUND AND BEYOND: ESSAYS IN HONOUR OF ARTHUR DUNKEL, 109 (Jagdish Bhagwati and Mathias Hirsch eds. Springer, 1998) (Hudec, The Role ofthe GATT Secretariat in the Evolution ofthe WTO Dispute Settlement Procedure). 402 Id.; See also THE GATT URUGUA y ROUND: A NEGOTIATING HISTORY 1986-1992, VOL. Two, 2679-2680 (Terence P. Stewart ed. Kluwer Law International, 1993) (Stewart ed. THEGATTURUGUAYROUND) (describing the reasons of anti legalism as following: growing concern among Contracting Parties on ineffectiveness of the GATT dispute settlement mechanism, outdated the GATT rules, and use of sophisticated measures that were not covered by the GATT rules). 403 GATT, Decision of5 Apr. 1966 on procedures under Article XXIII, 14S/18, Apr. 5 1966 (GATT Decision 1996). 404 GATT Decision 1996, preamble. 120 Figure 4: Disputes between LDCs and Developed Countries under Article XXIII of the GATT 1947 3.3.2.4 Revival of Disputes in 1970s The result of the Tokyo Round was the adoption of various "codes." Codes were essentially agreements focusing on non-tariff barriers, and constituted a significant step towards multilateralism. The codes were not binding on all Contracting Parties but were "plurilateral," and thereby only binding on those that chose to adopt the codes. The codes contained their own dispute settlement procedures, which were applicable to parties that were signatories of the specific code. For example, Article 15 of the 121 Agreement on Implementation of Article VI of the GATT (Tokyo Round Anti-dumping Code) set out the rules for consultation, conciliation and dispute settlement for the signatories of the code. Another example is Articles 13 and 14 of the Agreement on Technical Barriers to Trade (Tokyo Round TBT Code), which provided its own separate dispute settlement mechanism arising out of the code. The disparate dispute settlement processes of the various codes, however, raised some "forum-shopping" issues within the GA TT dispute settlement system and Contracting Parties were able choose a forum under a code that was beneficial to them.405 This practice could bring inconsistency and delay in resolving disputes within the system. The Understanding on Notification, Consultation, Dispute Settlement and Surveillance adopted on November 28, 1979 (1979 Dispute Settlement Understanding) was also concluded during the Tokyo Round.406 The 1979 Dispute Settlement Understanding embodied the compromise between Japan and the EEC, who were opposing any "substantive changes," and the United States and the Nordic countries, who felt the need for changes in the practices of the GATT dispute settlement system.407 The 1979 Dispute Settlement Understanding also had an annex on Agreed Description of the Customary Practice of the GATT in the Field of Dispute Settlement (Article XXIII:2). 405 Historic Development ofthe WTO Dispute Settlement System, WTO.org, http :Ilwww.wto.org/ english/tratop _el dispu _el disp _settlement_cbt _el c2s 1pl_ e.htm (last visited Mar. 17, 2011). 406 GATT Council, the Understanding on Notification, Consultation, Dispute Settlement and Surveillance, GATT B.I.S.D. 2681210 (Nov. 28, 1979). 407 ZIMMERMANN, NEGOTIATING THE REVIEW OF THE WTO DSU 50; See also Hudec, The Role ofthe GATT Secretariat in the Evolution ofthe WTO Dispute Settlement Procedure, 110-113 (describing the United States' effort to revive the GATT dispute settlement). 122 The structure of the dispute settlement stages after the Tokyo Round remained largely unchanged, comprising of a consultation, good offices, and panel stage. The 1979 Dispute Settlement Understanding and the Customary Practice set out the details of dispute settlement proceedings including working procedures, the standard for prima facie cases, selection of panelist, etc. 3.3.2.5 Rise of Disputes in 1980s and Creation of Office of Legal Affairs When Arthur Dunkel succeeded Oliver Long as the Director-General of the GATT in 1980, he perceived the need for legal assistance to panelists. As a result, he established the "Director of Legal Affairs" position within the Secretariat in 1981. 408 In the 1980' s, the number of disputes brought to the GATT increased significantly, in partial, in response to the creation of the position. In all, 115 disputes were raised in 1980s and 4 7 rulings were issued by panels.409 Although the first years of the Director of Legal Affairs were not free of flaws, "over the next ten years governments gradually acquired greater and greater confidence in the soundness and high legal quality of the GATT's dispute settlement process."410 It is not surprising that the increase of disputes in the 1980s, many of which dealt with highly sensitive matters, "led to an increasing number of 'legal failures. "'411 Structural 408 Hudec, The Role ofthe GATT Secretariat in the Evolution ofthe WTO Dispute Settlement Procedure, 114. 409 See HUDEC, ENFORCING INTERNATIONAL TRADE LAW 289 (Table 11.9). 410 Id. 115. 411 ZIMMERMANN, NEGOTIATING THE REVIEW OF THE WTO DSU 51. 123 impediments in the GATT dispute settlement system also negatively impacted its reputation. For example, the principle of "positive consensus" in establishing a panel in the GATT Council and adopting reports was a major hurdle that denied Members access to, or relief through, the GATT dispute settlement system.412 Positive consensus requires "that there had to be no objection from any contracting party to the decision. Importantly, the parties to the dispute were not excluded from participation in this decision-making process. In other words, the respondent could block the establishment of a panel."413 For instance, by raising an objection, a respondent in a dispute could prevent the establishment of a panel, and a losing party to a dispute could prevent the adoption of a report. However, the problems inherent in the positive consensus system did not necessarily lead to dissatisfaction with the outcomes of disputes. Hudec presents empirical studies that demonstrate a high percentage of full or partial satisfaction with the outcomes of disputes. For example, among 40 disputes brought into the GATT dispute settlement system, 60% reported full satisfaction and 23% partial satisfaction.414 There were two important decisions that impacted the dispute settlement process under the GATT before the launch of the Uruguay Round in 1986. One was the Decision on 412 Historic Development ofthe WTO Dispute Settlement System, WTO.org, http://www. wto. org/english/tratop _ e/ dispu _ e/ 413 Id. 414 See HUDEC, ENFORCING INTERNATIONAL TRADE LAW 289 (Table 11.10). 124 Dispute Settlement, contained in the Ministerial Declaration of November 29, 1982,415 and the other was the Decision on Dispute Settlement of November 30, 1984.416 The Ministerial Declaration maintained the previous framework for disputes mentioned in the Understanding on Notification, Consultation, Dispute Settlement and Surveillance negotiated during the Tokyo Round. However, it asked parties to disputes to resort to "the good offices of the Director-General or an individual or group of persons nominated by the Director-General" if they were unable to resolve their dispute through consultation. The Ministerial Declaration also focused on practical components of effective dispute settlement, such as the use of experts, terms of reference, and the role of the GATT Secretariat in assisting panelists.417 It is interesting to note that Contracting Parties were concerned that rulings and recommendations in dispute settlement could not "add to or diminish the rights and obligations provided in the General Agreement."418 The same notion was restated in Article 3:2 of the DSU. The Decision on Dispute Settlement attempted to rectify some procedural matters regarding the formation of panels. For instance, the decision granted more authority to the Director-General in the process of panel formation. 419 It was clear that a change in 415 GATT, Ministerial Declaration of Nov. 29, 1982: Decision on Dispute Settlement, BISD 29S/13, Nov. 1982 (Ministerial Declaration of Nov. 29, 1982) 416 GATT, The Decision on Dispute Settlement of Nov. 30, 1984, BISD 3 lS/9, Nov. 1982 (The Decision on Dispute Settlement of Nov. 30, 1984). 417 Ministerial Declaration of Nov. 29, 1982, iii! iii-v. 41s Id. if x. 419 For example Decision on Dispute Settlement of Nov. 30, 1984, if 3 (noting that "[i]n the event that panel composition cannot be agreed within thirty days after a matter is referred by the Contracting Parties, the Director-General shall, at the request of either party and in consultation with the Chairman of the 125 the dispute settlement process was called for, and a new round of negotiations was initiated to address the existing flaws. 3.3.2.6 Uruguay Round Negotiations on Dispute Settlement Arthur Dunkel played an important role in the development of the WTO dispute settlement system. He assigned a group of non-governmental experts, known as the "Leutwiler Group," to examine and identify the problems within the dispute settlement system. 420 The Punta Del Este Declaration specifically reiterates the role of a "prompt and effective" dispute settlement system. The relevant paragraph of the Declaration states: In order to ensure prompt and effective resolution of disputes to the benefit of all [C]ontracting [P]arties, negotiations shall aim to improve and strengthen the rules and the procedures of the dispute settlement process, while recognizing the contribution that would be made by more effective and enforceable GATT rules and disciplines. Negotiations shall include the development of adequate arrangements for overseeing and monitoring of the procedures that would facilitate compliance with adopted recommendations. The divergence of Contracting Parties on the desired nature of the GATT dispute settlement mechanism was evident from the beginning of negotiations on dispute settlement. Some countries like Japan and the EEC were of the view that the dispute settlement process previously used in GATT 194 7, which did not "provide for judicial settlements of international trade disputes," should be continued, while other countries Council, complete the panel by appointing persons from the roster of nongovernmental panelists to resolve the deadlock, after consulting both parties."). 420 ZIMMERMANN, NEGOTIATING THE REVIEW OF THE WTO DSU 52. 126 like the United States were proponents of the view that there is a need to have a "competent GATT dispute settlement body" to interpret ambiguous provisions.421 In 1989, the Trade Negotiation Committee in Montreal, on the basis of the Negotiation Group on Dispute Settlement, adopted the "proposed procedural reform."422 This decision was in force "on a trial basis" until the end of the Uruguay Round. 423 At this stage, there was no agreement on appellate review or the procedure for adoption of panel reports.424 3.3.2.6.1 Changes in the Uruguay Round The DSU, which emerged as a product of the Uruguay Round, introduced significant changes in the WTO dispute settlement mechanism. The DSU was a hybrid of significant features of the previous dispute settlement mechanism, and aimed to resolve procedural issues that existed in the old GATT dispute settlement system. 421 Id. 53 (noting different views in the first meeting of the Negotiation Group on Dispute Settlement on Apr. 6, 1987) 422 Id. 54. 423 Historic Development ofthe WTO Dispute Settlement System, WTO.org, http://www.wto.org/english/tratop_ e/dispu_ e/disp_settlement_ cbt_ e/c2s Ip 1_ e.htm (last visited Mar. 17, 2011). 424 Id. 127 3.3.2.6.1.1 Single Set of rules and procedures with a broader scope The Tokyo Round did not produce a single set of rules and procedures dealing with dispute settlement, but relied on codes that applied their own rules and procedures for dispute settlement. The DSU, on the other hand, provided for one coherent set of rules and procedures for dispute settlement that was to be applied to all covered agreements of the WTO. The GATT a la carte system, which provided for separate dispute settlement mechanisms, was no longer applicable.425 Even under the unified set of rules, however, "special and additional rules and procedures" could be applied under specific covered agreements when called for by the specific nature of the dispute.426 The DSU applies not only to goods, but also to services and intellectual property under the covered agreements. Such broad coverage and unified nature of the current DSU greatly enhances coherence and predictability in the dispute settlement system. 3.3.2.6.1.2 Automatic procedure for establishment of panels or the adoption of a report One of the major problems faced by parties to a dispute under the GATT system was the capacity of a Contracting Party (such as the responding party) to block the establishment 425 DSU, Article 1: 1 (The rules and procedures of this Understanding shall apply to disputes brought pursuant to the consultation and dispute settlement provisions of the agreements listed in Appendix 1 to this Understanding (referred to in this Understanding as the "covered agreements"). The rules and procedures of this Understanding shall also apply to consultations and the settlement of disputes between Members concerning their rights and obligations under the provisions of the Agreement Establishing the World Trade Organization (referred to in this Understanding as the "WTO Agreement") and of this Understanding taken in isolation or in combination with any other covered agreement.); Some of the WTO Agreements provide for additional regulations for settlement of certain disputes. See for example Article 17 of Agreement on Implementation of Article VI of the General Agreement on Tariffs, Apr. 15, 1994, 1868 U.N.T.S. 201 (Anti-dumping Agreement). 426 DSU, Article 1 :2; See also id. Appendix 2. 128 of a panel or adoption of the decision. In total 31 reports were not adopted throughout the lifetime of the GATT.427 Article 6: 1 of the DSU provides for automatic establishment of a panel in "the DSB meeting following that at which the request first appears as an item on the DSB' s agenda," if a consensus cannot be reached to establish a panel in the first meeting. The "negative" or "reverse" consensus principle has been a key to the success of the current dispute resolution system, as it removed the barriers to establishment of panels and adoption ofreports. Under a reverse consensus system a decision of the DSB to establish a panel, adopt a panel or AB report, or authorize retaliation is automatically adopted unless there is a consensus within the DSB to not adopt the decision.428 In the Uruguay Round negotiations, the big players such as the United States, European Community (EC), 429 and Canada had serious concerns about blocking adoptions of panel reports. The United States proposed that "the Negotiating Group consider various approaches including (1) automatic adoption of panel reports unless specific objections have been raised within a specific time period or appellate review has been requested, (2) adoption of particular legal interpretations by the Contracting Parties during annual 427 See GATT Panel Reports, Working Party Reports, Arbitrations and Decisions, WORLDTRADELAW.NET, http://www. worldtradelaw .net/reports/gattpanels/gattpanels.asp (last visited Mar. 17, 2011 ). 428 See DSU, Articles 6: 1, 16:4, 17: 14 and 22:6. 429 The EEC was renamed the EC in 1993. 129 sessions, and (3) retaining the practice of consensus with a procedure to avoid blocking by the losing party. "430 Ultimately, the United States' first proposal of automatic adoption through reverse consensus found its way into the DSU. However, the adoption ofreverse consensus raised concern about the potential automatic adoption of panel decision that misinterpreted WTO laws. To protect against such "erroneous or incomplete" panel decisions, an appellate stage was established.431 3.3.2.6.1.3 Appellate Review and Surveillance Article 17 of the DSU and the first meeting of the DSB on February 10, 1995 are considered to be the foundations on which the AB mandate is based. 432 Article 17 of the DSU establishes the AB through the DSB and limits its scope to "issues of law in the panel report and legal interpretations developed by the panel."433 The AB "shall comprise persons ofrecognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally."434 430 Stewart ed. THE GATT URUGUAY ROUND, 2765 (citing Negotiating Group on Dispute Settlement, Communication from the United States, GATT Doc. No. MTN.GNG/NG13/W/40, Apr. 6, 1990 (1990 Proposal of the US)). 431 Id. 2767 (citing Negotiating Group on Dispute Settlement, Statement by the Spokesman of the European atthe Meeting on 5-6 Apr., GATT Doc. No. MTN.GNG/NG13/W/39, Apr. 5, 1990 (1990 Proposal by the EC)); For more information see Chapter Three, § 3.3.2.6.1.3. 432 See WTO, Dispute Settlement Body, Minutes ofMeeting, WT/DSB/M/l (Feb. 28, 1995). 433 DSU, Articles 17:1and17:6. 434 Id. Article 17:3. 130 Before 1995, no appellate stage had been designed to review decisions of panels.435 Automatic adoption of rulings and recommendations of panels and incapability of WTO Members to block the binding decisions of panelists generated serious concern among the Uruguay Round negotiators. The AB was created as a standing body to respond to these serious concerns of WTO Members regarding the automatic adoption of panel decisions. Interestingly, the United States had, during the Uruguay Round negotiations, only supported the appellate stage for "extraordinary cases where a panel contains legal interpretations that are questioned formally by one of the parties."436 (emphasis added) Negotiators also raised concerns that appellate review might delay the proceedings.437 Another change brought about by the DSU was the formal surveillance of implementation following the adoption of panel (and AB) reports. The formal surveillance of implementation is a method of imposing political accountability on the losing party in a dispute. Article 21.6 of the DSU states that: 435 For more information on the GA TT procedures in 1990 see Proposal of the US, 3. ("[u]nder current GATT practice, when a panel has completed its examination it first issues to the parties a 'descriptive portion' of the draft panel report. This portion describes the facts at issue and then outlines seriatim the legal arguments made by the parties. The parties are then given a period (usually two to three weeks, though it can be longer ifthe panel thinks it appropriate) to review that portion of the report and to submit to the panel written suggestions for changes or additions. These suggestions are usually limited to the panel's characterization of that party's arguments, and corrections of factual errors; the panel retains the discretion to accept or reject the parties' suggestions. About two weeks after receiving comments on the descriptive portion, the panel issues its final report to the parties on a confidential basis. The final report includes findings and conclusions and, in most cases, a recommendation that a party take steps (usually unspecified) to come into compliance with its GATT obligations ifthe panel has found a breach. The parties are asked to keep the panel report confidential and are encouraged to reach a mutually satisfactory solution by a certain date, after which the Secretariat will circulate the report to all contracting parties (unless the parties jointly request that it be withheld)."). 436 Stewart ed. THEGATTURUGUAYROUND, 2767-2768. 437 See 1990 Proposal of the US, 4 (raising a question that "how might we ensure that the review process is used only in extraordinary cases, rather than affording an automatic opportunity to delay the dispute settlement process?"). 131 The DSB shall keep under surveillance the implementation of adopted recommendations or rulings. The issue of implementation of the recommendations or rulings may be raised at the DSB by any Member at any time following their adoption. Unless the DSB decides otherwise, the issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting after six months following the date of establishment of the reasonable period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is resolved. At least 10 days prior to each such DSB meeting, the Member concerned shall provide the DSB with a status report in writing of its progress in the implementation of the recommendations or rulings. 132 CHAPTER FOUR 4 WTO DISPUTE SETTLEMENT PROCESS This Chapter aims to examine the structure of the WTO dispute settlement system and bodies that are involved in the adjudicatory decision-making process.438 It also explains factors that contribute to the legitimacy of the WTO dispute settlement system such as methods of participation and transparency in WTO disputes, as well as techniques and jurisprudence that have been developed through the process of adjudication. Whether intentional or not, the WTO dispute settlement system has become one of the most efficient and influential dispute settlement mechanisms in international law.439 Its success, inter alia, can be attributed to the existence of compulsory jurisdiction in the DSU, the breadth of the WTO agreements that in tum allows a wide variety of disputes to be brought into the WTO dispute settlement system, and the binding effect of panel and AB decisions adopted by the DSB.440 438 This Chapter relies heavily on the DSU and Dispute Settlement System Training Module, WTO.org, http://www.wto.org/english/tratop_ e/dispu_e/disp _settlement_cbt_ e/signin_ e.htm (last visited Mar. 17, 2011). 439 See DSU negotiation history in Chapter Three, § 3.3.2.6. (noting that the Uruguay Round negotiators did not completely appreciate the magnitude of their decision in the AB. The reverse consensus rule, automatic adoption process of findings of panels and the AB as well as the creation of the AB changed the nature and greatly enhanced the strength of the dispute settlement mechanism.). 440 Additionally, in the WTO dispute settlement system, it is not necessary for the complainant of a dispute to have a "legal interest" to be able to initiate a dispute. See AB Report EC- Banana Ill, if 132 ("[w]e agree with the Panel that "neither Article 3:3 nor 3:7 of the DSU nor any other provision of the DSU contain any explicit requirement that a Member must have a 'legal interest' as a prerequisite for requesting a panel". We do not accept that the need for a 'legal interest' is implied in the DSU or in any other provision of the WTO Agreement."); See also Panel Report, Korea - Definitive Safeguard Measure on Imports ofCertain 133 The large number of disputes that have been raised in the WTO by its Members since 1995 and the number ofreports that have been adopted by the DSB are indicative of the efficiency and success of the WTO dispute settlement process Table 5: Number of Disputes and Reports m the WTO 4.1 WTO Bodies Involved in the Dispute Settlement Process The DSU has appointed several bodies within the WTO dispute settlement mechanism to deal with the settlement of disputes among WTO Members. These bodies are compnsed of the DSB, panels, the AB, the Director-General and the WTO Secretariat, arbitrators, Dairy Products,~~ 8 7-8 15, WT/DS98/R and Corr I (Jan 12, 2000) (as modified by AB Report WT/DS98/AB/R) (Panel Report Korea - Dairy), See also AB Report, Mexico - Tax Measures on Soft Drmks and Other Beverages, ~ 52, WT/DS308/AB/R (Mar 24, 2006) (AB Report Mexico -Taxes on Soft Drmks) (notmg that "whenever it considers that 'any benefits accrumg to [that member] are bemg nnparred by measures taken by another [m ]ember' imp hes that that [m ]ember is entitled to a rulmg by a WTO panel ") 441 28 panel reports were raised under Article 21 5 ofthe DSU Therefore, the total number of standard panel reports is 128 442 19 dec1s10ns dealt with appeals of panel reports under Article 21 5 of the DSU The number of appeals for standard panel reports is 88 443 See Facts and Figures on WTO Dispute Settlement, WORLDTRADELAW NET, http //www worldtradelaw net/dsc/database/bas1cfigures asp (last VlSlted Mar 17, 2011) 134 independent experts, and several specialized institutions. Because there are various procedural matters that impact the legitimacy of the WTO dispute settlement system, understanding the structure of the WTO dispute settlement structure is important in framing the discussion of its legitimacy. 4.1.1 Dispute Settlement Body {DSB) The DSB, as the representative of the political organ of the WTO, is involved in the adjudicatory function of the organization. The DSB is composed of representatives of all WTO Members. Article IV:3 of the WTO Agreement requires the General Council to "discharge" the responsibilities of the DSB as provided for in the DSU. The DSB is in charge of administering the DSU rules and procedures and has "the authority to establish panels, adopt panel and AB reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions as well as other obligations under the covered agreements."444 In order to guarantee that the decisions of the DSB do not exceed its mandate, decisions are to be taken by consensus.445 However, as discussed above, in the three distinct instances of establishing panels, adopting the AB or panels' findings, and authorizing retaliation, the reverse consensus rule applies and the decisions are considered to be adopted by consensus in the absence of an objection by all DSB members. In practice, 444 DSU, Article 2: 1. 445 Id. Article 2:4 (the footnote 1 of the DSU defines consensus: "[t]he DSB shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting of the DSB when the decision is taken, formally objects to the proposed decision."). 135 the principle of automatic adoption has given the panelist, and to an even greater degree the AB, s1gmficant power that could impact the rights and obligations of WTO Members Figure 5: Adoption Process of the Fmdings of Panels and the AB The findings of panels or the AB are not per se binding. In order to bestow binding authority on the findings, the decis10ns have to be adopted by the DSB. Such process was designed to reach to a balance between the political and adjudicatory organs of the WTO. Under the GATT legal system, the ability of any Contracting Party to block the adoption process was considered a significant obstacle to adopting panel reports. The adoption process under the GATT was part of the equilibrium that existed between the political and legal functions of the WTO. In other words, in order to reach a bmding decision, all Contracting Parties including the party ruled against had to accept the findmgs of a panel. The adjudication process was mainly considered a tool that was leveraged in political negotiations between Contracting Parties. Therefore, the political 136 organ of the GATT could practically control the decisions generated by the legal organ of the GATT. The reverse consensus principle implemented by the WTO changed the adoption process by establishing a quasi-automatic adoption mechanism. Although blocking the adoption process under the reverse consensus principle is still technically feasible, it has proven to be next to impossible in practice. Although WTO Members have opportunity to express their concerns or views on findings, the findings of panels and the AB are ultimately binding on parties of the disputes upon adoption of the decision by the DSB. Another responsibility of the DSB is to "maintain surveillance of implementation of rulings and recommendations."446 Any Member can raise the issue of implementation at any time in the DSB. The issue of implementation is placed on the agenda of the DSB six months following the date of establishment of the reasonable period oftime.447 The issue of implementation shall remain on the DSB's agenda until the issue is resolved.448 At least 10 days before such DSB meeting, the Member complained against is required to provide the DSB with a written status report of its progress in the implementation rulings and recommendations. 449 446 Id. Article 2: 1. 447 Id. Article 21 :6. 448 Id. The DSB must continue to keep surveillance over implementation of the recommendations or rulings it has adopted. Surveillance must be maintained even in cases where compensation has been provided or concessions or other obligations have been suspended, if the recommendations to bring a measure into conformity with (WTO) law have not been implemented; Id., Article 22:8. 449 Id. Article 21 :6. 137 Surveillance by the DSB and providing status reports to the DSB can impose political pressure on the non-complying party to bring its measures into compliance with WTO laws. The credibility of the WTO dispute settlement system relies to a great extent on the implementation of the decisions by the WTO Members. Therefore, WTO Members attempt to enforce the rulings and recommendations of the DSB in order increase its credibility and legitimacy. 4.1.2 The Director-General and the WTO Secretariat The Director-General of the WTO may be involved in the dispute settlement system. For example, the Director-General, in an ex officio capacity, may offer his good offices, conciliation, or mediation to assisting Members in settling disputes.45° Furthermore, the Director-General convenes the meetings of the DSB. If the parties cannot agree on the composition of a panel within 20 days, it is the Director-General who appoints panel members upon the request of either party, and in consults with the Chairman of the DSB and the Chairman of the relevant Council or Committee.451 The Director-General can also appoint the arbitrator(s) for the determination of the reasonable period of time for implementation of rulings and recommendations, if the parties cannot agree on the period of time and on the arbitrator.452 450 Id. Article 5:6. 451 Id. Article 8:7. 452 Id. Article 21:3(c), footnote 12. 138 The staff of the WTO Secretariat, who report to the Director-General, have an obligation to assist Members with respect to dispute settlement at their request,453 to conduct special training courses,454 and to provide additional legal advice and assistance to developing country Members in matters relating to dispute settlement.455 Furthermore, the Secretariat assists parties of the disputes in composing panels by proposing nominations for panelists to hear the dispute,456 assists panels once they are composed,457 and provides administrative support to the DSB. 4.1.3 Panels Panels are considered as the first stage of adjudication in the WTO the dispute settlement mechanism. The structure of panels has not been changed drastically vis-a-vis the pre Uruguay Round dispute settlement system. Panels are usually composed of three, and in some instances five, experts. Unlike the AB Members, panelists are not standing members, but are selected on an ad hoc basis.458 Article 8.1 of the DSU instructs that panels are to be composed of well-qualified governmental and/or non-governmental individuals, including persons who have served 453 Id. Article 27:2. 454 Id. 455 Id. 456 Id. Article 8:6. 457 Id. Article 27: 1. 458 Id. Article 8:5. 139 on or presented a case to a panel, served as a representative of a Member or of a contracting party to GATT 194 7, or as a representative to the Council or Committee of any covered agreement or its predecessor agreement, or in the Secretariat, taught or published on international trade law or policy, or served as a senior trade policy official ofa Member. The main concern in the selection of panelists is the "independence of the [M]embers, a sufficiently diverse background and a wide spectrum of experience."459 The Secretariat maintains an indicative list of panelists including governmental and non-governmental individuals with the aforementioned qualifications. The list is reviewed and approved by the DSB from time to time.460 The focal obligation of the panel composed for a specific dispute is to review the factual and legal aspects of the case and submit a report to the DSB. The report contains the panel's conclusions as to whether the claims of the complainant are well founded and the measures or actions being challenged are WTO-inconsistent. If so, the panel makes a recommendation for implementation by the respondent.461 4.1.3.1 Administrative and legal support to panels The WTO Secretariat plays an important role in assisting panelist and AB members. The WTO Secretariat "shall have the responsibility of assisting panels, especially on the legal, 459 Id. Article 8:2. 460 Id. Article 8:4. 461 Id. Articles 11and19. 140 historical and procedural aspects of the matters dealt with, and of providing secretarial and technical support."462 The role of the Secretariat is vital to the coherency of jurisprudence developed by the WTO dispute settlement system. The Secretariat's involvement in proposing panelists, assisting panelists and the AB in writing reports, and providing legal and administrative assistance generally to the DSB, panelists and the AB as well as WTO Members contributes to the coherency of the system as a whole.463 The Legal Affairs Division (LAD) of the Secretariat has a responsibility "to provide legal advice and information to WTO dispute settlement panels, other WTO bodies, WTO Members and the WTO Secretariat."464 The LAD's responsibilities also include "assisting [M]embers in the composition of dispute settlement panels, providing timely secretarial and technical support and legal assistance to WTO dispute settlement panels, providing legal advice to the [DSB] and its Chairman on the operation of the [DSU], and providing legal advice to the Director-General, the Secretariat and [M]embers on all WTO agreements and on other legal issues as they may arise."465 The LAD also contributes to building the capacity of the WTO by issuing legal publications and offering training regarding dispute settlement procedure. 462 Id. Article 27: 1. 463 Weiler, The Rule ofLawyers and the Ethos ofDiplomats, 345 (describing that the Secretariat "[d]e facto ... is the repository of intuitional memory of horizontal and temporal coherence .... "). 464 The Secretariat and Budget, WTO.org, http://www.wto.org/english/thewto_e/secre_e/div_e.htm (last visited Mar. 17, 2011 ). 465 Id. 141 4.1.3.2 Composition of Panels Unlike the AB, panelists are not standing bodies but are selected on an ad hoc basis. The Secretariat maintains an indicative list of list of names of governmental and non- governmental persons from which the panelists for each dispute are selected.466 The list must be approved by the DSB by consensus. 467 Panels are composed of three panelists unless the parties to a dispute agree, within 10 days from the establishment of the panel, to establish a panel composed of five panelists.468 Members are to be informed promptly of the composition of the panel. Article 8: 1 of the DSU on qualification of panelists states: Panels shall be composed of well-qualified governmental and/or non governmental individuals, including persons who have served on or presented a case to a panel, served as a representative of a Member or of a Contracting Party to GA TT 194 7 or as a representative to the Council or Committee of any covered agreement or its predecessor agreement, or in the Secretariat, taught or published on international trade law or policy, or served as a senior trade policy official of a Member.469 The Secretariat proposes nominations for the panel to the parties to a dispute.470 The parties cannot oppose nominations except for compelling reasons. Unless agreed by all parties, panelists may not compose of citizens of the Member state that is a party or third 466 DSU, Article 8:4. 467 Id. 468 Id. Article 8:5. 469 For special rules on composition of panels with relevant specific expertise see WTO, Trade in Services, The Ministerial Decision on Certain Dispute Settlement Procedures for the General Agreement on Trade in Services, S/L/2 (Apr. 4, 1995); See also OATS, Annex on Financial Services, if 4. 470 DSU, Article 8:6. 142 party to a dispute.471 If a developing county is a party to a dispute against a developed county, at least one panelist from a developing country Member can be assigned as a panelist upon the developing country party's request.472 If parties cannot reach to an agreement on the composition of the panel within 20 days after the date of its establishment by the DSB, either party may request the Director- General of the WTO to determine the composition of the panel.473 100 90 80 70 59 60 •Agreed by so 41 Parties 40 •Decided by DG 30 20 10 0 Agreed by Parties Decided by DG Figure 6: Composition of Panels Source474 471 Id. Article 8:3. 472 Id. Article 8:10. 473 Id. Article 8:7 (stating that "[i]fthere is no agreement on the panelists within 20 days after the date of the establishment of a panel, at the request of either party, the Director-General, in consultation with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall determine the composition of the panel by appointing the panelists whom the Director-General considers most appropriate in accordance with any relevant special or additional rules or procedures of the covered agreement or covered agreements which are at issue in the dispute, after consulting with the parties to the dispute. The Chairman of the DSB shall inform the Members of the composition of the panel thus formed no later than 10 days after the date the Chairman receives such a request.) 474 WTO, Legal Affairs, WTO Dispute Settlement: Statistical Overview, on file with author (Apr. 2010) (power point file) (DS Statistics on File with Author). 143 In practice, parties have usually been unable to agree on the composition of the panel, leaving the Director-General to nominate the panelists. This nominating authority of the Director-General illustrates another advantage of the WTO dispute settlement system, as the establishment of panels cannot be blocked due to a disagreement between the parties regarding the composition of panelists. 4.1.4 The Appellate Body Unlike panels, the AB is a standing body compromising of seven members who retain their positions for a four-year term, with the possibility of one term of reappointment. The AB is entrusted with the task ofreviewing the "legal" aspects of the reports issued by panels. The AB was created during the evolution from the GATT to WTO dispute settlement system, in part because of a fear that the automatic adoption of reports in the DSB could lead to the enforcement of "erroneous or incomplete" panel reports. Under the WTO, a party that is dissatisfied with the panel decision may file an appeal, and the AB reviews the challenged legal issues and may uphold, reverse or modify the panel's findings. 475 The appellate procedure created a second and final stage to prevent and correct potential errors, and constituted one of the most revolutionary changes from the GATT dispute settlement mechanism. 475 DSU, Article 17: 13. 144 The AB plays a significant role in providing "security and predictability to the multilateral trading system."476 The AB, by reviewing decisions of panels, can ensure that panelists apply a coherent interpretation of WTO provisions. For instance in US- Stainless Steel (Mexico),477 the AB expressed its "deep concern" that the panelists "depart[ed] from well-established [AB] jurisprudence."478 The AB in that dispute stated that: The creation of the [AB] by WTO Members to review legal interpretations developed by panels shows that Members recognized the importance of consistency and stability in the interpretation of their rights and obligations under the covered agreements. This is essential to promote "security and predictability" in the dispute settlement system, and to ensure the "prompt settlement" of disputes. The Panel's failure to follow previously adopted [AB] reports addressing the same issues undermines the development of a coherent and predictable body of jurisprudence clarifying Members' rights and obligations under the covered agreements as contemplated under the DSU. Clarification, as envisaged in Article 3.2 of the DSU, elucidates the scope and meaning of the provisions of the covered agreements in accordance with customary rules of interpretation of public international law. 479 4.1.4.1 Composition and Structure of the Appellate Body The DSB appoints AB members for a four-year term by consensus.480 Each person may be reappointed once.481 The first AB members were appointed by the DSB in 1995.482 476 Id. Article 3:2. 477 AB Report, United States - Final Anti-Dumping Measures on Stainless Steel from Mexico, WT/DS344/AB/R (May 20, 2008) (AB Report US-Stainless Steel (Mexico)). 478 Id. if 162. 479 Id. if 161. 480 DSU, Articles 2:3 and 17:2. 481 Id. Article 17:2 145 A division consisting of three AB members presides over each dispute.483 The AB is a body that is detached from affiliation with any government, and comprises of persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally.484 The AB shall also be broadly representative of membership in the WT0.485 The current AB members are as follows: Table 6: List of Current AB Members as of October 2010 Pursuant to Rule 5 of the AB Working Procedures, the Chairman of the AB is elected among the Members to serve a one-year term, which can be extended for an additional 482 See WTO, Dispute Settlement Body, Establishment ofthe Appellate Body: Decision adopted on Feb. JO, 1995, WT/DSB/l (June 19, 1995). 483 WTO, Working Procedure for Appellate Review, Rule 6, if 2, WT/AB/WP/5, Jan. 4, 2005 (AB Working Procedure). 484 DSU, Article 17:3. 485 Id. 146 period of one year. The Chairman is responsible for the overall direction of AB affairs. The current Chairman as of October 2010 is David Unterhalter. 4.1.4.2 The Appellate Review The DSU and the AB Working Procedures form the legal basis of the appellate review process in the WTO dispute settlement system. The AB Working Procedures were first drafted in 1996, and have been amended several times since. Articles 16.4 and 17 of the DSU address the structure, function and procedure of the AB.486 Article 17:9 of the DSU allows the AB to draw up its Working Procedures for Appellate Review (the AB Working Procedures) in consultation with the Chairman of the DSB and the Director-General, and to communicate with the WTO Members for their comments about the AB Working Procedures. The AB does not need to have the consensus of the DSB to create or amend the AB Working Procedures. Therefore, the AB can change its Working Procedures despite opposition of WTO Members. Such authority differentiates the panel stage from the appellate stage. The former is under the strict scrutiny of WTO Members, whereas the AB, functioning as a higher appellate organ, has more flexibility with a weaker Member-driven feature. Recently, in July 2010, the AB Chairman David Unterhalter circulated a letter to the DSB Chairman 486 DSU has also some provisions that apply both to panel and AB stages. See DSU, Articles 1, 3, 18 and 19. 147 notifying the DSB of amendments to the AB Working Procedures. 487 The amendments modified the deadlines for written submissions during an appeal, and more importantly, authorized electronic filing and service of written submissions. The full text of the amended AB Working Procedures was circulated to the Members on August 16, 2010. The ability to establish and amend the Working Procedures endows a significant authority to the AB, especially through Article 16: 1 of the AB Working Procedures. Article 16:1 of the AB Working Procedures states: In the interests of fairness and orderly procedure in the conduct of an appeal, where a procedural question arises that is not covered by these Rules, a division may adopt an appropriate procedure for the purposes of that appeal only, provided that it is not inconsistent with the DSU, the other covered agreements and these Rules. Where such a procedure is adopted, the division shall immediately notify the parties to the dispute, participants, third parties and third participants as well as the other Members of the [AB]. By allowing the AB division to adopt additional procedures for a particular appeal under certain circumstances, Article 16: 1 authorizes the AB to fill procedural gaps existing in the WTO legal system provided that it is not inconsistent with the DSU or other agreements. Furthermore, according to DSU Article 17.13, the AB has the authority to either uphold, modify for reverse the legal findings and conclusions of the panel. In situations where the AB agrees with the panel's final conclusion but not with the reasoning employed in reaching the conclusion, the AB will partly modify the panel's findings by providing its own reasoning. Where the AB disagrees with the panel's conclusion, the panel decision is reversed. 487 WTO Appellate Body, Working Procedure for the Appellate Review, WT/AB/WP/W/11(July27, 2010) (AB Working Procedures). 148 Dupheld Iii modified •reversed Figure 7: Upholding, Modification, and Reversal of Panel Decisions by the AB (AB Decisions from 1995-April 2010) Source488 4.1.4.3 Appellate Body Secretariat Article 17. 7 of the DSU requires the AB Secretariat to provide appropriate administrative and legal support to AB members. The current Director of the AB is Werner Zdouc, who supervises a team of 10 lawyers and four support staff. The AB Secretariat is bound by the Rules of Conduct stipulated in the DSU.489 Impartiality and independence are highly respected at the AB Secretariat. 488 DS Statistics on File with Author. 489 See AB Working Procedure, Annex II. 149 4.1.5 Arbitrators Adjudication of disputes through panels and the AB is not the only method of dispute resolution in the WTO. WTO Members also can resort to either individual or group arbitration as an alternative form of dispute resolution.490 Arbitration for the settlement of disputes has rarely been used in the WTO dispute settlement system,491 partly because arbitration results are not appealable and cannot be enforced through the DSU.492 There are two other instances in which arbitrators play an active role in the WTO dispute settlement system. The first is arbitration under Article 21.3(c) of the DSU, and the second is arbitration to decide on the level or the nature of the suspension of obligations proposed under Article 22.6 of the DSU. It is important to note that, unlike arbitration for the settlement of disputes, these arbitration decisions are binding on the parties. 4.1.6 Experts When a panel decides on the compatibility of a measure with WTO laws, the panel may face complex factual questions of technical or scientific nature. In such circumstances, relying solely on the knowledge of panelists or the Secretariat on complex matters is most certainly insufficient to resolve the dispute. For example, the panel is not equipped to reach decisions in matters of a complex nature such as subsidies or sanitary and 490 DSU, Article 25. 491 Award of the Arbitrators, United States - Section 110(5) ofthe US Copyright Act - Recourse to Arbitration under Article 25 ofthe DSU, WT/DS160/ARB25/l (Nov. 9, 2001) (Award ofthe Arbitrators US -Section 110(5) Copyright Act (Article 25)). 492 DSU, Articles 21 and 22. 150 phytosanitary measures without the assistance of experts, as panelists are appointed based on their expertise in international law rather than the substance of the dispute. It is for this purpose that Article 13 of the DSU specifically grants each panel "the right to seek information and technical advice from any individual or body which it deems appropriate. "493 Other provisions of the WTO agreements explicitly authorize or require panels to seek the opinions of experts when they deal with questions falling under these agreements: • Articles 19.3, 19.4 and Annex 2 of the Agreement on Implementation of Article VII of GATT 1994; • Article 11.2 of the Agreement on Sanitary and Phytosanitary Measures; • Articles 4.5 and 24.3 of the SCM Agreement; and • Articles 14.2, 14.3 and Annex 2 of the Agreement on Technical Barriers to Trade (TBT Agreement). A panel may consult either individual experts or appoint an expert review group to prepare an advisory report.494 Rules for the establishment of expert review groups and their procedures are contained in Appendix 4 to the DSU. Expert review groups provide the panel with the information under the panel's authority and the panel shall determine their terms of reference and detailed working procedures. 495 493 Id. Article 13:1. 494 Id. Article 13 :2. 495 Id. if 1, Annex IV. 151 4.2 Legal Basis of Disputes As previously mentioned, the DSU differs from the Tokyo Codes in that the DSU provides for one coherent set of rules and procedures for dispute settlement that applies to all covered agreements of the WTO. However, there are some additional special proceedings specified in the covered agreements when necessary. Article 1: 1 of the DSU stipulates that: The rules and procedures of this Understanding shall apply to disputes brought pursuant to the consultation and dispute settlement provisions of the agreements listed in Appendix 1 to this Understanding (referred to in this Understanding as the "covered agreements"). The rules and procedures of this Understanding shall also apply to consultations and the settlement of disputes between Members concerning their rights and obligations under the provisions of the Agreement Establishing the World Trade Organization (referred to in this Understanding as the "WTO Agreement") and of this Understanding taken in isolation or in combination with any other covered agreement. There are various provisions in the WTO agreements that refer to consultation and dispute settlement. These include Articles XXII and XXIII of GATT 1994, Article 19 of the Agreement on Agriculture, Article 11 of the SPS Agreement, Article 8.10 of the Agreement on Textiles and Clothing, Article 14 of the TBT Agreement, Article 8 of the Agreement on Trade-Related Investment Measures, Article 17 of the Agreement on Implementation of Article VI of GATT 1994, Article 19 of the Agreement on Implementation of Article VII of GATT 1994, Articles 7 and 8 of the Agreement on Preshipment Inspection, Articles 7 and 8 of the Agreement on Rules of Origin, Article 6 of the Agreement on Import Licensing Procedures, Articles 4 and 30 of the SCM, Article 14 of the Agreement on Safeguards, Articles XXII and XXIII of the General Agreement on Trade in Services (OATS), and Article 64 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TIRPS Agreement). 152 Many of these provisions simply refer to Articles XXII and XXIII of the GATT 1994 or use similar wording of these two Articles. Both Articles XXII and XXIII of the GA TT 1994 contain "consultation and dispute settlement provisions." However Article XXIII:l(a)-(c) set out the detailed procedures for WTO Members to follow in requesting remedies when their benefits under the WTO Agreements are being directly or indirectly nullified or impaired. Article XXIII:l defines the three types of complaints (violation, non-violation, and "other" situations) as follows: If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of (a) the failure of another contracting party to carry out its obligations under this Agreement, or ( b) the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or ( c) the existence of any other situation, the contracting party may, with a view to the satisfactory adjustment of the matter, make written representations or proposals to the other contracting party or parties which it considers to be concerned. Any contracting party thus approached shall give sympathetic consideration to the representations or proposals made to it. 4.3 Stages of Dispute Settlement The DSU, inter alia, provides for various stages of dispute settlement including consultation, panel stage, appellate review, adoption by the DSB, implementation, retaliation, and surveillance. The timeframe set by the DSU is one of the most important 153 features of the WTO dispute settlement system because it is design to assure that disputes are resolved in a timely manner.496 :zo da'f$ (+10 if Di rec tor-General asked 'to compose the panel 6 rronths fran p"1el~ composition 1 3 rronths if urgent up to ' mon1hs fran p"1el~ est.bl ishment 60da'f$ I for p"1el "TOTAi.FOR report uni ess REPORT 1 AllOP110H: :appealed ... i Usually up to' mmths (no appeal), or 17. '!w:ASOOJ!ft.[ mmths (with PUIOO or; appeal) from "llHE': est.bl ishment de1ermined by: of panel to member adoption of proposes, os B report (An .:zo) agrees; or parties in dispute agree; or arbitrator 10da'f$ 30da'f$ aft.er 'reason::ble period' e'1'iJes I Figure 8: Stages ofWTO Dispute Settlement Source497 496 In practice, the deadlines are not always met and parties of a dispute need to consent to adjust the timeframe. 154 4.4 Legal Effect of Panel and the Appellate Body Rulings Decisions of panelists and the AB enhance predictability and stability by creating expectations for WTO Members, and also promote coherency within the WTO dispute settlement system. This part deals with the notion of precedent and the weight of adopted and adopted reports within the WTO dispute settlement system. 4.4.1 Precedent and the Legal Status of Adopted/Unadopted Reports in Other Disputes Findings of panels and the AB relate to specific matters among WTO Members that have been parties to a dispute. The findings become binding solely on the parties of a dispute when they are adopted by the DSB. The reports of panels and the AB do not create a body of binding precedent for other disputes between either between the same parties on other matters or different parties regarding the same matter. Stare decisis, as a principle of common law, binds the decisions of lower courts vertically and the decisions of subsequent courts horizontally, requiring the court to follow decisions of higher courts or earlier courts on the same point of law. The stare decisis rule does not apply in the WTO dispute settlement system. Consequently, panels are under no obligation to follow previous AB decisions, and the AB is not obligated to follow its own previous rulings. 497 See The process - Stages in a Typical WTO Dispute Settlement Case, WTO.org, http :Ilwww.wto.org/ english/tratop _el dispu _eldisp _settlement_cbt _el c6s 1p1 _ e.htm (last visited Mar. 17, 2011). 155 However, one should not confuse rejection of the doctrine of stare decisis with a disregard for coherency and predictability in an adjudicatory system. The key objective of the WTO dispute settlement system remains to enhance "the security and predictability" of the multilateral trading system.498 Therefore the persuasive reasoning and jurisprudence developed in previous panel or AB reports carry significant weight, and subsequent panels or the AB generally seek to follow established jurisprudence. This feature is not exclusive to the WTO dispute settlement mechanism, but reflects the common values of consistency, coherency, and predictability to which all legal systems adhere with regards to the jurisprudence developed in their respective adjudicatory systems. When the panel in US-Stainless Steel (Mexico) departed from an established jurisprudence in the interpretation of dumping calculations, the AB admonished the panel, stating that: The Panel's failure to follow previously adopted AB reports addressing the same issues undermines the development of a coherent and predictable body of jurisprudence clarifying Members' rights and obligations under the covered agreements as contemplated under the DSU. Clarification, as envisaged in Article 3.2 of the DSU, elucidates the scope and meaning of the provisions of the covered agreements in accordance with customary rules of interpretation of public international law. 499 More importantly, previous adopted panel and the AB reports, by directing WTO Members to design or modify their laws and regulations to be consistent with a certain interpretation of a WTO provision, establish a "legitimate expectation" among WTO 498 Id. 499 AB Report US-Stainless Steel (Mexico),~ 161. 156 Members. The AB in Japan - Taxes on Alcoholic Beverages addressed the weight of adopted panel reports, stating: Adopted panel reports are an important part of the GA TT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO Members, and, therefore, should be taken into account where they are relevant to any dispute.500 The AB extended this reasoning to the AB reports as well, requiring subsequent AB decisions to consider relevant existing jurisprudence in its deliberations. 501 The reasoning of even unadopted panel reports that "have no legal status in the GATT or the WTO system since they have not been endorsed through decisions by the [Contracting Parties] to GATT or WTO Members"502 can be "relevant" and may provide "useful guidance."503 500AB Report Japan - Taxes on Alcoholic Beverages II, at 108; See also Panel Report, United States -Anti Dumping Measures on Polyethylene Retail Carrier Bags from Thailand, ~~ 7:20 and 7:21, WT/DS383/R (Feb. 18, 2010) (Panel Report US -Anti-Dumping Measures on PET Bag) (explaining that while the panel was "not bound by the reasoning in prior AB and/or panel reports, adopted Reports create legitimate expectations among WTO Members, and 'following the Appellate Body's conclusions in earlier disputes is not only appropriate, but is what would be expected from panels, especially where the issues are the same."'); See also Panel report EC - Salmon (Norway),~ 7.69 (noting that the panel "nonetheless consider[s] it appropriate to review those decisions to assess the similarities and differences in the underlying facts, and determine[s] whether the analysis of those Panels is helpful in our assessment of Dthe arguments in this case."). 501 AB Report US-Shrimp (Article 21.5 -Malaysia),~ 109. 502 Panel Report Japan -Alcoholic Beverages II, ~ 6.10. 503 See AB Report Japan - Taxes on Alcoholic Beverages II, at 108. 157 4.5 Participation in dispute settlement proceedings The WTO dispute settlement system was primarily designed to resolve disputes among WTO Members, which are comprised of governments. 504 Non-WTO states and non- government organizations must resort to local remedies within their domestic legal system, as they do not have access to the WTO dispute settlement system. However, even WTO Members, their legal counsel, and non-governmental bodies are faced with certain restrictions in utilizing the dispute settlement system. 4.5.1 Parties and Third Parties and Principle of Confidentiality Participation in the dispute settlement process is restricted by the confidentiality that covers most of the proceedings. 505 The portions of the dispute settlement process that remain open to all WTO Members are usually within the context of DSB meetings, such as meetings for the establishment of a panel, adoption of a panel or AB report, authorization ofretaliation, or surveillance. On the contrary, meetings convened to address a specific dispute initiated in the WTO dispute settlement system are usually not open to all Members, including consultation meetings and oral hearings. For instance, only parties to a dispute can participate in preparatory meetings with the panel, AB, or Arbitrator. 504 See DSU, Articles 4, 6, 9 and IO; See also AB Report US - Shrimp, if I 0 I (noting that "[i]t may be well to stress at the outset that access to the dispute settlement process of the WTO is limited to Members of the WTO."). 505 See DSU, Articles 4:6, 5:2, 14, 17:10, and 18:2. 158 The following table shows the scope of participation permitted in WTO dispute settlement: Table 7: Participation of WTO Members in Dispute Settlement Meetings B. Consultation ./ meetings (If accepted)506 C. Hearings with ./ the Panel, (Session of the AB, or first substantive Arbitrator meeting)507 D. Oral hearings ./ before the AB sos E. Preparator y meetings with the Panel, AB, or Arbitrator509 Source 506 Id. Article 4: 11. 507 Id. Appendix 3:3. 508 AB Working Procedures, Rule 27. 509 DSU, Article 12:3. 510 See WTO, Dispute Settlement Body, Special Session, Diagnosis ofthe Problems Affecting the Dispute Settlement Mechanism: Some Ideas by Mexico, TN/DS/W/90 (July 16, 2007) Annex 7 (Mexico - Diagnosis of the Problems Affecting the DSM). 159 4.5.2 Legal Representation While it is well established that only WTO Members can bring disputes before WTO dispute settlement, the DSU is silent as to whether private counsel can represent governments. The practice under the GATT system was that Contracting Parties were not allowed to bring private counsel to the meetings. However, such GATT practice had garnered concern that some WTO Members-LDCs and developing countries in particular-would not have the capacity for their governmental officials to be effective representatives before panels or the AB. The AB had opportunity to address this issue in the early days of the WTO through its decision in EC-Bananas III, where the AB emphasized that: ... We also note that representation by counsel of a government's own choice may well be a matter of particular significance - especially for developing country Members - to enable them to participate fully in dispute settlement proceedings. Moreover, given the AB's mandate to review only issues of law or legal interpretation in panel reports, it is particularly important that governments be represented by qualified counsel in AB proceedings.511 The AB noted that there is nothing in the WTO Agreements, customary international law, or the practice of international tribunals that prevented WTO Members from determining how their own delegations would be composed in AB proceedings.512 511 AB Report European Communities - Export Subsidies on Sugar, ifif 11 and 12, WT/DS265/ AB/R, WT/DS266/ AB/R, WT/DS283/ AB/R (May 19, 2005) (AB Report EC - Export Subsidies on Sugar (Australia)) (describing the request of Mauritius to have a private legal counsel present to represent the African, Caribbean and Pacific Group of States (ACP) and the objection of Australia to that request. Australia noted that the legal counsel could only represent ACP countries that are participants to the dispute.). 512 AB Report EC-Bananas III, if 10; See also 1975 Vienna Convention on the Representation of States in their Relations with International Organizations of a Universal Character, Mar. 14, 1975, A/Conf. 67/16, reprinted in 69 Am. J. Int'l L. 730, Article 43 (stating that "[s]ubject to the provisions of articles 46 and 73, the sending State may freely appoint the members of [its] delegation."); See also Statute of the International Court of Justice (ICJ), Article 42 (allowing parties to be presented by agents, counsels or advocates). 160 The reasoning behind the GATT' s reluctance to admit non-government representation was based on the confidentiality of the dispute settlement proceedings. Under the WTO legal system, however, the responsibility of maintaining confidentiality was shifted to the governments. This is demonstrated in the AB's ruling in Thailand-H-Beams, which stated that WTO Members represented by private counsel in panel or AB proceedings are "fully responsible under the DSU and the other covered agreements for any acts of their officials as well as their representatives, counsel or consultants."513 4.5.3 Amicus Curiae Submissions One of the most controversial issues in the WTO dispute settlement proceedings is whether a panel or the AB can receive unsolicited submissions from entities that are not a party or third party to the dispute. These entities include non-WTO Members, non- governmental organizations, and even WTO Members that are not a party of the dispute. "Friend of the court" submissions, known as amicus curiae briefs, are not mentioned in the DSU or the AB Working Procedures. 514 However, there are some provisions in the DSU or the AB Working Procedures can be read in a manner to permit panels or the AB to receive amicus curiae briefs. 513 AB Report, Thailand -Anti-Dumping Duties on Angles, Shapes and Sections ofIron or Non-Alloy Steel and H-Beamsfrom Poland, if 74, WT/DS122/AB/R (Apr. 5, 2001) (AB Report Thailand-H-Beams). 514 Black's Law Dictionary 98 (9th ed. 2009) (Latin translation; Defining amicus curiae as "[a] person who is not a party to a law suit but who petitions the court or is requested by the court to file a brief in the action because that person has a strong interest in the subject matter."). 161 Article 13 of the DSU authorizes panels to "to seek information and technical advice from any individual or body which it deems appropriate."515 Panels can also depart from the Working Procedures in Appendix 3 of the DSU and "in effect to develop their own Working Procedures, after consultation with the parties to the dispute."516 Indeed, the "objective assessment" obligation of panels including an "objective assessment ofthe facts ofthe case and the applicability ofand conformity with the relevant covered agreements ... " (emphasis added) requires panels to seek necessary information to settle disputes. 517 The AB in US - Shrimp distinguished between the right to accept and the obligation to consider amicus curiae briefs: In the present context, authority to seek information is not properly equated with a prohibition on accepting information which has been submitted without having been requested by a panel. A panel has the discretionary authority either to accept and consider or to reject information and advice submitted to it, whether requested by a panel or not. The fact that a panel may motu proprio have initiated the request for information does not, by itself, bind the panel to accept and consider the information which is actually submitted.518 515 DSU, Article 13:1. 516 AB Report US-Shrimp, if 105. 517 Id. if 106; See also id if 107 ("[a]gainst this context of broad authority vested in panels by the DSU, and given the object and purpose of the Panel's mandate as revealed in Article 11, we do not believe that the word 'seek' must necessarily be read, as apparently the Panel read it, in too literal a manner. That the Panel's reading of the word 'seek' is unnecessarily formal and technical in nature becomes clear should an 'individual or body' first ask a panel for permission to file a statement or a brief. In such an event, a panel may decline to grant the leave requested. If, in the exercise of its sound discretion in a particular case, a panel concludes inter alia that it could do so without 'unduly delaying the panel process', it could grant permission to file a statement or a brief, subject to such conditions as it deems appropriate. The exercise of the panel's discretion could, of course, and perhaps should, include consultation with the parties to the dispute. In this kind of situation, for all practical and pertinent purposes, the distinction between 'requested' and 'non-requested' information vanishes."). 51s Id. if 108. 162 The AB' s authority to accept and consider amicus curiae briefs emanates from Article 17:9 of the DSU, which authorizes the AB to draft its Working Procedures in consultation with the Chairman of the DSB and the Director-General.519 Article 16:1 of the AB Working Procedures also states: In the interests of fairness and orderly procedure in the conduct of an appeal, where a procedural question arises that is not covered by these Rules, a division may adopt an appropriate procedure for the purposes of that appeal only, provided that it is not inconsistent with the DSU, the other covered agreements and these Rules. Where such a procedure is adopted, the division shall immediately notify the parties to the dispute, participants, third parties and third participants as well as the other Members of the AB. For example, the AB in EC-Asbestos relied on Article 16:1 of the DSU to establish specific procedures for submission of amicus curiae briefs. 520 Briefs can be submitted as part of the submissions of participants i.e., the parties or a third party to a dispute. Briefs attached to submissions may also be from non-participants including non-party WTO Members or non-governmental entities. While the AB has accepted amicus curiae submissions on several occasions, many WTO Members have strongly opposed the practice.521 For example, the majority of WTO Members expressed serious concern regarding the specific procedures established by the AB in EC-Asbestos at a special meeting of the General Council. 522 519 DSU, Article 17:9 . 520 AB Report, European Communities - Measures Affecting Asbestos and Asbestos-Containing Products, irif 52-55, WT/DS135/AB/R (Apr. 5, 2001) (AB Report EC-Asbestos). 521 See WTO, Dispute Settlement Body, Minutes ofMeetings, WT/DSB/M/134 (Jan. 16, 2003) iii! 37, 42, 48 and 52 (see for instance statements of Mexico, Peru, China, Columbia, and Chile). 522 See General Council, Minutes ofMeetings, WTIGCIM/60 (Jan. 23, 2001), if 16 (noting that "it was clear that there was no agreement among Members on the issue of amicus curiae briefs. This had been demonstrated in a number of occasions, including during the DSU review process before Seattle and, in particular, when the reports on the shrimp/turtle and the US-British steel cases were considered by the 163 In a recent dispute, the panel received an "unsolicited communication from an individual." Rather than addressing the panel's ability to accept or consider such submission, the panel found it inappropriate to consider the communication based on the reasoning that the matter was not addressed in the terms of reference. 523 Since 1995, panels and the AB have received amicus curiae briefs in 31 disputes.524 In most of these cases, the panels or the AB were of the view that they were not obligated to consider the amicus curiae briefs, but would take them into account if incorporated into party submissions. 525 4.5.3.1 Briefs Appended to Submissions of Participants Parties of a dispute may include briefs or other material in their submissions to WTO dispute settlement proceedings. The materials can originate from any source, and can be prepared by private counsel, non-governmental entities, or individuals. The AB in US- Shrimp noted that a participant can "determine ... what to include in its submission" and "[assume] responsibility for the contents of that submission."526 In US-Shrimp (Article DSB. A wide range of Members had then criticized the Appellate Body for encroaching and infringing upon the rights of Members to decide on these questions. The WTO was a Member-driven, as well as an intergovernmental organization and this basic fundamental nature of the organization had to, and would, remain as such. If in the future the Appellate Body could not to find a positive provision of this nature in the current rules, then the matter should be referred to the Members."). 523 See Panel Report EC and Certain Member States -Large Civil Aircraft, if 1.9, footnote 7. 524 WorldTradeLaw.net's WTO Case Law Index, WORLDTRADELAW.NET, http://www.worldtradelaw.net/dsc/wtoindex.htm#amicus (last visited Mar. 17, 2011). 525 Id. 526 AB Report US - Shrimp, if 89. 164 21.5 -Malaysia) the AB also emphasized that when a party includes a brief in its submission, the material becomes "an integral part" of the party's submission. 527 Panels or the AB are obligated to take into account briefs that have been incorporated into participants' submissions. In EC-Salmon (Norway) the panel stated that "it would consider views expressed in the unsolicited submissions to the extent that parties decided to adopt the views expressed therein in their own submissions and arguments to the Panel. "528 4.5.3.2 Briefs Submitted by a WTO Member not Party to a Dispute In EC-Sardines, the AB determined that it has the authority to accept amicus curiae briefs from a WTO Member that was not party to the dispute. The AB reasoned that as the AB has "the authority to receive an amicus curiae brief from a private individual or an organization, afortiori," it is "entitled to accept such a brief from a WTO Member, provided there is no prohibition on doing so in the DSU."529 The AB added that the right to participate in WTO dispute settlement does not "prohibit" participation of a Member through submission of Amicus curiae briefs. 530 527 AB Report US-Shrimp (Article 21.5 -Malaysia), iii! 75-78 528 Panel report EC -Salmon (Norway), iii! 1.12 and 1.13. 529 AB Report EC -Sardines, if 164. 530 Id. if 165. 165 4.5.3.3 Briefs Submitted by Non-Governmental Entities The AB in US-Lead and Bismuth JJ 531 emphasized that "[i]ndividuals and organizations, which are not Members of the WTO, have no legal right to make submissions to or to be heard by the AB."532 Furthermore, the AB has no "legal duty to accept or consider unsolicited amicus curiae briefs submitted" by them. 533 However, the AB noted that Article 17:9 of the DSU and Rule 16(1) of the AB Working Procedures allows the AB to "decide whether or not to accept and consider any information that we believe is pertinent and useful in an appeal."534 Therefore, while the AB has rejected an obligation to accept briefs submitted by individuals and non-governmental entities, it has retained the right to consider the briefs at its own discretion. 4.6 Important Legal Issues in the WTO Dispute Settlement Proceedings The WTO dispute settlement proceeding is a complex adjudicatory system that requires skillful lawyers to handle all the technical matters including avoidance of issues (judicial economy or use of arguendo assumptions), standard of review, burden of proof, etc. The purpose of this dissertation is not to discuss all of these technical matters in detail. Rather, this dissertation seeks to explain the general structure of dispute settlement within 531 AB Report, United States - Imposition ofCountervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/AB/R (June 7, 2000) (AB Report US - Lead and Bismuth JI). 532 Id if 41. 533 Id. 534 Id. if 39. 166 the WTO to the extent necessary to understand how the system functions and how different component of the dispute settlement system can impact its legitimacy. 4.6.1 Avoidance of Issues It is a fairly common practice of panels and the AB to utilize certain techniques to avoid examining some issues or claims in a WTO dispute. These avoidance techniques have been developed as a means of judicial efficiency, and sometimes, for political considerations. Considering all claims and argument submitted by participant can be extremely time consuming. To ensure efficiency in the dispute settlement process and comply with stipulated deadlines, it is commonplace for panels and the AB to consider only the claims and arguments necessary to resolve the dispute before them. Moreover, these techniques are an essential safeguard for the legitimacy of the WTO dispute settlement system and have been utilized by panelists and the AB Members to avoid sensitive, political issues undermining the legitimacy of the WTO dispute settlement system. Furthermore, adjudicative bodies may avoid issues due to the difficulty of interpreting vague terms. In an effort to reach an agreement on contentious provisions, it is not uncommon for treaty negotiators to resort to the notion of "creative ambiguity," deliberately placing vague terms in the treaty to be clarified in the future by further negotiations or another body in the institution such as the General Council or adjudicative bodies. However, subsequent attempts to interpret the vague terms may face serious limitations, as the bodies entrusted with the duty of interpretation is now faced with the 167 task of deciding on the correct meaning of a term for which the original negotiators were unable to reach an agreement. Judicial economy and arguendo assumptions are methods that have been developed by panels and the AB for the sake of efficiency or avoid sensitive issues raised before them. 4.6.1.1 Judicial Economy Under a panel's terms of reference, the panel is obligated to resolve the dispute between the parties appearing before them, and make "such findings as will assist the DSB" in making recommendations or rulings. 535 Often a complainant alleges that a challenged measure violates different provisions of the WTO Agreements. Under the DSU, the panel is not required to address all the legal claims raised by the complainant.536 Rather, panels and the AB should address only those claims that can assist them in determining whether a challenged measure is consistent with WTO laws. However, application of judicial economy should not result in partial resolution of the matter at issue. The AB in that regard noted that: The principle of judicial economy has to be applied keeping in mind the aim of the dispute settlement system. This aim is to resolve the matter at issue and "to secure a positive solution to a dispute". To provide only a partial resolution of the matter at issue would be false judicial economy. A panel has to address those claims on which a finding is necessary in order to enable the DSB to make sufficiently precise recommendations and rulings so as to allow for prompt 535 DSU, Article 7: 1. 536 United States - Measure Affecting Imports of Woven Wool Shirts and Blouses from India, at 17-20, WT/DS33/AB/R (May 23, 1997) (AB Report US- Wool Shirts and Blouses). 168 compliance by a Member with those recommendations and rulings "in order to ensure effective resolution of disputes to the benefit of all Members."537 Put differently, the application of judicial economy "allows a panel to refrain from making multiple findings that the same measure is inconsistent with various provisions when a single, or a certain number of findings of inconsistency, would suffice to resolve the dispute."538 For example, in Brazil-Retreaded Tyres, the AB emphasizes: We emphasize that panels must be mindful, when applying the principle of judicial economy, that the aim of the dispute settlement mechanism under Article 3.7 of the DSU is to secure a positive solution to the dispute. Therefore, a panel's discretion to decline to rule on different claims of inconsistency adduced in relation to the same measure is limited by its duty to make findings that will allow the DSB to make sufficiently precise recommendations and rulings 'in order to ensure effective resolution of disputes to the benefit of all Members. ' 539 This jurisprudence, as William Davey noted, 540 might impact application of judicial economy by panels on their decisions.541 Furthermore, because of an increase in appeals at the WTO, panels have less of a tendency to resort to judicial economy and endeavor to analyze most of the claims brought before them in order to secure their findings from being modified or reversed by the AB. 542 537 AB Report, Australia - Measures Affecting Importation ofSalmon, ~ 223, WT/DS18/AB/R (Nov. 6, 1998) (AB Report Australia -Salmon); See also AB Report, Canada- Certain Measures Affecting the Automotive Industry,~~ 116-117, WT/DS139/AB/R, WT/DS142/AB/R (June 19, 2000) (AB Report Canada -Autos). 538 AB Report Canada - Wheat Exports and Grain Imports,~ 133. 539 AB Report Brazil - Retreaded Tyres, ~ 257. 540 William J. Davey, Has the WTO Dispute Settlement System Exceeded its Authority? A Consideration of Deference Shown by the System to Member Government Decisions and its Use ofIssue-Avoidance Techniques, 4 J. INT'LECON. L. 108-110 (2001) 541 Id. 109. 542 Id. 169 4.6.1.2 Arguendo Assumption In analysis of claims and argument of the participant of a dispute, panelists and the AB members have resorted to "Arguendo" legal technique. "Arguendo," the Latin term meaning "even if the panel were to assume or determine," is a technique that discusses different aspects of a claim "for the sake of argument."543 The AB recognized that the arguendo technique could be used in panel or AB analyses "to enhance simplicity and efficiency in decision-making."544 Panels or the AB apply the arguendo technique for various reasons. First, panelists or AB members might not agree with arguments of the participants of a dispute and may try to shape and complete the analysis in a manner that they consider to be simpler and more efficient. For example the AB in US-Shrimp (Thailand) /US-Customs Directive, 545 in response to India's challenge to "the Panel's decision not to address 'as a threshold question' whether Article XX(d) remains available to justify a 'specific action against dumping or subsidization,"' assumed arguendo that such a defense is available to the United States. The AB then proceeded to consider the United States' appeal of the Panel's finding that the measure at issue, as applied to subject shrimp, is "necessary" to secure compliance with certain laws 543 Black's Law Dictionary 121 (9th ed. 2009) 544 AB Report, China - Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, if 213, WT/DS363/AB/R (Jan. 19, 2010) (AB Report China -Audiovisual Services). 545 AB Report, United States - Measures Relating to Shrimp from Thailand I United States - Customs Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing Duties, WT/DS343/AB/R, WT/DS345/ AB/R (Aug. 1, 2008) (AB Report US - Shrimp (Thailand) /US - Customs Directive). 170 and regulations within the meaning of Article XX(d); after concluding that the measure is not "necessary" within the meaning of Article XX( d), AB found it unnecessary to express a view "on the question of whether a defense under Article XX(d) of the GATT 1994 was available to the United States."546 Second, panels or the AB may use the arguendo technique to send a signal to the non- complying party to refrain from appealing that claim or argument. For example, a panel may reason that, even assuming a party's argument is accepted, it would still not prevail in its ultimate argument because it cannot meet other requirements necessary to win the dispute. The AB has cautioned against using the arguendo technique, stating: Although panels and the AB may choose to employ this technique in particular circumstances, it may not always provide a solid foundation upon which to rest legal conclusions. Use of the technique may detract from a clear enunciation of the relevant WTO law and create difficulties for implementation. Recourse to this technique may also be problematic for certain types of legal issues, for example, issues that go to the jurisdiction of a panel or preliminary questions on which the substance of a subsequent analysis depends. 547 Arguendo can be considered as an issue avoidance technique. On one hand, by application of arguendo, panels and the AB can assume that arguments provided by the participant is acceptable and therefore, they will not discuss and analyze those claims and arguments in details. One the other hand, by application of arguendo they send a signal to the losing party that assuming that its claim or argument is accepted, it cannot meet 546 Id. ifif 308-310; See also WorldTradeLaw.net's WTO Case Law Index, WORLDTRADELAW.NET, http://www.worldtradelaw.net/dsc/wtoindex.htm#accession (last visited Mar. 17, 2011) (referring to AB Report US - Shrimp (Thailand) !US - Customs Directive for arguendo discussion). 547 AB Report China -Audiovisual Services, if 213. 171 other requirements and this might cause not to raise the claim or argument in the appellate stage. 4.6.2 Opening Panels or Appellate Body Oral Hearing to the Public The culture and environment of dispute settlement in the WTO after 1995 has been to a great extent influenced by diplomatic considerations. From the view of the negotiators, it was imperative that disputing parties reach a resolution to disputes brought before the WTO dispute settlement system, even if it meant that the dispute settlement process would have to be conducted behind closed doors. 548 Against this backdrop, the issue of opening oral hearings in the panel and appellate stages has become increasingly controversial, as the WTO has experienced a strengthening of the legal culture within its dispute settlement process. As a result, certain WTO Members, scholars, civil societies, and non-governmental entities have voiced the need for more transparency and departure from the closed-door mentality of the early negotiators. 549 The text of the DSU does not address the issue of public hearings for panel or AB meetings. However, the DSU and the panel Working Procedures underscore the 548 David Palmeter, The Need for Due Process in WTO Proceedings, 31 J. WORLD TRADE 54 (1997) (noting that [p ]erhaps nowhere is the diplomatic heritage of the WTO and GATT reflected more prominently than in the closed hearing aspects of it dispute settlement and appellate procedures. When these were truly 'conciliation' proceedings, closed meetings made perfect sense. Privacy is essential to the conciliation process, which can feature artful, face-saving diplomatic compromise. But dispute settlement is not conciliation. It is, for all practical purposes, a lawsuit and the appeal of the results of a lawsuit. These should be public affairs."). 549 For example see Doha Declaration, if 10; See also Sutherland Report, iii! 261-268 (emphasizing the importance of the public hearings in the panel and the appellate stages). 172 importance of confidentiality in the "deliberations" of panels and the AB. Article 14:1 the DSU states that "[p]anel deliberations shall be confidential." Panels are obligated to comply with the Working Procedures that have been adopted by them. Paragraphs 2 and 3 of the standard Working Procedures in Annex 3 of the DSU address some aspects of the panel meetings: The panel shall meet in closed session. The parties to the dispute, and interested parties, shall be present at the meetings only when invited by the panel to appear before it. The deliberations of the panel and the documents submitted to it shall be kept confidential. Nothing in this Understanding shall preclude a party to a dispute from disclosing statements of its own positions to the public. Members shall treat as confidential information submitted by another Member to the panel which that Member has designated as confidential. Where a party to a dispute submits a confidential version of its written submissions to the panel, it shall also, upon request of a Member, provide a non-confidential summary of the information contained in its submissions that could be disclosed to the public. Article 17: 10 of the DSU provides similar requirements for the AB: The proceedings of the AB shall be confidential. The reports of the AB shall be drafted without the presence of the parties to the dispute and in the light of the information provided and the statements made. (emphasis added) The DSU requires communications between parties and the panels or AB to be confidential.550 However, the participants of a dispute can waive this right. Article 18:2 of the DSU provides that "[n]othing in this Understanding shall preclude a party to a dispute from disclosing statements of its own positions to the public." Finally Article VII of the Rules of Conduct for the Understanding on the Rules and Procedures Governing the Settlement of Disputes provides that "[e Jach covered person shall at all times maintain the confidentiality of dispute settlement deliberations and proceedings together with any information identified by a party as confidential." 550 DSU, Article 18:2. 173 4.6.2.1 Opening Panel Meetings to the Public Panels and the AB have had an important role in enhancing transparency in the WTO dispute settlement system. For the first time in almost 12 years since the establishment of the WTO dispute settlement system, an NGO requested the panel to open its meetings to the public through web-casting in Brazil - Retreaded Tyres. 551 The panel refused, however, deciding that the meeting with the parties and third parties "would be held in closed sessions in accordance with the Working Procedures adopted by the Panel at the beginning of the proceedings."552 The United States, as a party to the dispute, requested an open meeting at the compliance panel stage in US- Upland Cotton (Article 21.5 -Brazil).553 The panel again declined the request, stating its concern that there was no precedent on that matter in WTO jurisprudence. 554 The panel decided to open its meetings to the public for the first time in EC - Bananas III (Article 21.5-US).555 In doing so, however, the panel emphasized that it does not wish to 551 Panel Report, Brazil - Measures Affecting Imports ofRetreaded Tyres, WT/DS332/R (Dec. 17, 2007) (as modified by Appellate Body Report WT/DS332/AB/R) (Panel Report Brazil-Retreaded Tyres). 552 Id. if 1.9. 553 Panel Report, United States - Subsidies on Upland Cotton - Recourse to Article 21. 5 ofthe DSU by Brazil, WT/DS267/RW and Corr.I (June 20, 2008) (as modified by AB Report WT/DS267/AB/RW) (Panel Report US- Upland Cotton (Article 21.5 -Brazil)). 554 Id. iii! 8.16-8.20. 555 Panel Report, United States - Continued Existence and Application ofZeroing Methodology, WT/DS350/R (Feb. 19, 2009) (as modified as Appellate Body Report WT/DS350/AB/R) (Panel Report US - Continued Suspension). 174 create precedent on this matter, and narrowly held that "it is entitled, under the particular circumstances of this case and pursuant to Article 12.1 of the DSU, to open its hearings for public observation."556 However, third parties in the dispute did not consent to opening the meetings for public observation, and the third party sessions remained closed to the public.557 The panel interpreted the term "deliberation" in Article 14: 1 of the DSU narrowly: [It] is not of the view that a panel hearing is similar to a consideration by a legislative body or a committee. Even though exchanges of points of view take place in both instances, the nature of the exchange of arguments by parties to a dispute before an adjudicating body remains different from that of an assembly or a committee. This suggests that the term "deliberation" was not intended to cover the exchange of arguments between the parties, but rather the internal discussion of the Panel with a view to reach its conclusions. We note that our interpretation of the term "deliberation" conforms to the use of that term in the statutes of other international judicial bodies. 558 [footnote omitted] The panel also noted that parties can waive their right to confidentiality of their communications to the extent they desire under Article 18:2 of the DSU.559 Finally, the panel concluded that "the Rules of Conduct should not be construed in a manner that would restrict the rights of Members under the DSU .... Article VII does not prevent the Panel from holding hearings open to observation by the public."560 556Id.if7.53. 557 Id. 558 Id. if 7.49. 559 Id. ir 7.50. 560 Id. if 7 .51. 175 Following the US-Continued Suspension, at the panel stage in four disputes, the public could participate in oral hearings via simultaneous closed-circuit broadcast to a separate viewing room.561 4.6.2.2 Opening Appellate Body Meetings to the Public The AB was asked for the first time to decide on opening oral hearings at the appellate stage in Canada-Continued Suspension, by the United States, Canada, and the European Communities. Accordingly, the AB in Annex IV of its report included "procedural ruling of 10 July to allow public observation of the oral hearing."562 Among all the third party participants only Brazil, China, India, and Mexico objected to the open oral hearing. 563 The AB permitted open appellate hearings by departing from its previous approach regarding definition of"proceedings."564 As noted, Article 17:10 of the DSU states that "the proceedings of the AB shall be confidential." In Canada-Continued Suspension, the AB explained that the confidentiality requirement of "proceedings" in Article 17: 10 of the DSU is "understood as operating in a relational manner" among the AB and the 561 See European Communities - Regime for the Importation, Sale and Distribution ofBananas - Recourse to Article 21.5 ofthe DSU by the United States, if 1.11, WT/DS27/RW/USA and Corr.I (Dec. 22, 2008) (as upheld by AB Report WT/DS27/AB/RW/USA) (Panel Report EC-Bananas Ill (Article 21.5 - US)); Panel Report, United States - Measures Relating to Zeroing and Sunset Reviews, , if 1.6, WT/DS322/R (Jan. 23, 2007) (as modified by AB Report WT/DS322/AB/R) (Panel Report US- Zeroing (Japan)); Panel Report EC and Certain Member States - Large Civil Aircraft, if 1.13. 562 AB Report Canada - Continued Suspension, Annex IV. 563 Id. at 318 (stating that oral hearings are part of the "proceedings" mentioned in Article 17: 10 of the DSU). 564 AB Report, Canada - Measures Affecting the Export ofCivilian Aircraft, WT/DS70/AB/R (Aug. 20, 1999) (AB Report Canada -Aircraft). 176 participants on the one hand, and the AB and third participants on the other. 565 The AB inspiring from Panel Report EC-Bananas III (Article 21.5 - US) analyses these relationships. The AB notes that: The requirement that the proceedings of the Appellate Body are confidential affords protection to these separate relationships and is intended to safeguard the interests of the participants and third participants and the adjudicative function of the Appellate Body, so as to foster the system of dispute settlement under conditions of fairness, impartiality, independence and integrity. In this case, the participants have jointly requested authorization to forego confidentiality protection for their communications with the Appellate Body at the oral hearing. The request of the participants does not extend to any communications, nor touches upon the relationship, between the third participants and the Appellate Body. The right to confidentiality of third participants vis-a-vis the Appellate Body is not implicated by the joint request. 566 The AB' s reasoning in opening meetings at the appellate stage has been that because the matter is not addressed in the DSU, Article 17:9 of the DSU grants the AB the authority "to exercise control over the conduct of the oral hearing. "567 Therefore, the AB has concluded that it can "[lift the] confidentiality [requirement] at the joint request of the participants as long as this does not adversely affect the rights and interests of the third participants or the integrity of the appellate process."568 Finally, the AB adopted the following additional procedures pursuant to Rule 16:1 of the AB Working Procedures: (a) The oral hearing will be open to public observation by means of simultaneous closed circuit television. The closed-circuit television signal will be shown in a 565 AB Report Canada - Continued Suspension, at 320. 566 Id. 567 Id. 56& Id. 177 separate room to which duly-registered delegates of WTO Members and members of the general public will have access. (b) Oral statements and responses to questions by third participants wishing to maintain the confidentiality of their submissions will not be subject to public observation. (c) Any third participant that has not already done so may request authorization to disclose its oral statements and responses to questions on the basis of paragraph (a), set out above. Such requests must be received by the AB Secretariat no later than 5:30 p.m. on 18 July 2008. ( d) An appropriate number of seats will be reserved for delegates of WTO Members in the room where the closed-circuit broadcast will be shown. (e) Notice of the oral hearing will be provided to the general public through the WTO website. WTO delegates and [M]embers of the general public wishing to observe the oral hearing will be required to register in advance with the WTO Secretariat. (f) Should practical considerations not allow simultaneous broadcast of the oral hearing, deferred showing of the video recording will be used in the alternative. 569 4.6.3 Scope of Appeal The scope of appellate review by the AB is addressed in Article 17:6, 17: 12, 17:13 of the DSU. The AB may "uphold, modify or reverse the legal findings and conclusions of the panel."570 However, Article 17:6 of the DSU limits the scope of an appeal "to issues of law covered in the panel report and legal interpretations developed by the panel." Article 17: 12 of the DSU requires the AB to "address each of the issues raised in accordance with paragraph 6 during the appellate proceeding." 569 Id. 570 DSU, Article 17:13. 178 The AB must distinguish between issues of law and issues of fact before adjudicating a matter, as the AB has explicitly excluded factual matters from the scope of its appeal. 571 In practice, however the line between issues of law and fact is often blurred due to the complexity of disputes. The AB makes it own determination regarding what constitutes an issue of fact or an issue of law. In Chile-Price Band System,572 the AB provided that "the Panel's characterization of its finding 'as a factual matter' does not mean that the issue whether Chile's price band system is a border measure similar to a variable import levy or a minimum import price is shielded from appellate review."573 The AB has also expanded its authority to examine facts when necessary to rule on a challenged issue. The AB in EC-Hormones ruled that "[t]he consistency or inconsistency of a given fact or set of facts with the requirements of a given treaty provision is ... a legal characterization issue. It is a legal question."574 One of the controversial issues regarding the scope of appellate review is the AB' s authority to review a panel's assessment of the facts of a dispute. In disputes where the 571 AB Report EC-Hormones, if 132 (stating that "[u]nder Article 17:6 of the DSU, appellate review is limited to appeals on questions of law covered in a panel report and legal interpretations developed by the panel. Findings of fact, as distinguished from legal interpretations or legal conclusions, by a panel are, in principle, not subject to review by the Appellate Body."); See id. if 239 (refusing to rule "factual conclusions" that are outside the scope of appellate review). 572 Chile - Price Band System and Safeguard Measures Relating to Certain Agricultural Products, WT/DS207/AB/R (Oct. 23, 2002) (AB Report Chile Price Band System). 573 Id. if 224. 574 AB Report EC - Hormones, if 132; See also AB Report, Canada - Certain Measures Concerning Periodicals, at 22-23, WT/DS3 l/AB/R (July 30, 1997) (AB Report Canada - Periodicals); See also AB Report Chile Price Band System, if 224. 179 AB considers that a panel has not assessed the existing factual issues correctly, the AB may intervene and reverse or modify the findings. Article 11 of the DSU requires that: ... a panel should make 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. (emphasis added) With regards to its ability to examine the panel's assessment of the facts, the AB in EC- Hormones reasoned that "whether or not a panel has made an objective assessment of the facts before it, as required by Article 11 of the DSU, is also a legal question which, if properly raised on appeal, would fall within the scope of appellate review."575 The appropriate scope of Article 11 of the DSU is still developing in WTO jurisprudence and its relationship with Article 17:6 remains in a state of flux. 4.6.4 Completion of Legal Analysis and Remand The main function of the WTO dispute settlement system is to resolve disputes.576 Only in 15 percent of disputes has the AB upheld the panels' interpretation of factual and legal issues. In 79 percent of dispute the AB has modified the panels' decisions. The AB has reversed 4 percent of findings of panels. When a complainant brings a case to the WTO dispute settlement system, it is often the case that the party will invoke several inconsistencies with WTO law. In the interest of 575 AB Report EC - Hormones,~ 132. 576 DSU, Articles 3 :3 and 3 :2. 180 "judicial economy," however, the panel may not analyze all of the claims raised by the complainant, but only address those claims necessary to reach a decision. While panels are free to exercise such judicial economy, a dilemma arises when the AB reverses or modifies the panels' findings of a violation of a provision of the WTO Agreements. In such case, the panel analysis remains incomplete, while the AB' s hands remain tied because of the limitation on the AB's scope of review to questions of law. The main reason for this dilemma lies in the fact that the AB does not have the authority to send a case back to the lower level to complete the analysis. The absence in the WTO of this procedure, called a "remand," makes it necessary for the AB to complete the factual analysis in order to avoid having the complainant start a new dispute settlement proceeding all over again. 4.6.4.1 Completion of Analysis by the Appellate Body The AB had to take on the task of completing the analysis for the first time in US- Gasoline, one of its first disputes.577 Rather than specifying that it was completing the analysis, however, the AB simply concluded that the panel had erred, and proceeded to conduct a full analysis of Article XX(g) of the GA TT 1994 in the interest of resolving the dispute in a positive manner. 578 577 AB Report, United States - Standards for Reformulated and Conventional Gasoline, WT /DS2/AB/R (May 20, 1996) (AB Report US-Gasoline). 578 Id at 13-29. 181 The AB directly addressed the issue in Canada-Periodicals, where it established that the AB "can" and "should" complete the analysis in certain circumstances" when "there was a sufficient basis in the panel report to do so. 579 The AB further explained and clarified the scope of the AB's authority in EC-Poultry, where the AB, referring to US-Gasoline and Canada-Periodicals, completed the analysis of an_issue that had not been addressed by the panel for reasons of judicial economy. 580 Thus, the AB has completed the analysis in situations where a panel has not addressed the issues and the requirements of Canada-Periodicals were met,581 and when the AB has sought to rectify legal interpretations of the panel that the AB did not agree with. 582 It should be noted that the AB is able to complete the legal analysis only when there are sufficient factual findings or undisputed facts in the panel record to compete the legal 579 AB Report Canada - Periodicals, at 23-24. 580 AB Report, European Communities - Measures Affecting the Importation ofCertain Poultry Products, ifif156 ff, WT/DS69/AB/R (July 23, 1998) (AB Report EC-Poultry). 581 Idif156; See also Alan Yanovich, and Tania Yoon, Completing the Analysis in WTO Appeals: The Practice and its Limitations, 9 J. INT'L ECON. L. 933 (2006) (Yanovich and Yoon, Completing the Analysis in WTO Appeals). 582 See AB Report US -Shrimp, iii! 114-124; See also Yanovich and Yoon, Completing the Analysis in WTO Appeals, 937-940. 182 analysis.583 This is because the AB is not authorized to make new factual findings, and must rely on the panel report as a basis for its legal analysis. 584 For instance, the AB in EC-Asbestos declined to address a "novel" issue because it had not been argued in sufficient detail at the panel level, either in the immediate case or in previous disputes. 585 The AB refused to complete the analysis because the issue in question was not "closely related" to the issues that had been analyzed, and the "due process" rights of the participants may be prejudiced through the AB' s completion of the analysis. The AB reached a similar decision in EC - Export Subsidies on Sugar (Australia), where it concluded that the agriculture claims analyzed by the panel were not "closely related" enough to the SCM Agreement Article 3 claims for the AB to complete a legal analysis on the latter.586 The AB stated that the panel had made reference to "limited arguments" and completion of analysis "might affect the due process rights of the participants. "587 583 For instance see AB Report US- Gasoline, at 18 ff; AB Report Canada - Periodicals, at 469 ff; AB Report, EC- Hormones, 'i['i[ 222 ff; AB Report EC- Poultry, 'i['i[ 156 ff; AB Report Australia -Salmon, 'i['i[ 117 ff, 193 ff and 227 ff; AB Report US - Shrimp, 'i['i[ 123 ff; AB Report, Japan - Measures Affecting Agricultural Products, 'i['i[ 112 ff, WT/DS76/AB/R (Mar. 19, 1999) (AB Report Japan -Agricultural Products II); AB Report, United States - Tax Treatment for "Foreign Sales Corporations'', 'i['i[ 133 ff, WT/DS108/AB/R (Mar. 20, 2000) (AB Report US-FSC); AB Report Canada-Aircraft (Article 21.5 - Brazil), 'i['i[ 43 ff, and AB Report US - Wheat Gluten, 'i['i[ 80 ff and 127 ff. 584 See AB Report Australia - Salmon, 'i['i[ 209 ff, 241 ff and 255; AB Report, Korea - Definitive Safeguard Measure on Imports ofCertain Dairy Products, 'i['i[ 91 ff and 102 ff, WT/DS98/AB/R (Jan.12, 2000) (AB Report Korea - Dairy); AB Report Canada -Autos, 'i['i[ 133 ff and 144 ff; See also AB Report, Korea - Measures Affecting Imports ofFresh, Chilled and Frozen Beef, 'i['i[ 128 ff, WTIDS 161/AB/R, WT/DS169/AB/R (Jan. 10, 2001) (AB Report Korea- Various Measures on Beef). 585 AB Report EC -Asbestos, 'if 84. 586 AB Report EC - Export Subsidies on Sugar (Australia), 'if 337. 587 Id. 'i['i[ 336-341. 183 4.6.4.2 Remand Remand is a mechanism which has been designed "[t]o send (a case of claim) back to the court or tribunal from which it came for some further action."588 The remand mechanism has not been provided to the AB in the WTO dispute settlement system. The main reason for the omission was that the appellate stage is limited to issues of law and negotiators of the DSU did not intend for the AB to be a superior judicial court within the WTO structure. 589 As previously stated, the AB can only complete the panel's analysis when the panel report contains sufficient factual findings. Consequently, when the panel's analysis is insufficient or incomplete, the absence of a remand mechanism has at times caused parties to re-initiate panel proceedings from the beginning in order to fulfill the goal of "secur[ing] a positive solution to dispute" as stated in Article 3:7 of the DSU. Although the DSU and the AB Working Procedures are silent on the existence of remand authority, Rule 16:1 of the AB Working Procedures may grant the capacity to resolve this procedural gap. It is necessary to keep in mind, however, that the deadlines and timetables stipulated in the DSU may be affected by application of remand. 588 Black's Law Dictionary 1407 (9th ed. 2009). 589 For more information see Chapter Three, § 3.3.2.6.1.3 for the history of establishment of Appellate Stage; See also DSU, Article 17:6. 184 4.6.S Concurring and Dissenting Opinions in Appellate Body Reports Neither the DSU nor the AB Working Procedures explicitly address the inclusion of concurring and dissenting opinions in AB reports, and dissenting opinions have been rare. 590 Nonetheless, both the DSU and the AB Working Procedures implicitly allude to the possibility of dissent. Specifically, the AB Working Procedures predict that consensus may not be attainable in some instances, and the provisions of the DSU governing expression of opinions can be applied by analogy to dissenting opinions by AB members. Article 17: 11 of the DSU provides that "[o ]pinions expressed in the AB report by individuals serving on the AB shall be anonymous." In order to ensure coherent jurisprudence, Rule 3 of the AB Working Procedures notes that "[t]he [AB] and its Divisions shall make every effort to take their decisions by consensus." In other words, when a decision cannot be arrived at by consensus, the matter at issue is decided by a majority vote. 590 Meredith K Lewis, The Lack ofDissent in WTO Dispute Settlement, 9 J. INT'L ECON. L. 895 (2006); Dissenting opinions can be found in the following panel reports: see Panel Report, European Communities - Measures Affecting the Importation ofCertain Poultry Products, ifif 289-93, WT/DS69/R (July 23, 1998) (as modified by Appellate Body Report WT/DS69/AB/R) (Panel Report EC- Poultry); Panel Report, United States - Import Measures on Certain Products from the European Communities, WT/DS165/R and Add. I (Jan. 10, 2001) (as modified by Appellate Body Report WT/DS165/AB/R) (Panel Report US- Certain EC Products); Panel Report, United States - Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany, WT/DS213/R and Corr.I (Dec. 19, 2002) (as modified by AB Report WT/DS213/AB/R) (Panel Report US-Carbon Steel); Panel Report, European Communities - Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/R (Apr. 20, 2004) (as modified by AB Report, WT/DS/246/AB/R) (Panel Report EC - Tariff Preferences); Panel Report, United States - Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/R (Aug. 31, 2004) (as modified by AB Report, WT/DS264/AB/R) (Panel Report US Softwood Lumber V); Panel Report, United States - Laws, Regulations and Methodology for Calculating Dumping Margins ("Zeroing''), WT/DS294/R (May 9, 2006) (as modified by AB Report WT/DS294/AB/R) (Panel Report US-Zeroing (EC)). Only in one AB report a dissenting opinion exists. See AB Report, United States -Subsidies on Upland Cotton, WT/DS267/AB/R (Mar. 21, 2005) (AB Report US - Upland Cotton). For concurring opinion at the appellate stage see AB Report EC -Asbestos. 185 4.7 Obstacles to Participation in the WTO Dispute Settlement System faced by Developing Countries and LDCs The rule-based dispute settlement system of the WTO is premised on the assumption that all Members are equal. In reality, however, not all WTO Members share equal economic and political standing. The economic capacity and legal expertise of a WTO Member significantly impact the ability of the Members to raise disputes before panelists or the AB. 300 250 200 150 t- - • WTO Complaints 100 Grouped by Income 1 Classification so 0 -- - - -,- -- High Income Upper Middle Lower Middle Low---- Income Income Income Figure 9: WTO Complaints Grouped by Income Classification Source 591 591 See WTO Complaints Grouped by Income Classification, WORLDTRADELAW.NET, http://www.worldtradelaw.net/dsc/database/classificationcount.asp (last visited Mar. 17, 2011 ). 186 47 percent of the disputes raised by upper-middle-income countries have been against lower-middle and upper-middle-income Members.592 Similarly, 42 percent of disputes raised by lower-middle-income Members have been against upper, lower, and low- income countries. This demonstrates that 1) developing countries utilize the system for their benefit, and 2) developed countries are not the only respondents of disputes brought by developing countries. More than two thirds of the WTO Membership is comprised of developing countries and LDCs. As the large majority of the multi-lateral trading system, developing countries and LDCs should be provided with adequate opportunity to take advantage of the dispute settlement system. In this regard, the DSU has established special and differential treatment (S&D treatment) for developing countries and LDCs. Under the S&D treatment provisions, developing countries and LDCs can ask for additional or privileged procedures and legal assistance as stipulated in the DSU. Table 8: Special and Differential Treatment in the DSU S&D Treatment at Article 4·10 ofthe DSU: Consultation Stage During consultations Members should give special attention to the particular problems and interests of developing country Members. Article 12:10 ofthe DSU: In the context of consultations involving a measure taken by a developing country Member, the parties may agree to extend the periods established in paragraphs 7 and 8 of Article 4. If, after the relevant period has elapsed, the consulting parties cannot agree that the consultations have concluded, the Chairman of the DSB shall decide, after consultation with the parties, whether to extend the relevant period and, if so, for how long. 592 To date, upper-middle-income members have not raised any dispute against low-income Members. Id. 187 S&D Treatment at the Article 8: 10 ofthe DSU: Panel Stage When a dispute is between a developing country Member and a developed country Member the panel shall, if the developing country Member so requests, include at least one panelist from a developing country Member. Article 12:10 ofthe DSU: In examining a complaint against a developing country Member, the panel shall accord sufficient time for the developing country Member to prepare and present its argumentation. Article 12: 11 ofthe DSU: Where one or more of the parties is a developing country Member, the panel's report shall explicitly indicate the form in which account has been taken of relevant provisions on differential and more-favorable treatment for developing country Members that form part of the covered agreements which have been raised by the developing country Member in the course of the dispute settlement procedures. S&D Treatment in Article 21:2 ofthe DSU: Implementation Particular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement. Article 21: 7 ofthe DSU: If the matter is one which has been raised by a developing country Member, the DSB shall consider what further action it might take which would be appropriate to the circumstances. Article 21:8 ofthe DSU: If the case is one brought by a developing country Member, in considering what appropriate action might be taken, the DSB shall take into account not only the trade coverage of measures complained of, but also their impact on the economy of developing country Members concerned. Article 27:2 of the DSU explicitly requires the Secretariat to provide legal assistance to developing countries: While the Secretariat assists Members in respect of dispute settlement at their request, there may also be a need to provide additional legal advice and 188 assistance in respect of dispute settlement to developing country Members. To this end, the Secretariat shall make available a qualified legal expert from the WTO technical cooperation services to any developing country Member which so requests. This expert shall assist the developing country Member in a manner ensuring the continued impartiality of the Secretariat. Maintaining neutrality is a core concern of the Secretariat. Providing legal assistance in disputes through the LAD, AB Secretariat, and Rules Division may compromise such impartiality. The number of the legal officers within the Secretariat is limited and there is no conflict of interest mechanism designed to guarantee their impartiality. Therefore, the Secretariat cannot directly assist developing countries and LDCs in their disputes within the WTO, and their assistance is limited to general comments. Raising a dispute before panelists and the AB is a highly technical and costly matter, and developing countries and LDCs may not possess the requisite expertise or the resources to retain private counsel. Moreover, the limitations placed on the Secretariat in assisting developing countries and LDCs is a significant obstacle to effectively implementing Article 27:2 of the DSU. As it is indisputable that all Members should have effective recourse to the dispute settlement system. The question is how developing countries and LDCs can obtain the legal assistance necessary to raise a dispute in the WTO dispute settlement system pursuant to the DSU. Recognizing the lack of adequate legal resources, Petros Mavroidis and Ulrich Petersmann have been assigned to provide additional legal advice and assistance to developing countries on issues pertaining to dispute settlement. From 1995 to 2009, 113 189 official requests were filed by developing countries and LDCs. 593 The requests included overall strategy on disputes, comments on legal drafts, general legal options on various litigation, and non-litigation concerns. The Advisory Centre on WTO Law (ACWL) is also an organization independent of the WTO that provides advice, support, and training to developing countries and LDCs. 594 However, not all developing countries are members of the ACWL and there are some restrictions and fees associated with the services provided by the ACWL. 593 See WTO, Summary of Request for Assistance Under Article 27:2 of the DSU (statistics on file with author). 594 For more information on ACWL see Chapter Five, § 5.2.2.6.2. (Impediment to Access to the Dispute Settlement System). 190 CHAPTER FIVE 5 LEGITIMACY IN THE WTO DISPUTE SETTLEMENT SYSTEM The dissertation proposes a multi-dimensional standard of legitimacy that can be applied in the WTO dispute settlement system. As noted in Chapter three, legitimacy within the WTO cannot be examined without considering the particular political and legal structure of the organization. The interaction between the diplomatic and adjudicative organs of the WTO has added considerably to the complexity of the notion of legitimacy. Moreover, one should bear in mind that factors affecting the legitimacy of the WTO as a whole might not be the same as those affecting the legitimacy of the dispute settlement system. Therefore, in analyzing the legitimacy of an organ, it is essential to take into account the particular characteristics of the organ and its relationship with other organs within its legal apparatus. There are various factors, inter alia, that impact the notion of legitimacy within the WTO dispute settlement system: 1. The procedures by which the WTO dispute settlement system is delegating authority to adjudicate and settle disputes among WTO Members and the limitations of the delegated authority; 2. The process by which informed and coherent decisions are generated within the WTO dispute settlement system and different factors that impact them; and 191 3. The methods by which the decisions of the WTO dispute settlement system protect the interests of WTO Members and ensure fairness and effectiveness. In this dissertation, legitimacy within the WTO dispute settlement system includes both normative and sociological aspects oflegitimacy. The concept oflegitimacy refers to "justification of authority"595 on one hand, and "perception of acceptability"596 and "a pull toward compliance" on the other. 597 Figure 10: Components of the Notion of Legitimacy Thus, legitimacy within the WTO dispute settlement system not only concerns the justification of authority, but also whether addressees of the organization's rulings and 595 Bodansky, The Legitimacy ofInternational Governance, 601 (referring to legitimacy as "justification of authority"); See also Wolfrum, Legitimacy in International Law From a Legal Perspective, 6 (stating that "although it mostly means to refer to the justification of authority, this notion being understood as the equivalent of having the power to take binding decisions or to prescribe binding rules"). 596 Treves, Aspects ofLeg1t1macy ofDecisions ofInternational Courts and Tribunals, 170 (referring to legitimacy as "perception of acceptability"). 597 Thomas M. Franck, The Power ofLegitimacy and the Legitimacy ofPower: International Law m an Age ofPower Disequilibrium, 100 American Journal of International Law 88, 93 (2006). 192 recommendations perceive such decisions as acceptable and endeavor to comply with them. 5.1 Multi-Dimensional Standard of Legitimacy This section introduces a multi-dimensional standard of legitimacy that can be applied to the WTO dispute settlement system. 598 The standard of legitimacy that is applicable in nation states is not necessarily applicable within the WTO as a Global Governance Institution. Therefore it is necessary to define a comprehensive standard of legitimacy that has the capacity to encompass specific features of the WTO, and in particular, its unique capacity as a supranational dispute settlement body whose decisions are binding on its Members. Furthermore, factors contributing to the legitimacy of the diplomatic organ of the WTO are not the same as those contributing to the legitimacy of the adjudicatory body. Article IV:3 of the WTO Agreement requires that the General Council convene to discharge the responsibilities of the DSB provided for in the DSU. The DSB is in charge of administering the DSU rules and procedures and it "shall have the authority to establish panels, adopt panel and AB reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions as well as other obligations under the covered agreements. "599 598 This model of legitimacy relies on theories developed by Rildiger Wolfrum, Daniel Bodansky, Daniel C. Esty, Robert Howse, Joseph H. H. Weiler, and Allen Buchanan. 599 DSU, Article 2: 1. 193 Under the reverse consensus mechanism, the decision of the DSB to establish a panel, adopt a panel or AB report, or authorize retaliation is automatically adopted unless there is a consensus within the DSB to not adopt the decision.600 The reverse consensus rule does not exist in diplomatic organs of the WTO. Such discrepancy in the structure of authority between the diplomatic and adjudicatory bodies requires a differentiated standard of legitimacy. The multi-dimensional standard of legitimacy, as proposed, analyzes legitimacy in the WTO dispute settlement system from three major perspectives that act in tandem: 1. source based legitimacy, 2. procedure based legitimacy, and 3. result based legitimacy. Along with these three major pillars, an overall perception of legitimacy also exists. As noted in Chapter one, in order to measure and analyze the internal institutional legitimacy of the WTO dispute settlement system, a series of interviews was conducted with ambassadors or officials primarily responsible for settlement of WTO disputes in Geneva, as listed in Annex 1.601 The interviewees include ambassadors, head of missions, first and second secretaries, counselors, and attache. However, due to confidentiality rules, names and ranks of the interviewees cannot be disclosed. Due to time limitations for conducting interviews, however, it was not feasible to inquire into every detailed aspect of the proposed model oflegitimacy. Therefore, priority was 600 See DSU, Articles 6: 1, 16:4, 17:14 and 22:6. 601 The interviewees consist ofrepresentative of both developed and developing countries that are Members of the WTO. However, the interviewees do not include LDCs, as LDCs have rarely been either complainants or respondents of a WTO dispute. 194 given to the most important factors contributing to the multi-dimensional standard of legitimacy. The interviewees were selected among countries that have been most actively involved in the WTO disputes As of August 2010, the countries of the interviewees were involved in more that 88% of all WTO disputes Figure 11: Multi-Dimensional Standard of Legitimacy 195 5.1.1 Source Based Legitimacy Consent is the most common method of justifying authority within a legal or political system, and constitutes one of the main sources oflegitimacy. This section discusses the difference between legality and legitimacy, the scope of consent, and interpretative methods to construe such consent that have been developed within the WTO dispute settlement system. 5.1.1.1 Relationship between Legality and Legitimacy In order to understand the notion of legitimacy, it is vital to examine the relationship between legality and legitimacy. The close nexus between these two notions has deep roots. 602 Legitimacy, which is derived from the Latin root of legitimus, is defined by Black's Law Dictionary as "[l]awfulness," and legitimation as "[t]he act of making something lawful."603 Abi-Saab has noted that the relationship between legality and legitimacy is identical, mutually supportive, or antinomicaL 604 A proper analysis of the notion of legitimacy in the WTO must begin with an examination of whether legitimacy equals legality. In other words, does the 602 Bodansky, The Concept ofLegitimacy in International Law, 311. 603 Black's Law Dictionary 984 (9th ed. 2009). 604 Abi-Saab, The Security Council as Legislator and as Executive, 115. 196 establishment of legitimacy automatically lead to a conclusion of legality, and does an act that is legal automatically guarantee legitimacy of the act? Viewed from a positivist point of view, legality and legitimacy are identical.605 In the context of international institutions, this theory is particularly supported by the idea that institutions should operate within their mandate. In a domestic legal system, there are established mechanisms for checks and balances of authority that monitor decision-makers. Such mechanisms are absent in Global Governance Institutions where authority has been granted by its members, however, and members cannot fully control the institutions' activities. Such lack of full control distinguishes an international conference from an international organization. Esty expressed a view that "[t]he principle oflegality helps check abuses of power and ensure that decision makers exercise restraint in their policy-making activities. Such restraint is especially important in the international realm - as overreaching by supranational authorities quickly raises serious legitimacy issues."606 The notion of legality is a principal factor of legitimacy in Global Governance Institutions when one considers the fundamental source from which such institutions derive their authority. Bodansky noted that "[l]egality plays a vital role in ensuring that 605 Id; See also Anthony D'amato, On the Legitimacy ofInternational Institutions, in LEGITIMACY TN INTERNATIONAL LAW, 83 (Rudiger Wolfrum and Volker Roben eds. Springer, 2008) (noting that domestic level the concepts are synonymous. However in international he was convinced that there is space between them). 606 Esty, Good Governance at the World Trade Organization, 552 (2007). 197 the exercise of authority by an international institution can be linked back to its treaty basis - its basis, that is, in state consent."607 However, legal positivism is not a comprehensive theory that can adequately describe the notion of legitimacy at the international stage. Bodansky argued that legitimacy in the context of international institutions is not identical to legality, but rather represents a broader concept, for three reasons: First, although legality provides one possible justification for the exercise of authority, it is by no means the only criteria that we apply in assessing how institutions exercise their authority. That is why it is a meaningful statement to say that Kosovo was illegal but still legitimate- because the criteria of legitimacy and legality are not exactly the same. Second, the exercise of authority can exist outside of a legal system. And these non-legal exercises of authority can also raise issues of legitimacy .... Finally . . . [i]n establishing a new international institution or reforming an existing one, an important question is: How should institutions be designed in order to enhance their legitimacy? What should be the rules, for example, regarding participation, transparency and so forth? These questions cannot be answered in terms of legality because when we are creating a new institution, no legal rules yet exist. Within the context of the WTO, legitimacy is a broader concept than legality, while legality is an indispensable component of legitimacy. Thus, while the fact that a decision comports to WTO laws may not necessarily guarantee legitimacy, a decision that is against the expressed agreement of WTO Members cannot be legitimate. In this light, the DSU carries an explicit prohibition, stating that the DSB cannot "add to or diminish the rights and obligations provided in the covered agreements."608 607 Bodansky, The Concept ofLegitimacy in International Law, 311. 608 DSU, Article 3:2; For more information on treaty interpretation in the WTO dispute settlement system and its limitation see Chapter Five, § 5.1.1.4.3. 198 Such approach might not be applicable to other international organizations such as the United Nations or NATO. For instance, Richard Goldstone, in his report for the International Independent Commission of Inquiry on Kosovo, characterized the NATO bombing of Serbia in 1999 as "illegal but legitimate."609 The report notes that: The Commission concludes that the NA TO military intervention was illegal but legitimate. It was illegal because it did not receive prior approval from the United Nations Security Council. However, the Commission considers that the intervention was justified because all diplomatic avenues had been exhausted and because the intervention had the effect of liberating the majority population of Kosovo from a long period of oppression under Serbian rule.610 In comparing the interplay of legitimacy and legality in different institutions, one should consider differences between the WTO and the United Nations in terms of the history of their establishment, structure of authority, capacity, and goals. The United Nations Charter was drafted and adopted almost 50 years before the WTO Agreement, and has not since been revised to accommodate ever-emerging global challenges. The scope of mandate, goals and decisions-making process of the WTO and the United Nations are also very distinct. Furthermore, the report dealt with the NATO's action in the context of the genocide and lack of efficiency of the Security Council to take action in a timely manner. Consequently, the concept of "illegal but legitimate" does not exist in the WTO context. As Abi-Saab states, "legitimacy lies at one remove, upstream, from legality, and explains its anchorage or rooting in society. It is not an alternative that can replace legality."611 609 INDEPENDENT INTERNATIONAL COMMISSION ON Kosovo, THE Kosovo REPORT: CONFLICT, INTERNATIONAL RESPONSE, LESSONS LEARNED 4 (Oxford University Press, 2000). 610 Id. 611 Abi-Saab, The Security Council as Legislator and as Executive, 115 (noting that he "discard[s] from the discourse of legitimacy any attempt to use it as a means to dodge or get round the law; as a passedroit, a 199 However, one should bear in mind that an excessively rigid mandate and lack of capacity to deal with unforeseen challenges may lead an international organization to take actions that are broader than its authority, rendering such actions illegal. If a treaty only reflects the most urgent needs of its signatories, an action that is otherwise illegal may nonetheless be legitimate, as long as it complies with consents of the signatories. Such scenarios evidence the need for complimentary sources of legitimacy to evaluate actions that fall outside the mandate of international organizations. 5.1.1.2 State Consent as a Source of Legitimacy As previous noted, consent is one of the main sources of legitimacy.612 In the international stage, consent of states to treaties can be recognized as one of the sources of authority. For example, the Statute of the International Court of Justice (ICJ) recognizes international conventions establishing rules expressly recognized by the contesting states as a source of international law. 613 When a state accedes to an international treaty, the authority established by the treaty is justified. Wolfrum described the notion of consent in public international law as follows: licence trumping legality or a "justification" of its violation (cause d'exoneration, "circumstance excluding wrongfulness"). 612 See JOSEPH RAz, ETHICS IN THE PUBLIC DOMAIN: ESSAYS IN THE MORALITY OF LAW AND POLITICS 340 (Oxford: Clarendon Press, 1994) (explaining the relationship between consent and legitimacy in three ways: consent might be a condition or the condition of holding legitimate authority; or consent is not directly a condition of legitimacy but the conditions for the legitimacy of authority might be such that only a government based on the consent of the governed meets them; or legitimate government may deserve the consent of its subjects). 613 Statute ofICJ, Article 38:l(a). 200 For public international law legitimacy rests - at least according to the traditional view - in the consent of the States concerned. According to this view international law is based upon the assumption that States have the ability to negotiate and to adhere to international agreements. By doing so they accept obligations vis-a-vis the other partners to that agreement or vis-a-vis a larger community. They also have the ability to commit themselves unilaterally.614 After the negotiation of international treaties by state representatives, there should be a process by which domestic institutions adopt the treaties. Such procedure is "to ensure that there is a chain of legitimacy justifying the implementation of the ensuing international obligations through national institutions."615 Legitimacy based solely on state consent does not in itself have the capacity to justify the authority of the WTO as a Global Governance Institution. First, the structure of authority within the WTO is more complex than that of domestic legal systems, and factors additional to state consent are needed to analyze the concept of legitimacy within the structure of the WTO. For example, even if Global Governance Institutions are granted the authority to create new rights and obligations for their member states and the states consent to the mandate, such consent may not be sufficient to guarantee that those decisions are legal and legitimate. Second, not all WTO Members - either in theory or practice - adopt a democratic governance structure, and the accountability relationship between the Global Governance Institutions and the people may be very remote.616 614 Wolfrum, Legitimacy in International Law From a Legal Perspective, 6. 615 Id 7; See also Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 25-62 (characterizing this procedure as "International Legal Pedigree View"). 616 Keohane and Nye, The Club Model ofMultilateral Cooperation, 229 (noting that "the international bureaucrats are more remote than national bureaucracies, and the chain of connections to elections is more indirect"); See also Wolfrum, Legitimacy in International Law From a Legal Perspective, 16 (describing remote connection between people and international organizations). 201 In contemporary international law, consent to obligations can be static or dynamic. In the next section, the nature of these two obligations will be examined. 5.1.1.3 Consent to Dynamic vs. Static Obligations Abi-Saab identified the distinction between static and dynamic obligations. Static - or punctual - obligations are those that are "discharged at one point in time, and thus their content cannot change over time."617 For example a limited consent to a court jurisdiction in a specific case can be considered as a static obligation. On the other hand, dynamic obligations "are of a more general and dynamic nature, the contents of which are specified over time, as those involving the creation of or participation in international institutions, the activities of which may lead to substantial modifications in the scope and substance of the original obligations of member States."618 Dynamic consent can be described as consent to "an ongoing system of governance" such as the United Nations Charter or the WTO Agreement.619 Consent to treaties establishing a Global Governance Institution belongs to the latter. Abi-Saab observed that states consent and "sign law-making organic treaties establishing international governance regimes, which develop lives of their own and undertake proliferating legal activities that touch individuals within their boundaries."620 617 Abi-Saab, The Security Council as Legislator and as Executive, 111; See also Bodansky, The Legitimacy ofInternational Governance, 604 (defining notion of specific consent). 618 Abi-Saab, The Security Council as Legislator and as Executive, 111. 619 Bodansky, The Legitimacy ofInternational Governance, 604 (defining notion of dynamic consent). 620 Abi-Saab, The Security Council as Legislator and as Executive, 112. 202 The dynamic nature of such consent creates a legitimacy concern that the established Global Governance Institution might exceed its mandate, thus jeopardizing the continuation of the consent needed to maintain legitimacy in its authority. In this regard, Wolfrum stated that "[t]here is, de facto, the danger, though, that the legitimizing effect of the original consent may fade over time. This would be particularly true if, due to changing circumstances, the burden of implementing a given obligation increased significantly." The concern that an institution may exceed its mandate is of particular concern when consent is granted tp an international governance institution with a legislative or adjudicatory function. Dynamic and static consent are not mutually exclusive, and can thus co-exist under one institution. The WTO is a Global Governance Institution with multiple layers of governance. The WTO Agreement contains obligations that are both static and dynamic. It is possible that states consent to static obligations pertaining to a specific matter while simultaneously designating an organ within the organization to make secondary rules or interpret the existing rules and decisions that relate to the matter at hand. Therefore, it is necessary to examine the boundaries of dynamic obligations within the structure of the WTO, and the mechanism of checks and balances that control its norm setting organs. 203 5.1.1.4 Scope of Consent within the WTO The compound structure of the WTO is the result of a massive treaty consisting of more than 27,000 pages. The WTO Agreement comprises the institutional framework of the organization and encompasses multilateral and plurilateral trade agreements. The multilateral trade agreements included in Annexes 1, 2 and 3 are integral parts of the Marrakesh Agreement and bind all WTO Members.621 The process of the Uruguay Round negotiations was very complex and it is highly improbable that 123 countries negotiating the Uruguay Round were able to agree on and foresee all details of the provisions of the WTO agreements. As a result, the emergence of situations that have not been addressed in the WTO Agreements nor subsequently clarified have created - and in all likelihood, will continue to create - challenges for the organization. In such cases, the negotiators have resorted to two mechanisms to fill in the gaps: 1) secondary rules; and 2) interpretation of existing ambiguities in WTO provisions. 5.1.1.4.1 Secondary Rule Making Function within the WTO As noted in the Chapter two, the process of decision making in the WTO takes place within a multilayered regulatory framework. Under the previous GA TT system, the Member-driven characteristic of the GATT was essential and explicit, as it was established that the Contracting Parties were solely responsible for negotiating and reaching decisions on lowering trade barriers. However, with the establishment of the WTO as an institution and the expansion of its institutional functions, it became evident 621 See Marrakesh Agreement, Article 11:2. 204 that a purely Member-driven organizational structure would be inadequate to carry out all the objectives declared in the WTO's mandate. At its conception, the WTO had 123 Members, and it is practically impossible for all WTO Members to participate in every decision making process, including day-to-day administrative work or dispute settlement. Although the WTO has been recognized as a Member-driven organization, some specific mechanisms have been designed within the WTO by which new rules or standards can be adopted. Secondary rule making, or "droit derive" provides specific organs within a Global Governance Institution such as the WTO with the authority to set rules and regulations within the bounds of their mandate. The capacity to adopt norms that can affect rights and obligations within an international organization may emanate from expressed or implied consent of its contracting members. 622 5.1.1.4.1.1 Expressed Authority for Secondary Rule Making Under the WTO Agreement, WTO Members may agree to establish an organ that can set new norms that would be binding on them. Such authority may be granted explicitly to an organ such as the General Council. Such norm-setting process has been recognized as secondary rule making, or "droit derive." As Pascal Lamy noted, "there are some cases where WTO bodies are able to adopt effective decisions that ensure pragmatic responses 622 Peter Van den Bossche, and lveta Alexovicova, Effective Global Economic Governance by the World Trade Organization, 8 Journal oflntemational Economic Law 683-684 (2005) (categorizing secondary legislation making into expressed and implied authority). 205 to specific needs."623 His statement referred to the authority of the General Council to adopt amendment, waivers, authorities' interpretations, and accession protocols.624 Such actions "do not necessarily require any additional ratification by Members."625 For example, the accession protocol of the People's Republic of China regarding "private right to trade" states that "[w]ithout prejudice to China's right to regulate trade in a manner consistent with the WTO Agreement, China shall progressively liberalize the availability and scope of the right to trade, so that, within three years after accession, all enterprises in China shall have the right to trade in all goods throughout the customs territory of China."626 Although this obligation is not mentioned in the WTO Agreements, the General Council is granted the authority to impose its terms on China. Pascal Lamy was also referring to the WTO Agreement on Sanitary and Phytosanitary Measure (SPS Agreement) as well as the Agreement on Subsidies and Countervailing Duties (SCM Agreement).627 Article 12 of the SPS Agreement states that: A Committee on Sanitary and Phytosanitary Measures is hereby established to provide a regular forum for consultations. It shall carry out the functions necessary to implement the provisions of this Agreement and the furtherance of its objectives, in particular with respect to harmonization. As implied in the above text, when WTO Members consent under the SPS Agreement to allow the Committee to "carry out the functions necessary to implement the provisions of this Agreement," the Committee is endowed with the authority to create new detailed 623 Lamy, The WTO's Contribution to Global Governance, 44. 624 Id. 625 Id. 626 WTO, Accession ofthe People's Republic ofChina, WT/L/432 (Nov. 23, 2001) p.4. 627 Lamy, The WTO 's Contribution to Global Governance, 44. 206 rules that are not initially mentioned in the Agreement established by the WTO, as long as the Committee acts within its mandate. As a result, the Committee is granted the authority to adopt decisions that impact the rights and obligations of the WTO Members, with the Members controlling only the initiation of the process. 628 It is also possible to authorize various WTO organs to adopt standards and norms set by other international institutions and non-WTO organs. For instance, Article 3 of the SPS Agreement requires WTO Members to "base their sanitary or phytosanitary measures on international standards, guidelines or recommendations."629 Under the SPS Agreement, conformity with such international standards that have not been legislated by the WTO must be deemed to be necessary to protect human, animal or plant life or health, and in disputes, parties are presumed to be consistent with the relevant provisions of this Agreement and of GATT 1994 if their measures conform to such international standards. 630 International standards are defined in the Annex A of the SPS Agreement as the following: (a) for food safety, the standards, guidelines and recommendations established by the Codex Alimentarius Commission relating to food additives, veterinary drug and pesticide residues, contaminants, methods of analysis and sampling, and codes and guidelines of hygienic practice; (b) for animal health and zoonoses, the standards, guidelines and recommendations developed under the auspices of the International Office of Epizootics; 628 See for example, WTO Committee on Sanitary and Phytosanitary Measures, Decision on the Implementation of Article 4 of the Agreement on the Application of Sanitary and Phytosanitary Measures, G/SPS/19, Oct. 26, 2001. 629 SPS Agreement, Article 3: l. 630 Id. Article 3:2. 207 ( c) for plant health, the international standards, guidelines and recommendations developed under the auspices of the Secretariat of the International Plant Protection Convention in cooperation with regional organizations operating within the framework of the International Plant Protection Convention; and ( d) for matters not covered by the above organizations, appropriate standards, guidelines and recommendations promulgated by other relevant international organizations open for membership to all Members, as identified by the Committee. Such implied authority of "out-sourcing rule making"631 essentially binds WTO Members to international standards that they may not have participated in creating. 5.1.1.4.1.2 Implied Authority for Secondary Rule Making The authority to enact secondary treaty legislation within the WTO might be derived from an implied authority that has been granted to various organs to set new norms. There are many factors that contribute to creation of such authority. For instance, the WTO may need to evolve and expand its mandate in order to respond to upcoming challenges. Such change might not be contemplated in the original treaty. In the context of the dispute settlement system, Article 3 .3 of the DSU explicitly states that "[t]he prompt settlement of situations in which a Member considers that any benefits accruing to it directly or indirectly under the covered agreements are being impaired by measures taken by another Member is essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members. "632 631 CASS, THE CONSTITUTIONALIZATION OF WTO 185 (explaining that such out-sourcing might undermine the legitimacy of the WTO). 632 DSU, Article 3:3. 208 If the WTO dispute settlement system fails to resolve a dispute promptly due to an absence ofrelevant law or lack of clarification, both the authority and credibility of the organization would be severely undermined. Therefore, WTO Members expect panelists and the AB to resolve their disputes in a prompt and efficient manner. WTO dispute settlement has a special feature that is different from any other function of the WTO. The decision-making process within the WTO dispute settlement system has been designed in a manner that does not require consent of WTO Members to adopt the ruling and recommendations of the DSB. Rather, the dispute settlement system is granted exceptional power through the implementation of a "reverse consensus" rule in the adoption of the rulings and recommendations of panelists and the AB in the DSB. Under the reverse consensus system, decisions of WTO tribunals are automatically adopted in DSB meetings, excepting the unlikely situation in which all parties, including the prevailing party, objects to the results. Thus, the reverse consensus system provides panelists and the AB an implied authority to establish rules to resolve disputes efficiently. For example, decisions of the AB Members allowing public observation of oral hearings,633 accepting amicus curiae briefs from non-state actors in adjudicative process, 634 and carrying out preliminary rulings635 are some of the decisions that have 633 See Procedural ruling of July 10 to allow public observation of the oral hearing in AB Report US Continued Suspension, Annex IV; See also AB Report Canada - Continued Suspension, Annex IV. 634 AB Report US - Shrimp. 635 AB Report EC - Banana III. 209 been developed through adjudications without expressed reference in the DSU.636 However, such authority is not unlimited, and faces certain restrictions. 5.1.1.4.2 Interpretative Function within the WTO It is virtually impossible to draft a treaty or agreement that covers all minute details and predicts all possible situations. The difficulty of drafting a comprehensive treaty was further aggregated in the Uruguay Round negotiations by the participation of 123 countries that each had different levels of expectations. For the negotiators to have any hope of reaching an overall agreement, they often had to remove the subject of contention from the negotiations or resort to "creative ambiguity."637 The WTO Agreement provides for a mechanism by which WTO provisions can be interpreted. The Ministerial Conference and the General Council as well as the WTO dispute settlement body are organs that deal with interpretation. 636 See Cottier, DSU Reform, 261 (stating that "[d]ispute resolution .. .is the prime arena where bodies of the Organization are starting to play a role in their own right, no longer exclusively dependent on the will of individual Members."). 637 Kamala Dawar and Peter Holmes, Negotiation Or Litigation? The Curiously Evolving Governance of the WTO, in THE LAW AND ECONOMICS OF GLOBALISATION: NEW CHALLENGES FOR A WORLD IN FLUX, 96 (Linda Yueh ed. Edward Elgar Publishing Ltd, 2009) (discussing the role of the dispute settlement system in interpretation of ambiguity in WTO agreements). 210 5.1.1.4.2.1 General Council The "exclusive" authority to adopt interpretations of WTO agreements is vested in the Ministerial Conference and the General Council. 638 As all Members participate in the decision-making process in both organs, an adopted interpretation is binding on all WTO Members and not only to Members requesting the interpretation. A three-quarters majority is needed for approval of such authoritative interpretation.639 It is interesting to note that neither the Ministerial Conference nor the General Council have ever adopted an authoritative interpretation under Article IX:2 of the WTO Agreement. Further, the General Council has never adopted an authoritative interpretation under Article IX of the WTO Agreement. Since 1995, the only formal request for authoritative interpretation was with regard to "sequencing" by the European Communities in 1999.64° Failure to use such mechanism and the inability of the WTO Members to conclude the Doha Round negotiations have shifted the burden of clarifying 638 WTO Agreement, Article IX:2 (noting that "[t]he Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements. In the case of an interpretation ofa Multilateral Trade Agreement in Annex 1, they shall exercise their authority on the basis of a recommendation by the Council overseeing the functioning of that Agreement. The decision to adopt an interpretation shall be taken by a three-fourths majority of the Members. This paragraph shall not be used in a manner that would undermine the amendment provisions in Article X."). 639 Id. 640 See WTO, General Council, Request for an Authorative Interpretation Pursuant to Article IX:2 ofthe Marrakesh Agreement Establishing The World Trade Organization: Communication from the European Communities, WT/GC/W/133 (Jan. 25, 1999); See also WTO, General Council, Request for an Authorative Interpretation Pursuant to Article IX:2 ofthe Marrakesh Agreement Establishing The World Trade Organization: Communication from the European Communities, WT/GC/W/143 (Feb. 5, 1999). See also the response of the United States to the request of the European Communities. WTO, General Council, Procedures for Amendment and Interpretation Pursuant ofthe Dispute Settlement System: Response to European Communities' Request for an Authoritative Interpretation ofthe Dispute Settlement Understanding Pursuant to Article IX:2 ofthe WTO Agreement, WT/GC/W/144 (Feb. 5, 1999) (noting that Article X of the DSU requires that any amendments to the DSU are to be approved by consensus). 211 existing provisions and ambiguities of the WTO agreements to the WTO dispute settlement system. A question that arises in this context is whether the WTO dispute settlement system has the authority to interpret provisions of the WTO Agreements despite the existence of Article IX:2. Article 3 :2 of the DSU expressly instructs that the WTO dispute settlement system is intended to clarify existing provision of the WTO Agreements in accordance with customary rules of interpretation of public international law in specific disputes. Furthermore, the DSU designates the AB as an organ to review legal interpretations that have been developed by the panel in a dispute.641 However, the interpretation that has been developed by panels or the AB is only binding on the parties with respect to the specific dispute, and not on other WTO Members or future disputes involving the same parties. The AB in US - Wool Shirts and Blouses, in an exercise of judicial economy, referred to the exclusive authority of the Ministerial Conference and the General Council to adopt interpretations of the WTO Agreement under article IX:2: As India emphasizes, Article 3.2 of the DSU states that the Members of the WTO 'recognize' that the dispute settlement system 'serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law' emphasis added). Given the explicit aim of dispute settlement that permeates the DSU, we do not consider that Article 3.2 of the DSU is meant to encourage either panels or the [AB] to 'make law' by clarifying existing provisions of the WTO Agreement outside the context of resolving a particular dispute. A panel need only address those claims which must be addressed in order to resolve the matter in issue in the dispute. 641 DSU, Article 17:6. 212 We note, furthermore, that Article IX of the WTO Agreement provides that the Ministerial Conference and the General Council have the 'exclusive authority' to adopt interpretations of the WTO Agreement and the Multilateral Trade Agreements.642 In Japan - Alcoholic Beverages 11, the AB emphasized that the panel report adopted by the DSB does not constitute "subsequent practice" within the meaning of Article 31 of the Vienna Convention on the Laws of Treaties, and that its scope is limited to the parties of the dispute.643 The AB reasoned: [w]e do not believe that the [Contracting Parties], in deciding to adopt a panel report, intended that their decision would constitute a definitive interpretation of the relevant provisions of GATT 1947. Nor do we believe that this is contemplated under GATT 1994. There is specific cause for this conclusion in the WTO Agreement. Article IX:2 of the WTO Agreement provides: 'The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements'. Article IX:2 provides further that such decisions 'shall be taken by a three-fourths majority of the Members'. The fact that such an 'exclusive authority' in interpreting the treaty has been established so specifically in the WTO Agreement is reason enough to conclude that such authority does not exist by implication or by inadvertence elsewhere.644 However, Weiler observed that the authority for interpretation within the WTO has been "shifted" to the dispute settlement system: Du jure, the DSU leaves the final interpretation of the agreements in the hands of the General Council and the Ministerial Conference. DSU IX:2. Du facto, unless the WTO is to break the hollowed principle of consensus, that power has shifted to the [AB].645 642 AB Report US- Wool Shirts and Blouses, pp. 19-20 (footnote omitted). 643 AB Report Japan -Alcoholic Beverages II, pp.12-15. 644 Id p.13. 645 Weiler, The Rule ofLawyers and the Ethos ofDiplomats, 342. 213 As of April 2011, more than 159 panel reports and 97 AB reports have been adopted by the DSB.646 This impressive track record is due in part to the legal interpretations regarding the provisions of the WTO agreements that panelists and the AB have developed in order to resolve disputes promptly and efficiently. 5.1.1.4.2.2 Dispute Settlement System The dispute settlement system is considered as one of the most important organs of the WTO. The DSB participates in the adjudicatory system of the organization as the representative of the political organ of the WTO. The DSB is composed of representatives of all WTO Members. Article IV :3 of the WTO Agreement requires that the General Council "discharge" its responsibilities as the DSB as provided for in the DSU. The DSB is in charge of administering the DSU rules and procedures and it "shall have the authority to establish panels, adopt panel and the AB reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions as well as other obligations under the covered agreements."647 Article 3:2 of the DSU states the main goal of the WTO dispute settlement mechanism and sets the interpretative method that should be utilized by panelists and the AB: The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public 646 See Facts and Figures on WTO Dispute Settlement, WORLDTRADELAW.NET, http://www.worldtradelaw.net/dsc/database/basicfigures.asp (last visited Apr. 10, 2011). 647 DSU, Article 2: 1. 214 international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements. Security and predictability are among the central values to the multilateral trading system in interpreting the provisions of the WTO agreements. The AB in Japan - Alcoholic Beverages II was of the view that: WTO rules are reliable, comprehensible and enforceable. WTO rules are not so rigid or so inflexible as not to leave room for reasoned judgements in confronting the endless and ever-changing ebb and flow of real facts in real cases in the real world. They will serve the multilateral trading system best if they are interpreted with that in mind. In that way, we will achieve the 'security and predictability' sought for the multilateral trading system by the Members of the WTO through the establishment of the dispute settlement system. 648 The panel in US - Section 301 Trade Act649 also focused on the significance of the dispute settlement system in bringing security and predictability to the WTO: Providing security and predictability to the multilateral trading system is another central object and purpose of the system which could be instrumental to achieving the broad objectives of the Preamble. Of all WTO disciplines, the DSU is one of the most important instruments to protect the security and predictability of the multilateral trading system and through it that of the marketplace and its different operators. DSU provisions must, thus, be interpreted in the light of this object and purpose and in a manner which would most effectively enhance it. In this respect we are referring not only to preambular language but also to positive law provisions in the DSU itself.650 In sum, coherent interpretation of the provisions of the WTO Agreements pursuant to customary rules of interpretation of public international law is an effective tool to guarantee security and predictability of the WTO legal regime. 648 AB Report Japan -Alcoholic Beverages II, p. 31. 649 Panel Report, United States - Section 110(5) ofthe US Copyright Act, WT/DS 160/R, July 27, 2000) (Panel Report US - Section 301 Trade Act). 650 Id. ~ 7. 75. 215 5.1.1.4.3 Treaty Interpretation in the WTO Dispute Settlement System Treaty interpretation is a tool that is used to understand the common intention of the signatories of a treaty. Understanding legislative intent adds clarity to treaty interpretation, which is an important element that impacts the legitimacy of an institution. Esty elaborated on the impact of clarity on legitimacy, noting: Clarity is important both in the structure of the rule-making process and in the rules that emerge. The legitimacy of governance depends in no small part on having those who are governed understand how decisions are made and why particular outcomes emerge. Being clear on who has decision-making authority and on what basis they will exercise it is fundamental to governance being seen as fair and non-arbitrary.651 Thomas Franck's theory of legitimacy offers further assistance in understanding the significance of treaty interpretation in the context of the WTO. Franck's theory adopts a legal and textual approach to legitimacy, and helps shed light on the issue of interpretation. 652 Franck introduced four elements that reinforce the notion of legitimacy: "determinacy, symbolic validation, coherence, and adherence."653 Among these four elements, determinacy, which Franck describes as "that which makes [the rule's] message clear" or "transparent," relies heavily on interpretation. 654 651 Esty, Good Governance at the World Trade Organization, 520; See also generally Howse, Robert, Adjudicative Legitimacy and Treaty Interpretation in International Trade Law: The Early Years ofWTO Jurisprudence, in THE EU, THE WTO, AND THE NAFTA: TOWARDS A COMMON LAW OF INTERNATIONAL TRADE? 35-69 (Weiler, Joseph H.H. ed. New York: Oxford University Press, 2000). 652 See generally FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 91 (noting that "determinacy is the linguistic or literary-structural component of legitimacy, so symbolic validation, ritual, and pedigree provide legitimacy's cultural and anthropological dimension."). 653 Id. 654 Id. 52. 216 It is interesting to note that the GA TT 194 7 "did not say anything about interpretation."655 In contrast, the DSU in Article 3:2 specifically referred to "customary rules of interpretation of public international law." In US - Gasoline, one of its first decisions, the AB recognized the Vienna Convention on the Law of Treaties (Vienna Convention)656 as "customary rules of interpretation of public international law."657 In this decision, the AB emphasized that the WTO Agreement "is not to be read in clinical isolation from public international law," and explained that: [G]eneral rule of interpretation [in Article 31(1) of the Vienna Convention] has attained the status of a rule of customary or general international law. As such, it forms part of the 'customary rules of interpretation of public international law' which the [AB] has been directed, by Article 3(2) of the DSU, to apply in seeking to clarify the provisions of the General Agreement and the other 'covered agreements' of the Marrakesh Agreement Establishing the World Trade Organization (the 'WTO Agreement'). That direction reflects a measure of recognition that the General Agreement is not to be read in clinical isolation from public international law. 658 655 Abi-Saab, The Appellate Body and Treaty interpretation, 456; See also DAMME, ISABELLE VAN, TREATY INTERPRETATION BY THE WTO APPELLATE BODY (Oxford University Press, 2009). 656 Vienna Convention on the Law of Treaties, 8 ILM 679 (1969) (Vienna Convention). 657 However, this does not mean that Articles 31 and 32 are the only mechanisms by which WTO laws can be interpreted. Article 3:2 of the DSU expressly refers to "customary rules of interpretation of public international law" and not specifically to provisions of the Vienna Convention. 658 AB Report US - Gasoline, p.17. See also AB Report, India - Patent Protection for Pharmaceutical and Agricultural Chemical Products, if 46, WT/DS50/AB/R (Jan. 16, 1998) (AB Report India-Patents (US)); AB Report Japan -Alcoholic Beverages II, pp. 10-12; Article 31 of the Vienna Convention reads: Article 31 General rule of interpretation 1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: 217 One should note that although the Vienna Convention has attained the status of customary international law and the AB as often relied on Articles 31 and 32 of the Vienna Convention, these Articles are not the only mechanisms by which WTO laws can be interpreted. Article 3.2 of the DSU expressly refers to "customary rules of interpretation of public international law" and not specifically to provisions of the Vienna Convention. Hudec pointed out that [t]he care and attention given to the [Vienna Convention] (now dutifully echoed and amplified in most panel report) could be viewed as a bit excessive, given the rather open- ended drafting of [the Vienna Convention] Articles 31 and 32 and the differences among scholars as to what they mean."659 (footnote omitted). (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty. 3. 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. 4.A special meaning shall be given to a term if it is established that the parties so intended). 659 Robert E. Hudec, The New WTO Dispute Settlement Procedure: An Overview ofthe First Three Years, 8 MINN. J. GLOBAL TRADE 29-30 (1999) (Hudec, The New WTO Dispute Settlement Procedure) (citing SINCLAIR, THE VIENNA CONVENTION ON THE LAW OF TREATIES 114-19 (2nd ed. 1984). Hudec quoted Sinclair's response to generality of the Vienna Convention: The Criticism directed towards the generality of the rules is no doubt well founded if (but only it) the intention had been to formulate a comprehensive code of the canons of interpretation available to international tribunals or other decision-makers. But the [International Law] Commission specifically disavowed any such intent .... ). 218 5.1.1.4.3.1 Clarification vs Law Making The role of panels and the AB in the WTO dispute settlement system is "to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law."660 However, such clarification under the Articles 3:2 and 19:2 of the DSU "cannot add to or diminish the rights and obligations" of WTO Members. This is one of the reasons that panelists and the AB are not authorized to adopt authoritative interpretations within the meaning of Article IX:2 of the WTO Agreement and the scope of their findings is limited to the parties of a dispute.661 The AB in US- Wool Shirts and Blouses held that the panels and the AB should not "make law": Given the explicit aim of dispute settlement that permeates the DSU, we do not consider that Article 3 .2 of the DSU is meant to encourage either panels or the [AB] to 'make law' by clarifying existing provisions of the WTO Agreement outside the context of resolving a particular dispute. 662 When panelists and the AB examine the compatibility of a measure with WTO laws, three situations can be identified. The first situation is when provisions of WTO Agreements have explicitly addressed the issue, and panelists and the AB need only to 660 DSU, Article 3:2. 661 See AB Report, United States - Import Measures on Certain Products from the European Communities, if 92, WT/DS165/AB/R (Jan. 10, 2001) (AB Report US - Certain EC Products). 662 AB Report US - Wool Shirts and Blouses, p. 19. 219 apply the rule to the measure in question. In this case, the law is clear. There is no need for clarification, and panelists and the AB cannot interpret the rule in a manner that contradicts the expressed consensus of WTO Members. Otherwise, such interpretation would result in adding to or diminishing rights and obligations of WTO members, which is prohibited under Article 3 :2 of the DSU. In the second situation, the WTO Agreements have not addressed the issue at all, and the law is silent on the matter. In such case one should examine whether panelists and the AB can create secondary rules that do not "add to" the rights and the obligation of WTO Members in the light of Article 3:2 of the DSU. Put differently, it is important to examine the scope of authority of the WTO dispute settlement system in making secondary rules that are within its scope of authority. The third situation is when the issue is addressed in the WTO Agreements, but the provisions do not provide clear guidance on how the law is to be applied. This situation often emerges when negotiators have deliberately or by accident utilized vague terms. For example, the term "impairment or nullifications of any benefits" under Article XXIII of the GATT does not elaborate on whether an impairment or nullification would require a showing of damage, whether de minimus or actual. In such case, it is the task of panelists and the AB to interpret the law and clarify the meaning of the terms "in accordance with customary rules of interpretation of public international law." The first situation is clear and does not need to be elaborated. However, it is necessary to examine the two other circumstances. 220 5.1.1.4.3.2 Silence of WTO Law and Secondary Rule Making Under the WTO Dispute Settlement System Because treaties cannot provide for the details of every possible scenario that may arise, it is inevitable that panelists and the AB will face procedural and substantive matters that the negotiators failed to address in the WTO Agreements. The question is how panelists or the AB should deal with such circumstances. Article 3.7 of the DSU emphasizes the role of the WTO dispute settlement as reaching "a positive solution" to disputes.663 The AB in US-Stainless Steel (Mexico) held that: The creation of the [AB] by WTO Members to review legal interpretations developed by panels shows that Members recognized the importance of consistency and stability in the interpretation of their rights and obligations under the covered agreements. This is essential to promote "security and predictability" in the dispute settlement system, and to ensure the "prompt settlement" of disputes.664 In other words, WTO Members expect panelists and the AB to resolve a dispute in an expeditious and prompt manner. Prompt settlement of disputes requires panelists and the AB to rule on the consistency of a measure with WTO laws and to not refrain from resolving the dispute. Fabri explained such situation as follows: According to some, the judge should refrain from interpreting provisions that have deliberately been left vague, and where an issue may not have been fully resolved through negotiations and has been "carried over" to be dealt with in future negotiations. Nevertheless, it is legitimate to ask how such an approach can be reconciled with the fact that jurisdiction is compulsory and the court cannot decline to hear a case. In this respect, the WTO judge behaves like any other judge who believes that he cannot take refuge in the vagueness of the law and its lacunas so as to avoid giving a ruling. Moreover, in such circumstances, there are many judges who do not hesitate to resort to general principles of law. 663 DSU, Article 3:7. 664 AB Report US-Stainless Steel (Mexico), if 161. 221 From this point of view, the WTO judge has so far shown extreme restraint.665 (footnotes omitted) However, this does not necessarily mean that panelists and the AB are required to rule on every claim that has been brought before them. Panels and the AB have created issue avoidance techniques to refrain from addressing certain matters for efficiency or political reasons, or where the WTO law is silent or vague.666 Contrary to domestic legal systems that allow courts to refrain from ruling when existing laws are silent on an issue, such practice has not been established at the WTO. Lack of such practice coupled with rigidity in creating new laws by the political organ has led to increased pressure on the WTO dispute settlement system when faced with silence or vagueness of WTO laws. Silence in the provisions of WTO Agreements may pertain to procedural or substantive matters. In this dissertation, procedural matters refer to rules that panelists and the AB members utilize to hear and "to promote ... the fair, prompt and effective resolution of trade disputes."667 Substantive matters refer to normative aspects of WTO laws that are not pertinent to procedural aspects of a dispute within the WTO dispute settlement system. However, the line between procedural and substantive matters is not always 665 Helene Ruiz Fabri, Drawing a Line of Equilibrium in a Complex World, in THE WTO AT TEN: THE CONTRIBUTION OF THE DISPUTE SETTLEMENT SYSTEM 13 8-13 8 (Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes eds. Cambridge University Press, 2006). 666 See Chapter Four, § 4.6.1. 667 AB Report US - FSC, if 166. 222 clear-cut. For instance, the issue of burden of proof at first sight seems to be a procedural matter. Nevertheless, it bears substantive consequences for the parties of a dispute. 5.1.1.4.3.2.1 Lack of Procedural Rules Procedural rules can be a decisive factor in determining the outcome of a dispute in the WTO dispute settlement system. Procedural rules have been expressed in the DSU as well as the Working Procedures of panels or the AB. WTO panels in practice follow the procedures that have been expressed in the DSU and the Working Procedures found in Appendix 3 to the DSU. Article 12 of the DSU states that "[p]anels shall follow the Working Procedures in Appendix 3 unless the panel decides otherwise after consulting the parties to the dispute."668 The DSU authorizes the parties to agree on the terms of the Working Procedures and, if necessary, to modify them. Paragraph 11 of the Working Procedures explicitly allows parties to add any additional procedures specific to the panel. Once the parties agree on the terms, panels are obligated to follow the Working Procedures. 669 For instance, although a preliminary ruling is neither required nor mentioned in the DSU, parties can include such procedure in the terms of the Working Procedures of their dispute. Paragraphs 10 and 11 of the Working Procedures of the panel on US - Steel 668 DSU, Article 12. 669 Working Procedures, if 1. 223 Safeguards670 added the following paragraphs regarding preliminary ruling procedures and submission of factual evidence: 10) A party shall submit any request for a preliminary ruling not later than its first submission to the Panel. If the Complaining Parties request such a ruling, the United States shall submit its response to the request in its first submission. If the United States requests such a ruling, the Complaining Parties shall submit their responses to the request prior to the first substantive meeting of the Panel, at a time to be determined by the Panel in light of the request. Exceptions to this procedure will be granted upon a showing of good cause. 11) Parties shall submit all factual evidence to the Panel no later than during the first substantive meeting, except with respect to evidence necessary for purposes of rebuttal submissions, or answers to questions or provided that good cause is shown. In all cases, the other part(ies) shall be accorded a period of time for comment, as appropriate.671 The AB, similar to panels, refers to the DSU and its Working Procedures on procedural matters. One difference between the procedural restrictions of the panel and the AB is that the WTO Members have agreed that the AB, in consultation with the Chairman of the DSB and the Director-General, and after communication with Members, can draft its own Working Procedures. In light of such explicit authority, the AB in paragraph 16: 1 of its Working Procedures states: In the interests of fairness and orderly procedure in the conduct of an appeal, where a procedural question arises that is not covered by these Rules, a division may adopt an appropriate procedure for the purposes of that appeal only, provided that it is not inconsistent with the DSU, the other covered agreements and these Rules. Where such a procedure is adopted, the division shall immediately notify the parties to the dispute, participants, third parties and third participants as well as the other Members of the [AB]. 670 Panel Reports, United States - Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248/R I WT/DS249/R I WT/DS251/R I WT/DS252/R I WT/DS253/R I WT/DS254/R I WT/DS258/R I WT/DS259/R, and Corr. I (Dec. 10, 2003) (as modified by AB Report WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R) (Panel Report US-Steel Safeguards). 671 Dispute Settlement System Training Module, WTO.org, http://www. wto. org/english/tratop _ e/dispu _ e/disp _settlement_cbt _ e/a5s1p1 _ e .htm (last visited Mar. 17, 2011). 224 Therefore, the AB is authorized to adopt procedural rules that are not covered by the DSU, provided that they are not inconsistent with the DSU and other covered agreements. This was the reasoning behind the AB' s decision that it had the authority to determine whether open oral hearings were permitted at the AB stage. The AB averred that the DSU does not address the issue, and pursuant to Article 17:9 of the DSU, the AB has the authority "to exercise control over the conduct of the oral hearing."672 Thus, according to the AB, it can "[lift the] confidentiality [requirement] at the joint request of the participants as long as this does not adversely affect the rights and interests of the third participants or the integrity of the appellate process."673 5.1.1.4.3.2.2 Absence of Substantive Rules The silence of provisions of the WTO Agreements regarding a substantive issue indicates that the Uruguay Round negotiators either failed to foresee the issue or could not reach an agreement on the matter. Failure to conclude the Doha Round negotiations is further increasing the possibility of WTO Members who have not been able to achieve their goals through political negotiations bringing unfinished subjects of negotiations to the WTO disputes settlement system. 672 AB Report Canada - Continued Suspension, p. 320. 673 Id. 225 The compulsory jurisdiction of the WTO dispute settlement system and the quasi- automatic adoption process of rulings and recommendations that circumvent the consensus or majority decision-making requirement make the dispute settlement system an even more attractive forum for Members to air their grievances. The WTO dispute settlement system has explicitly been prohibited from adding to or diminishing the rights and obligation of WTO Members through its rulings and recommendations.674 Nonetheless, the AB has been criticized by WTO Members, as well as a number of scholars, for exercising such prohibited judicial activism. 675 Panelists and the AB have recognized this problem, and they have developed some mechanisms such as judicial economy or arguendo assumptions to avoid rendering decisions on issues that may fall outside of their mandate. 676 It is interesting to note that the interviewees were more comfortable with panelists and the AB creating new rules in procedural matters than substantive matters. Of the interviewees, 78 percent were of the view that panelists and the AB members can fill procedural gaps. They believed that the WTO dispute settlement system has been granted with such authority to create procedural rules in order to resolve a dispute fairly and promptly. One of the interviewees characterized such authority as "essential" for the 674 DSU, Articles 3:2 and 19:2. 675 Frieder Roessler, The Institutional Balance Between the Judicial and the Political Organs ofthe WTO, in NEW DIRECTIONS IN INTERNATIONAL ECONOMIC LAW, ESSAYS IN HONOUR OF JOHN H. JACKSON (Marco Bronckers and Reinhard Quick eds. Kluwer Law International, 2000); See also Lorand Bartels, The Separation ofPowers in the WTO: How to Avoid Judicial Activism, 53 INT'L & COMP. L.Q. 861 (2004); John Patrick Kelly, Judicial Activism at the World Trade Organization: Developing Principles ofSelf Restraint, 22 NW. J. INT'L L. & BUS. 353 (2002). 676 See Chapter Four,§ 4.6.1. 226 WTO dispute settlement system. In contrast, only 26 percent of the interviewees expressed that panelists and the AB members were permitted to "overreach" in substantive matters.677 90 78 80 70 60 50 Ill Overreaching in Procedural Matters 40 • Overreaching in 30 Substantive Matters 20 10 0 Yes No No Response Figure 12: Overreaching in Procedural and Substantive Matters Some of the interviewees emphasized that in certain circumstances, panelists and the AB have more discretion to overreach their mandate on substantive matters, such as when: 1. Parties of the dispute have expressly agreed to such discretion; and 2. The new substantive rules do not affect the rights and obligations of other WTO Members. 677 Some interviewees were not in favor of using the phrase "filling the gap." 227 5.1.1.4.3.3 Vagueness in WTO Laws and Various Stages of Interpretation For reasons previously explained, vagueness in international treaties is inevitable and WTO Agreements are not an exception. Such ambiguity has not only been reflected in substantive rights and obligations of WTO Members, but also in its dispute settlement process and procedural matters. Abi-Saab noted that '[t]he ambiguities in the language of the DSU, and in some of the [AB]'s institutional features, reflect the heritage of the GATT, with the insistence that it was a mere agreement and not an organization .... "678 WTO Members must be aware of the scope of their rights and obligations if they are to meaningfully consent to and comply with them. By clouding the scope of such rights and obligations, the inevitable vagueness in WTO Agreements undermines the legitimacy of the system as a whole. Vagueness decreases the determinacy of a legal system that is an essential part of legitimacy. Among the four elements of legitimacy defined in Thomas Franck's model, determinacy depends on clarification of existing rules. Determinacy, defined as "that which makes [the rule's] message clear" or "transparent," relies heavily on interpretation. 679 Interpretation as a means of clarification is a significant component of legitimacy. Interpretative methods have been developed in the WTO legal system, however, through which the dispute settlement system can clarify the scope of rights and obligations of WTO Members. Article 3 :2 of the DSU provides guidance in the face of such vagueness by authorizing panelists and the AB members to clarify the existing provisions of the WTO Agreements 678 Abi-Saab, The Appellate Body and Treaty interpretation, 454. 679 FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 52. 228 in accordance with customary rules of interpretation of public international law. The WTO dispute settlement system has recognized Articles 31 and 32 of the Vienna Convention as customary rules of interpretation of public international law and has applied the various stages enshrined in those Articles in its rulings and recommendations. The AB referring to the Vienna Convention in US - Shrimp ruled that: A treaty interpreter must begin with, and focus upon, the text of the particular provision to be interpreted. It is in the words constituting that provision, read in their context, that the object and purpose of the states parties to the treaty must first be sought. Where the meaning imparted by the text itself is equivocal or inconclusive, or where confirmation of the correctness of the reading of the text itself is desired, light from the object and purpose of the treaty as a whole may usefully be sought.680 The interpretative stages enshrined in the Vienna Convention that have been recognized by the AB members and panelists for interpretation of the provisions of WTO Agreements are vital to the legitimacy of the dispute settlement system because it contributes to determinacy of the legal regime. As the AB in EC - Computer Equipment noted that "[t]he purpose of treaty interpretation is to establish the common intention of the parties to the treaty."681 Therefore, it is essential to analyze the process and the various stages of interpretation to better understand the intention of WTO Members. As a general principle, an interpreter should follow the "principle of effectiveness." The AB in US - Gasoline held: [o ]ne of the corollaries of the 'general rule of interpretation' in the Vienna Convention is that interpretation must give meaning and effect to all the terms of the treaty. An interpreter is not free to adopt a reading that would result in 680AB Report US-Shrimp, if 114. See also Panel Report US-Section 301 Trade Act, if 7.22. 681 AB Report EC- Computer Equipment, if 93. 229 reducing whole clauses or paragraphs of a treaty to redundancy or inutility.682 (footnote omitted) However, in order to establish the common intention of WTO Members, an interpreter has to decide whether to take a holistic or a prioritized approach. In AB Report EC - Chicken Cuts, the AB described the interpretation method proposed in Article 31 of the Vienna Convention as a "holistic" approach: Interpretation pursuant to the customary rules codified in Article 31 of the Vienna Convention is ultimately a holistic exercise that should not be mechanically subdivided into rigid components. Considering particular surrounding circumstances under the rubric of "ordinary meaning" or "in the light of its context" would not, in our view, change the outcome of treaty interpretation.683 Nevertheless, the holistic approach is a vague standard that does not assist an interpreter, per se, to establish common intention of WTO Members. Therefore, it is essential to analyze various stages of interpretation reflected in Article 31 and 32 of the Vienna Convention and examine which approach is more acceptable to the interviewees. 5.1.1.4.3.3.1 Textual Approach In Japan - Alcoholic Beverages 11, the AB in connection with applying "customary rules of interpretation" ruled that treaty interpretation should be "based" on the text of the treaty: 682 AB Report US - Gasoline, p. 23; See also AB Report Japan -Alcoholic Beverages II, p. 12 (referring to ut res magis vale at quam pereat); AB Report, European Communities - Customs Classification ofFrozen Boneless Chicken Cuts, if 214, WT/DS269/AB/R, WT/DS286/AB/R, and Corr. l (Sept. 27, 2005) (AB Report EC- Chicken Cuts). 683AB Report EC- Chicken Cuts, if 176; See also Panel Report US -Section 301 Trade Act, if 7.22 (noting that the elements referred to in Article 31 - text, context and object-and-purpose as well as good faith - are to be viewed as one holistic rule of interpretation rather than a sequence of separate tests to be applied in a hierarchical order"). 230 Article 31 of the Vienna Convention provides that the words of the treaty form the foundation for the interpretive process: "interpretation must be based above all upon the text of the treaty".684 In accordance with Article 31 of the Vienna Convention, looking into the text ofWTO Agreements is the first step for interpretation. The AB in India - Patents (US) states that the role of a treaty interpreter is to "determine the intention of the parties" by focusing on the words of the treaty: The duty of a treaty interpreter is to examine the words of the treaty to determine the intentions of the parties. This should be done in accordance with the principles of treaty interpretation set out in Article 31 of the Vienna Convention. But these principles of interpretation neither require nor condone the imputation into a treaty of words that are not there or the importation into a treaty of concepts that were not intended.685 The AB suggested that in analyzing the words of a treaty, it considers first "the ordinary meaning of the treaty text."686 The New Shorter Oxford English Dictionary has often been used as an authoritative reference by the parties of disputes, panelists, and the AB.687 Nevertheless, the AB notes that "[i]t should be remembered that dictionaries are 684 AB Report Japan -Alcoholic Beverages II, p. 11. 685 AB Report India-Patents (US), if 45; See also AB Report EC-Hormones, if 181 (confirming India Patents (US) interpretative method: The fundamental rule of treaty interpretation requires a treaty interpreter to read and interpret the words actually used by the agreement under examination, not words the interpreter may feel should have been used. 686 AB Report, United States -Section 211 Omnibus Appropriations Act of 1998, if 172, WT/DS176/AB/R (Feb. 1, 2002) (AB Report US - Section 211 Appropriations Act). 687 For example see AB Report US- Upland Cotton, footnote 33 (citing the appellant's submission of the United States, if 85) . 231 important guides to, not dispositive statements of, definitions of words appearing in agreements and legal documents. "688 The Panel in US -Section 301 Trade Act notes that: Text, context and object-and-purpose correspond to well established textual, systemic and teleological methodologies of treaty interpretation, all of which typically come into play when interpreting complex provisions in multilateral treaties. For pragmatic reasons the normal usage, and we will follow this usage, is to start the interpretation from the ordinary meaning of the "raw" text of the relevant treaty provisions and then seek to construe it in its context and in the light of the treaty's object and purpose.689 One of the results of this textual approach, according to Van Den Bossche, is that "[b]y choosing and then consistently applying, a 'text first' approach to interpretation, the [AB] has given itself credibility and reliability in the eyes of WTO Members."690 5.1.1.4.3.3.2 Contextual Approach The Vienna Convention recognizes that a purely textual approach is not sufficient in properly interpreting the terms of a treaty. This is why Article 31 :1 of the Vienna convention requires that a treaty be interpreted "in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose." 688 AB Report, United States - Continued Dumping and Subsidy Offeet Act o/2000, WT/DS217/AB/R, ii 248, WT/DS234/AB/R (Jan. 27, 2003) (AB Report US- Offeet Act (Byrd Amendment)); See also AB Report, United States - Final Anti-Dumping Measures on Stainless Steel from Mexico, ilil 58-59, WT/DS344/AB/R (May 20, 2008) (AB Report US-Softwood Lumber IV); AB Report EC- Chicken Cuts, ii 175 (noting that dictionaries are not necessarily dispositive in the analysis of the ordinary meaning of a treaty term). 689 Panel Report US - Section 301 Trade Act, ii 7.22. 690 Peter Van Den Bossche, From Afterthought to Centerpiece. The WTO AB and Its Rise to Prominence in the World Trading System, in THE WTO AT TEN: THE CONTRIBUTION OF THE DISPUTE SETTLEMENT SYSTEM, 309 (Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes eds. Cambridge University Press, 2006). 232 Article 31 :2 of defines the context as the following: The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty. The preamble and annexes of the WTO Agreement have been taken into considerations by panelists and the AB members as the context introduced in Article 31 :2 of the Vienna Convention.691 The spirit of Article 31 :2 was followed by the AB in US-Line Pipe, 692 which ruled that in order to consider the meaning of Article 5.1 first sentence, the AB must consider the context as well as the object and purpose of the Safeguard Agreement. 693 The AB in EC - Chicken Cuts also confirmed that Article 31 of the Vienna Convention should not be applied mechanically. The AB stated that: Interpretation pursuant to the customary rules codified in Article 31 of the Vienna Convention is ultimately a holistic exercise that should not be mechanically subdivided into rigid components. Considering particular surrounding 691 See for example AB Report EC - Chicken Cuts, if 195 (noting that "[t]he Harmonized System is not, formally, part of the WTO Agreement, as it has not been incorporated, in whole or in part, into that Agreement. Nevertheless, the concept of "context", under Article 31, is not limited to the treaty text namely, the WTO Agreement-but may also extend to "any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty", within the meaning of Article 31(2)(a) of the Vienna Convention, and to "any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty", within the meaning of Article 31(2)(b) of the Vienna Convention . ... "). 692 AB Report, United States - Definitive Safeguard Measures on Imports ofCircular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R (Mar. 8, 2002) (AB Report US Line Pipe). 693 Id. if 251; See also AB Report Chile Price Band System, if 204. 233 circumstances under the rubric of "ordinary meaning" or "in the light of its context" would not, in our view, change the outcome of treaty interpretation.694 5.1.1.4.3.3.3 Object and Purpose Approach In addition to the meaning of the text and their context, Article 31: 1 of the Vienna Convention also focuses on the objective and purpose of the treaty, which in the WTO, refers to the common intentions ofWTO Members.695 The AB in US-Shrimp followed this holistic approach and reasoned that: A treaty interpreter must begin with, and focus upon, the text of the particular provision to be interpreted. It is in the words constituting that provision, read in their context, that the object and purpose of the states parties to the treaty must first be sought. Where the meaning imparted by the text itself is equivocal or inconclusive, or where confirmation of the correctness of the reading of the text itself is desired, light from the object and purpose of the treaty as a whole may usefully be sought.696 Following the above approach, the AB in US - Shrimp examined the objective and purpose of the WTO Agreement to conclude that turtles are "exhaustible natural resources" under Article XX:g of the GATT.697 694AB Report EC - Chicken Cuts,~ 176. 695 Id.~~ 238-240 (noting that the term 'its object and purpose' makes it clear that the starting point for ascertaining 'object and purpose' is the treaty itself, in its entirety"). 696AB Report US - Shrimp, ii 114. See also Panel Report US - Section 301 Trade Act, ii 7 .22. 697 AB Report US - Shrimp, ~ 153 (holding that"[ w ]e note once more that the preamble of the WTO Agreement demonstrates a recognition by WTO negotiators that optimal use of the world's resources should be made in accordance with the objective of sustainable development. As this preambular language reflects the intentions of negotiators of the WTO Agreement, we believe it must add colour, texture and shading to our interpretation of the agreements annexed to the WTO Agreement, in this case, the GA TT 1994. We have already observed that Article XX(g) of the GATT 1994 is appropriately read with the perspective embodied in the above preamble."). 234 5.1.1.4.3.3.4 Subsequent Practice and Relevant Rules of International Law If an examination of the text, context, and object and purpose of the treaty sufficiently disclosed the intention of the WTO Members, this would be the end of the analysis. Abi- Saab emphasized that it was only if the previous steps were not enough to clarify the intention of WTO Members that the interpreter was allowed to proceed to the next step of examining subsequent practice or other supplementary means of interpretation.698 Panels and the AB have considered subsequent practice of WTO Members as "objective evidence of understanding of the parties as to the meaning of the treaty."699 The AB in Japan Alcoholic Beverages II provided guidelines on the matter, explaining that subsequent practice constituted "a 'concordant, common and consistent' sequence of acts or pronouncements which is sufficient to establish a discernible pattern implying the agreement of the parties [to a treaty] regarding its interpretation."700 The AB in US - Gambling elaborated on the requirements for conduct to be considered "subsequent practice" within the meaning of Article 31 :3(b ). The AB held that "in order for 'practice' within the meaning of Article 31 (3)(b) to be established: (i) there must be a common, consistent, discernible pattern of acts or pronouncements; and (ii) those acts or pronouncements must imply agreement on the interpretation of the relevant provision."701 698 Abi-Saab, The Appellate Body and Treaty interpretation, 459. 699 AB Report EC - Chicken Cuts, if 255. 700 AB Report Japan - Alcoholic Beverages II, p.13. 701 AB Report, United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services, if 192, WT/DS285/AB/R (Apr. 20, 2005) (AB Report US- Gambling). 235 Article 31 :3( c) of the Vienna convention requires an interpreter to consider "any relevant rules of international law applicable in the relations between the parties" in the interpretation of a treaty. The AB emphasized that WTO Agreements cannot be read "in clinical isolation from public international law. 11702 The panel in EC -Approval and Marketing ofBiotech Products asserted: Article 31 (3 )( c) mandates a treaty interpreter to take into account other rules of international law ("[t]here shall be taken into account"); it does not merely give a treaty interpreter the option of doing so .... [A] treaty interpreter following the instructions of Article 31 (3 )( c) in good faith would in our view need to settle for that interpretation which is more in accord with other applicable rules of international law. 703 The AB in US - Shrimp noted that its "task ... is to interpret the language of the chapeau [of Article XX of the GATT], seeking additional interpretative guidance, as appropriate, from the general principles of international law."704 This illustrates one of the significant features of modem international law, which is that unless otherwise stipulated, a treaty between countries will not be entirely considered a "self-contained [regime] in the sense that the application of general international law would be generally excluded."705 702 AB Report US - Gasoline, p. 17. 703 Panel Report, European Communities - Measures Affecting the Approval and Marketing ofBiotech Products, if 7.69, WT/DS291/R, WT/DS292/R, WT/DS293/R, Add.I to Add.9, and Corr.I (Nov. 2I, 2006) (Panel Report EC -Approval and Marketing ofBiotech Products). 704 AB Report US - Shrimp, if I 58, footnote I 57; See also AB Report EC - Chicken Cuts, if 195 (noting that the Harmonized System might qualify as a "relevant rule[] of international law applicable in the relations between the parties" and took it into account while interpreting the WTO Agreements); See AB Reports, China - Measures Affecting Imports ofAutomobile Parts, if 149, footnote 215, WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R (Jan. 12, 2009) (AB Report China -Auto Parts) (referring to AB Report EC- Chicken Cuts that the AB did not exclude the Harmonized System.). 705 U.N. INT'L L. COMM'N (ILC), 58rn SESSION OF THE STUDY GRUOUP OF THE ILC, Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion ofInternational Law,, if 236 Otherwise, such rigid approach would not only cause an ineffective interpretation of existing WTO provisions and impairment of institutional benefits to WTO Members, but also result in insecurity and unpredictability of the multilateral trading system. In this regard, the AB expressed in Japan - Taxes on Alcoholic Beverages (Japan -Alcoholic Beverages II) that: WTO rules are not so rigid or so inflexible as not to leave room for reasoned judgments in confronting the endless and ever-changing ebb and flow of real facts in real cases in the real world. They will serve the multilateral trading system best if they are interpreted with that in mind. In that way, we will achieve the "security and predictability" sought for the multilateral trading system by the Members of the WTO through the establishment of the dispute settlement system.706 This does not mean that WTO tribunals are able to "adjudicate" non-WTO laws. The AB in Mexico - Tax Measures on Soft Drinks and Other Beverages (Mexico - Taxes on Soft Drinks) noted that "[w]e see no basis in the DSU for panels and the [AB] to adjudicate non-WTO disputes".707 As expressed in Article 3.2 of the DSU, the role of the WTO dispute settlement system is "to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements."708 172, UN. Doc. A/CN.4/.682 (Apr. 13, 2006) (stating "None of the treaty-regimes in existence today is self contained in the sense that the application of general international law would be generally excluded."). 706 AB Report Japan-Alcoholic Beverages II, p. 31, (footnote omitted). 707 AB Report Mexico - Taxes on Soft Drinks, if 56. 708 Id. (emphasis added); See also DSU, Article 3:2. 237 5.1.1.4.3.3.4.1 General Public International Law in the WTO Legal System The obligation of an interpreter to take into account "any relevant rules of international law applicable in the relations between the parties" coupled with the fact that the WTO Agreement is not a self contained regime and cannot be seen in a "clinical isolation" have raised the question of whether public international law is applicable law or a tool to interpret WTO laws. As Abi-Saab has emphasized, "there are certain general principles of international law, or of law tout court, without which it is impossible to imagine how any legal system can function - in other words, principles inherent in the concept of the legal system itself - such as the principles of good faith and proportionality."709 Some of the principles expressed in WTO Agreements are such "general principles of international law" to which Abi-Saab refers, such as good faith or due process. In these cases, inclusion of public international law as applicable law would face less criticism by WTO Members. On the other hand, it would be much more difficult to argue that principles that have not yet attained recognition as an inherent concepts are also matters on which the WTO dispute settlement system has the authority to decide. 5.1.1.4.3.3.4.1.1 General Principles of Public International Law within WTO Jurisprudence As indicated above, the close correlation between the general principles of public international law and the rules to which they are applied frequently gives rise to the 709 Abi-Saab, The Appellate Body and Treaty interpretation, 463-464. 238 question as to what extent panelists and the AB are authorized to include such general principles of public international law within the WTO legal regime. This section continues by arguing that considering the nature of a principle, it is within the discretion of the WTO dispute settlement system to include general principles of international law in WTO jurisprudence, and that such practice should not be considered as acts of "making law" which is prohibited under Article 3.2 of the DSU. Principles are the underlying foundations of rules. Ronald Dworkin defined principles as "a standard that ... is a requirement of justice or fairness or some other dimension of morality."710 He distinguished principles from rules by emphasizing two distinctive characteristics of rules. 711 First, he argued that rules apply in an "all-or-nothing" manner. 712 Second, rules "set out legal consequences that follow automatically when the conditions provided are met."713 Principles, in Dwrokin's opinion, do not contain either of these characteristics. Meanwhile, Cheng stated that principles are "in general, propositions underlying the various rules of law which express the essential qualities of 710 Ronald M. Dworkin, The Model ofRules, 35 U. CHI. L. REV. 23 (Dworkin, The Model ofRules) (emphasis added). 711 For more information on differences between rules and principles see ANDREW MITCHELL, LEGAL PRINCIPLES IN WTO DISPUTES 7-10 (Cambridge: Cambridge University Press, 2008); See also BENDITT, THEODORE M., LAW AS RULE AND PRINCIPLES: PROBLEMS OF LEGAL PHILOSOPHY 74-75 and 168 (Stanford: Stanford University Press, 1978). 712 Dworkin, The Model ofRules, 25 (explaining that "[i]fthe facts a rule stipulates are given, then either the rule is valid, in which case the answer it supplies must be accepted, or it is not, in which case it contributes nothing to the decision."). m Id. 239 judicial truth itself, in short ofLaw." 714 Cheng's view on the matter is closer to the jurisprudence ofWTO. General principles of international law are among the recognized sources of international law applicable to disputes arising before the ICJ as expressed in Article 38(1)(c) of the Statute of the ICJ. 715 Article 38 of the Statute refers to "[1] ... international conventions, whether general or particular, establishing rules expressly recognized by the contesting states; [2] ... international custom, as evidence of a general practice accepted as law; [3] ... the general principles of law recognized by civilized nations."716 The question then arises as to whether sources of international law specified in Article 3 8 of the ICJ Statute are applicable within the WTO legal regime. It is obvious that the Statute expressly directs the ICJ to apply those sources when a dispute arises before it. The scope of this provision, however, is not limited to cases before the ICJ, in that Article 3 8 of the Statute is simply an assertion of the sources of international law and the sources of international law that international tribunals, including WTO tribunals, should take into account in cases arising before them. 714 CHENG, BIN, GENERAL PRINCIPLES OF LAW AS APPLIED BY INTERNATIONAL COURTS AND TRIBUNALS 6- 26 (Cambridge: Grotius Publication Ltd. 1987). 715 Statute of the ICJ, Article 38(I)(c) states one of the sources of international law as "the general principles oflaw recognized by civilized nations."; For more information on background of the Article 3 l(l)(c) see id. 716 Statute of the ICJ, Article 38(l)(c). 240 Although not many WTO tribunals have referred explicitly to Article 38 ofICJ in their reports,717 they have acknowledged its content, which discusses treaty provisions, customary international law, and general principles and doctrines.718 This paper, however, does not suggest that the content of Article 38 of the ICJ is the "applicable law" within WTO jurisprudence as such approach might lead to what would be deemed as adjudication of non-WTO laws. Moreover, the AB has recognized the existence and applicability of general principles of international law within WTO jurisprudence. In 1998, the AB, in its report on United States -Import Prohibition ofCertain Shrimp and Shrimp Products (US- Shrimp), considered good faith as one of the general principles of international law that confers obligations upon WTO Members. The AB expressed that "a general principle of international law, controls the exercise ofrights by states."719 The AB also recalled the principle of good faith as a "pervasive"720 principle that "underlies all treaties."721 717 Panel Report, United States -Section I 10(5) ofthe US Copyright Act, footnote 114, WT/DS160/R, July 27, 2000) (Panel Report US - Section 110(5) Copyright Act) (referring to Article 38(d) of the Statute of the ICJ). 718 See generally Panel Report EC-Approval and Marketing ofBiotech Products, ifif 7.87-8; AB Report EC -Hormones, if 123 (discussing whether the precautionary principle is recognized as customary international law); AB Report EC - Bananas III, if l 0. 719 AB Report US - Shrimp, if 158 (emphasis added). 720 See also AB Report US - FSC. if 166 (characterizing good faith as a "pervasive principle" of general international law). 721 AB Report, United States - Transitional Safeguard Measure On Combed Cotton Yarn from Pakistan, if 81, WT/DSl92/AB/R (Nov. 5, 2001) (AB Report US- Cotton Yarn). 241 In its report, the AB expressed the view that general principles of international law "controls the exercise ofrights"722 of WTO Members. Such an approach confers considerable weight to general principles of international law, granting it pragmatic meaning in WTO jurisprudence. Under this view, WTO Members can refer to those general principles in their disputes because these general principles generate obligations on the part of the panel and AB. As a result, those general principles have legal value within the system and WTO tribunal, which is therefore authorized to apply them if necessary. The scope of general principles of international law, nonetheless, is not clear-cut among WTO Members, WTO panels and the AB, and academics. Some principles are applicable to every case and are very well recognized by WTO Members and the WTO dispute settlement system, such as the principles of good faith, 723 due process, 724 non- retroactive application of treaties, 725 and effectiveness in interpretation of treaties. 726 722 AB Report US-Shrimp, if 158. 723 Id.; See also AB Report US - FSC, if 166; See also AB Report, United States -Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, if 101, WT/DS184/AB/R (Aug. 23, 2001) (AB Report US - Hot-Rolled Steel); See also AB Report EC - Sardines, if 278 (stating that" ... [we] must assume that Members of the WTO will abide by their treaty obligations in good faith, as required by the principle of pacta sunt servanda articulated in Article 26 of the Vienna Convention. And, always in dispute settlement, every Member of the WTO must assume the good faith of every other Member."). 724 AB Report US - Shrimp, if 182. 725 AB Report, Brazil - Measures Affecting Desiccated Coconut, at 179-180, WT/DS22/AB/R (Mar. 20, 1997) (AB Report Brazil - Desiccated Coconut); See also AB Report EC - Bananas Ill, ifif 23 5 and 23 7 (referring to Article 26 of VCLT); See also AB Report EC - Sardines, if 200; See also AB Report, anada - Term ofPatent Protection, if 71, footnote 49, WT/DSl 70/AB/R (Oct. 12, 2000) (AB Report Canada Patent Term). 726 AB Report US - Gasoline, p. 23; See also AB Report Japan -Alcoholic Beverages II, p. 12 (citing ut res magis valeat quam pereat); See also AB Report US - Upland Cotton, if 549. 242 Yet, the existence and application of other general principles of international law within WTO jurisprudence are not as well established, such as the scope and applicability of the precautionary principle or the principle of res judicata. Some general principles such as the principle of non-discrimination or MFN are specifically mentioned and defined in the WTO Agreements, while others have been established and developed by WTO tribunals by referring to rules of customary international law and general principles of international law. Examples of principles established through such process include the principles of effective interpretation or proportionality. 727 The distinction between general principles of international law as applicable law or as an interpretative tool is important to determine the scope of authority granted to panels and the AB in conducting their adjudicatory role. It is interesting to note that all of the interviewees were of the view that general principles of international law cannot be ignored by panelists and the AB members and they should be used as a means for interpretation of existing provisions of WTO Agreements. However, this does not mean that general principles of international can be used as applicable law within the WTO legal system. Only 10 percent of interviewees suggested that general principles of international law could be used as applicable law. 727 AB Report US - Cotton Yarn, ifif 119-120; AB Report US Line Pipe, if 259. 243 100 90 80 70 60 • General Principle of 50 International Law as 40 Applicable Law 30 1111 General Principle of 20 International Law as Interpretative Tool 10 0 General Principle of General Principle of International Law as International Law as Applicable Law Interpretative Tool Figure 13: General Principle of International Law as Applicable Law or Interpretative Tool 5.1.1.4.3.3.5 Supplementary Means of Interpretation Article 32 of the Vienna Convention addresses supplementary means of interpretation, and becomes applicable if, after applying Article 31, the meaning of the term remains ambiguous or obscure, or leads to a result which is manifestly absurd or unreasonable. 728 In WTO jurisprudence, a supplementary means of interpretation is also part of customary 728 Article 32 Vienna Convention reads: Article 32: Supplementary means of interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable. 244 rules of interpretation of public international law. 729 Article 32 of the Vienna Convention assists the interpreter in resorting to supplementary means such as the preparatory work of the treaty and the circumstances of its conclusion. The AB in EC - Computer Equipment730 stated: The application of these rules in Article 31 of the Vienna Convention will usually allow a treaty interpreter to establish the meaning of a term. However, if after applying Article 31 the meaning of the term remains ambiguous or obscure, or leads to a result which is manifestly absurd or unreasonable, Article 32 allows a treaty interpreter to have recourse to: ... supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion. With regard to "the circumstances of [the] conclusion" of a treaty, this permits, in appropriate cases, the examination of the historical background against which the treaty was negotiated.731 The AB emphasized that "Article 32 does not define exhaustively the supplementary means of interpretation to which an interpreter may have recourse."732 5.1.1.4.3.4 Treaty Interpretation and its Impact on Legitimacy Treaty interpretation contributes to determinacy of rights and obligations of WTO, which is an essential component of legitimacy of the WTO legal system. However, choosing a 729 AB Report Japan -Alcoholic Beverages II, p. 10. 730 AB Report, European Communities - Customs Classification ofCertain Computer Equipment, WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R (June 22, 1998) (AB Report EC- Computer Equipment). 731 AB Report EC - Computer Equipment,~ 86; See also AB Report EC - Poultry,~ 83; AB Report US - Upland Cotton, ~ 623. 732 AB Report EC- Chicken Cuts,~ 283. 245 proper method of interpretation is a not an easy task. Abi-Saab, regarding the proper method of interpretation, stated that: However logical this progression may be as an analytical and pedagogic device, interpretation remains one integrated operation which uses several tools simultaneously to shed light from different angles on the interpreted text; these tools should not be seen as watertight compartments or as a series of separate sub-operations but, rather, as connected (even overlapping) and mutually reinforcing parts of a whole, of a continuum or a continuous and multifaceted process that cannot be reduced to a mechanical operation and which partakes as much of art (the art of judgment) as of science (the science of law)."733 Abi-Saab noted that the "judicial policy" of the AB on interpretation "appears, at first glance, as belonging to the strict constructionist school that interprets texts literally and narrowly. Indeed, there is a great emphasis on words, even individual words, greater than in any other international forum, which verges on obsession (recalling to mind the description coined by Rene-Jean Dupuy of 'obsede textuel')."734 He added that that "[a]nother manifestation of the strict constructionist and literal approach is the tendency to stick the reasoning very closely to, and keep it in constant contact with, the words."735 The tendency of the AB to take a very textual approach derives from the fear of WTO Members that the AB might "make law." The strict textual approach can lead to undermining the legitimacy of the dispute settlement system, however, when a strict textual interpretation is inadequate to clarify the common intention of WTO Members. Although the current deadlock facing the Doha Round has led to a situation in which the AB' s textual approach will lessen the danger that the AB acts beyond its mandate, such approach should only be temporary. Otherwise, in the long term, it will undermine the 733 Abi-Saab, The Appellate Body and Treaty interpretation, 461. 734 Id. 735 Id. 246 legitimacy of the WTO dispute settlement if panelists or the AB were not able to establish the common intention of the WTO Members. 736 All the interviewees, as demonstrated in the figure below, were of the view that Articles 31 and 32 of the Vienna Convention provided the proper method of interpreting existing provisions of the WTO Agreements. 737 All interviewees expected panelists and the AB members to follow the steps provided in the Articles and focus on textual, contextual and objective-based approaches mentioned in Article 31 of the Vienna Convention. However, less attention was given to negotiating history and subsequent practice of WTO Members. 738 100 11 Textual, 90 --- Contextual 80 and 70 Objective Aup roach 60 ---• Soosequnet 50 Practice and Negotiation 40 History 30 20 10 0 Textual, Contextual and Subsequnet Practice and Objective Approach Negotiation History Figure 14: Interpretative Approaches 736 See Donald McRae, Treaty Interpretation and the Development ofInternational Trade Law By the WTO Appellate Body, in THE WTO AT TEN: THE CONTRIBUTION OF THE DISPUTE SETTLEMENT SYSTEM, 360, 367-368 (Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes eds. Cambridge University Press, 2006) (arguing that the ordinary meaning approach is not a "readily ascertainable thing"). 737 Statistics on file with author. 13s Id 247 5.1.1.5 Why Consent Cannot Be the Only Source of Legitimacy in the WTO Consent based legitimacy cannot be considered as the only source of legitimacy in the WTO as a Global Governance Institution. Consent may be appropriate as the sole source of legitimacy in an organization where members are able to give consent to all the terms and details to which they are agreeing. However, such condition does not exist in the WTO. First, not all rights and obligations have been stipulated in the WTO Agreements and WTO Members have accepted the notion of dynamic consent and secondary law making by organs of the WTO. In other words, WTO organs have been authorized in specific circumstances to create rules that might affect rights and obligations of the WTO Members. Second, not all of the current WTO Members participated in the Uruguay Round and the "single undertaking" mechanism adopted in WTO Agreements did not allow countries to take reservations or opt out of provisions that were not beneficial to them. Therefore, it is highly questionable whether consent by itself would be sufficient to legitimize the authority of the WTO. Another factor that undermines the legitimacy of the WTO is that developing countries and LDCs have not been able to create their own world trade organization and could not afford not to join the WTO. These features have challenged the voluntariness of the consent given by the WTO Members. Buchanan in this regard stated: From the standpoint of a particular weak democratic state, participation in [Global Governance Institutions] such as the WTO is hardly voluntary, since the state would suffer serious costs by not participating. Yet "substantial" voluntariness is generally thought to be a necessary condition for consent to play a legitimating role. Of course, there may be reasonable disagreements over what counts as substantial voluntariness, but the vulnerability of individual weak states 248 is serious enough to undercut the view that the consent of democratic states is by itself sufficient for legitimacy. (footnote omitted)739 Another reason that consent cannot be the only source of legitimacy is that an external standard of legitimacy is required to control the discretion of WTO organs creating new norms. Static and dynamic consent are not sufficient to legitimize the decision of an institution, because accession to the United Nations Charter or the WTO Agreement, per se, does not guarantee that the decisions of these institutions are legitimate. As Bodansky stated, "some external standard of legitimacy" is needed to evaluate the decision of institutions.740 Wolfrum in this regard noted that "[e]ven if one cannot speak of international governance in the strict meaning of the word, the legitimizing effect of the original State consent to the establishment of the international organizations in question and the involvement of State officials in the organs of those organizations may not be considered adequate to cover the new developments."741 Consequently, Bodansky stated that in institutions "with broad decision-making authority" such as the WTO, "general consent is insufficient."742 Therefore, there is need to have some external standard of legitimacy such as accountability or transparency to control and observe decisions of the WTO organs. 739 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 36-37. 740 Bodansky, The Legitimacy ofInternational Governance, 609. 741 Wolfrum, Legitimacy in International Law From a Legal Perspective, 17. 742 Bodansky, The Legitimacy ofInternational Governance, 610 (in this dissertation the term dynamic consent has be utilized instead of"general consent"); See also Jackson, The Evolution ofthe World Trading System, 51 (stating that "consent theory often does not adequately assist in the process ofresolving differences about the extent of legitimacy for international norms"). 249 5.1.2 Procedure Based Legitimacy Because of the insufficiency of a purely source based approach such as consent, an external mechanism is necessary to evaluate the legitimacy of decisions of the WTO dispute settlement system. In this regard, the WTO dispute settlement system, as noted in the previous section, has developed a clarification mechanism to interpret the existing provisions of the WTO in accordance with customary rules of interpretation and to rule on disputes among WTO Members. 743 However, this does not mean that decisions of panelists or the AB are guaranteed to be legal and legitimate per se. Put differently, the decisions might not be compatible with what WTO Members have agreed in the WTO Agreements or might not be acceptable to them. 744 Rulings and recommendations of the dispute settlement system must follow certain procedural principles to guarantee their legality and legitimacy. The multi-dimensional standard of legitimacy takes into account such factors by introducing an additional source of legitimacy that is necessary to analyze the decision-making and clarification process in WTO dispute settlement system. Procedure based legitimacy emphasizes administrative process and procedural integrity. As Writh stated "the procedural integrity is itself an important source of authority and legitimacy for international law."745 743 See the notions of authoritative interpretation by the General Council and interpretative tools developed by panelists and the AB members. 744 This dissertation does not examine the scope of authority of authoritative interpretation by the General Council and focus only on the WTO dispute settlement system clarification process. 745 David A. Writh, Reexamining Decision-Making Processes in International Environmental Law, 79 IOWAL. REV. 798 (1994). 250 Franck perceived legitimacy as "accepted principles of right process."746 However, one should note that elements of "right process" need to be clarified and such "accepted principles of right process" have not been elaborated in Franck's model of legitimacy. This part of the dissertation discusses the procedural principles including principles of accountability, transparency, due process, expertise, institutional integrity and participation as well as their impact on the legitimacy of decision-making process within the WTO dispute settlement system. 5.1.2.1 Accountability The issue of accountability and abuse of power in international organizations is very important because "even the minimal types of checks and balances found in domestic governments are absent on the global level."747 Global Governance Institutions have been granted a broad scope of authority that can restrain the sovereignty of their members. Within the context of the WTO as a Global Governance Institution, it is necessary to examine how and to what extent the WTO dispute settlement system is accountable to WTO Members for the authority that has been granted to it. The notion of accountability is an integral part of legitimacy in the context of dynamic consent. As noted on the previous section, dynamic consent enables treaty parties to a multilateral organization to grant an organ within the organization the authority to make 746 FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 19. 747 Ruth W. Grant, and Robert 0. Keohane, Accountability and Abuses ofPower in World Politics, 99 AM. POL. SCI. REV. 30 (2005) (Grant and Keohane, Accountability and Abuses ofPower in World Politics) 251 rules in the future. The notion of accountability makes such organ responsible for its decisions to the treaty parties. This section first discusses the notion of accountability and its elements in domestic legal systems and international organizations. Then, the notion of applicability in the context of the WTO dispute settlement system is examined. Analogy to domestic legal systems would be less plausible to describe the notion of accountability in the WTO dispute settlement system.748 Before analyzing the notion of accountability within the WTO, we should be reminded of an important caveat noted earlier. The structure of authority and power is different at domestic and international levels and an analogy of notions in a domestic context to international matters is not compatible in comprehensively understanding the accountability of authority within the WTO. However, examination of accountability in both domestic and legal systems cast light on the concept of accountability in the WTO dispute settlement system. Second, the notion of accountability in an international organization should be considered along with its capacity, goals, and its role in the pursuit of global justice. Buchanan and Keohane noted that "what the terms of accountability ought to be - what standards of accountability ought to be employed, who the accountability holders should be, and whose interests the accountability holders 748 See Keohane and Nye, The Club Model ofMultilateral Cooperation, 227 (stating that "domestic analogy is less plausible for global regimes" in context of democratic deficits); See also DE WET, THE INTERNATIONAL CONSTITUTIONAL ORDER (stating inaccuracy of assumption that "there is one national model of democratic governance which can set threshold conditions for the legitimacy of international governance"); De Wet, The Legitimacy of United Nations Security Council, 135 (De Wet criticizes the use of"national democratic governance as a model for international governance"); See also Alvarez, Multilateralism and its discontents, 410 (noting that "we should not fall into the opposite error of mythologizing domestic democratic governance"). 252 should represent - cannot be definitively ascertained without knowing what role, if any, the institution should play in the pursuit of global justice." 749 (emphasis in original) Accountability in general term means "responsiveness."750 In his analysis of the notion of accountability Buchanan introduced three elements that assist us in better conceptualizing the notion of accountability in domestic and international legal system: "(l) standards that those who are held accountable are expected to meet; (2) information available to accountability-holders, who can then apply the standards in question to the performance of those who are held to account; and (3) the ability of these accountability holders to impose sanctions: to attach costs to the failure to meet the standards."751 In order to analyze the notion of accountability within the WTO, I briefly discuss the models of accountability in domestic legal systems and international organizations. One should keep in mind that these models are not completely transferable to the WTO system and the specific characteristics of the WTO should be taken into account. Nonetheless, these models are helpful to our understanding of an applicable model of accountability to the WTO system. 5.1.2.1.1 Models of Accountability in Domestic Legal Systems In a domestic legal system, accountability is ensured through the election process. The democratic election of representatives ensures that the role of accountability is fulfilled, 749 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 52. 750 Slaughter, Agencies on the Loose?, 523. 751 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 51. 253 which, in the words of Grant and Keohane, is to "sanction two kinds of abuses: "the unauthorized or illegitimate exercise of power and decisions that are judged by accountability holders to be unwise or unjust."752 They defined two theoretical models of accountability, both which support the concept of accountability in a domestic context through elective representation: a "participation" model of accountability and a "delegation" model of accountability. 753 They elaborated that in the participation model of accountability "those affected hold power-wielders accountable directly through participation, whereas in the delegation model, those delegating power hold power wielders accountable through a variety of mechanisms for judgment after the fact."754 In the former, constituents vote a representative into power through elections, and then hold the elected official accountable through the process of re-election in the following term. In the latter, the constituents are deemed to have delegated authority to the elected official, but establish various mechanisms (i.e. the system of checks and balances in the United States governmental system) that hold the official accountable for his or her actions after the delegation of power has been completed. The following chart summarizes the two models: 752 Grant and Keohane, Accountability and Abuses ofPower in World Politics, 30. 753 Id. 31. 754 Id. 33. 254 Table 9: Two General Models of Accountability for Nation-Sates Power-Wielder regarded as Who Is entitled to Hold the Powerful Accountable? Those Affected by Their Those Entrusting Them with Actions - Participation Power - Delegation Instrumental agents Ia. "Direct Democracy": Ila. Principal-Agent: Actions of power Power-wielders act as wielders are what those faithful agents of principals affected (the people) who empower them. instructed them to do in this contingency. Discretionary authorities lb. Populists: Policies llb. Trustee: Power followed by the power wielders perform the duties wielders lead to outcomes of their offices faithfully approved by those affected to confer additional powers. Source One cannot explain the theory of accountability in international organizations by relying only on one of these two theories. First, global demos does not exist and therefore direct democracy cannot be applied in international stage. Also, the fact that authority in the international stage has not been necessarily acquired through a delegation process undermines applicability of the "principal-agent" relationship. Furthermore, in the case of intergovernmental organizations that have acquired their authority from the consent of member states, one can argue that not all member states are democratic and the chain of delegation between people and the institutions is thus "attenuated."756 Although these differences prevent the direct application of domestic models to the international stage, these notions form the basis for accountability models in international institutions, and 755 Grant and Keohane, Accountability and Abuses ofPower in World Politics, 31. 756 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 40. 255 provide guidance in determining the structure of accountability that exists in the absence of a global demos or electoral system. 5.1.2.1.2 Models of Accountability in International Institutions Grant and Keohane identified seven possible accountability mechanisms that can be applied in international organizations. The first four models heavily rely on delegation and the last three models stem from a participation model of accountability. Hierarchal accountability is the accountability that exists when a superior is granted the power to "remove subordinates from office, constrain their tasks and room for discretion, and adjust their financial compensation."757 This kind of accountability is applicable within multilateral organizations such as the United Nations or the World Bank.758 Supervisory accountability applies to the relationship "between organizations where one organization acts as principal with respect to specified agents."759 In this model, the organization is held accountable through the supervision of its members, and is held to the standards imposed by the members granting the organization its authority. In this regard, the level of accountability demanded on the institution depends on the supervising members, and these "supervisory relationships are more or less democratic as states are more or less democratic."760 757 Grant and Keohane, Accountability and Abuses ofPower in World Politics, 36. 758 Id. 759 Id. 160 Id. 256 In the fiscal accountability model, an agency providing funding "can demand reports from, and ultimately sanction, agencies that are recipients of funding."761 This model is of significance in organizations that are funded by governments for their activities. Grant and Keohane defined legal accountability as "the requirement that agents abide by formal rules and be prepared to justify their actions in those terms, in courts or quasi judicial arenas. Public officials, like anyone else, can be 'held accountable' for their actions both through administrative and criminal law."762 Market accountability focuses on investors and consumers. This model refers to a relationship in which consumers enforce accountability by refusing to invest in companies or countries they dislike because of bad policies or standards adopted by the company or country.763 Peer accountability refers to "mutual evaluation of organizations by their counterparts."764 Unlike other models of accountability such as supervisory accountability where the relationship is based on a power granted by one entity to another, peer accountability relies on existing mutual relationships between entities acting in the same field, such as NGOs. Finally, in public reputational accountability "superiors, supervisory boards, courts, fiscal watchdogs, markets, and peers all take the reputations of agents into account."765 Under this model, reputation can provide a mechanism for accountability either "in conjunction 161 Id. 162 Id. 763 Id. 37. 764 Id. 765 Id. 257 with" other mechanisms, or "in the absence of'' a separate mechanism to ensure accountability. Table 10: Seven Mechanisms of Accountability in World Politics Authority of organizations opportunities UN Secretary General Multilateral Restraints on World Bank organization ability to act, and IMF and its loss of office governance by executive head their executive board Funded agency Budget Withholding of restrictions UN dues Individual From International officials or restriction of Criminal Court agency authority to criminal penalties Firm or Loss of access Refusal or government to, or higher capital markets cost of capital to finance developing country governments during world financial crisis Organizations Effects on Independent organizations and their network ties manne leaders and therefore certification on others' body's support evaluation of the Greenpeace- Shell controversy Individual or Diffuse effects Effects on U.S. agency on reputation "soft power" of prestige, self- unilateralism esteem 258 *Reputational effects are involved in all issues of accountability, as mechanisms leading to punishment through hierarchy, supervision, fiscal measures, legal action, the market, and peer responses. The category of public reputational effects refers to situations where the other means of accountability are not available, but reputational effects are widely known and significant. ** The first four model of accountability: hierarchical, supervisory, fiscal and legal accountability rely on delegation model of accountability. The last three: market, peer and reputational model are based on participation model of accountability. Source'00 The absence of global demos and an electoral process at the global stage does not mean that Global Governance Institutions cannot be held accountable. 767 Rather, in analyzing the notion of accountability in a Global Governance Institution, one should take into account the structure of authority and determine who is entitled to hold the power-wielder accountable for its action. The model of accountability that is applicable to a multilateral organization is usually a combination of various models, including delegated and participatory, supervisory, fiscal, hierarchical, and reputational. 768 In multilateral organizations, negotiators, as the representative of governments, follow instructions of their government in the negotiation process. The results of the negotiations are then subject to approval by domestic mechanisms that have been designed based on the Constitution of each party to the treaty. After the establishment of a multilateral organization state officials supervise every aspect of the entity. Grant and Keohane noted that: State officials closely supervise all of these entities. Indeed, these organizations are constrained from the start since the legitimacy of their actions is often judged 766 Id. 36. 767 Esty, Good Governance at the World Trade Organization, 515 (noting that electoral discipline does not exist in the global context). 768 Grant and Keohane, Accountability and Abuses ofPower in World Politics, 40. 259 simultaneously by three sets of potentially conflicting standards: whether they serve the interests of their member states, the purposes for which they were established, and evolving standards of benefits and harms. 769 The absence of the definitive electoral system that exists in the domestic system has often led to criticism about the lack of accountability in international organizations. However, the accountability models introduced above explain the high level of accountability that nonetheless exists in multilateral organizations. However, this does not mean that their accountability is perfect. 770 5.1.2.1.3 Accountability in and of the WTO Dispute Settlement System This dissertation has limited the discussion of the scope of accountability within the WTO dispute settlement to its internal actors. Moreover, the dispute settlement system is exclusive to WTO Members as "accountability holders" and only WTO Members can bring disputes before the WTO tribunals.771 Both the participation and delegation models of accountability are applicable within the WTO dispute settlement system with some restrictions. Before examining the accountability mechanisms within the WTO dispute settlement system, it is necessary to point out two caveats. First, accountability is "a set of ex post mechanisms to allow the governed to respond to and/or reject decisions already taken." 772 (emphasis in original) For example, the removal of a legal consultant by the 769 Id 37. 770 Id (noting that these institutions "are, indeed, highly constrained by accountability mechanisms." (footnote omitted)). 771 Accountability holder refers to those to whom the system is accountable. 772 Slaughter, Agencies on the Loose?, 523; See also Grant and Keohane, Accountab1hty and Abuses of Power m World Poht1cs, 30. 260 Director of the Legal Affairs Division of the WTO due to serious violation of the codes of conduct would be perceived as an accountability mechanism. Second, accountability in the WTO is not perfect and one cannot expect to find the same level of accountability that one might perceive in a democratic government within the WTO regime. The participation model of accountability applies because the performance of the Secretariat is closely evaluated by WTO Members, who are participants in endowing the Secretariat with its authority in the DSB meetings. The DSB is composed of representatives of all WTO Members, and pursuant to Article IV :3 of the WTO Agreement the General Council "discharges" its responsibilities of the DSB provided for in the DSU. The DSB not only has the authority to establish panels and the AB, but also to adopt the panel or the AB reports. In other words, the findings of panels or the AB are not binding in and of themselves. In order to take on a binding nature, the decisions have to be adopted by the DSB, the political organ of the WT0.773 Although the reverse consensus rule has made it nearly impossible to block the adoption of a panel's report, the DSB has the right to scrutinize every aspects of the report and all WTO Members are allowed to express their views and evaluate the function of the panelists, the AB and the Secretariat. 774 The delegation model of accountability is also applicable because WTO Members that have entrusted the panelists and the AB with the authority to clarify and interpret WTO laws can evaluate their function. In WTO Members' point of view, the panelists and the 773 DSU, Article 2:1. 774 Id. 261 AB are agents of WTO Members and WTO Members try to control them in various stages of the dispute settlement process. The panelist and the AB members, based on dynamic consent, can interpret and clarify vague terms within the provisions of the WTO Agreements. Such authority has been entrusted to the WTO dispute settlement system by WTO Members, who can make the panelists, the AB, Arbitrators, and the Secretariat assisting them accountable. However, such accountability is not absolute. Contrary to the GATT system, the reverse consensus rule applies in adoption of decisions of panelists, arbitrators and the AB members. This change in the WTO system contributes to the independence of the WTO dispute settlement system and reduces supervision and control by WTO Members. However, there are some mechanisms by which panelists, AB members and arbitrators can be held accountable to WTO Members. For example, during the panel stage the parties of a dispute can receive and comment on the descriptive part as well as the interim report which includes analysis and findings of the panel. 775 During the adoption process at the DSB meetings, the DSB scrutinizes panelists, the AB, or the arbitrators of their findings and legal interpretation of WTO Agreements. While the DSB deliberates on whether to adopt the report of the panel or the AB, the legal team within the Secretariat would be responsive to panelists, the AB and arbitrators on the one hand and their director who has been appointed by the consensus of the WTO Members on the other. The hierarchical model of accountability also can be recognized in the relationship between subordinate officials--such as the legal team assisting panelists, the AB or 775 See DSU, Article 15 and Appendix 3:10. 262 arbitrators--and directors of the Legal Affairs Division, the AB Secretariat and Rules Division. While the fiscal model of authority is not directly applicable in the WTO dispute settlement system, it could be invoked if a WTO Member is unable or unwilling to accept the findings of the DSB and tries to stop paying its contribution to the WTO or withdraw from the organization.776 When requesting the establishment of a panel, the parties to a dispute also select the composition of panelists to sit for their dispute. Therefore, the reselection of panelists depends on the evaluation of their performance in previous disputes. Meanwhile, the selection of AB members is more complex. The AB members are selected by the consensus of the DSB for a four-year term. Therefore, accountability during the term of the AB members is an ex post factor, while reselection of the AB members for another four year term is an accountability factor. The AB and the panelists have acquired a well-established credibility among WTO Members. Such reputation also can count as an accountability factor. One of the reasons that one can observe a cautious textual interpretation approach in the current jurisprudence of the AB is the fear that the credibility that the AB has accumulated since 1995 will be jeopardized. 776 In 2009, the United States contributed 25,313,222 CHF equal to %13 of the WTO budget. See Secretariat and Budget, Members' contributions to the WTO budget and the budget ofthe Appellate Body for the year 2009, WTO.org, http://www.wto.org/english/thewto_e/secre_e/contrib09_e.htm (last visited Mar.17,2011). 263 5.1.2.2 Transparency Access to information is another procedural function that is crucial to the existence of all forms of accountability.777 Grant and Keohane made a distinction between the role of "transparency" and "availability of information" in different models of accountability. They emphasized that "the availability of information is crucial for all forms of accountability, but transparency, or the widespread availability of information, is essential to market, peer, and reputational accountability, as well as to the internal workings of democratic accountability in states which play a supervisory role."778 Transparency plays an important role in the procedure based legitimacy of the WTO and provides a means for effective participation. The rise of democratic principles has resulted in criticism of Global Governance Institutions by civil societies for their lack of transparency.779 The Sutherland Report noted that "[t]he rise of mass democracy, or what some have called 'global associational revolution' was particularly powerful in the decade of the nineties as the United Nations world conference galvanized the forces of civil society globally in a bid to promote a more inclusive, participatory and transparent system of global governance."780 Transparency provides an opportunity for 777 Grant and Keohane, Accountability and Abuses ofPower in World Politics, 39. 118 Id. 779 See Chapter Two,§ 2.3.1. (referring to club model ofnegotiations). 780 Sutherland Report, if 176. 264 accountability holders to have "a clear view of who is making the decision and on what basis they are deciding."781 Transparency within an international governmental organization is a broad concept that refers to "openness of proceedings and access to official documents."782 Transparency in international organizations can be analyzed in different perspectives. First, the notion of transparency can be examined with regard to information access in the decision-making process of international organizations. Under this perspective, transparency is perceived from the viewpoint of the member state entitled to information from the organization. Such relationship can be analyzed in both an internal and external context. Internal transparency in an international organization refers to information access by accountability holders of internal stakeholders. For instance, in an international governmental organization, nation-state members have the right to know how the organization works and decides. Paragraph 10 of the Doha Ministerial Declaration exemplifies the notion of internal transparency: Recognizing the challenges posed by an expanding WTO membership, we confirm our collective responsibility to ensure internal transparency and the effective participation of all members. While emphasizing the intergovernmental character of the organization, we are committed to making the WTO's operations more transparent, including through more effective and prompt dissemination of information, and to improve dialogue with the public. We shall therefore at the national and multilateral levels continue to promote a better public understanding 781 Esty, WTO's Legitimacy Crisis, 16 (noting that how transparency will impact the public acceptance of authority). 782 Stein, International Integration and Democracy, 493-494 (noting transparency "supports democracy by facilitating access to information that enables citizens to participate in public life, hold public authority accountable to public opinion, counter 'a capture' of public institutions by special interest groups, enhance citizens' confidence in public authority, and improve the performance of public officials." footnote omitted) 265 of the WTO and to communicate the benefits of a liberal, rules-based multilateral trading system. 783 External transparency, on the other hand, refers to availability of information to stakeholders outside of the charter of an international organization. The second perspective is to analyze the role of international organizations on the transparency of domestic legal and political regimes of member states. Under this perspective, it is the organization that is evaluating the transparency of its members. In this approach, the roles of international treaties in regulating transparency are to (1) to make information on relevant laws, regulations, and other policies publicly available; (2) to notify interested parties of relevant laws and regulations and changes to them; and (3) to ensure that laws and regulations are administered in a uniform, impartial, and reasonable manner.784 Within the context of the WTO, for instance, Article X of the GATT outlines such transparency requirement for WTO Members. 785 The One World Trust's 2008 Global Accountability Report examines transparency as a factor impacting accountability in 30 of the world's most powerful international governmental organizations, NGOs, and business entities.786 The Global Accountability Report analyzes transparency capability through indicators such as existence of a transparency 783 World Trade Organization, Ministerial Declaration of 14 November 2001, if 10, WT/MIN(Ol)/DEC/l, 41 I.L.M. 746 (2002). 784 WTO, Working Group on the Relationship between Trade and Investment, Transparency, WT/WGTl/W/109 (Mar. 27, 2002), p.l. 785 For more information on history and evolution of jurisprudence on Article X ofGATT see Padideh Ala'i, From the Periphery to the Center? The Evolving WTO Jurisprudence on Transparency and Good Governance, 4 J. INT'L ECON. L. 779 (2008); See generally Robert Wolfe, Regulatory Transparency, Developing Countries and the WTO, 2 WORLD TRADE REV. 157 (2003). 786 ROBERT LLOYD, WARREN SHANA AND MICHAEL HAMMER, 2008 GLOBAL ACCOUNT ABILITY REPORT (One World Trust, 2008) (2008 Global Accountability Report) (assessing accountability in four dimensions: transparency, participation, evaluation, and complaint and response mechanisms). 266 policy787 for disclosure of information that includes commitment to respond to all information requests, timeframes for responding to information requests, narrowly defined conditions for non-disclosure, and independent appeals process for denial of information. 788 The report also takes into consideration whether transparency and disclosure of information systems include a leadership structure that assumes responsibility for oversight on the transparency of practices and compliance with transparency policy, training on transparency policy, and the accessibility of transparency policy to external stakeholders. 789 Figure 15: One World Trust Transparency Ca~ability Analysis of the WTO in 2006 Source79 787 Policies and systems have been differentiated in the 2008 Global Accountability Report. See rd. 20-21 (pohcies are written documents through which an organization makes a commitment to the values and principles of transparency, participatory decision-making, evaluation and learning, and complaints handling. Systems are the management strategies through which an organization encourages, enables and supports the implementation of the commitments made in policy or supports accountability more broadly.). 788 ROBERT LLOYD, WARREN SHANA AND MICHAEL HAMMER, 2008 GLOBAL ACCOUNT ABILITY REPORT INDICATORS 1 (One World Trust, 2008). 789 Id p. 1. 790 MO NIA BLAGESCU AND ROBERT LLOYD, 2006 GLOBAL ACCOUNT ABILITY REPORT: HOLDING POWER TO ACCOUNT 26 (One World Trust, 2006). 267 The need for more transparency in the WTO decision-making process was raised as a controversial issue at the Seattle Third Ministerial Meeting in 1999.791 Transparency within the WTO context deals with both the internal and external aspects of legitimacy. Internal transparency refers to the availability of information regarding the decision- making process within the institutional structure of the WTO, while external transparency addresses the availability of information to stakeholders outside of the structure of the WTO such as NGOs, citizens, civil societies, and other organizations. This dissertation does not aim to analyze the issue of transparency in the WTO as a whole. Rather it examines the issue of transparency within the dispute settlement system of the WT0.792 Furthermore, an analysis of the regulation of transparency in the domestic legal systems of WTO Members under TPRM or various provisions in the WTO Agreements is also outside of the boundaries of this dissertation. The scope of this research is limited to internal and external transparency within the WTO dispute settlement system from the point of view of its internal actors, i.e., WTO Members and their delegates in the DSB and WTO staff, panelists, the AB members, and arbitrators. 791 See MARY FOOTER AN INSTITUTIONAL AND NORMATIVE ANALYSIS OF THE WORLD TRADE ORGANIZATION 173 (Martin us Nijhoff Publishers, 2006) (noting the dissatisfaction of some WTO members in the First Ministerial Meeting in Singapore in 1996). 792 For more information on the issue of internal and external transparency in the WTO's decision-making process see THE WORLD TRADE ORGANIZATION: LEGAL, ECONOMIC AND POLITICAL ANALYSIS, VOL. Two, 85-87 (Patrick F. J. Macrory, Arthur Edmond Appleton, and Michael G. Plummer eds. Springer, 2005). 268 5.1.2.2.1 Internal and External Transparency in the WTO Dispute Settlement Mechanism In the WTO dispute settlement system, WTO Members have the right to a transparent decision-making process. All WTO Members, including the parties of a dispute and third parties, are allowed to attend DSB meetings. As the DSB has the authority to adopt findings of panels and the AB, Members can be ensured effective participation only through full access to the DSB meetings. 5.1.2.2.1.1 Internal Transparency When a dispute is initiated in the WTO, the initial consultation stage is confidential.793 However, ifthe parties to the dispute agree, third party WTO Members can join the consultation meeting. 794 WTO Members other than the disputing parties and third parties are not allowed to attend hearings with the panels, the AB, or Arbitrators. Third parties are only allowed to attend the first substantive meeting. 795 At the appellate stage, only the parties to a dispute and third parties are ensured a right to attend oral hearings. 796 Other WTO Members and the public cannot attend oral hearings unless the parties to a dispute afford such permission. In practice, if third parties object 793 DSU, Article 4:6. 794 DSU, Article 4: 11. 795 Id. Appendix 3:6. 796 AB Working Procedures, Rule 27:3. 269 to opening hearings to the public and other WTO Members, their statements will not be disseminated. 797 Table 11: Internal Transparency in Dispute Settlement Meetings 797 For more information on opening panel and the AB hearing to public see Chapter Four,§ 4.6.2. 798 DSU, Article 4: 11. 799 Id. Appendix 3.6. 800 AB Working Procedures, Rule 27. 801 DSU, Article 12:3. 802 Mexico - Diagnosis of the Problems Affecting the DSM, p. 37 (see Annex 7). 270 5.1.2.2.1.1.1 Access to Documents In the transparency process of international organizations, it is essential for stakeholders to have access to documents. For instance, all 153 Members of the WTO should have access to the existing documents within the WTO. Such necessity expands to external stakeholders as well. In an effort to enhance transparency within the organization, the General Council in 2002 decided to derestrict all WTO official documents, and established procedures for their circulation and derestriction. 803 According to the procedures, if a WTO Member submits a restricted document, such document "shall be automatically derestricted after its first consideration by the relevant body or 60 days after the date of circulation, whichever is earlier, unless requested otherwise by that Member."804 (footnote omitted) The procedures also provided for automatic derestriction of all minutes of meetings 45 days after the meeting. 805 To ensure transparency to all WTO Members, the Procedures also provide for the derestriction of translations of official WTO documents. All official WTO documents shall be translated expeditiously in three official languages (English, French and Spanish) and made available through the WTO website. 806 803 WTO, General Council, Procedures for the Circulation and Derestriction ofWTO Documents, WT/L/452 (May 16, 2002), ii 1 (WTO Circulation and Derestriction Procedures) Member or prepared by the Secretariat to be issued in any one of the following WTO document series: WT-series (including reports of panels and the Appellate Body); G-series (except G/IT-series); S-series; IP-series; GATS/EL-series; GA TS/SC-series; the Schedules of Concessions and TN-series. Where a new WTO document series is created, the relevant WTO body shall decide on the derestriction procedures applicable to that series, taking into account the present decision."). 804 Id. ii 2.a. 805 Id. ii 2.c. 806 Id. ii 3. 271 Submissions by the parties to a dispute to the panel or the AB are confidential and only made available to the parties. 807 Third parties have access only to the first substantive meeting, unless enhanced third party rights are provided to them. 808 The parties to a dispute and third parties can disclose their own submissions or statements. Article 18 :2 of the DSU reads: Written submissions to the panel or the [AB] shall be treated as confidential, but shall be made available to the parties to the dispute. Nothing in this Understanding shall preclude a party to a dispute from disclosing statements of its own positions to the public. Members shall treat as confidential information submitted by another Member to the panel or the [AB] which that Member has designated as confidential. A party to a dispute shall also, upon request of a Member, provide a non-confidential summary of the information contained in its written submissions that could be disclosed to the public.809 (emphasis added) At the panel stage, only the disputing parties have access to the descriptive interim report. In comparison, access to submission and statement of the parties and third parties is more open at the appellate stage. Parties and third parties of a dispute receive appellant and appellee' s submissions. 810 807 DSU, Article 12:6. 808 Id. Articles 10:3 and Appendix 3:6. 809 For example see the United States' submissions to China -Auto Parts dispute at Measure Affecting Import ofAutomible Parts, THE OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE: WTO DISPUTE SETTLEMENT, http://www.ustr.gov/trade-topics/enforcement/dispute-settlement-proceedings/wto-dispute settlement/measures-affecting-im (last visited Mar. 17, 2011 ). 810 DSU, Articles 21and22. 272 Table 12: Internal Transparency in Access to Documents m WTO Circulation and Derestriction Procedures. 812 The USA, the EC and the Advisory Center publish their submissions in their web sites. Australia, Canada and New Zealand may provide them upon request. 813 DSU, Articles 12:6 and Appendix 3:6. 814 Id. Article 10:3. 815 Id. Articles 15 and Appendix 3. 816 Id. Articles 21:3 (c), 22.:6, and 25. 817 AB Working Procedures, Rules 21, 22 and 28. 818 DSU, Article 4: 11. 273 5.1.2.2.1.1.2 Enhanced Third Party Rights The entitlement of third parties to dispute settlement proceedings to which they are not a direct party can be justified through the long-term institutional interest that third parties have with regards to the dispute settlement process, or the short-term interest they may have in a dispute. If third parties are not granted access to dispute settlement meetings and documents, it would be impossible for them to exercise this right through effective participation. Furthermore, allowing all WTO Members access to such information provides a valuable opportunity for capacity building for developing countries and LDCs.820 Third parties face restrictions to access to part of the first substantive meeting and the entire second substantive meeting at the panel stage as well as the interim review process. Furthermore, third parties are not granted access to certain documents such as submissions made after the first substantive meeting, oral statements of the parties, and the parties' responses to questions from the panel, and do not have advance access to the interim and final panel report. 819 Mexico - Diagnosis of the Problems Affecting the DSM, p. 37 (see Annex 7). 820 In Chapter Five, § 5.2.2.6.2. I will explain the technical and financial barriers of developing and LDC to access to the WTO dispute settlement mechanism (Impediment to Access to the Dispute Settlement System). 274 By gaining enhanced third parties rights, a third party can attend all meeting of panels with the parties and are permitted to make statement and written submissions. They can also receive copies of all submission and other relevant materials. 821 The DSU provides that third parties "shall have an opportunity to be heard by the panel and to make written submissions to the panel. These submissions shall also be given to the parties to the dispute and shall be reflected in the panel report. " 822 Enhanced third party rights raise a question as to whether panelists and the AB are authorized to grant third parties a broader right to access documents and meetings than expressly provided for in the DSU. In the EC-Hormones dispute, the AB upheld the panel's authority to grant additional participatory rights to third parties, stating: ... Although Article 12.l and Appendix 3 of the DSU do not specifically require the Panel to grant ... ["enhanced" third party rights] to the United States, we believe that this decision falls within the sound discretion and authority of the Panel, particularly if the Panel considers it necessary for ensuring to all parties due process of law. 823 (emphasis added) 821 See WTO, Dispute Settlement Body, Minutes ofMeeting, Jamaica statement in WTO, WT/DSB/M/16 (June 4, 1996) p.4 (noting that "[i]n order to pursue this matter in a transparent manner, Jamaica further requested that its participation include the following: (i) the right to make written submissions; (ii) attendance at all meetings of the panel, and the opportunity to receive all submissions of parties to the panel; (iii) the opportunity to be heard by the panel, to ask questions and to respond to questions raised by other parties regarding its submissions."). 822 DSU, Article 10:2. 823 AB Report EC - Hormones, ii 154. 275 While special circumstances necessitated enhanced third party rights in EC - Hormones, the AB confirmed that it was also within the panel's discretion to decide not to grant such rights. The AB held in US - 1916 Act824 that: A panel's decision whether to grant "enhanced" participatory rights to third parties is thus a matter that falls within the discretionary authority of that panel. Such discretionary authority is, of course, not unlimited and is circumscribed, for example, by the requirements of due process. In the present cases, however, the European Communities and Japan have not shown that the Panel exceeded the limits of its discretionary authority.825 5.1.2.2.2 External Transparency External transparency makes information available to external stakeholders that are affected by the WTO dispute settlement system, such as civil societies, NGOs and the public. As an inter-governmental organization, only WTO Members can bring disputes before panelist, the AB, and arbitrators. The general rule, therefore, is that the public does not have access to the DSB meetings and hearings at either the panel or the appellate stage. Nonetheless, there has been growing recognition that external stakeholders may have some right to information regarding the dispute settlement process, either as entities directly affected by the decisions or as indirect representatives of the Members that grant the DSB the authority to render such decisions. As previously explained, the General Council has required derestriction of all WTO official documents in recognition of the impact of panel or AB decisions on civil societies 824 AB Report, United States -Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R (Aug. 23, 2001) (AB Report US-1916 Act). 825 Id if 150; See also AB Report US- FSC, if 243. 276 and the public. The WTO website was also established as a response to the call for enhanced transparency, and provides another resourceful means of disseminating information. The first priority of the WTO website is to make all information available to the public and WTO Members, and one can easily find information about disputes, relevant laws and current changes in the WTO system in the three official languages of the WT0.826 Panelists and the AB have themselves recognized the need to provide an opportunity for the public to access dispute settlement information. One way for the public and civil societies to participate is to provide information to panelists, the AB and arbitrators under the notion of Amicus Curiae briefs that has been established and developed by panelists and the AB. Also, the public and civil societies in some circumstances can attend hearings. 827 Since 1995, panels and the AB have received Amicus Curiae briefs in 31 cases. 828 In most of these cases, the panels or the AB were of the view that it is not necessary to consider the Amicus Curiae briefs. 829 In 13 of these 15 cases, Members have expressed concern at DSB meetings. 830 826 For example see What's on the WTO Website, WTO.org, http://www.wto.org/english/info_e/site_e.htm (last visited Mar. 17, 2011). 827 For more details on Amicus Curiae briefs and open oral hearing see Chapter Four, §§ 4.5.3. and 4.6.2. 828 WorldTradeLaw.net's WTO Case Law Index, WORLDTRADELAW.NET, http://www.worldtradelaw.net/dsc/wtoindex.htm#amicus (last visited Mar. 17, 2011). 829 Id. 830 See WT/DSB/M/50, WT/DSB/M/103, WT/DSB/M/83, WT/DSB/M/86, WT/DSB/M/140, and WT/DSB/M/134. 277 90% 79% 80% 70% •Need of more Tranparency 60% (Generally) 50% • Internal Transparency 40% iii External Transparency 30% • AmicusCuriae Breifs 20% 10% 0% 1 Figure 16: Transparency in the WTO Dispute Settlement System Opening hearings to the public is not expressly addressed in the DSU. However, the AB and panelists, in the interest of transparency, have established jurisprudence by which hearings can be made available to the public. The potential for opening hearings seems to have been a significant advance for transparency in the WTO, as 58 percent of interviewees were of the view that opening oral hearings to the public would be beneficial for the transparency of the WTO as a whole and in increasing legitimacy of the dispute settlement system. Despite the perception of enhanced transparency created by open hearings, the actual effect of such measures is ambiguous, as seen in the number of attendees to the hearings. Although the number of attendees fluctuates based on significance of a dispute, one can perceive gradual decrease in number of registrants to the AB open oral hearings. 278 Moreover, the actual number of attendees is usually lower than the number of registrants. 831 5.1.2.3 Due Process One of the main characteristics of contemporary international law, and global administrative law in particular, is the incorporation of principles of administrative law. 832 Due process in domestic legal systems is defined as "[t]he conduct of legal proceedings according to established rules and principles for the protection and enforcement of private rights, including notice and the right to a fair hearing before a tribunal with the power to decide the case."833 The notion of due process, however, is not confined to domestic legal systems, but has been recognized as an essential element for "legitimacy and effectiveness" of international as well as domestic legal regimes. 834 Mitchell explained that administrative and judicial systems seek to achieve due process "by exercising their discretion in a fair manner and by developing procedural or 831 Statistics on file with author. 832 For more information on history of due process in domestic and international context see DAVID PALMETER, THE WTO AS A LEGAL SYSTEM: ESSAYS ON INTERNATIONAL TRADE AND POLICY 199-209 (Cameron May, 2003) (PALMETER, THE WTO AS A LEGAL SYSTEM); See also Andrew Mitchell, Due Process in WTO Disputes, in KEY ISSUES IN WTO DISPUTE SETTLEMENT: THE TEN FIRST YEARS, 144-160 (Rufus Yerxa and Bruce Wilson eds. Cambridge University Press, 2005) (Mitchell, Due Process in WTO Disputes). 833 Black's Law Dictionary 575 (9th ed. 2009). 834 Mitchell, Due Process in WTO Disputes, 144; See generally Benedict Kingsbury,Nico Krisch, and Richard B. Stewart, The Emergence ofGlobal Administrative Law, 68 LAW & CONTEMP. PROBS. 15 (2005). 279 evidentiary rules explaining how rights, duties, powers and liabilities are administered. " 835 One should keep in mind that analogizing due process in domestic context with that at the international level might not fully explain all aspects of due process in Global Governance Institutions. Rather, the authority and scope of the WTO should be taken into account, and the comparisons should be made on a case-by-case basis depending on the characteristics of the measure in question. 836 The AB in US Shrimp emphasized that: ... Inasmuch as there are due process requirements generally for measures that are otherwise imposed in compliance with WTO obligations, it is only reasonable that rigorous compliance with the fundamental requirements of due process should be required in the application and administration of a measure which purports to be an exception to the treaty obligations of the Member imposing the measure and which effectively results in a suspension pro hac vice of the treaty rights of other Members.837 5.1.2.3.1 Due Process in the WTO Dispute Settlement System The principle of due process is applicable with regard to different issues in WTO dispute settlement proceedings. Although the DSU does not explicitly refer to the term "due process," panelists and the AB have recognized the "sound" discretion and authority of panelists and the AB to apply the principle in their proceedings. 838 The AB stated that 835 Mitchell, Due Process in WTO Disputes, 144 (recognizing the difficulty to define the notion of due process). 836 PALMETER, THE WTO AS A LEGAL SYSTEM 201 (discussing application of due process in domestic and international law). 837 AB Report US - Shrimp, ~ 182. 838 See AB EC - Hormones,~ 154 (noting that application of principle of due process "falls within the sound discretion and authority of the Panel, particularly ifthe Panel considers it necessary for ensuring to all parties due process of law."); Authority to provide enhanced third party rights is also vested in principle of due process. For more information see AB Report, United States - Tax Treatment for "Foreign Sales 280 the obligation to afford due process is "inherent in the WTO dispute settlement system."839 (footnote omitted) The principle of due process "is fundamental to ensuring a fair and orderly conduct of dispute settlement proceedings."840 The AB in EC-Hormones held that "the DSU, and in particular its Appendix 3, leave panels a margin of discretion to deal, always in accordance with due process, with specific situations that may arise in a particular case and that are not explicitly regulated."841 The AB in US - FSC also read the spirit of due process into the procedural rules binding the panels and the AB, stating that the "procedural rules of WTO dispute settlement are designed to promote, not the development of litigation techniques, but simply the fair, prompt and effective resolution of trade disputes."842 The content of the request for a panel determines the terms of reference by which panelists are to adjudicate the dispute.843 The scope of the terms ofreference is closely tied to the purpose of due process. The AB in Brazil - Desiccated Coconut emphasized: A panel's terms of reference are important for two reasons. First, terms of reference fulfil an important due process objective - they give the parties and third parties sufficient information concerning the claims at issue in the dispute in Corporations" -Recourse to Article 21.5 ofthe DSU by the European Communities, ~ 243 , WT/DS108/AB/RW (Jan. 29, 2002) (AB Report US-FSC (Article 21.5 -EC)) (noting that "panels enjoy a discretion to grant additional participatory rights to third parties in particular cases, as long as such "enhanced" rights are consistent with the provisions of the DSU and the principles of due process."). 839 AB Report US- Continued Suspension,~ 433. 840 AB Report Thailand - H-Beams, ~ 88. 841 AB Report EC - Hormones, ~ 152, footnote 13 8. 842 AB Report US - FSC, ~ 166. 843 See DSU, Article 7: 1. 281 order to allow them an opportunity to respond to the complainant's case. Second, they establish the jurisdiction of the panel by defining the precise claims at issue in the dispute. 844 Due process is not only pertinent to the terms of reference or to ensuring an opportunity to answer claims or present evidence. Rather it is the founding principle for granting, inter alia, enhanced third party rights, 845 right to private counsel, and a margin of discretion to panelists. Additionally, due process has a direct affect on the appellate review of a panel's decision- making process, as a violation of the principle of due process by panels has been recognized as a failure "to make an objective assessment" under Article 11 of the DSU. In US - Gambling, the AB noted: [A]s part of their duties, under Article 11 of the DSU, to "make an objective assessment of the matter" before them, panels must ensure that the due process rights of parties to a dispute are respected. 846 5.1.2.4 Expertise Expertise is another source of legitimacy that is applicable within the WTO dispute settlement system. 847 An expert is "a person who, through education or experience, has developed skill or knowledge in a particular subject."848 Bodansky stated the authority of 844 AB Report Brazil - Desiccated Coconut, p. 22; See also AB Report India - Patents (US), ~ 94 (stating that [c]laims must be stated clearly. Facts must be disclosed freely. This must be so in consultations as well as in the more formal setting of panel proceedings. In fact, the demands of due process that are implicit in the DSU make this especially necessary during consultations."). 845 AB Report US-FSC (Article 21.5 -EC),~ 243. 846 AB Report US - Gambling, ~ 273. 847 Bodansky, The Legitimacy ofInternational Governance, 620 (referring to Plato and noting that he was of the view that "expertise" is a source oflegitimacy). 848 Black's Law Dictionary 660 (9th ed. 2009). 282 a regime can be legitimized through its success, and that success, in tum, can be the result of expertise. 849 He explained that: Just as we rely on expertise rather democratic decision making to build airplanes and to cure diseases, we might believe that, if economists were to make economic decisions and environmental experts environmental decisions, this would lead to the best outcomes. Indeed, it is precisely this desire to have monetary issues decided by financial experts that underlines the effort to insulate the U.S. Federal Reserve Board and the New European Central Bank for politics. 850 The level of expertise required to exercise authority may also affect the degree to which people are willing to subject themselves to that authority. In this respect, Esty noted that "[a]s a general rule, people appear more willing to cede authority to 'expert' decision[- ]making in realms that are perceived to be technical or scientific."851 (footnote omitted) Panelist and the AB members are selected as neutral experts for a specific period of time by WTO Members to resolve their disputes. Article 8.1 of the DSU states that panels "shall be composed of well-qualified governmental and/or non-governmental individuals, including persons who have served on or presented a case to a panel, served as a representative of a Member or of a Contracting Party to GA TT 194 7 or as a representative to the Council or Committee of any covered agreement or its predecessor agreement, or in the Secretariat, taught or published on international trade law or policy, or served as a senior trade policy official of a Member." (emphasis added) Similarly Article 17:3 of the DSU notes that the AB, without any affiliation with any governments, shall comprise persons ofrecognized authority, with demonstrated 849 Bodansky, The Legitimacy ofInternational Governance, 620. s50 Id. 851 Esty, WTO's Legitimacy Crisis, 9. 283 expertise in law, international trade and the subject matter of the covered agreements generally. 852 Both panelist and the AB members are obligated to be neutral. Such neutrality guarantees the integrity of the WTO. Article 17:3 of the DSU addresses that AB members shall be broadly representative of membership in the WTO. The same rule applies to panelists. The main concern in selection of panelists is "independence of the members, a sufficiently diverse background and a wide spectrum of experience."853 Not only it is essential that panelist and the AB be composed of individuals who are neutral and are experts, but so should the Secretariat providing them with administrative and legal assistance. 854 5.1.2.4.1 Rules of Conduct for Panelists, Appellate Body and Secretariat, Experts Impartiality and neutrality are important factors in procedure based legitimacy that can be ensured through a set ofrules that monitor the conduct of those holding authority. The DSU and Rules of Conduct have set rules that secure impartiality and neutrality within the WTO dispute settlement system and have, as a result, enhanced the confidence of its users. 855 Rules of Conduct "aim to define standards and principles that ought to guide the 852 DSU, Article 17:3. 853 Id. Article 8:2. 854 For more information on selection panelists and the AB and structure of the Secretariat see Chapter Four,§ 4.1.3.2. 855 For more information on evolution of codes of conduct see Hellen Keller, Codes ofConduct and Their Implementation: The Question ofLegitimacy, in LEGITIMACY IN INTERNATIONAL LAW, 219-298 (Rudiger Wolfrum and Volker Roben eds. Springer, 2008) (Keller, Codes ofConduct). 284 [behavior] of the addressee in a particular way."856 Although the DSU contains some provisions to enhance impartiality of arbitrators, panelists or AB members - such as forbidding ex parte communications - 857 such provisions are sparse and inadequate. Therefore, the DSB, to sustain "the integrity, impartiality and confidentiality" and "to enhance confidence in" the WTO dispute settlement system, passed the Rules of conduct for the understanding on rules and procedures governing the settlement of disputes858 (Rules of Conduct). The AB Working Procedures also contain provisions regarding rules of conduct of the AB members and the AB Secretariat. 859 WTO Staff Regulations and Staff Rules860 also regulate the conduct of the WTO staff. The Rules of Conduct apply to all "covered persons," which include panel members, AB members, arbitrators, experts assisting panels, members of the Textile Monitoring Body, and (WTO) Secretariat and AB Secretariat staff. 861 The Rules of Conduct states that covered persons shall "be independent and impartial, shall avoid direct or indirect conflicts of interest and shall respect the confidentiality of proceedings of bodies pursuant to the dispute settlement mechanism, so that through the 856 Id 220. 857 DSU, Article 18: 1. 858 WTO, Dispute Settlement Body, Rules ofConduct for the Understanding on Rules and Procedures Governing the Settlement ofDisputes, WT/DSB/RC/1 (Dec. 11, 1996) (Rules of Conduct). 859 AB Working Procedures, Rules 8-11. 860 WTO, General Council, Conditions ofService Applicable to the Staff ofthe WTO Secretariat, WT/L/282 (Oct. 21, 1998) (see Annex 2). 861 Rules of Conduct,§ IV:l. 285 observance of such standards of conduct the integrity and impartiality of that mechanism are preserved."862 The issue of whether an expert is a "covered person" under the Rules of Conduct was first addressed in US - Continued Suspension. Having decided that experts are covered under the Rules of Conduct, and that the Rules of Conduct embody the principles of due process, the AB held that a violation of the impartiality requirement by experts equated a violation of the due process principle. 863 The Rules of Conduct require the covered persons to ( 1) adhere strictly to the provisions of the DSU; (2) disclose the existence or development of any interest, relationship or matter that that person could reasonably be expected to know and that is likely to affect, or give rise to justifiable doubts as to, that person's independence or impartiality; and (3) take due care in the performance of their duties to fulfill these expectations, including through avoidance of any direct or indirect conflicts of interest in respect of the subject matter of the proceedings.864 The self-disclosure as well as confidentiality requirements are important factors in securing integrity, impartiality and neutrality of the WTO dispute settlement system.865 Violation of these requirements by a covered person are examined by either the Chair of the DSB, the Director-General, or the standing AB, as deemed appropriate under the 862 Id §II. 863 AB Report US - Continued Suspension, ifif 415-443. 864 Rules of Conduct, § III: 1. 865 Id §§ VI and VII. 286 respective procedures detailed in paragraphs VIII:5 to VIII: 17. If a person is found to be in violation of the Rules of Conduct, the consequence may be exclusion from further participation in the process or other disciplinary action. 866 5.1.2.4.2 Resort to Experts in WTO Dispute Settlement With the rise in the number of disputes brought before the WTO, the subject matter of the disputes brought before panels and the AB have also increased in complexity. While panelists are granted more authority to seek outside expertise to aid in the fact-finding stage of the dispute, AB members are more restricted in their ability to seek information, as the appellate stage is technically restricted to a review of the law. At the panel stage, panelists are authorized to "to seek information and technical advice from any individual or body which it deems appropriate."867 Therefore, the DSU permits panelists to consult with either individual expert to appoint an expert review group to assist them to resolve disputes. 868 An expert review group is to be comprised of "persons of professional standing and experience in the field in question."869 Impartiality of the experts is critical for credibility of opinions. Annex 4 of the DSU states: Citizens of parties to the dispute shall not serve on an expert review group without the joint agreement of the parties to the dispute, except in exceptional circumstances when the panel considers that the need for specialized scientific expertise cannot be fulfilled otherwise. Government officials of parties to the 866 Id. § VIII. 867 DSU, Article 13: 1. 868 Id. Article 13:2. 869 Id. if 2, Annex 4. 287 dispute shall not serve on an expert review group. Members of expert review groups shall serve in their individual capacities and not as government representatives, nor as representatives of any organization. Governments or organizations shall therefore not give them instructions with regard to matters before an expert review group. 870 Seeking the assistance of experts may be necessary to carry out an objective assessment of the facts, as required under the DSU. While panels often seek assistance on technical matters to which they may not have direct knowledge, they may also seek legal assistance from the Secretariat. Legal assistance may particularly be necessary as panelists are not necessarily lawyers. They can be well-qualified governmental and/or non-governmental individuals, including persons who have experience as a senior trade policy official of a Member. 871 The issue of expertise faces various difficulties at the appellate level, however. Appeals at the WTO dispute settlement system are limited to issues of law and legal interpretation developed by the panel. 872 Therefore, the AB is not authorized to review a question of fact. However the complexity of the disputes often blurs the lines between factual and legal issues. Moreover, the legal implications may be closely tied to the factual issues, making it necessary for the AB to have a clear understanding of the facts. For example, in a complex dispute on subsidies, the AB members must fully examine and understand the measure at issue in order to render an effective ruling. While individual or group experts may have been available to provide assistance at the panel stage, such authority is 870 Id.~ 3, Annex 4. 871 Id Article 18: l. 872 Id Article 17:6. 288 not granted at the appellate stage. Therefore, the AB members are left to rely solely on the Secretariat's or their own knowledge. The education and background of panelists, AB members, and arbitrators are also relevant to the notion of expertise. It is interesting to note that at the moment all the AB members have had legal education background and some have served as diplomats. In the past, when the disputes were not as complex and the backgrounds of the AB members were more diverse. Table 13: Current AB Members and their Educational Background 289 Table 14: Former AB Members and their Educational Background Current trends in the types of disputes brought before the WTO demonstrate that future disputes will likely not be limited to alleged violations of the GATT or GATS, but will increasingly deal with more specialized WTO Agreements such as TBT, SPS or SCM agreements. 290 An inability of the AB members to fully comprehend and effectively rule on the complex issues before them will undermine the credibility that the AB has built since 1995. Indeed, 58 percent of interviewees expressed their views on the need for the AB to have access to expertise in order to understand factual and legal aspects of an appeal. However, there was no consensus on the method for acquiring expertise in complex disputes before the AB. 5.1.2.4.3 Expertise and Move from Ad hoc to Permanent Panel The main concern in the selection of panelists is the "independence of the [M]embers, a sufficiently diverse background and a wide spectrum of experience."873 The Secretariat maintains an indicative list of panelists including governmental and non-governmental individuals with the aforementioned qualifications. There have been suggestions to establish a permanent panel, such as the European Communities' proposal in the DSU Review. On one hand a permanent panel could contribute to greater effectiveness, speed and consistency of panel proceedings. On the other hand it might undermine the expertise requirement necessary for a sound judgment, 874 in that there is a risk that permanent panelists would lack sufficient expertise on the specific subject matter of the dispute. 875 873 Id. Article 8:2. 874 WTO, Dispute Settlement Body, Special Session, Further Contribution ofthe European Communities and Its Members to the Improvement and Clarification ofthe WTO Dispute Settlement, TN/DS/W/38 (January 23, 2003), if 14. 875 Id 291 Only 15 percent of interviewees were of the view that a permanent panel is necessary to increase the expertise of panelists and coherency of their decisions. 5.1.2.5 Institutional Integrity As discussed previously, the Rules of Conduct help to ensure institutional integrity by guaranteeing the neutrality of the Secretariat, panelists, AB members, arbitrators and experts. Another important factor that significantly contributes to institutional integrity is coherency. Coherency in the dispute settlement system is best understood through an examination of the roles of the Secretariat and the AB in interpreting WTO laws. 5.1.2.5.1 Neutrality Neutrality is a vital component oflegitimacy. Esty in this regard reiterated that "[t]o be seen as legitimate, decision makers must be understood to be pursuing the public good in an objective, unbiased, and uncorrupted manner-not promoting powerful special interests or their own private gains."876 WTO has set various rules and procedures to guarantee the impartiality and neutrality of the WTO dispute settlement system. These rules and procedures can make panelists, the AB, Arbitrators, experts and the Secretariat accountable. 877 876 Esty, Good Governance at the World Trade Organization, 519. 877 For more information about the impact of public participation on neutrality of decision makers and its impediments see Esty, Good Governance at the World Trade Organization, 519-520. 292 5.1.2.5.2 Integrity and Coherency The notions of integrity and coherency also comprise essential component that contribute to legitimacy. Franck, by referring to Dowrkin, described "integrity" or "coherence" from two perspectives: morals and adjudicative. 878 In a moral sense, "a substantive rule has integrity when it relates in a principled fashion to other rules of the same system."879 Coherency in adjudicative sense means that "in applying a rule, conceptually alike cases will be treated alike. "880 Franck stated that "in the international community, perhaps even more than in national legal systems, great emphasis is placed on rule coherence. Rules, to be perceived as legitimate, must emanate from principles of general application."881 Coherency in a legal system establishes "legitimate expectation" from the system. Franck explained: States' perceptions of the extent to which a rule is legitimate determines, in part, their sense of an obligation to adhere, and secure the adherence of others, to the rule. It is precisely in shaping such perceptions that coherence plays a vital role. When states act consistently, it is easy enough to perceive the operation of a rational, consistent principle in influencing patterns of state conduct.882 Franck concluded that "[t]he degree of a rule's legitimacy depends in part on its coherence, which is to say its connectedness, both internally (among the several parts and purposes of the rule) and externally (between one rule and other rules, through shared 878 FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 143. 879 Id. 880 Id. 881 Id. 152. 882 Id. 174. 293 principles )."883 5.1.2.5.2.1 The Role of the Appellate Body on Coherency Article 3 :2 of the DSU explicitly expresses that the WTO dispute settlement system "is a central element in providing security and predictability to the multilateral trading system." (emphasis added) The AB was designed as an exceptional mechanism to correct legal misinterpretations of panels.884 However, WTO Members frequently resorted to the appellate stage and the AB from the beginning conceived the AB as a higher court. As of April 2010, 107 AB reports have been adopted. 885 The AB has upheld the panel's decision in only 15 percent of appealed disputes. By modification and reversing panels decisions and if necessary completion of analysis, the AB contributes to coherency of interpretations developed in WTO dispute settlement system, keeping panels from deviating from an application of established jurisprudence. 886 883 Id. 180 (noting that "[the] connectedness between rules united by underlying principles-both manifest in a rule's mandate and, often, also in its textured exceptions and exculpations-manifests the existence of an underlying rule-skein which connects disparate ad hoc arrangements into a network of rules "governing" a community of states, the members of which perceive the coherent rule system's powerful pull towards voluntary compliance."). 884 see Ch apter Three,§ 3.3.2.6.1.3. 885 See Facts and Figures on WTO Dispute Settlement, WORLDTRADELAW.NET, http://www.worldtradelaw.net/dsc/database/basicfigures.asp (last visited Mar. 17, 2011). 886 See Chapter Four,§ 4.4.1 on Precedence and the Legal Status of Adopted/Unadopted Reports in Other Disputes. 294 4 •upheld •mod-.f"led •reversed Figure 17: AB Decisions from 1995-April 2010 Source 887 The AB has developed an interpretive method that aims at bringing coherency to the WTO dispute settlement. The AB in Japan - Alcoholic Beverages II emphasized that "[WTO laws] will serve the multilateral trading system best if they are interpreted with that in mind. In that way, we will achieve the "security and predictability" sought for the multilateral trading system by the Members of the WTO through the establishment of the dispute settlement system."888 Two other factors in the institutional structure of the AB also contribute to the coherency of the WTO dispute settlement system. First, unlike to panelists that are appointed ad hoc, the AB members are selected for a four-year term with a possibility of reappointment for one additional term. The standing nature of the AB can be a significant factor in coherency of the AB jurisprudence, as it can provide consistency in the legal and political viewpoints of the AB. Second, the AB Working Procedures have developed a notion of "collegiality."889 Rule 4: 1 of the AB Working Procedures states that "[t]o ensure consistency and coherence in decision-making, and to draw on the 887 DS Statistics on File with Author. 888 AB Report Japan -Alcoholic Beverages II, p.34 889 Hudec, The New WTO Dispute Settlement Procedure, 28-29. 295 individual and collective expertise of the [AB] [m]embers, the [AB] [m]embers shall convene on a regular basis to discuss matters of policy, practice and procedure." The Working Procedures also requires all AB members to receive all documents filed for appeals, regardless of whether the member is sitting in the particular division of the dispute.890 With the view to ensure coherency and consistency, the division responsible for deciding each appeal is obligated to discuss all the issues have been raised in the appeal with other AB members over the "exchange of views meeting."891 The division cannot finalize the report to be circulated to WTO Members without holding such meeting. Although previous decisions of panels and the AB are not binding for other non-party Members, the interpretation of law developed by panelists and the AB, and subsequently adopted by WTO members establish a "legitimate expectation."892 The AB noted that: [a]dopted panel reports are an important part of the GATT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO Members, and, therefore, should be taken into account where they are relevant to any dispute.893 (emphasis added) In US -Stainless Steel (Mexico), however, the AB admonished the panel for departing from established jurisprudence, stating that: The creation of the [AB] by WTO Members to review legal interpretations developed by panels shows that Members recognized the importance of consistency and stability in the interpretation of their rights and obligations under 890 AB Working Procedures, Rule 4:2. 891 Id. Rule 4:3. 892 See for example Panel Report US -Anti-Dumping Measures on PET Bag, if 7.21; AB Report US Softwood Lumber V, iii! 109-112; AB Report Japan Alcoholic Beverages II, pp. 12-15; AB Report US Shrimp (Article 21.5 - Malaysia), if 109. 893 AB Report Japan -Alcoholic Beverages II, p.14 296 the covered agreements. This is essential to promote "security and predictability" in the dispute settlement system, and to ensure the "prompt settlement" of disputes. 894 Legitimate expectation does not mean that subsequent panelists or the AB are obliged to follow the precedent. The AB in US - Continued Zeroing emphasized that even "the factual findings adopted by the DSB in prior cases regarding the existence of the zeroing methodology, as a rule or norm, are not binding in another dispute."895 Jackson characterized this practice in the WTO dispute settlement system as "de facto precedential effect. " 896 Palmeter and Mavroidis called it the "strong persuasive power" of adopted reports in the WTO system. 897 Despite the absence of a formal stare decisis principle, it is interesting to note that the coherency at the AB has reached such a level that dissenting opinions are now very rare in WTO jurisprudence. 898 5.1.2.5.2.2 Secretariat as an Integral Part of Institutional Memory The "Director of Legal Affairs" position was created by Director-General Arthur Dunkel in 1981.899 Since then, the Secretariat has expanded not only in size, but also in the scope of its functions, which now include assisting panelists, the AB and arbitrators. 894 AB Report US-Stainless Steel (Mexico},~ 161. 895 AB Report, United States - Continued Existence and Application ofZeroing Methodology,~ 190, WT/DS350/AB/R (Feb. 19, 2009) (AB Report US- Continued Zeroing). 896 JACKSON, THE JURISPRUDENCE OF GATT AND THE WTO, 127. 897 David Palmeter, and Petros C. Mavroidis, The WTO Legal System: Sources ofLaw, 92 AM. J. INT'L L. 398, 401 (1998) (noting that the panel should take the previous jurisprudence into account). 898 For more information on dissent see Chapter Four, § 4.6.5. 297 Because the GA TT did not have the status of an organization, the role of the Secretariat was weak. However, after gaining organization status with the establishment of the WTO, the expansion of the organization's role has led to an increase in de Jure or de facto authority granted to the Secretariat. The Secretariat, which includes the Legal Affairs Office, the AB Secretariat, and Rules division, provides technical and legal assistance to panelist, the AB, and Arbitrators. The assistance of the Secretariat is indispensible in reaching and drafting decisions. At the panel stage, the assistance of the Secretariat is more significant. The main reason is that panelists are selected on an ad hoc basis, and it is possible for panelists to not have enough time or legal expertise to draft the decisions. The jurisprudence that has been developed since 1995 is massive and dynamic, and it would be not be easy for panelists to have a comprehensive knowledge of existing jurisprudence as well as non-legal technical matters. The AB members are selected for a longer period. However, this does not mean that the assistance of the AB Secretariat is not needed. On the contrary, not all AB members have a litigation background or have worked as judges. Furthermore, the AB position is considered as a part time job, and AB members often travel to Geneva only when meetings are being held. The Secretariat is the one entity that has a comprehensive knowledge of all existing jurisprudence and interpretations developed in the WTO. Furthermore, it is the Secretariat that drafts the decisions under the supervision of panelists, the AB or 899 See Chapter Three, § 3.3.2.5. 298 Arbitrators. Therefore, as Weiler noted, the Secretariat is, de facto, "the repository of institutional memory of horizontal and temporal coherence, of long term hermeneutic strategy. "900 The Secretariat assist panelists and the AB in drafting a decision that is coherent with past jurisprudence. Such coherency is essential for predictability and stability of the system. 5.1.2.6 Participation Participation of stakeholders in the decision-making process is an integral component of legitimacy. The notion of participation is entangled with other concepts such as transparency, and due process. Some theoretical aspects of participation were explained previously in Chapter four sections 4.5, such as the participation of external actors in the notion of internal and external transparency and the issue of amicus curiae briefs. Governments, as the primary stakeholders of the WTO dispute settlement system, should have access to the dispute settlement and judicial proceedings. Here, the capacity to participate and impediments to participation will be discussed. 900 Weiler, The Rule ofLawyers and the Ethos ofDiplomats, 345 (criticizing the relationship of the legal secretary and panelists). 299 5.1.2.6.1 Capacity to Participate in WTO Dispute Settlement System A Member's capacity to participate in WTO dispute settlement is a reflection of various factors such as economic prosperity, volume of trade with other WTO Members, and legal expertise. - l 300 I I 250 200 150 100 • Complainants • Respondents 50 0 High Income Upper Middle Lower Middle Low Income Income Income Figure 18: Total Number of Complainants and Respondents by Income Classification Source901 The higher income countries have more capacity to use, and therefore benefit from, the WTO dispute settlement system. They also have more experts on WTO issues both in Geneva and their capitals and participate more frequently as parties or third parties in the dispute settlement system. 901 WTO Complaints Grouped by Income Classification, WORLDTRADELAW.NET, http://www.worldtradelaw.net/dsc/database/classificationcount.asp (last visited Mar. 17, 2011) (A number of complaints have been filed by multiple Members acting jointly. In some of these complaints, the Members filing the complaint fall into different income categories. Where this is the case, we have counted the complaint in each income category in which at least one complainant falls. Therefore, the number of the complaints in these tables will add up to more than the total number of complaints under the DSU). 300 90 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 80 +-~~~-.,,...-~---~~~~~~~~~~~~~~~~~~~~~~~~~ 70 -1--~~~-----1--~~~~~~~-.,--~~~~~~~~~~~~--~~~ 60 -i-~~~------tR-~~~~~~~-.i--~~~~~~~~~~~~--,--~~ 50 -t-~~~-----,..._~~~~~~~--1--~~~~~~~~~~~~--.---~~ 40 +-~~~..... -11---~~~~~~~~---~~~~~~~~~~~~ ...... 1-a~~ 30 20 -r-~~-t1fd--.--..-t--11t--=:-~~---.1-1r-.--~~~~~~-:::---..::-~~~-... l~~~~!!:!E!l~~~~~~~~~~~lit.!:~r;J., !-. ra ra '1J 0 ra ra ra ra i:: Vl 0 ra ra ::l Vl ra '1J ra ra ra -.N ~ 0.0 ..c 0 ra -~ u !-. ·:;: ·v; ·a ·a -~ ~ "6b ~ :a ::l ·c '1J :0 ·a ~ ra :a i:: ::l "O !-. "O ::0 u '1J s '1J s ra '1J ~ !-. 0 ra !-. ::l ·.c:: 0 ra Q.. ra ra ra ·a ::l ..c u u 0 s .s !-. 0.0 i:: !-. i:: N N co co u ::l '1J '1J 0 0.. ·c z ::l '1J s!-. u ..... --. ::l 0 ra c:i:: ·c i:: ~ ra '1J z Q.. "O ra E- i:: < c:i:: ~ ra ~ i:: ::l '1J ::l c:: :a Cl"l E- c..:i N ~ ra ::l > Vl ra ~ tl Cl"l !-. ::2 ~ ..... -Number of Cl"l Disputes as Third party -Number of Staff in Mission (Geneva) Figure 19: Relationship Between Number of Staff in Geneva and Number of Disputes as Third Party [Developing Countries] 5.1.2.6.2 Impediment to Access to the Dispute Settlement System Although all WTO Members are guaranteed limited access to disputes to which they are not a party, it goes without saying that Members can reap the full benefits of the system only if they have the capacity to bring cases before the panel and AB. However, pursuing a dispute is very expensive and entails complicated technical details.902 Considering that 902 Bernard M. Hoekman and Petros C. Mavroidis, WTO Dispute Settlement, Transparency and Surverillance, in DEVELOPING COUNTRIES AND THE WTO: A PRO-ACTIVE AGENDA, 136-137 (Bernard M. Hoekman and Will Martin eds. Blackwell Publishing, 2003) (noting the substantial costs ofrecourse to WTO dispute settlement); See also Ostry, the WTO, Global Governance and Policy Options, 65 (addressing the cost of bringing disputes before the WTO dispute settlement system). 301 more than two thirds of WTO Members are developing countries or LDCs, providing easier access to the dispute settlement system is emerging as a widely discussed issue. One proposal that is being discussed is the establishment of a fund on dispute settlement through the contribution of all WTO Members. At the moment there is no mechanism to provide financial assistance to developing countries or LDCs within the WTO budgetary system. The African Group, during the current DSU Review, has proposed the "fund on dispute settlement."903 The proposal suggests establishing a fund to "facilitate the effective utili[z]ation by developing and least-developed country Members of this Understanding in the settlement of disputes arising from the covered agreements."904 The fund would be financed from the regular WTO budget. 905 There are many issues that need to be answered about this proposal. The first issue is the definition of developing countries. Currently, while the definition for LDCs follows the categorization of the UN, the status of developing countries is a self-selected definition that gives rise to conflicts regarding whether certain countries should be allowed to elect the status. For instance, it may be difficult to convince the United States and other developed countries to fund China or Brazil to bring disputes against them in the WTO. The second issue also emanates from the vagueness of the definition of developing countries. South-south disputes (disputes between Members in the southern hemisphere) 903 WTO, Dispute Settlement Body, Text for the African Group Proposals on Dispute Settlement Understanding Negotiations, TN/DS/W/92 (Mar. 5, 2008) (African Group Proposal on WTO Fund). 904 Id. 2. 9os Id. 3. 302 are rising within the WTO dispute settlement and the proposal does not specify how the fund should assist a developing country in bringing a dispute against another developing country. The third issue pertains to the capacity of the WTO dispute settlement system to handle all disputes. Considering the current concern that the WTO dispute settlement system is overburdened with an excessive number of disputes, the proposed fund may further strain the dispute settlement system's capacity to effectively address each dispute brought before it. There is no doubt that developing countries and LDCs need to be able to access the dispute settlement system more effectively. Because the Doha Round is in a state of deadlock, one cannot expect major changes to occur immediately. However, there have been some gradual changes within WTO dispute settlement to assist developing countries and LDCs in building capacity to bring disputes. For example, the enhanced third party rights that have been developed by panels and the AB will assist developing countries and LDCs in gaining access to all the meetings, through which they can gain knowledge and experience on technical and legal matters. Furthermore, ACWL is an independent organization that has been established to assist developing countries and LDCs in building capacity to bring dispute before the WTO dispute settlement system. The ACWL gives free legal advice and training on WTO law and provides support in WTO dispute settlement proceedings at discounted rates. These services are available to the developing country Members of the ACWL (30 percent) and to LDCs that are 303 Members of the WTO or are in the process of acceding to the WTO (44 percent).906 The ACWL even provides free services for LDCs that participate as third parties in dispute settlement proceedings. 907 Despite such advancements, the legal complexities and resources needed to participate as a party in a dispute remains daunting, and further advancements will be needed to ensure that all WTO Members are guaranteed access to the WTO dispute settlement system. 5.1.3 Result Based Legitimacy Justice and legitimacy are "closely" related concepts.908 Fairness contributes to credibility of an institution and the perception of fairness that stakeholders have towards a system can impact the legitimacy of its rulings and decisions. Franck stated that "the shared sense of justice or fairness of a moral community has a power to pull toward voluntary rule compliance which is different from, yet comparable to the compliance pull which legitimacy exerts on behalf of rules of the secular community. "909 Esty described fairness as having both "procedural and substantive elements."910 He 906 The ACWL Provides Advice, Support and Training to Developing and Least- Developed Countries, ADVISORY CENTRE ON WTO LAW (ACWL), available at http://www.acwl.ch/e/index.html (last visited Mar. 17, 2011). 907 Least Developed Countries, ADVISORY CENTRE ON WTO LAW (ACWL), http://www.acwl.ch/e/ld_countries/ld_countries.html (last visited Mar. 17, 2011). 908 Buchanan and Keohane, Legitimacy of Global Governance Institutions, 34. 909 FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS 73; See also generally JOHN RAWLS, JUSTICE AS FAIRNESS: A RESTATEMENT (Erin Kelly ed. Harvard University Press, 2001) (discussing elements of fairness) 910 Esty, WTO's Legitimacy Crisis, 18. 304 asserted that procedural fairness is due process, i.e., "openness - identification of who is making decisions; disclosure of the assumptions on which the process turns; and an explanation of the values, influences, and information sources that are being brought to bear."911 In his view substantive fairness referred to "a function of consistency across circumstances and time as well as the generation of outcomes that comport community's values and traditions. For the WTO there is a need to ensure that, in addition to [identifying] the right answer from the trade perspective, the institution is capable of cross-issue balancing where other values (for example, environmental concerns) are at play."912 (footnote omitted) While it is not difficult to understand the effect of fairness on legitimacy, whether legitimacy can be incorporated into the concept of fairness is a more difficult issue. Keohane and Buchanan asserted "collapsing legitimacy into justice confuses a non-ideal with an ideal standard and undermines the valuable social function of legitimacy assessments."913 They stated: First, there is sufficient disagreement on what justice requires that such a standard for legitimacy would thwart the eminently reasonable goal of securing coordinated support for valuable institutions on the basis of normative reasons. Second, even if we all agreed on what justice requires, withholding support from institutions because they fail to meet the demands of justice would be self defeating from the standpoint of justice itself, because progress toward justice requires effective institutions.914 911 Id. 912 Id. 913 Buchanan and Keohane, Legitimacy ofGlobal Governance Institutions, 34. 914 Id. 305 Within the WTO, fairness is affected by whether the expectations that WTO Members have towards the WTO have been satisfied, as well as the fulfillment of procedural legitimacy safeguards such as due process and participation. To define the expectations that WTO Members have towards the WTO, it is first necessary to discuss whether the mandate of the WTO is limited to facilitating trade and bringing economic welfare, or encompasses the goal of development. In other words, if a WTO Member is of the view that the aim of the WTO is bring development or socials justice to that Member, a decision is fair only if that goal is advanced through the decision. Historically, the GATT 1947 was created to lower trade barriers. Although the Preamble notes that the Contracting Parties recognize "that their relations in the field of trade and economic [endeavor] should be conducted with a view to raising standards of living, [and] ensuring full employment," there was no direct emphasis on the notion of non- economic development. The Doha Round also did not mention the notion of development as the main goal of the WTO. Finally, in the Doha Round negotiations, many developing countries insisted on placing "sustainable development" in the Doha Ministerial Declaration. As a result, Paragraph 6 of the Declaration "strongly reaffirm[ s] [WTO Members"] commitment to the objective of sustainable development, as stated in the Preamble to the Marrakesh Agreement."915 915 World Trade Organization, Ministerial Declaration of 14 November 2001, WT/MIN(Ol)/DEC/l, 41 1.L.M. 746 (2002), if 6. 306 The WTO at the moment is functioning under the Uruguay Round agenda in which WTO laws were drafted without development in mind as a principal goal of the WTO. Put differently, such level of expectation is more or less reflected in the WTO Agreements. While the expectation and the needs of WTO Members have changed since 1995, the text of the WTO Agreements has not evolved under the Doha Round negotiations. Therefore, one can see divergence between the expectations from the WTO and the capacity of the current WTO legal regime under the Uruguay Round. This divergence has created some tension between WTO Members in terms of what to expect from the WTO. Some WTO Members expect accession to the WTO to bring development to their countries, a view that impacts their expectation regarding what they can gain from the organization both in terms of trade negotiations and dispute settlement. 5.1.4 Overall Perception of Legitimacy The asymmetrical structure of the WTO, both in terms of the imbalance between its adjudicatory and diplomatic organs and the imbalance in the political organ of the WTO itself, has contributed to complexity of analyzing the notion of legitimacy within the WTO. For instance North and South countries have different expectations of the WTO as a whole and such disagreement impacts their perception regarding the acceptability of WTO rules and decisions. Legitimacy is not established overnight, but is slowly developed through the accumulation of many historical, cultural, social as well as legal factors. We cannot expect the principles of legitimacy to be neatly and perfectly explained within the 307 structure and history of the WTO. Despite the many legitimacy challenges that face and will continue to face the WTO, however, it is worth noting that 100 percent of interviewees expressed general satisfaction with the work of the dispute settlement system. 308 6 CONCLUSION Formation of the concept of legitimacy is a gradual process that neither develops nor dismantles overnight. Because legitimacy in contemporary international law ebbs and flows in an organic process, understanding the foundations of legitimacy from theoretical, historical, and institutional perspectives is important in understanding the characteristics of legitimacy as it stands today. The evolution of the dispute settlement system of the WTO and the impacts that historical and institutional developments within the WTO have had on the dispute settlement system provide an intriguing example of how various factors can contribute to the legitimacy of an organization. Particularly in today's inter-connected world where the roles of international organizations as global governance institutions are changing in the international stage, the notion of legitimacy has taken on a whole new level of complexity, as exemplified in the WTO's expanding mandate and its unique dispute settlement system. This dissertation has sought to delve into the theoretical, historical, and institutional underpinnings of the notion of legitimacy in the WTO and its dispute settlement system. By observing the unique characteristics of the WTO dispute settlement system, this dissertation has proposed a new multi-dimensional standard of legitimacy that analyzes three perspectives of legitimacy that work in tandem: (1) source based legitimacy, (2) procedure based legitimacy, (3) result based legitimacy. 309 Source based legitimacy focuses on dynamic and static consent as the most common methods of justifying authority within the WTO legal system and it deals with secondary rule making and the interpretative methods where WTO laws are silent or vague as well as their implication on legitimacy of the WTO dispute settlement system. The WTO is an organic organization that expands its mandate to effectively accommodate new challenges. Because of the dynamic nature of the WTO, source based legitimacy alone is not sufficient to legitimize the decision of the institution. Therefore, there is a need to establish an external standard of legitimacy to control and observe decisions of the WTO organs. Procedure based legitimacy examines procedural safeguards such as accountability, transparency, participation, due process, use of experts, and institutional integrity that contribute to legitimacy within the dispute settlement system. Result based legitimacy observes that the outcomes of the WTO dispute settlement system, in light of source and procedure based legitimacy, are fair and just. Over all legitimacy captures historical, cultural, social as well as legal factors that impact legitimacy of the WTO dispute settlement system. The results of the interviews demonstrated that all the interviewees were satisfied with the work of the dispute settlement system. The high level of satisfaction expressed by the interviewees indicates that the WTO system has been successful in its endeavors to overcome the many limitations facing the WTO organs, by maintaining the credibility that it has achieved, through the development of various techniques explained in the research, despite the many limitations facing the WTO organs. 310 The WTO is finding itself at a very important cross road as it awaits its next growth spurt through the Doha Development Round. However, the future of the Round remains unclear, the deadlock in the Doha Round negotiations has impeded necessary developments in the WTO's mandate. By offering a standard that takes into consideration various aspects of the (past, present and future of the) WTO the multi-dimensional model of legitimacy provides a guidepost through which it will assist the WTO dispute settlement system in ensuring the prompt settlement of disputes among WTO Members as well as to maintaining - and moreover enhancing - its legitimacy. The multi-dimensional standard of legitimacy demonstrates the existing limits as well as the capacity of the dispute settlement system to deal with upcoming challenges that have not been solved by the Doha Round. What distinguishes this dissertation from others similar studies is the examination of the interviewees' reaction toward application of the multi-dimensional standard of legitimacy in the WTO dispute settlement system. 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Risse, Thomas, Transnational Governance and Legitimacy, in GOVERNANCE AND DEMOCRACY COMPARING NATIONAL, EUROPEAN AND INTERNATIONAL EXPERIENCES, 179-199 (Benz, Arthur, and Papadopoulos, Yannis eds. New York: Routledge, 2006). Roessler, Frieder, The Institutional Balance between the Judicial and the Political Organs ofthe WTO, in NEW DIRECTIONS IN INTERNATIONAL ECONOMIC LA w' ESSAYS IN HONOUR OF JOHN H. JACKSON, 325-356 (Bronckers, Marco, and Quick, Reinhard eds. Hague: Kluwer Law International, 2000). Rosenau, James N., Governance, Order, and Change in WORLD POLITICS, IN GOVERNANCE WITHOUT GOVERNMENT: ORDER AND CHANGE IN WORLD POLITICS, 1-29 (Rosenau, James N. and Czempiel, Ernst Otto eds. Cambridge: Cambridge University Press, 1992). Scholte, Jan Aart, Globalization, in ROUTLEDGE ENCYCLOPEDIA OF INTERNATIONAL POLITICAL ECONOMY: VOL. Two, 613-621 (Jones, R. J. Barry ed. New York: Routledge, 2001). 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Treves, Tullio, Aspects ofLegitimacy ofDecisions ofInternational Courts and Tribunals, in LEGITIMACY IN INTERNATIONAL LAW, 169-188 (Wolfrum, Rudiger and Rohen, Volker eds. Berlin, Heidelberg, New York: Springer, 2008). Weiler, Joseph H.H., The Rule ofLawyers and the Ethos ofDiplomats: Reflections on the Internal and External Legitimacy ofWTO Dispute Settlement, in EFFICIENCY, EQUITY, AND LEGITIMACY: THE MULTILATERAL TRADING SYSTEM AT THE MILLENNIUM, 334-350 (Porter, Roger B., Sauve, Pierre, Subramanian, Arvind, and Zampetti, Americo Beviglia eds. Washington, DC: Brookings Institution Press, 2001). Wet, Erika de, The Legitimacy of United Nations Security Council Decisions in the Fight against Terrorism and the Proliferation of Weapons ofMass Destruction: Some Critical Remarks, in LEGITIMACY IN INTERNATIONAL LA w, 131-154 (Wolfrum, Rudiger, and Rohen, Volker eds. Berlin, Heidelberg, New York: Springer, 2008). 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GATT DOCUMENTS AND DECISIONS GATT Council, the Understanding on Notification, Consultation, Dispute Settlement and Surveillance, GATT B.I.S.D. 26S/210 (Nov. 28, 1979). GATT, Ministerial Declaration on the Uruguay Round of20 September 1986, MIN.DEC, at 6 (1987) (Punta Del Este declaration). 323 Report of the Panel, United States-Restrictions on Imports ofTuna (Sept. 3, 1991), GATT B.l.S.D. (35th Supp.). Ruling by the Chairman, Application ofArticle I: 1 to Rebates on Internal Taxes (Aug. 24, 1948), GATT B.l.S.D. 11/12. ---. The Phrase "Charges ofany Kind" in Article I: 1 in Relation to Consular Taxes (Aug. 24, 1947), GATT B.l.S.D. 11/12. Working Party Report, Greece - Preferential Tariff Quotas to the USSR, L/344 7 (Dec. 2, 1970), GATT B.l.S.D. 18S/179. ---.Report of Working Party Seven on the Cuban Schedule, GATTICP.2143 (Sept. 13, 1948). WTO DOCUMENTS World Trade Organization, Ministerial Declaration of 14 Novermber 2001, WT/MIN(Ol)/DEC/1, 41 1.L.M. 746 (2002). General Council, Minutes ofMeetings, WT/GC/M/60 (Jan. 23, 2001). WTO Committee on Sanitary and Phytosanitary Measures, Decision on the Implementation ofArticle 4 ofthe Agreement on the Application ofSanitary and Phytosanitary Measures, G/SPS/19 (Oct. 26, 2001). WTO Ministrial Conference, Accession ofthe People's Republic ofChina, WT/L/432 (Nov. 23, 2001). WTO, Appellate Body, Working Procedure for the Appellate Review, WT/AB/WP/W/11 (July 27, 2010) ---. Committee on Sanitary and Phytosanitary Measures, Existing International Standards: Codex Alimentarius Commission, G/SPS/W/18 (June 16, 1995). ---.Dispute Settlement Body, Establishment ofthe Appellate Body: Decision adopted on Feb. 10, 1995, WT/DSB/1(June19, 1995). ---.Dispute Settlement Body, Minutes ofMeeting, WT/DSB/M/1 (Feb. 28, 1995). ---. Dispute Settlement Body, Minutes ofMeeting, Jamaica statement in WTO, WT/DSB/M/16 (June 4, 1996). ---.Dispute Settlement Body, Minutes ofMeetings, WT/DSB/M/134 (Jan. 16, 2003). 324 ---.Dispute Settlement Body Special Session, Further Contribution ofthe United States to the Improvement ofthe Dispute Settlement Understanding ofthe WTO Related to Transparency - Revised Legal Drafting, TN/DS/W/86 (Apr. 21, 2006). ---.Dispute Settlement Body Special Session, Diagnosis ofthe Problems Affecting the Dispute Settlement Mechanism: Some Ideas by Mexico, TN/DS/W/90 (July 16, 2007). ---.Dispute Settlement Body Special Session, Further Contribution ofthe European Communities and Its Members to the Improvement and Clarification ofthe WTO Dispute Settlement, TN/DS/W/38 (Jan. 23, 2003). ---. Dispute Settlement Body, Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement ofDisputes, WT/DSB/RC/1 (Dec. 11, 1996) (Rules of Conduct). ---. Dispute Settlement Body, Text for the African Group Proposals on Dispute Settlement Understanding Negotiations, TN/DS/W/92 (Mar. 5, 2008). ---.General Council, Decision on Implementation Issues and Concerns, WT/L/384 (Dec. 19, 2000) ---.General Council, Conditions ofService Applicable to the Staff ofthe WTO Secretariat, WT/L/282 (Oct. 21, 1998). ---.General Council, Procedures for Amendment and Interpretation Pursuant ofthe Dispute Settlement System: Response to European Communities' Request for an Authoritative Interpretation ofthe Dispute Settlement Understanding Pursuant to Article IX:2 ofthe WTO Agreement, WT/GC/W/144 (Feb. 5, 1999). ---. General Council, Procedures for the Circulation and Derestriction of WTO Documents, WT/L/452 (May 16, 2002). ---. General Council, Request for an Authorative Interpretation Pursuant to Article IX:2 ofthe Marrakesh Agreement Establishing The World Trade Organization: Communicationfrom the European Communities, WT/GC/W/133 (Jan. 25, 1999). ---. General Council, Request for an Authorative Interpretation Pursuant to Article IX: 2 ofthe Marrakesh Agreement Establishing The World Trade Organization: Communicationfrom the European Communities, WT/GC/W/143 (Feb. 5, 1999). ---. Legal Affairs, WTO Dispute Settlement: Statistical Overview, on file with author, (Apr. 2010) (power point file) (DS Statistics). ---. Trade in Services, The Ministerial Decision on Certain Dispute Settlement Procedures for the General Agreement on Trade in Services, S/L/2 (Apr. 4, 1995). 325 ---. Trade Policy Review Body, Overview ofDevelopments in the International Trading Environment; Annual Report by the Director-General; Part B; Shapingfactorsfor Trade; Looking to the Future, WT/TPR/OV/12 (Nov. 18, 2009). ---.Working Group on the Relationship between Trade and Investment, Transparency, WT/WGTI/W/109 (Mar. 27, 2002). WTO DISPUTE SETTLEMENT DECISIONS Appellate Body Report, Australia -Measures Affecting Importation ofSalmon, WT/DS18/AB/R (Nov. 6, 1998). ---. Brazil - Measures Affecting Desiccated Coconut, WT/DS22/AB/R (Mar. 20, 1997). ---.Canada- Certain Measures Affecting the Automotive Industry, WT/DS139/AB/R, WT/DS142/AB/R (June 19, 2000). ---. Canada - Certain Measures Concerning Periodicals, WT/DS31/AB/R (July 30, 1997). ---. Canada - Continued Suspension of Obligations in the EC - Hormones Dispute, WT/DS321/AB/R (Nov. 14, 2008). ---.Canada-Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R (Aug. 20, 1999). ---.Canada- Term ofPatent Protection, WT/DSl 70/AB/R (Oct. 12, 2000). ---. Chile - Price Band System and Safeguard Measures Relating to Certain Agricultural Products, WT/DS207/AB/R (Oct. 23, 2002). ---. China - Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/AB/R (Jan. 19, 2010). ---.EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R (Feb. 13, 1998). ---. European Communities - Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/AB/R (Apr. 20, 2004). ---.European Communities -Customs Classification ofCertain Computer Equipment, WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R (June 22, 1998). ---. European Communities - Customs Classification ofFrozen Boneless Chicken Cuts, WT/DS269/AB/R, WT/DS286/AB/R, and Corr.1 (Sept. 27, 2005). 326 ---. European Communities - Export Subsidies on Sugar, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R (May 19, 2005). ---. European Communities - Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R (Apr. 5, 2001). ---.European Communities -Measures Affecting the Importation ofCertain Poultry Products, WT/DS69/AB/R (July 23, 1998). ---. European Communities - Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R (Sept. 25, 1997). ---.European Communities-Trade Description ofSardines, WT/DS231/AB/R (adopted Oct. 23, 2002). ---.Japan - Measures Affecting Agricultural Products, WT/DS76/AB/R (Mar. 19, 1999). ---.Japan-Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DSlO/AB/R, WT/DSll/AB/R (Nov. 1, 1996). ---.Korea-Definitive Safeguard Measure on Imports ofCertain Dairy Products, WT/DS98/AB/R (Jan. 12, 2000). ---. Korea - Measures Affecting Imports ofFresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R (Jan. 10, 2001). ---. India - Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R (Jan. 16, 1998). ---.Mexico - Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R (Mar. 24, 2006). ---. Thailand -Anti-Dumping Duties on Angles, Shapes and Sections ofIron or Non Alloy Steel and H-Beamsfrom Poland, WT/DS122/AB/R (Apr. 5, 2001). ---.United States-Anti-Dumping Act of1916, WT/DS136/AB/R, WT/DS162/AB/R (Sept. 26, 2000). ---. United States -Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R (Aug. 23, 2001). ---. United States - Continued Dumping and Subsidy Offset Act of2000, WT/DS217/AB/R, WT/DS234/AB/R (Jan. 27, 2003). ---. United States - Continued Existence and Application ofZeroing Methodology, WT/DS350/AB/R (Feb. 19, 2009). 327 ---. United States - Continued Suspension of Obligations in the EC - Hormones Dispute, WT/DS320/AB/R (Nov. 14, 2008). ---. United States -Definitive Safeguard Measures on Imports ofCircular Welded Carbon Quality Line Pipe.from Korea, WT/DS202/AB/R (Mar. 8, 2002). ---. United States - Final Anti-Dumping Measures on Stainless Steel from Mexico, WT/DS344/AB/R (May 20, 2008). ---. United States - Import Measures on Certain Products from the European Communities, WT/DS165/AB/R (Jan. 10, 2001). ---. United States -Import Prohibition ofCertain Shrimp and Shrimp Products, WT/DS58/AB/R (Nov. 6, 1998). ---. United States - Import Prohibition ofCertain Shrimp and Shrimp Products - Recourse to Article 21.5 ofthe DSU by Malaysia, WT/DS58/AB/RW (Nov. 21, 2001). ---. United States -Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/AB/R (June 7, 2000). ---.United States-Measure Affecting Imports of Woven Wool Shirts and Blouses.from India, WT/DS33/AB/R (May 23, 1997). ---. United States -Measures Affecting the Cross-Border Supply ofGambling and Betting Services, WT/DS285/AB/R (Apr. 20, 2005). ---. United States - Measures Relating to Shrimp from Thailand I United States - Customs Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing Duties, WT/DS343/AB/R, WT/DS345/AB/R (Aug. 1, 2008). ---.United States-Section 211 Omnibus Appropriations Act of 1998, WT/DSl 76/AB/R (Feb. 1, 2002). ---. United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R (May 20, 1996). ---. United States -Subsidies on Upland Cotton, WT/DS267/AB/R (Mar. 21, 2005). ---.United States -Tax Treatment for "Foreign Sales Corporations", WT/DS108/AB/R (Mar. 20, 2000). ---. United States - Tax Treatment for "Foreign Sales Corporations" - Recourse to Article 21.5 ofthe DSU by the European Communities, WT/DS108/AB/RW (Jan. 29, 2002). 328 ---.United States - Transitional Safeguard Measure On Combed Cotton Yarn.from Pakistan, WT/DS192/AB/R (Nov. 5, 2001). ---.China-Measures Affecting Imports ofAutomobile Parts, WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R (Jan. 12, 2009). Award of the Arbitrators, United States - Section 110(5) ofthe US Copyright Act - Recourse to Arbitration under Article 25 ofthe DSU, WT/DS160/ARB25/1 (Nov. 9, 2001). Panel Report, Brazil - Measures Affecting Imports ofRetreaded Tyres, WT/DS332/R (Dec. 17, 2007) (as modified by Appellate Body Report WT/DS332/AB/R). ---. EC Measures Concerning Meat and Meat Products (Hormones), Complaint by the United States, WT/DS26/R/USA (Feb. 13, 1998) (as modified by AB Report WT/DS26/AB/R, WT/DS48/AB/R). ---.European Communities -Anti-Dumping Measure on Farmed Salmon.from Norway, WT/DS337/R (Jan. 15, 2008). ---. European Communities - Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/R (Apr. 20, 2004) (as modified by AB Report, WT/DS/246/AB/R). ---. European Communities - Measures Affecting the Approval and Marketing ofBiotech Products, WT/DS291/R, WT/DS292/R, WT/DS293/R, Add.I to Add.9, and Corr.I (Nov. 21, 2006). ---.European Communities -Measures Affecting the Importation ofCertain Poultry Products, WT/DS69/R (July 23, 1998) (as modified by Appellate Body Report WT/DS69/AB/R). ---. European Communities - Regime for the Importation, Sale and Distribution of Bananas-Recourse to Article 21.5 ofthe DSU by the United States, WT/DS27/RW/USA and Corr.I (Dec. 22, 2008) (as upheld by AB Report WT/DS27/AB/RW/USA). ---. European Communities and Certain Member States - Measures Affecting Trade in Large Civil Aircraft, WT/DS316/R (circulated to WTO Members June 30, 2010) (appeal in progress). ---.Korea-Definitive Safeguard Measure on Imports ofCertain Dairy Products, WT/DS98/R and Corr.I (Jan. 12, 2000) (as modified by AB Report WT/DS98/AB/R). ---. United States -Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand, WT/DS383/R (Feb. 18, 2010). 329 ---. United States - Continued Existence and Application ofZeroing Methodology, WT/DS350/R (Feb. 19, 2009) (as modified as Appellate Body Report WT/DS350/AB/R). ---. United States - Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany, WT/DS213/R and Corr.1 (Dec. 19, 2002) (as modified by AB Report WT/DS213/AB/R). ---. United States - Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/R (Aug. 31, 2004) (as modified by AB Report, WT/DS264/AB/R). ---. United States - Import Measures on Certain Products from the European Communities, WT/DS165/R and Add.l (Jan. 10, 2001) (as modified by Appellate Body Report WT/DS165/AB/R). ---. United States - Import Prohibition ofCertain Shrimp and Shrimp Products, WT/DS58/R and Corr.1 (Nov. 6, 1998) (as modified by AB Report WT/DS58/AB/R). ---. United States - Laws, Regulations and Methodology for Calculating Dumping Margins ("Zeroing''), WT/DS294/R (May 9, 2006) (as modified by AB Report WT/DS294/ AB/R). ---. United States - Measures Relating to Zeroing and Sunset Reviews, WT/DS322/R (Jan. 23, 2007) (as modified by AB Report WT/DS322/AB/R). ---.United States-Section 110(5) ofthe US Copyright Act, WT/DS160/R, July 27, 2000). ---. United States -Subsidies on Upland Cotton -Recourse to Article 21.5 ofthe DSU by Brazil, WT/DS267/RW and Corr.1 (June 20, 2008) (as modified by AB Report WT/DS267/AB/RW). ---. United States -Definitive Safeguard Measures on Imports ofCertain Steel Products, WT/DS248/R I WT/DS249/R I WT/DS251/R I WT/DS252/R I WT/DS253/R I WT/DS254/R I WT/DS258/R I WT/DS259/R, and Corr.1 (Dec. 10, 2003) (as modified by AB Report WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R). TREATIES AND CONVENTIONS 197 5 Vienna Convention on the Representation of States in their Relations with International Organizations of a Universal Character, Mar. 14, 1975, AICONF. 67/16, reprinted in 69 Am. J. Int'l L. 730 (not in force). 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However, due to confidentiality rules, names and ranks of interviewees cannot be disclosed. 337 South Africa United States of America 338 ANNEX 2 (LIST OF INTERVIEW QUESTIONS) 1) THEME: EXPECTATION FROM THE WHOLE SYSTEM a) Trade & Development b) Imbalance in the system i) Negotiations ii) Dispute Settlement iii) Technical Assistance c) Role ofthe Secretariat i) Member-driven? 1-a) • Do you think membership to the WTO has been beneficial to development of your country? o More specifically, do you think liberalization of trade brings development to your country? If not, what obstacles do you perceive? 1 - b) • What do you think of your country's status in the WTO as a developing/developed country? o More specifically, do you think your voice is being heard in the system? Do you still think that you are excluded from the negotiations in the Doha Round 339 o Whether have you been able to use the system and to benefit from it (negotiations, dispute settlement, or technical assistance) • What do you think about the power of developed countries in the WTO? • What do you see in the future of the Doha Round? 1-c) • What do you see the role of Secretariat? o Negotiations o Dispute settlement o Day-to-day administrative work • Do you think the WTO is a 100 percent member-driven organization? (negotiations, dispute resolution, and day-to-day administrative work) 2) THEME: PARTICIPATION IN THE SYSTEM a) Secretariat i) Number of a Member's nationals in Secretariat b) General Council, Ministerial Conference and Meetings i) Existence ofMission in Geneva (1) Number (2) Expertise (3) Active interaction with capital? ii) Frequency of attendance in meetings iii) Membership in one of the coalitions (G20 ... ) 340 iv) Technical assistance c) Adjudicatory organ i) Parties or 3rd party of a dispute ii) Expertise in Dispute Settlement System (DSS) (1) Foreign Counsel? iii) Technical assistance 2-a) • How many of your country's nationals are currently working at the WTO Secretariat? 2-b) • Do you have a mission in Geneva? If so, o Has your country put specific people in charge of WTO issues in Geneva? If so, how many persons? o How many WTO experts do you have in your mission? o How often you have interactions with your capital? Once a week? Once a month? • How often do you participate in meetings at the WTO? o What is the level of participation in different committees and working groups within the WTO? • Is your country a member of any groups or coalitions in the WTO, like the Cairns group, GlO, G20, G33 and etc.? 341 • Have you received any technical assistance pertaining to your participation in the WTO? If so how often? Please explain. 2-c) • Has your country been a party to a dispute or participated as a third party to a dispute? • Does your country have experts in bringing disputes in the WTO? If so, how many persons? (estimate) o Has your county used foreign legal counsels to represent it in WTO disputes? If so, from which law firms did your country procure legal counsel? o Have your country ever used ACWL? What were the perceived deficiencies, if any? • Have you received any technical assistance regarding how to bring disputes to the WTO? 3) THEME: EXPECTATION FROM THE DSS a) Legal Affairs/AB Secretariat i) Institutional memory? (1) Drafting issue papers (2) Limits of assistance to Panelists and AB Members ii) Large or small? iii) Technical assistance 342 (1) Consideration of specific problems of developing countries, LDCs (2) Capacity building and trainings b) Panelists and Tribunals i) Treaty interpretation (1) Broad v. narrow (2) Gap filling (procedural v. substantive) (3) Consideration ofnon WTO law (a) Jus Cogens (b) Opinio Juris (c) General principle of international law (d) Other non trade obligations c) Access to the system i) A CWL and litigation cost d) Transparency i) Internal (Members) (1) Access to documents (2) Access to meetings (3) Examination of their arguments ii) External (public) (1) Open oral hearings (2) Amicus Curiae Briefs (a) Prohibition? (b) Procedures/or submission 343 e) DSU Reform i) Professionalism (1) Expertise (2) Code of conduct ii) Procedure development (1) Establishment ofpanel (2) Sequencing (3) Remand iii) Compliance iv) Timeframe v) Alternative means ofdispute settlement (1) Consultation (2) Arbitration (3) Good offices, Conciliation 3 -a) Are you generally satisfied with the work of the DSS? • What do you see as the role of the Legal Affairs, the AB Secretariat, or the Rules Division? o Do you consider them as an institutional memory of the system? o What are the limits of assistance to panelists and the AB members, and arbitrators? 344 • Do you think the Legal Affairs, the AB Secretariat or the Rules Divisions should be enlarged, streamlined, or maintained in its current state? • What is your evaluation of the technical assistance, if any, that has been provided by Legal Affairs and AB Secretariat? (Do you think that the level of assistance provided adequately meets the needs of your country?) 3-b) • Has any of your country's nationals been a panelist or an AB member? • Do you think panelists and the AB members have exceeded their mandate? If so, please provide some examples? • Do you think that the DSS has the capacity to fill the gaps, if necessary? (procedural v. substantive) • What do think of treaty interpretation methods that have been developed within the DSS? o Do you think it is proper to have a narrower or broader interpretation? Textual v. Contextual? o Procedural v. Substantive? o Should panelists or AB members consider non-WTO laws? Jus Cogens, Opinio Juris, general principle of international law and other non-trade obligations? 3-c) • Has your country used ACWL services? • What are your proposals for facilitating access to the WTO? 345 3 -d) • Do you see the need for more transparency in the DSS? (internal & external transparency) 4 - e) DSU Reform • Do you agree with a permanent panel in the DSS? • Do you think there is a need to equip the DSS with experts (economists, environmentalists, etc.)? Who do you think should provide expertise in a dispute? (parties of a dispute or independent experts within the WTO) • Do you think there is a need for change in the code of conduct, or that panelists and the AB members should be more strictly scrutinized in terms of their background, conflict of interest, etc? • What kind proposal for procedural development has your country submitted to the WTO or supported within the WTO? 5 - e) Enforcement issues: • Do you perceive any problem regarding compliance with rulings and recommendations of the DSB? If so, what changes do you propose to improve compliance? • What changes do you propose in the timeframe of disputes? 6 - e) Alternative dispute settlement mechanisms: • Why do you think alternative dispute resolution has not been utilized more often in the WTO disputes?