Since the inception of World Trade Organization, there has been a paradigm shift from the standard political-diplomatic settlement which was there under General Agreement on Tariffs and Trade also known as GATT to a standard legalized dispute settlement under WTO. Judicial Law Making which we see today under WTO is completely different sometimes unrecognizable from what we had under GATT. Previously under the GATT Model, a dispute settlement panel report would be only binding if it is adopted by the GATT members including the losing party. Whereas, under the WTO Model a report is spontaneously adopted unless WTO Members including the parties in dispute decide by consensus to go against it. Some cautions that legalized approach is too cumbersome in certain political scenarios1 whereas many in favor state the prospective to oblige more influential WTO members from enchanting in unilateral conduct.2
Though GATT dispute settlement system went through various changes over the progression of time, its sole purpose remained to enable a settlement which is diplomatic in nature between the two parties.3 Whereas presently under WTO, the judicial law-making is way more legalized and adjudicative which relies extensively on the rules stated under the Vienna Convention on the Law of Treaties and also the principles of public international law which are the cornerstones to every WTO Instruments.
Law Making Under GATT: Before the Creation of WTO
To be fair, GATT was always intended to be one element of a bigger and better institutional structure. In the 1947 GATT there were no prearrangement for prescribed judicial dispute settlement process nor there was any express provision for resort to the International Court of Justice in resolving such disagreements.4 This was primarily because diplomatic methods of consultation were the means of solving any disputes. GATT Article XXII gave the right to consult where complaints were made by one Party to another. This could be related to anything which affects the smooth running of the agreement. Article XXIII talked about investigation, recommendations and ruling by the parties which is all the members of the GATT Council in a situation where the party thought that a benefit under GATT was invalidated and annulled. Third party adjudication came into picture much later for the first time when Chile came up with complaint about the practices of Australia with respect of fertilizer subsidiary in 1949.5 A Working party was founded, and the report prepared by the neutral nations of the working party was recognized even after there was an opposition from Australian delegates. But the main problem at that time was that reports which were issued by the working groups were treated as a mere recommendation and not as a court like judgment.6 The failure of the dispute settlement can be seen from the fact that only six complaints came in during the 1960s and no dispute came up during 1963 to 1970. Though in the 1970s there would be a revival of the use of panel procedures but that was largely as a result of new aggressive policy of the USA.7 I strongly believe this happened because of increased dominance of the developed countries in the WTO regime. As disputes were settled diplomatically and not by legality, the developing countries couldn’t find a voice to protect its rights and interests under GATT.
Then came the Tokyo Rounds which were successful in a sense as USA did accomplish a significant codification of existing practice and a renewed commitment from GATT countries to use the Dispute resolution mechanism provided.8 Moreover, in some of the subsidiary codes which were talked during this round set up a deadline for dispute settlement and also made it a right to resort to such settlement mechanisms.9
Conclusively, in the Uruguay Round, an all-inclusive agreement on dispute settlement methods were attained, embracing the establishment of an Appellate body.
Notes on Law Making Mechanism Under GATT
To truly realize what changes WTO brought in, it is important for us to comment on the success and failures of GATT Dispute settlement mechanism. At the end it all boils down to the battle between legalism and diplomacy. While some economics particularly the USA, backed legalism, while a lot of important voices chose diplomatic flexibility.Those in favor of legalism were in favor of time limits in panel processes, sufficient reasons given for a ruling and most importantly, the adaptation of a ruling should not depend on the consensus of all the contracting parties. Whereas, those who vouched for diplomatic flexibility talked about how trade agreements at the end of the day should not be considered anything except it is political in nature and even and the need of exceptions where a contracting state can consider an outcome of the report illegitimate. I strongly disagree with both the notions as I strongly feel the key was to balance between the two sides rather than picking one.
Thus, without doubt GATT was not without its limitations especially pertaining to dispute resolutions. The DSU which was discussed10 in the Uruguay Rounds echo a response to many criticisms of the GATT Dispute Settlement process. This criticism where:11
1. “Delay and uncertainty in the process, given the absence of a right to a panel and the absence of the hard time limits on consultations, responses to requests for panels, and panels proceedings and rulings.
2. An absence of legal rigor and clarity in the panels finings.
3. The uncertainty of a panel ruling based adopted, given the consensus rule for adoption.
4. Delay in and partial or non-complete compliance with panel rulings.”12
Though GATT had its fair share of short comings. I strongly believe that GATT has relatively proved successful in some ways. On an average, it took about two years to resolve a dispute from a time a complaint was lodged. Exception to that being just 10 cases over the span of almost four decades. One Research finds successful compliance rate at 88%.13 Other important trends were that there was an explosion of complaints in the 1980s more than half of all GATT complaints were brought in the last of the four decades of GATT history which shows that member states were starting to have faith in the diplomatic dispute solving mechanism GATT presented them with.
Judicial Law Making at the WTO
Politically speaking the intended function of WTO Dispute Settlement mechanism was to make sure that rules agreed upon in Uruguay are implemented even if those rules had gap in them and not completely efficient. One problem which the members faced was the risk of losing out their rights thus to make sure that WTO dispute Settlement mechanism can’t do that, a provision was added which stated that the Appellate Body cannot add or lessen the rights given under the various agreements. 14
Moving from the diplomatic stance GATT Dispute Settlement mechanism held, WTO judicial law making has evolved into two dimensions which are mainly filling gaps and illuminating ambiguities.15 One thing is for certain that substantial judicial law-making is taking place at the WTO.
A. Filling Gaps.
DSU’s silence has given the Appellate Body ample opportunities to make procedural rules and some of this rule even has filled gaps which were reasons for disagreement among members previously. One of the first cases were such instance was seen was United States Import Prohibition of Certain Shrimp and Shrimp products.16 In this case, the appellate body categorically stated that the panel has the right to deliberate amicus curiae briefs presented by non-state actors by construing Article 13 of DSU which conditions that a panel may pursue information and procedural advice from any individual or figure it deems proper.
In another case. European Communities- Regime for the Importation, Sale and Distribution of Bananas,17 the appellate body stated that private lawyers can represent states in oral proceedings. The body went ahead, and non-government lawyers could represent even in panel stage from just the oral proceedings after the decision of Indonesia-certain measures affecting the automobile industry.18 Thus I strongly believe that WTO with its judicial law-making capabilities have tried to slowly liberalize the trade process by eliminating restrictions as much as it could.
B. Sorting Out Ambiguity
It is quite common for the WTO Appellate Body to give meaning to ambiguous terms in a treaty. In one instance of US- Shrimp/Turtle I Case. The main issue was whether US could rely on GATT Article XX(g) to ban the importation of certain shrimps from certain countries which does not follow the right method for protecting endangered sea turtles while fishing the shrimps. The body stated that the exceptions could be invoked but it should be read with “in the light of contemporary concerns of the community of nations about the protection and conservation of the environment “.19 However, I believe that in this case the judicial law making overstepped a bit as it not only created exceptions but also talked about contemporary concerns which are ever changing, thus opening a Pandora’s box which member states never previously discussed about.
But appellate body has not always interpreted something dynamically. Sometimes the body has come out with a precise meaning to a language that was intentionally left vague while drafting. In the decisions of United States-Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea,20 United States- Safeguard Measures on Imports of Fresh Chilled or Frozen Lamb Meat from New Zealand and Australia21 and United States-Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities,22 the Body stated that Causation analysis needs to be used in cases related to safeguard. The Appellate Body relied on the obligation not to attribute injury from other causes to imports that were the subject of an investigation relating to safeguard. The body ruled out that it is a requirement that national authorities analyze not only the nature but also the extent of the other causes.23
Advantages of Judicial Law Making Under WTO
Though it is very difficult to do a quantitative comparison between Judicial Lawmaking under WTO and Diplomatic compromise under GATT, there is no doubt that lawmaking has expanded under WTO manifold than under GATT. WTO disposes approximately twenty-five dispositive dispute settlement reports per year whereas there were merely eight adopted pane reports every year under the GATT regime.
Though WTO has its problems, the judicial law making has produced a vast jurisprudential acquis. Other than the sharp number of disputes that the states have submitted to the dispute settlement,24 there has been lack of occasions where a state upon loosing has expressly chosen not to follow through it. The most important components of WTO judicial law making was compulsory jurisdiction, automatically binding rules, sanctions for non-compliance and an Appellate Body. Moreover, the Appellate body would provide a protection against the rare wrong decision made by the ad hoc panel. The kind of verdicts which under the GATT were considered as a wrong.25
The new modified way of Judicial Law Making made the Appellate Body looked like an independent, semi-autonomous judicial division of the WTO Organization. The appellate Body through its judicial Law making has shown a number of times its independence from the WTO Institution, some of these ways were:
1. “Retaining normative standards and legal principles and sources from outer the domain of GATT/WTO law, discrete to and sometimes in tension with GATT ‘collective wisdom’.
2. Substituting the teleological and practical understanding specific of GATT panels in the deal of trade-liberalizing goals with textualism and formalism that abstract from the context of the WTO as an institution and the liberalizing goals of the multilateral trading system.
3. Developing a doctrine of implicit judicial powers, including to fill gaps (the decisions to allow amicus curiae briefs);
4. Shouting with a megaphone that the Appellate Body will afford no particular deference or even respectful consideration to decisions of the panel under appeal.
5. Rejecting a notion of institutional balance that would require some deference to political/diplomatic rule-making processes of the WTO.
6. Emphasizing the precedential weight of the Appellate Body’s own decisions relative even to past adopted decisions of GATT panels;
7. Giving itself a sort of remand authority (completing the analysis) that allows the Appellate Body to illustrate how its correction of the panel’s legal interpretation is to be applied to the facts of the dispute;
8. Allowing argumentation of cases by private legal counsel unaffiliated with trade officialdom and
9. Emphasizing consensus rulings by each division of the Appellate Body and collegiality Thus, the Appellate Body would appear to speak with a single voice in contrast to the political and diplomatic divisiveness within the ‘institution’.”26
Statistics show that that judicial law making has been a success. The large number of cases in which parties has initiated the dispute settlement system proves that the Member states have faith in the judicial law making of the WTO. Not only the law making contributed in settling disputes but also served to provide clarification of the rights and obligations contained in the various agreements. Though many cases do not go through the entire process is to some extent a positive sign. I feel that to adjudicate how successful the judicial law making has been depend on the benchmark one applies. If one compares with previous system of GATT, the contemporary scheme has been far more successful. Due to its quasi automatic and quasi-judicial characteristics it can effectively handle more complex cases. Thus, members get more chance to defend their rights. The judicial Law making of WTO is certainly unique compared with other systems of dispute resolution in international law because of its compulsory nature and the mechanism by which it is enforced and thus it stands out from the rest. 27
Disadvantages of Judicial Law Making Under WTO
This Article doesn’t just mean to talk just about the effectiveness of the appellate body as I hold serious concerns on how effective and legitimate it really is. Lot of scholar compliments28 the sheer number of disputes filed but they fail to analyze that this numbers don’t give us an estimate on how many violations took place including those which weren’t even filed. And the numbers are even holding down. If the average of last 20 years are taken, in the first 10 years 324 consultation request whereas in the last 10 years only 164 consultation requests have been filed. Moreover, statistics indicate that nearly one third of WTO members never really filed a single dispute.
Similarly rate of compliance may be high to the rulings but as one of the scholars stated, “a low-aiming court, issuing in minimalist remedies, may generate a high level of compliance but have little impact on the state of the world.”29 Moreover, according to my research there are tons of repeat cases around trade remedies and non-discrimination to seemingly make things more complicated.
Though many scholars have framed the WTO agreement as neo-liberal trade agenda, it actually is far more balanced than that as the Judicial Law-making aspect of the Appellate Body still holds the diplomatic tone towards the disputes. The Appellate Body rather than moving away from that outlook has tried to reflect and respond to these views which was never the intention a of judicial law-making mechanism.30 Moreover, I strongly feel the Appellate Body sometimes is partial to certain notions which includes trade remedies. How much sensitive the trade remedies may be for London, New Delhi or Washington DC, it has always been looked down up as protectionist in Geneva.
Another major disadvantage of the appellate body is that the members have generally a governmental background and just a very limited judicial experience. I strongly believe that this effect the judicial law-making potential of the body as not only they relevant experience but also because they could me mere puppets of their governments and it is very difficult for a government official to be unbiased towards his government. Because of all these issues, it blockades the effectiveness of an efficient judicial law-making mechanism.31
Some state that, a greater substantive clarity in WTO agreements are required and for that there is a requirement of an explicitly restrained and deferential standard of reviews in more of the WTO Agreements. I strongly feel that such modifications would contradict the principle that legislation should always contain gaps and ambiguities.32
Critics have proposed a lot of changes so that the judicial law-making is stopped or at least modified. Some suggest to going back to political-diplomatic approach of the GATT System to replacing the negative consensus rule with a rule that would permit a majority or one third members the right to block the adaptation. I strongly feel that this solution goes beyond a mere check or balance against the judicial body. This may further promote trade blocs which we definitely don’t want.
The current State of judicial law making practiced by the Applicant body is if not almost absolute, is significant and the judicial law making has become more expansive than originally intended by most of the negotiators. Still there are concerns on how long it will remain this way the current members are selected through a process where members may veto any candidate they feel may engage in unappropriated law making. This law in itself is the sole reason why the body has less number of members. Thus, I strongly feel that the Appellate Body is in danger of getting destroyed from within. If the selected members rewrite DSU rules or make exceptions to rules which promote protectionism, then the entire foundation of the WTO would be damaged beyond repair.
I believe that the appellate body should give greater consideration to object and purpose while fulfilling its judicial law-making functions so that it can understand why a gap was there and whether it is deliberately left vague. This is important because if all the gaps are fulfilled by WTO and there is no space left for modifications, it would become one stringent law which would go against the very balance which the WTO seeks to achieve. I believe the solution lies if the WTO Agreement is not treated as a medium of liberalizing the trade but as a contract which is trying to balance the rights of both the parties.
I also believe that one major reason why judicial law making in WTO faces such hard-political constraint is because of EC-US Cooperation. Despite growth of WTO memberships, the share of market of EC-US is the highest. And thus, there is always political pressure from this bloc from not coming out with rules which could hamper the economy of this bloc. This is evident to me from several cases in which EC or US were respondents, the Appellate body avoided issues which could create a political situation. In US-Shrimp/ Turtle case could have put a limitation on the scope of GATT XX(g) but didn’t even raise the question. The body had even embraced the principle of judicial economy33 thereby brining in a limitation to the scope of judicial law making and the potential of negative political reactions.
Thus, according to me, even though the Appellate body continue to use its judicial law-making potential to advance liberalization by dynamically interpreting the Agreements of WTO, it cannot use its law making to adversely shift the balance of rights against the interests of the powerful states or blocs. This political constrains are working as shackles to the Judicial law-making potential of the Appellate Body to make trade more liberalized and accessible to the entire in world in a truer sense.
1 Judith Goldstein & Lisa L. Martin, Legalization, Trade Liberalization, and Domestic Politics: A Cautionary Note, 54 INT’L ORG. 603, 603-32 (2000)
2 John H. Jackson, Restricting The GATT System ,56-80 (1990);
3 Robert E. Hudec, GATT Dispute Settlement After the Tokyo Round: An Unfinished Business,13 CORNELLINT’L L.J. 145 (1980)
4 Keck and Mithouard 1993 E.C.R. I– 6097.
5 The Australian subsidy on ammonium sulphate; Report adopted by the CONTRACTING PARTIES on 3 April 1950 (GATT/CP.4/39) II/188
6 J.H. Bello and A.F. Holmer, ‘Settling Disputes in the GATT: The Past, Present, and Future’ (1990) 24 The International Lawyer 519 at 521.
7 United States, International Trade Commission, Review of the Effectiveness of Trade Dispute Settlement under the GATT and the Tokyo Round Agreements (Washington, DC: USITC, 1985) at p 23.
8 The ‘codification’ is the Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance adopted on 28 November 1979, BISD 26S/210 1979 Understanding.
9 Supra Note 6 on p. 29.
10 1989 Dispute Settlement Procedures Improvements, BISD 36S/61.
11 Michael Trebilcock,, Robert Howse, , and Antonia Eliason, “The Regulation of International Trade: 4th Edition,” 2012 p 176.
12 Supra Note 6 pp. 69 and 79.
13 R.E. Hudec, Enforcing International Trade Law: The Evolution of the Modern GATT Legal System (Salem, NH: Butterworth, 1993).
14 WTO Agreement, Annex 2, in THE LEGAL TEXTS Understanding on Rules and Procedures Governing the Settlement of Disputes, Apr. 15, 1994, Arts. 3.2, 19.2
15 Richard H. Steinberg, Judicial Law making at the WTO: Discursive, Constitutional, and Political Constraints; Article in The American Journal of International Law · June 2004; at p. 251
16 United States-Import Prohibition of Certain Shrimp and Shrimp Products, IO Doc. WT/DS58/AB/R (adopted Nov. 6, 1998), reprinted in 38 ILM 118 (1999)
17 European Communities-Regime for the Importation, Sale and Distribution of Bananas, WTO Doc. WT/DS27/ AB/R, paras. 5-10 (adopted Sept. 25, 1997), excerpted in 37 ILM 243 (1998)
18 Indonesia-Certain Measures Affecting the Automobile Industry, WTO Doc. WT/DS54/R, paras. 4.1-4.35
(adopted July 23, 1998)
19 Supra note 17 on para. 129.
20 WTO Doc. WT/DS202/AB/R (adopted Mar. 8, 2002)
21 WTO Doc. WT/DS177/AB/R (adopted May 16,2001)
22 WTO Doc. WT/DS166/AB/R (adopted Jan. 19, 2001)
23 Supra Note 22 on para. 185.
24 P.C. Mavroidis, Dispute Settlement in the WTO: Mind over Matter (2016) (manuscript on file at European University Institute (EUI), Florence).
25 Van den Bossche, ‘From Afterthought to Centrepiece: The Appellate Body and Its Rise to Prominence in the World Trading System
26 Robert Howse , The World Trade Organization 20 Years On: Global Governance by Judiciary, European Journal of International Law, Volume 27, Issue 1, 1 February 2016, Pages 9–77
27 World Trade Organization, Evaluation of the WTO dispute settlement system: results to date; Strengths and weakness.
28 M. Elsig, B. Hoekman and J. Pauwelyn, Thinking about the Performance of the WTO: A Discussion Across Disciplines, EUI Working Paper RCAS 2016/13 (2016), at 10.
29 Shany, ‘Assessing the Effectiveness of International Courts: A Goal-Based Approach’, 106 American Journal of International Law (AJIL) (2012) 225, at 227.
30 Pauwelyn, ‘The Dog That Barked But Didn’t Bite: Fifteen Years of Intellectual Property Disputes at the WTO’, 1 Journal of International Dispute Settlement (2010) 389.
31 Howse, ‘The World Trade Organization 20 Years On: Global Governance by Judiciary’, 27 European Journal of International Law (2016) 9.
32 Hersch Lauterpacht, The Development of International Law by the International Corut 155 (1982).
33 United States-Measures Affecting Imports of Woven Shirts and Blouses from India, X’JO Doc.WT/DS33/AB/R, pt. VI (adopted May 23, 1997).