EU trade latest, United States & TTIP, WTO & Plurilaterals, WTO disputes

Insight: Will US ‘light another fire’ over Servansing’s bid for second Appellate Body term?

Shree Baboo Chekitan Servansing will tell the World Trade Organization’s Dispute Settlement Body on Monday that he wants a second term on the Appellate Body, Borderlex has learned. Now the big question: Will the US, which has blocked efforts to fill vacant seats on the WTO’s top court for almost a year, stand in his way?

 

Servansing, 63, is one of only four remaining judges on the seven-member body. The Mauritian’s first term expires on 30 September, and his decision to seek a second term is a sort of litmus test to determine just how far the US will go in what many see as an effort to derail the WTO’s dispute settlement system.

 

No one seems to know just what to do to persuade the Trump administration to stop jamming the process to fill the three empty seats because, as one senior official told Borderlex, “the Americans are not being very lucid about what they want and what exactly it is that they will settle for. They have pointed to their grievances, but not laid out in any meaningful way what exactly are the changes they are looking for”.

 

But when it comes to Servansing’s eventual reappointment to another four-year term, some sources in Geneva are guardedly optimistic. They hope Washington will differentiate the two issues and not cause the appeals process to grind to a halt. If Servansing were booted from the Appellate Body, that would leave just three judges – the number needed to hear an appeal – and the system would break down if any of those remaining judges recused himself or herself for any legal reason.

 

“The question of reappointment is a sort of mechanical one – it’s different than selecting new people,” one legal expert said. “If it goes down to three, and for some reason one of the three is unable to serve on a panel, there will be a situation where appeals can’t be dealt with. Do you really want to precipitate this situation by taking it down to three? If you do, the rest of the world will know where you stand.”

 

US needs a place for its own appeals

 

Beyond that, there is a self-serving interest for Washington to keep the Appellate Body up and running: it has several appeals of its own in the pipeline. Indeed, 14 of the 17 trade complaints lodged at the WTO since late September involve the US either as a complainant or a respondent. The US is a party to all nine WTO complaints filed the last three months – including one lodged yesterday by India over steel and aluminium duties.

 

“The US is also filing appeals, so that suggests it has an interest in having those appeals heard,” the legal expert said. “If its own appeals can’t be heard, that would be a problem for the US. While the big fire burns, don’t light another fire. That is the message being given to the US.”

 

Whether the US is open to that message remains unclear, though. President Donald Trump’s animosity towards the WTO generally and the Appellate Body in particular is widely known. His envoy in Geneva, Dennis Shea, has a very limited mandate and isn’t empowered to discuss solutions. Rather, his job seems to be parroting Washington’s oft-stated grievances about the WTO, stressing to fellow ambassadors earlier this month that the US “is not content to be complacent about this institution”.

 

Obama was no fan of Appellate Body

 

US disgruntlement with the Appellate Body didn’t start with the Trump administration – and a block of Servansing’s second term wouldn’t be the first time the US took such a step.

 

The Obama administration prevented the reappointment of American Jennifer Hillman in 2011, presumably because it felt her rulings weren’t sufficiently pro-US. The administration repeated the move five years later, when South Korea’s Seung Wha Chang was up for a second term. The US trade representative’s office objected to Chang’s role in a series of decisions with which Washington disagreed. Although appeals judges issue rulings as a collective three-person panel, the US accused Chang of making “wrong” decisions and overstepping his authority.

 

The wider issue of how to get the US on board to begin filling vacant Appellate Body seats seems so entrenched that some in Geneva wonder if there is an eventual way out that doesn’t involve bypassing the court.

 

WTO chief Roberto Azevêdo made no headway during talks in Washington with US trade representative Robert Lighthizer last October and returned to Geneva “deeply disappointed”. And Appellate Body Chairman Ujal Singh Bhatia said in a 3 May speech that he had discussed the situation with “a number of delegations that make frequent use of WTO dispute settlement” and found that none backed the US position.

 

“The vast majority of my interlocutors, while expressing deep concern about the current situation, reaffirmed their desire to preserve the system in its current configuration,” Bhatia said.

 

Washington aside, there is little appetite in Geneva to engage in systemic discussions. “The position of the rest of the world is that if it ain’t broke, don’t fix it”, Borderlex was told. “No one seems to be blinking or reaching for any quickfire solutions. If you open that can of worms, others will come in with different demands and the whole thing will unravel. The message they are conveying collectively is ‘let’s not hurry up on this.’”

 

Negative reaction would send ‘political message’

 

The issue of Servansing’s reappointment is a bit more pressing. Even if the US doesn’t speak out at the DSB meeting on Monday, it may insist on meeting with the Mauritian. WTO members rejected calls for such meetings in the past and instead, came up with a process whereby the Appellate Body member seeking reappointment would make a statement at a special DSB meeting and answer questions subject to agreed ground rules. Questions about specific disputes were off limits, for instance.

 

This process was used when Bhatia and fellow judge Thomas Graham were reappointed to second terms in December 2015. It’s not clear whether the procedure remains valid today, however.

 

The way Washington reacts to Servansing’s bid for a second term will signal whether WTO members need to look at options that don’t include the US.

 

Governments have made it crystal clear that they want to keep the US in the system. But if the Trump administration moves to prevent Servansing’s reappointment, “a political message would have been passed to the rest of the world that it may not be possible to deal with the US”, a source told Borderlex. “That would spur other members to explore other options more seriously”, such as recourse to Article 25 of the Dispute Settlement Understanding.

 

Article 25 enables parties to a dispute to agree on the procedures, including the selection of the arbitrators, and results in a judgement that is as enforceable as one that is adopted through the Appellate Body.

 

This option certainly wouldn’t sit well with Trump, as it falls outside the DSB and defeats Washington’s purpose in blocking the selection process. The bigger question would then be how to deal with the many disputes that involve the US.

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