Dr.

Ram Manohar Lohiya National Law University

Lucknow,U.P.

SUBJECT : INTERNATIONAL TRADE LAW

TITLE OF PROJECT:

ROLE OF PRECEDENT IN WTO DISPUTE SETTLEMENT

(Final Draft)

Submitted to: Submitted By:

Ms. PRIYA ANURAGINI Anubhav Verma

Assist.Prof.(Law) Enrollment- 150101023

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 TABLE OF CONTENTS

1. SYNOPSIS

2. INTRODUCTION

3. ROLE OF PRECEDENT IN INTERNATIONAL LAW

4. PRACTICE IN THE WTO

5. PARTIAL ROLE OF PRECEDENT UNDER WTO

6. CONCLUSION

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 INTRODUCTION

To understand the role of precedent in WTO we need to understand the doctrine of stare decisis.
Stare decisis means to stand firmly by things that have been decided and not disturb them. 1 The
incorporation of this idea formally within the International law ambit is absolutely revolting to
International law experts. In fact to ensure that International law stays clear of the principle of
precedent it was codified under Article 59 of the ICJ statute which in clear terms states that the
decision of the court has no binding force except between parties and in respect of that particular
case.2 Since it is widely believed that the absence of stare decisis in International law has
influenced the decision of the GATT contracting parties to not have the principle of binding
precedents, hence it becomes important for us to examine the practice in International law and as
to why it was not incorporated within international law itself.

This fear of accepting stare decisis has permeated International Trade law as well. This is
evident from the panel reports in India – Patents3 and US- Stainless Steel4 which have stated in
unequivocal terms that AB (Appellate body) reports are not binding on Panels or AB in the
future. However, the AB on numerous occasions has held to the contrary. Even though Article
3.2 of the DSU strives for providing security and predictability within the WTO legal order,
International trade scholars are not willing to give AB reports a status of more than just being
‘persuasive’ at best. This has given rise to jurisprudence which is ambiguous and self
contradictory in nature. This reluctance to accept the value of precedents within the WTO regime
is evident in the comment made by John H. Jackson where he has claimed that it can be argued
that there is quite a powerful precedent effect in the jurisprudence of the WTO, but that is
definitely not stare decisis and it is not so powerful as to require panels or AB considering new
cases to follow prior cases.5

1
Russ Versteeg, ESSENTIAL LATIN FOR LAWYERS, 159 (1990).
2
Statute of the International Court of Justice, Article 59.
3
INDIA - PATENT PROTECTION FOR PHARMACEUTICAL AND AGRICULTURAL CHEMICAL PRODUCTS,
Report of the Panel, WT/DS50/R, 5 September 1997.
4
UNITED STATES – FINAL ANTI-DUMPING MEASURES ON STAINLESS STEEL FROM MEXICO, Report of the
Panel, WT/DS344/R, 20 December 2007
5
John H. Jackson, SOVEREIGNTY, THE WTO AND CHANGING FUNDAMENTALS OF INTERNATIONAL LAW,
(Cambridge: 2006) p. 177
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 ROLE OF PRECEDENT IN INTERNATIONAL LAW

The text of Article 38 of the Statute adopted by the Committee reflected these concerns. It
provided in paragraphs (a) to (c) that the Court applies international conventions, international
custom and general principles of law recognized by civilized nations. Then it specifies, in
paragraph (d), that judicial decisions and teachings of the most qualified publicists are only a
‘subsidiary means for the determination of rules of law.’

The Council of the League of Nations added Article 59 to the text, whereby ‘The decision of the
Court has no binding force except between the parties and in respect of that particular case.’
Furthermore, the Council amended Article 38 (d), which now enabled the Court to refer only to
judicial decisions ‘subject to the provisions of Article 59’.6

Thus, according to the 1922 Statute, reproduced on that point in 1945, sources of international
law explicitly exclude judicial decisions. At best, they can play an ‘auxiliary’ and ‘indirect’ role
in the determination of the rule of law.7 In developing its jurisprudence, the Court may refer to
its precedent, but it has no binding character. The rule of stare decisis is ruled out.

Also it is believed that the doctrine of stare decisis does not exist within the ICJ because the
doctrine depends on a system of hierarchy and since there is only one world court, therefore is no
stare decisis and, no system of binding precedent.8

PRACTICE IN THE WTO

As in other areas of international law, there is no rule of stare decisis in WTO dispute settlement
according to which previous rulings bind panels and the Appellate Body in subsequent cases.
This means that a panel is not obliged to follow previous Appellate Body reports even if they
have developed a certain interpretation of exactly the provisions which are now at issue before
the panel. Nor is the Appellate Body obliged to maintain the legal interpretations it has
developed in past cases. The Appellate Body has confirmed that conclusions and
recommendations in panel reports adopted under GATT 1947 bound the parties to the particular

6
Ibid.
7
Robert Jennings and Arthur Watts (eds), OPPENHEIM'S INTERNATIONAL LAW, (vol I, 9th edn) 41, s 13.
8
Olav A. Haazen, ‘Precedent in the World Court’, 38 HARV. INT'L L.J. 587, 587 (1997)
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dispute, but that subsequent panels were not legally bound by the details and reasoning of a
previous panel report.9

If the reasoning developed in the previous report in support of the interpretation given to a WTO
rule is persuasive from the perspective of the panel or the Appellate Body in the subsequent case,
it is very likely that the panel or the Appellate Body will repeat and follow it. This is also in line
with a key objective of the dispute settlement system which is to enhance the security and
predictability of the multilateral trading system (Article 3.2of the DSU). In the words of the
Appellate Body, these GATT and WTO panel reports — and equally adopted Appellate Body
reports10 — “create legitimate expectations among WTO Members, and, therefore, should be
taken into account where they are relevant to any dispute”11

The legal text in this regard suggests that even though much deference has to be shown to prior
Panel/AB reports, they are not to be treated as autonomous sources of law. Article 9.2 is very
clear of the WTO agreement gives WTO member countries the exclusive right to authoritative
interpretations of provisions of the WTO Agreement and the Multilateral Trade Agreements to
the Ministerial Conference and the General Council. Article 3.2 of the DSU also directs the
Appellate Body to not add diminish the rights and obligations of the parties while interpreting
WTO law in accordance with the principles of customary international law. The language of the
abovementioned DSU provisions, especially that of Article 3.2 (repeated in Article 19.2) of the
DSU, reflects these concerns about an ’activist judiciary’ and the fact that Members wanted to
reserve for themselves the final right to determine the interpretation of the covered agreements.12

This issue has been discussed in several Panel and AB reports as well. The first one to do so was
the Appellate Body in the case of Japan-Alcoholic Beverages II13. The AB in this case held that
adopted GATT panel reports are part of the GATT acquis and should be given due consideration
by future panels. They create legitimate expectations among WTO Members, and, therefore,
should be taken into account where they are relevant to any dispute. However, they are not

9
7.2 Legal status of adopted/unadopted reports in other disputes, DISPUTE SETTLEMENT SYSTEM TRAINING
MODULE: CHAPTER 7 Legal effect of panel and appellate body reports and DSB recommendations and rulings

10
Appellate Body Report, US — Shrimp (Article 21.5 — Malaysia), para. 109.
11
Appellate Body Report, Japan — Alcoholic Beverages II DSR 1996:I, 97 at p107-108
12
Felix David, ‘The Role of Precedent in the WTO’, Masstricht Working Papers, P.5.
13
Appellate Body Report, Japan-Alcoholic Beverages II, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R.
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binding, except with respect to resolving the particular dispute between the parties to that
dispute.

In fact in US – Oil Country14, the AB has said very explicitly that Panels are bound to follow
previous Appellate Body reports.

If we consider the situation statistically, a serious inclination towards following precedents, esp.
in case of AB reports, can be observed. Appellate Body reports are cited 687 times while Panel
reports are cited 263 times. Panels and AB reports have frequently cited GATT Panel reports,
including non adopted reports. In fact GATT Panel reports have been cited 510 times, clearly
surpassing Panel reports.15

Recently the dispute regarding US – Stainless Steel16 put the question regarding the binding
nature of precedents back in hot debate when the Panel openly disagreed with previous AB
reports and decided not to follow the ‘zeroing jurisprudence’ laid down by the AB.

In the context of doing so, the Appellate Body offered some helpful clarifications of the role of
precedent in the WTO dispute settlement system, including the following: "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." The "absent cogent reasons" language appears to be the new
standard for following precedent: You must follow precedent unless you have "cogent reasons"
for doing otherwise.

Hence the preeminent role of the Appellate Body reports in the WTO Dispute settlement
structure has been explicitly asserted by both the AB as well as the member countries.

14
Appellate Body Report, US - Oil Country Tubular Goods Sunset Reviews, WT/DS268/AB/R.
15
Zhu Lanye, ‘Effects of WTO Dispute Settlement Panel and Appellate Body Reports’, TEMPLE INT’L &
COMP.L.J. p.231
16
Appellate Body Report, US - Stainless Steel, WT/DS344/AB/R.
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 PARTIAL ROLE OF PRECEDENT IN THE WTO

The DSB grapples seriously with separation of powers. As pointed out previously, the General
Council reports to the Ministerial Conference. Therefore, it becomes problematic for the DSB,
which is an arm of the General Council to interpret the General Agreement.

Therefore, it is suggested that the DSB should require that at least the Appellate Body decisions
are binding on the panels. It is appropriate also given that a system of hierarchy does exist within
the WTO legal order. Moreover such a system of partial stare decisis would not just help create a
more stable jurisprudence for member countries to rely on, it also gives Appellate Body the
freedom to deviate from its past judgments if it feels that the interpretation was not sought on
logical grounds. Precedents would bind panelists from errant or unprincipled behaviour, which
many have rightly feared.17 This would help avoiding situations like the one that came up in the
US-Stainless Steel case.

Considering that by their very nature panels are ad-hoc and it is understandable that different
panels would be selected even if they deal with the same issue.18 However it is the legitimate
expectation of the member countries that change in panel personnel would not affect
interpretation of WTO law. This would serve the purpose of ensuring greater harmonization and
fairness.

Some scholars believe that the watered down interpretations of DSU panels have enhanced the
obligations of the developing countries while enhancing the rights of the developed countries. A
system of stare decisis would reduce first world -third world tension.19 In other words, stare
decisis would reduce the probability that developed countries would use their political and
economic power to sway the outcome of a dispute.

In sum, in the context of WTO adjudication, like any common law legal system, de jure stare
decisis would mean more than just "a rule is a rule" not to be twisted or discarded by a runaway
judge. It would mean that on appropriate occurrences, the rule can and will be departed from,
after careful analysis and acceptable reasoning.20

17
Karl Llewellyn, THE COMMON LAW TRADITION, (1960) p.219-20
18
Dispute Settlement Understanding, Article 8.
19
Raj bhalla, ‘Towards De jure stare decisis in WTO Adjudication’, 33 Geo. Wash. Int'l L. Rev. 873. p. 907
20
Id. at p.935
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 CONCLUSION

Formally speaking, in the WTO legal order exists no strictly binding precedent in the sense of
stare decisis. As a general matter Panels do not, and should not, feel constrained by previous
panel and Appellate Body decisions so strongly as to feel required to blindly follow them. This
result remains unchanged by the recent Appellate Body Report in US - Stainless Steel. The
Appellate Body has perhaps not adopted a genuinely new approach regarding the role of its
previous decisions. It has, however, as explicitly as never before noted the importance of the
DSU objectives of the development of a ’coherent, predictable and consistent body of case law’
and the ’prompt resolution of disputes’ and the role it has to play in this regard.

The international legal system is not fond of the common law jurisprudence which mandates that
courts operate under a strict precedent or stare decisis rule of law. Stare decisis is a principle
common to Anglo-American jurisprudence. Stare decisis is so attractive because it facilitates a
system of information transferred between judges, litigants and lawyers. It allows the participants
to feel that they are more a part of the decision-making process and more in control. Here it is
not suggested that a common law way of thinking should be imposed on WTO dispute
settlement. However we strongly believe that a partial adoption of such a system would promote
increasing certainty and fairness, which would translate into ensuring that the problems of the
past GATT dispute settlement system are not created again in the WTO dispute settlement
process.

Although the WTO dispute settlement flirts with stare decisis, the reports and decisions are not
binding. It is believed that a system of binding precedent within the WTO dispute settlement
process will require a great deal of time to develop, as it is thought that it would be difficult for
the WTO to pass legislation that would make international trade law dispute decisions binding
when the WTO itself is not binding.

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 BIBLIOGRAPHY

 Books & Articles:

1. Bhala, Raj. "The Myth About Stare Decisis and International Trade Law (Part
One of a Trilogy)." American University International, Law Review 14, no. 4
(1999): 845-956.
2. The United States and the WTO Dispute Settlement System, Robert Z. Lawrence,
CSR NO. 25, MARCH 2007, Council on Foreign Relations, The Bernard and
Irene Schwartz Series on American Competitiveness

 Websites:
1. http://www.socpaper.com/a-research-on-stare-decisis-in-wto-dispute-settlement-
mechanism.html
2. http://books.google.co.in/books/about/Stare_Decisis_and_the_WTO_Adjudicatio
n.html?id=RIFfMgAACAAJ&redir_esc=y
3. http://books.google.co.in/books?id=96x7IwWDJUQC&pg=PA3113&lpg=PA311
3&dq=stare+decisis+in+wto&source=bl&ots=yJiDtNDYay&sig=Zuw4AoWxvjY
L_Pnv7dahjnFnhZE&hl=en&sa=X&ei=V21IUd2uCOqp4ASt1oHQCA&ved=0C
GUQ6AEwCA#v=onepage&q=stare%20decisis%20in%20wto&f=false

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