By Brian Soiset.

The Trump administration’s critiques of the global trading system in many ways mark a break with decades of the United States’ (“U.S.”) trade policy, which had encouraged trade liberalization and the development of rules-based institutions.  In one respect, however, its policies have been more a continuation (albeit escalation): critiquing the World Trade Organization’s (“WTO”) Dispute Settlement Body (“DSB”).  The DSB acts as the WTO’s judicial body, ruling on disputes between members that arise under WTO agreements.  The DSB is similar to a court system, with mechanisms ranging from arbitration to more formalized hearings and appeals.  Because the WTO can authorize retaliation against members who do not comply with decisions of the DSB, its decisions are regarded as binding.

U.S. political leaders, however, have come to regard the DSB as biased and prone to rule against the U.S.  Such frustration has emerged from a number of DSB decisions that have invalidated U.S. trade policies. The frustration has been bipartisan, with the Bush administration publicly criticizing DSB decisions as being “devoid of legal merit” and the Obama administration blocking the appointment of panelists to the DSB’s Appellate Body.  Robert Lighthizer, the current U.S. Trade Representative, may be one of the more vociferous DSB critics, yet his positions found bipartisan support even before the U.S.’ recent turn against trade liberalization.  These tensions have reached a boiling point:  the U.S. has blocked the appointment of further panelists to the DSB’s Appellate Body and threatened to withdraw from the WTO if the DSB does not “shape up.”  Notwithstanding that the U.S. was the primary proponent for creating a binding and rules-based dispute settlement system for trade, it may now take the lead in deconstructing this system.

At this critical juncture, a new perspective on U.S. critiques of the DSB is necessary.  Most scholarship on this issue has focused on the percentage of decisions lost by the U.S. versus those of other states, which shows that the U.S. faces a similar percentage of adverse decisions as other WTO members.  Nonetheless, such analysis does not address the more particularized grievances of the U.S., which concern specific decisions of the DSB that the U.S. regards as legally erroneous.  A different analytical framework, comparative law, sheds new light on these frustrations.  While agreements establishing the DSB do not specify that it operate within a particular legal tradition, most of its jurists have come from the civil law tradition.  As a result, the DSB’s jurisprudence owes much to the civil law system, especially in its interpretative approach to WTO agreements.  The U.S., on the other hand, draws on its common law system in its interpretative approach to WTO Agreements.  These differing legal traditions help explain, at least in part, U.S. grievances with DSB decisions.

Civil law and common law systems differ fundamentally in their respective sources of law:  civil law systems draw primarily on codes created by legislative bodies, whereas common law systems rely on a combination of legislation and judge-made case law.  Both legislation and judges’ interpretative approaches to legislation are distinctive in each system.  In the civil law system, the code provides a body of general principles that purport to be comprehensive, so when faced with new situations, judges will engage in a liberal interpretation of legislation to root such scenarios in the general principles of the code.^[1]  In contrast, the legislation of common law countries is more limited in scope, enumerating rules for specific situations, and judges will strictly interpret legislation, limiting it to enumerated scenarios, while relying on case law for situations not addressed in legislation.^[2]  Each system thus has a distinct perception of judicial rulings in novel scenarios:  a civil law judge applies existing law by liberally interpreting principles of legislation; a common law judge will create new case law.^[3]

These differing approaches shed new light on U.S. critiques of decisions by the DSB.  The U.S.’ frustrations have emerged from a number of adverse decisions by the DSB that have invalidated U.S. trade policies, including methods of calculating antidumping duties and the distribution of antidumping duties to affected U.S. industries. In each of these disputes, WTO agreements were silent on the specific measures challenged.  The DSB thus faced novel situations, and the common law expectations of the U.S. ultimately clashed with the civil law-approach adopted by the DSB.

To be clear, each of these disputes involved a number of technical arguments specific to the underlying issues.  Nonetheless, arguments advanced by the U.S. in each dispute had a common theme rooted in the common law: that the silence of the WTO agreements indicated the challenged measures were not prohibited.^[4]  In essence, the U.S. proposed a strict interpretation of WTO treaties.  The DSB, however, engaged in a civil law analysis. Treating the WTO agreements as being comprehensive even for situations not directly addressed therein, the DSB identified principles (e.g., the definition of dumping or the definition of a subsidy) within the relevant agreements and found that the U.S. measures violated these principles, a more liberal interpretative approach.^[5]  From the civil law perspective, the DSB had applied existing law.  From the common law perspective, however, the DSB had created new (case) law.

A comparative legal analysis thus sheds new light on the U.S.’ frustrations with the DSB.  The U.S. essentially regards these adverse decisions as judicial activism by the DSB, and U.S. media has echoed this perspective.  While such activism may be a feature of the common law, the U.S. argues that such activism is inappropriate with respect to international law, a central tenet of which is that a law cannot apply to a state without its explicit consent, a tension in the DSB previously observed by scholars.^[6]  Indeed, ambiguity is often a deliberate tactic in treaty writing that serves to paper over differences between states, and the liberal interpretative approach applied by the DSB, which assigns specific meanings to ambiguous text, could undermine such compromises.  Thus, from the U.S.’ perspective, the DSB has engaged in judicial activism that is fundamentally at odds with the nature of international law and the WTO agreements.

Yet the U.S.’ views find scant support among other WTO members, most of whom are part of the civil law tradition and regard DSB decisions as applying existing law.  As a result, the limited reforms to the DSB proposed by other WTO members do little to address the U.S.’ frustrations, and the U.S. has predictably rejected these proposals as insufficient.

Reform of the DSB is unlikely to succeed unless the U.S.’ frustrations are better understood in the context of comparative law.  Indeed, reform would seem to necessitate that WTO members explicitly agree on the interpretative approach to treaties to be adopted by the DSB:  whether a strict approach rooted in the common law, or a liberal approach rooted in the civil law.  The DSB has tended to default to the latter approach simply because most of its jurists have come from civil law systems, yet this approach emerged without specific recognition or consent by WTO members.  Reform proposals thus far have done little to address the central tension in the DSB identified by the U.S.: that the liberal interpretative approach to treaties adopted by the DSB conflicts with central tenets and features of international law.  WTO members would be well served not to disregard the U.S.’ critiques as crying over spilt milk, but rather consider whether the DSB’s interpretative approach is consistent with international law.

Brian Soiset is an international trade lawyer who has worked in the United States and China. He has represented clients in trade disputes before U.S. courts and international panels.  The views expressed in this article are his personal views and do not represent those of his employer.

^[1] Joseph Dainow, The Civil Law and the Common Law:  Some Points of Comparison, 15 Am. J. of Comp. L. 419, 424 (1967).

^[2] Id. at 425-426.

^[3] Id. at 431.

^[4] See, e.g., US – Zeroing, WT/DS/294/AB/R (2006), para. 32 (noting Antidumping Agreement does not require an “offset” to antidumping duties); US – Offset Act (Byrd Amendment), WT/DS217/AB/R (2003), paras. 15-18 (arguing that Byrd Act payments are not covered by Antidumping or Subsidy Agreements).

^[5] See, e.g., US – Zeroing, WT/DS/294/AB/R (2006), para. 123-127 (expanding applicability of definition of “dumping” to entirety of agreement); US – Offset Act (Byrd Amendment), WT/DS217/AB/R (2003), paras. 234-236 (enunciating principles under which agreements may be expanded to Byrd Act payments).

^[6] John H. Jackson, The Varied Policies of International Judicial Bodies – Reflections on Theory and Practice, 25 Mich. J. Int’l L. 869, 870-873 (2004).