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C.3.1 Articles 3.2 and 11 of the DSU
— Function of panels and the Appellate Body
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C.3.1.1 US — Certain EC Products,
para. 92
(WT/DS165/AB/R)
… we observe that it is certainly not the task of either panels
or the Appellate Body to amend the DSU or to adopt interpretations
within the meaning of Article IX:2 of the WTO Agreement. Only WTO
Members have the authority to amend the DSU or to adopt such
interpretations. Pursuant to Article 3.2 of the DSU, the task of panels
and the Appellate Body in the dispute settlement system of the WTO 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” (emphasis added). Determining what the rules
and procedures of the DSU ought to be is not our responsibility nor the
responsibility of panels; it is clearly the responsibility solely of the
Members of the WTO.
C.3.1.2 Mexico — Taxes on Soft Drinks,
para. 78
(WT/DS308/AB/R)
… Mexico’s interpretation would imply that, in order to resolve
the case, WTO panels and the Appellate Body would have to assume that
there is a violation of the relevant international agreement (such as
the NAFTA) by the complaining party, or they would have to assess
whether the relevant international agreement has been violated. WTO
panels and the Appellate Body would thus become adjudicators of non-WTO
disputes. As we noted earlier, this is not the function of panels and
the Appellate Body as intended by the DSU.
C.3.1.3 US — Stainless Steel (Mexico), paras. 156-158, 160-162
(WT/DS344/AB/R)
… the second sentence of Article 11 begins with the term “Accordingly”.
This term creates a link between the first and the second sentence of
Article 11; it ties the second sentence to the general description
contained in the first sentence. The second sentence enunciates two
specific “functions” of panels, namely, the duty “to make an
objective assessment of the matter before it” and “to make such
other findings as will assist the DSB in making the recommendations or
in giving the rulings” under the covered agreements.
We consider the meaning of “[t]he function of panels” in the
first sentence of Article 11 is informed by the general provisions
contained in Article 3 of the DSU, which sets out the basic principles
of the WTO dispute settlement system. Article 3.2 provides that “[t]he
dispute settlement system of the WTO is a central element in providing
security and predictability to the multilateral trading system”; 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 international law”.
It is well settled that Appellate Body reports are not binding,
except with respect to resolving the particular dispute between the
parties. This, however, does not mean that subsequent panels are free to
disregard the legal interpretations and the ratio decidendi contained
in previous Appellate Body reports that have been adopted by the DSB. …
…
Dispute settlement practice demonstrates that WTO Members attach
significance to reasoning provided in previous panel and Appellate Body
reports. Adopted panel and Appellate Body reports are often cited by
parties in support of legal arguments in dispute settlement proceedings,
and are relied upon by panels and the Appellate Body in subsequent
disputes. In addition, when enacting or modifying laws and national
regulations pertaining to international trade matters, WTO Members take
into account the legal interpretation of the covered agreements
developed in adopted panel and Appellate Body reports. Thus, the legal
interpretation embodied in adopted panel and Appellate Body reports
becomes part and parcel of the acquis of the WTO dispute settlement system. Ensuring “security and
predictability” in the dispute settlement system, as contemplated in
Article 3.2 of the DSU, implies that, absent cogent reasons, an
adjudicatory body will resolve the same legal question in the same way
in a subsequent case.
In the hierarchical structure contemplated in the DSU, panels and the
Appellate Body have distinct roles to play. In order to strengthen
dispute settlement in the multilateral trading system, the Uruguay Round
established the Appellate Body as a standing body. Pursuant to Article
17.6 of the DSU, the Appellate Body is vested with the authority to
review “issues of law covered in the panel report and legal
interpretations developed by the panel”. Accordingly, Article 17.13
provides that the Appellate Body may “uphold, modify or reverse” the
legal findings and conclusions of panels. The creation of the Appellate
Body 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 Appellate Body 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. While the
application of a provision may be regarded as confined to the context in
which it takes place, the relevance of clarification contained in
adopted Appellate Body reports is not limited to the application of a
particular provision in a specific case.
We are deeply concerned about the Panel’s decision to depart from
well-established Appellate Body jurisprudence clarifying the
interpretation of the same legal issues. The Panel’s approach has
serious implications for the proper functioning of the WTO dispute
settlement system, as explained above. Nevertheless, we consider that
the Panel’s failure flowed, in essence, from its misguided
understanding of the legal provisions at issue. Since we have corrected
the Panel’s erroneous legal interpretation and have reversed all of
the Panel’s findings and conclusions that have been appealed, we do
not, in this case, make an additional finding that the Panel also failed
to discharge its duties under Article 11 of the DSU.
C.3.1.4 US — Continued Zeroing,
para. 365
(WT/DS350/AB/R)
The Panel engaged in circuitous reasoning and it is not clear whether
the Panel in fact found that it could invoke cogent reasons to depart
from previous Appellate Body rulings on the same legal issue. The
statement of the Panel that it “is important for a panel to have
cogent reasons for any decision it reaches”, regardless of “whether
or not the panel follows such reports”, is ambiguous. Ultimately, the
Panel in this case did follow previous Appellate Body reports. In the
light thereof, the Panel does appear to have acceded to the hierarchical
structure contemplated in the DSU. …
C.3.1.5 China — Publications and Audiovisual Products, paras.
213, 215
(WT/DS363/AB/R)
We observe that reliance upon an assumption arguendo is a
legal technique that an adjudicator may use in order to enhance
simplicity and efficiency in decision-making. Although panels and the
Appellate Body 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. The purpose of WTO dispute settlement
is to resolve disputes in a manner that preserves the rights and
obligations of WTO Members and clarifies existing provisions of the
covered agreements in accordance with the customary rules of
interpretation of public international law. In doing so, panels and the
Appellate Body are not bound to favour the most expedient approach or
that suggested by one or more of the parties to the dispute. Rather,
panels and the Appellate Body must adopt an analytical methodology or
structure appropriate for resolution of the matters before them, and
which enables them to make an objective assessment of the relevant
matters and make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in the covered
agreements.
…
In our view, assuming arguendo that China can invoke Article
XX(a) could be at odds with the objective of promoting security and
predictability through dispute settlement, and may not assist in the
resolution of this dispute, in particular because such an approach risks
creating uncertainty with respect to China’s implementation
obligations. We note that the question of whether the introductory
clause of paragraph 5.1 allows China to assert a defence under Article
XX(a) is an issue of legal interpretation falling within the scope of
Article 17.6 of the DSU. For these reasons, we have decided to examine
this issue ourselves.
C.3.2 Articles 3.2 and 19.2 of the DSU — “not add to or diminish
rights and obligations”. See also Terms of Reference of
Panels, Specific measure at issue (T.6.3)
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C.3.2.1 US — Wool Shirts and Blouses, p. 19, DSR 1997:I, p. 323
at 340
(WT/DS33/AB/R, WT/DS33/AB/R/Corr.1)
… 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 Appellate Body 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.
C.3.2.2 Chile — Alcoholic Beverages,
para. 79
(WT/DS87/AB/R, WT/DS110/AB/R)
… In this dispute, while we have rejected certain of the factors
relied upon by the Panel, we have found that the Panel’s legal
conclusions are not tainted by any reversible error of law. In these
circumstances, we do not consider that the Panel has added to the rights
or obligations of any Member of the WTO. Moreover, we have difficulty in
envisaging circumstances in which a panel could add to the rights and
obligations of a Member of the WTO if its conclusions reflected a
correct interpretation and application of provisions of the covered
agreements. Chile’s appeal under Articles 3.2 and 19.2 of the DSU
must, therefore, be denied.
C.3.2.3 Mexico — Taxes on Soft Drinks,
para. 53
(WT/DS308/AB/R)
A decision by a panel to decline to exercise validly established
jurisdiction would seem to “diminish” the right of a complaining
Member to “seek the redress of a violation of obligations” within
the meaning of Article 23 of the DSU, and to bring a dispute pursuant to
Article 3.3 of the DSU. This would not be consistent with a panel’s
obligations under Articles 3.2 and 19.2 of the DSU. We see no reason,
therefore, to disagree with the Panel’s statement that a WTO panel “would
seem … not to be in a position to choose freely whether or not to
exercise its jurisdiction”.
C.3.2.4 Mexico — Taxes on Soft Drinks,
para. 56
(WT/DS308/AB/R)
… We see no basis in the DSU for panels and the Appellate Body to
adjudicate non-WTO disputes. Article 3.2 of the DSU states that the WTO
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” (emphasis
added). Accepting Mexico’s interpretation would imply that the WTO
dispute settlement system could be used to determine rights and
obligations outside the covered agreements. …
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