In the most recent meeting of the World Trade Organization’s (“WTO”) General Council, which occurred on December 12, 2018, the United States rejected the European Union’s (“EU”) proposal to reform the WTO dispute settlement process. Although the proposal was designed to address on-going concerns of the U.S. about the WTO’s dispute settlement process, the U.S. Ambassador to the WTO, Dennis Shea, stated that it was “hard to see how {the proposal} responds to the concerns raised by the United States.”

The United States continues to believe that the WTO Appellate Body (“AB”) has failed to remain within the bounds of the its review authority under the WTO Agreements. Among other things, the United States has criticized the AB for (i) failing to circulate its reports in a timely fashion, (ii) making findings on issues of fact that are not necessary to resolve a dispute, (iii) issuing advisory opinions, (iv) treating its prior reports as binding precedent, and (v) allowing its members to participate in decisions even after their terms have expired.

Most importantly, the United States believes that the AB has often issued decisions changing the substantive rights and obligations of Members contained in the WTO Agreements. To express its objections to these practices, the United States has blocked the appointment of new members to the AB for several years, stating that it would not move forward with the appointment process until the issues endemic in the dispute settlement system are resolved.

In its proposal, the EU sought to address many of the concerns expressed by the United States. For example, the EU proposed that, after consultation with the parties involved in a dispute, the AB could issue its reports after the 90-day limit provided by the WTO’s Dispute Settlement Understanding (“DSU”). The EU also proposed that the AB be allowed to address “the issues raised on appeal by the parties to the dispute to the extent … necessary for the resolution of the dispute.” Additionally, with respect to the precedential nature of AB decisions, the EU recommended that WTO members meet with the AB to discuss the adoption of particular reports, thereby keeping open a “channel of communication” about the jurisprudence developed by the AB. Lastly, the EU proposed that outgoing AB members be permitted to complete appeals pending at the end of their tenure.

In its December 12 rejection of the EU’s proposal, the United States explained that, rather than resolving the issues raised by the United States, the proposal simply seems to affirm their validity. Accordingly, Ambassador Shea reacted to the proposal by suggesting that, instead of amending the DSU “to permit what is now prohibited,” WTO Members formally discuss the concerns raised by the United States “to ensure that the system adheres to WTO rules as written.” Other Members have pushed back, though, noting that the United States has not come forward with its own thoughts on how to improve the system.