RESTRICTED
PREPARATORY COMMITTEE PC/IPL/13
FOR THE 8December 1994
WORLD TRADE ORGANIZATION
(94-2711)
SUB-COMMITTEE ONINSTITUTIONAL ,
PROCEDURAL AND LEGAL MATTERS
ESTABLISHMENT OFTHE APPELLATE BODY
Recommendations bythePreparatory Committee totheWTO
approved on6December
1. TheDispute Settlement Understanding (DSU) provides thatastanding Appellate Body shall
beestablished bytheDSBtohearappeals frompanel cases onissues oflawcovered inthepanel report
andlegalinterpretations developed bythepanel. However, theDSU doesnotanswer allquestions
which must besettled before theAppellate Body canfunction effectively. Based ontheprovisions
oftheDSU, input from delegations, anddatafrom theSecretariat onexperience withpastdisputes,
thisnoteaddresses these issues andmakes proposals.
2. Inmaking these proposals, itisunderstood thatnotallissues connected withtheAppellate
Body require decisions orrecommendations atthispoint. Many issues, suchasthesizeandpowers
oftheAppellate Body, arealready determined intheDSU anddonottherefore require decisions.
Ofthose issues requiring adecision, some, suchastheselection oftheAppellate Body members, clearly
mustbedecided before thatbodycanfunction. Others, suchasmatters related totheworking procedures
oftheAppellate Body, areonlytobetaken afterthatbodyisestablished. Itisnottherefore necessary
totieupallloose endsatthisstage.
3. Decisions taken before theentry intoforceoftheWTO willhavetobetaken bythePreparatory
Committee, andwilltechnically taketheformof"recommendations totheWTO".1Decisions taken
aftertheentry intoforce oftheWTO maybetaken bytheGeneral Council (sitting astheDSB) or
theAppellate Body itself, inconsultation withtheChairman oftheDSBandtheDirector-General.2
Proposals putforward hereconcern thecomposition oftheAppellate Body, including conditions of
employment ofitsmembers andconflict ofinterest guidelines formembers andsupporting staff, and
thetypeofadministrative support given toit.
A. Composition oftheAppellate Body
4. TheDSU provides thattheDSBshallappoint seven persons toserve ontheAppellate Body.3
Itistobeastanding body, withmembers serving four-year terms, except forthree initial appointees
determined bylotwhose terms expire attheendoftwoyears.4Vacancies aretobefilled astheyarise
and,inthecaseofanunfinished term, lastonlyuntiltheendofthatterm.5Thesuccess oftheWTO
willdepend greatly ontheproper composition oftheAppellate Body, andpersons ofthehighest calibre
should serve onit.Issues arise astoitsmembers 'expertise, representative balance, impartiality,
conditions ofemployment, andtheselection procedures tobeused.PC/IPL/13
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1. Expertise ofpersons serving ontheAppellate Body
5. TheDSU provides thattheAppellate Body "shall comprise persons ofrecognized authority,
withdemonstrated expertise inlaw,international tradeandthesubject matter ofthecovered agreements
generally." Theexpertise should beofatypethatallows Appellate Body members toresolve "issues
oflawcovered inthepanel report andlegalinterpretations developed bythepanel.6
2. Representative balance
6. While theoverriding concern istoprovide highly-qualified members fortheAppellate Body,
theDSUalsorequiresthattheAppellateBodymembershipbe"broadlyrepresentative"ofthemembership
intheWTO. Therefore factors suchasdifferent geographical areas, levels ofdevelopment, andlegal
systems shallbedulytaken intoaccount. Thequestion ofhowthisbalance istobeachieved isbest
lefttobeworked outduring theactual consultation andselection procedures.
3. Impartiality andconfidentiality
7. TheDSU provides thatmembers oftheAppellate Body "shall notbeaffiliated withany
government."7MembersoftheAppellateBodyshouldnotthereforehaveanyattachmenttoagovernment
thatwould compromise theirindependence ofjudgment. Thisrequirement would notnecessarily rule
outpersons who, although paidbyagovernment, serve inafunction rigorously anddemonstrably
independent from thatgovernment.
8. TheDSU alsoprovides thatthemembers oftheAppellate Body "shall notparticipate inthe
consideration ofanydisputes thatwould create adirect orindirect conflict ofinterest."8Itwould appear
desirable toclarify thescope ofthisrequirement through theelaboration ofhighstandards ofconduct.
Members oftheAppellate Body would adhere tosuchstandards and,inaparticular case, disclose any
relevant financial, business andprofessional interests.
9. TheDSUfurther provides that"theproceedings oftheAppellate Body shallbeconfidential."9
Itwould thusbedesirable toelaborate rules protecting theconfidentiality ofthedeliberations ofthe
Appellate Body, andensuring thenon-disclosure byAppellate Body members andsupport staffof
confidential information provided byparticipants inthedispute settlement process.
4. Conditions ofemployment ofmembers
10. TheDSU provides thatAppellate Body members "shall beavailable atalltimes andonshort
notice."10Thefirstpartofthisclause suggests thatmembers oftheAppellate Body haveapriority
working relationship withtheWTO. Thesecond partoftheclause suggests thatmembers mayhave
other activities. TheDSU alsoprovides thatallmembers "shall stayabreast ofdispute settlement
activities andother relevant activities oftheWTO."11
11. Thecontractual basisofmembers oftheAppellate Body should reflect theoverriding concern
thatcandidates areofahighenough calibre toensure theintegrity andauthority ofdecisions taken
bytheAppellate Body. Therequirement thathigh-calibre members beavailable atalltimes could
bemet,onaflexible basis, byoffering Appellate Body members contracts based onamonthly retainer
plusafeeforactual daysworked. Thiscontractual arrangement could alsoleadtoawider range of
candidates being available, since members could continue topursue other activities where theywere
resident. Thisarrangement could bekeptunder review bytheDSB, andconsidered atthelatest at
thefirstMinisterial Conference, todetermine whether amove tofull-time employment waswarranted.PC/IPL/13
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12. Theamount ofaretainer/fee package would havetobelarge enough tooffset amember 's
opportunity costofwork foregone because ofpotential conflicts ofinterest, orincompatibility with
sporadic tripstoGeneva. Thiscostwould alsoinclude thedisruption ofamember 'scareer dueto
theuncertain butlimited length oftheAppellate Body assignment (twoorfouryears initially, with
apossibility ofaonefurther period offouryears) andtheuncertainty ofthetotalremuneration actually
received. Further, thecompensation should behighenough toprovide anincentive foramember
nottotakeonwork which might create aconflict ofinterest. Accordingly, itwould appear thatthe
retainer should besetataminimum ofSF7,000 permonth, plusafully-adequate daily fee,travel
expenses andaperdiem. Theactual amounts should besetonthebasisoffurther research oncurrent
ratesforequivalent services under similar conditions. Thecontractual conditions foreachmember
oftheAppellate Body should bethesame, reflecting theprinciple thatallthemembers should have
equal status.
5. Selection procedure
13. TheDSU provides that"theDSBshallappoint persons toserve ontheAppellate Body."12
Thedecision bytheDSBtoappoint Appellate Body members could bemade onthebasisofaproposal
formulated jointly, afterappropriate consultations, bytheDirector-General, theChairman oftheDSB,
andtheChairmen oftheGoods, Services, TRIPS andGeneral Councils. Suggestions forcandidates
could beforwarded bydelegations totheDirector-General. These suggestions could include candidates
ofnationalities other thanthatoftheforwarding delegation.
B. Matters Concerning theInternal Procedures oftheAppellate Body
14. TheDSU provides that"working procedures shall bedrawn upbytheAppellate Body in
consultation withtheChairman oftheDSBandtheDirector-General, andcommunicated totheMembers
fortheirinformation."13Matters suchasguaranteeing therotation required bytheDSUandfacilitating
communications, ifnecessary, within theAppellate Body should formpartoftheworking procedures.
TheDSBChairman, attheappropriate time, should consult withMembers inorder toobtain their
views ontheworking procedures prior toadvising theAppellate Body.
C. Administrative andLegal Support
15. TheDSUprovides thattheAppellate Body "shall beprovided withappropriate administrative
andlegalsupport asitrequires."14Thenumber ofsupport staffneeded depends ontheanticipated
workload oftheAppellate Body. Thisinturnwilldepend largely onthenumber ofnewpanel cases
andtheanticipated propensity toappeal panel decisions. Under theGATT, there wasanaverage of
sixnewpanel cases peryearduring thepastfiveyears, withactual annual numbers fluctuating between
twoandten.Atonepoint during thatperiod, sixteen panel cases wereunder wayatonetime. Two
additional factors could alsoleadtomuch greater dispute settlement activity: theincreased scope of
review resulting from services andintellectual property disputes, andtheincreased attractiveness of
amore automatic dispute settlement system.
16. Based onthese factors, areasonable levelofsupport intheinitial stages ofoperation ofthe
Appellate Body would beoneregistrar, threeprofessional assistants withlegaltraining, andsufficient
clerical staff. Theregistrar would beincharge ofsupport totheAppellate Body, ensuring thatthere
wasapoolofappropriate legalandtrade policy expertise, andadministrative assistance, available to
theBody anditsmembers.
17. TheAppellateBodyanditssupportstaffshouldbeindependentfromtheSecretariat.Thesupport
staffshould beselected bytheDirector-General, inconsultation withtheChairman oftheDSB, on
acompetitive basis following apublic advertisement. They should beemployed bytheWTO, onPC/IPL/13
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conditions similar tothose accorded secretariat staff ofsimilar rank, butshould otherwise be
administratively separate from itandanswerable totheAppellate Body. Anymovement ofsupport
stafffrom theAppellate Body totheWTO Secretariat should beonacompetitive basis following a
public advertisement, andnotbysimple administrative transfer. TheSecretariat shallputasidesufficient
space tohouse theAppellate Body.PC/IPL/13
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Endnotes
1. Decision ontheEstablishment ofthePreparatory Committee oftheWorld Trade Organization,
Article 7.
2. DSU Article 17:9.
3. DSU Article 17:1, 2
4. DSU Article 17:2, sentence 1
5. DSU Article 17:2, sentences 3,4.
6. DSU Article 17:6
7. DSU Article 17:3, sentence 2.
8. DSU, Article 17:3, sentence 5.
9. DSU, Article 17:10, sentence 10.
10. DSU Article 17:3, sentence 2.
11. DSU 17:3, sentence 4.
12. DSU Section 17:2, sentence 1.
13. DSU, Article 17:9.
14. DSU Article 17:7.