The Role of Precedent at the WTO

The Role of Precedent at the WTO

Earlier this week the WTO Appellate Body clarified the role of legal precedent in WTO jurisprudence. The background to the discussion was a WTO panel’s refusal to follow a previous Appellate Body decision because the panel viewed the previous Appellate Body decision as failing to accord proper deference to permissible Member State interpretations. The details of the panel decision are here. I have written about judicial overreaching by the WTO Appellate Body and basically agreed with the lower panel’s legal reasoning on deference to permissible interpretations of Member States in the AD/CVD context.

Well, the Appellate Body in Stainless Steel (Mexico) did not take kindly to the panel’s refusal to follow the previous Appellate Body report and issued the following smack down:

158. 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….

160. 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 … implies that, absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case.

161. In the hierarchical structure contemplated in the DSU, panels and the Appellate Body have distinct roles to play…. 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….

162. 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 ….

Did you catch all of that? WTO Appellate Body decisions are not binding, but they must be followed. Unless, that is, there are cogent reasons not to follow them. But then if you don’t follow them because you think you do have cogent reasons (i.e., the standard of review in the treaty was ignored by the previous Appellate Body report), then the Appellate Body will be deeply concerned.

The role of precedent has always been difficult with respect to international courts and tribunals. But I read the Appellate Body in Stainless Steel (Mexico) as essentially requiring panels to follow Appellate Body decisions and treat them as legal precedent. You can’t call it legal precedent, but it is. As one anonymous commenter put it in this post, the message from the Appellate Body to panels is the following:

You really, really should follow prior Appellate Body decisions. It would be quite bad for the system if you do not. But if you’ve got what you think are compelling reasons for not doing so, we understand if you feel you have to go your own way. Bearing in mind, of course, that if you do, we will almost certainly reverse you on appeal. You may think your reasons are pretty good, but if they were really that persuasive we would have gone that way ourselves, hence they are not, in fact, “cogent”.

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Devon Whittle

Why is it that it is so politically unfeasible for the AB to tell the Panel that it has to follow their decisions? I understand the whole “General Council has exclusive rights to interpretation” and that the DSB can’t add to or diminish Member rights, but don’t all Members (as the AB said) rely on past decisions as a guide to future practice/current law?

Is there any evidence that any Member would baulk at the possibility of precedent?

Vlad Perju

I agree with you. My post is a little tongue-in-cheek. Obviously the principal role of the Appellate Body in the WTO dispute settlement process is to secure uniformity in interpretation of laws. I find it curious that the WTO Appellate Body is not willing to call itself a court and is unwilling to call its decisions “precedent.” So instead we have “Appellate Body Members” who render “reports” that “are not binding” but must be followed.