The Concept of Appeal in International Dispute Settlement
The Concept of Appeal in International Dispute Settlement
The Concept of Appeal in International Dispute Settlement
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Abstract
The WTO Appellate Body represents an innovation in international law in that an inter-
national adjudication authority now operates as a final instance to hear appeals arising
from international arbitral (panel) procedures. It is thereby strongly emulating domes-
tic appellate courts without, however, possessing the characteristics that make appellate
courts the institutions of justice that they are. Following this trend in a cutting-edge fash-
ion are several other inter-governmental arrangements that had been either concluded
(Central America Free Trade Agreement (CAFTA), the Olivos Protocol in the Southern
Common Market (Mercosur)) or proposed (the US Congresses’ 2002 Trade Promotion
Authority Act, the ICSID Discussion Paper of 22 October 2004, the third draft Free
Trade Area for the Americas). They embrace the concept of a permanent international
instance for appeal from arbitral awards, particularly regarding investment agreements
including also disputes arising between the state (public) and the individual legal person
(private).
1 Introduction
One of the innovations in international law1 introduced in the Marrakech Agreement
Establishing the World Trade Organization (WTO)2 was the Appellate Body (AB),
then unique among global and multilateral organizations. Presumably, for trade
* Director, Institute for Transborder Studies, and Professor, Department of Political Science, Kwantlen
University College, Canada. Email: [email protected].
Thank you to the participants at the conference International Law: Do We Need It? Agora 8: International
Dispute Resolution, European Society of International Law: Second Biennial Conference, 18–20 May 2006,
Paris, and to the anonymous EJIL reviewers for their questions and comments regarding this article.
1
Throughout the article, I use ‘international law’ and ‘public international law’ interchangeably.
2
Agreement establishing the World Trade Organization, 1994, available at: www.wto.org.
3
ICSID Discussion Paper, 22 Oct.2004, and Amendments to the ICSID Rules and regulations. ICSID News
Release, 5 Apr. 2006, available at: www.worldbank.org/icsid/highlights/03-04-06.htm.
4
Annex 10F-Appellate Body or Similar Mechanism, Chapter Ten Investment, The Central America–
Dominican Republic–United States Free Trade Agreement, 2004, available at: www.ustr.gov/Trade_
Agreements/Bilateral/CAFTA/CAFTA-DR_Final_Texts/Section_Index.html.
5
Protocolo de Olivos para la Solución de Controversias en el MERCOSUR, Secretariat MERCOSUR, 2000, avail-
able at: www.mercosur.int/msweb/principal/contenido.asp.
6
US Model Bilateral Investment Treaty (BIT), 2004, Office of the US Trade Representative, available at:
www.ustr.gov/Trade_Sectors/Investment/Model_BIT/Section_Index.html; see also Hornbeck, ‘A Free
Trade Area of the Americas: Status of Negotiations and Major Policy Issues’, CRS Report RS20864.
7
Third Draft Agreement – November 21, 2003. Free Trade of the Americas Draft Agreement. FTAA.TNC/
w/133/Rev.3, available at: www.ftaa-alca.org/FTAADraft03/Index_e.asp.
8
It generally coincides with appellate mechanisms in other areas, for instance, in the International Crimi-
nal Tribunal for the Former Yugoslavia (ICTY). However, appellate bodies in the area of international
criminal and humanitarian law are distinguishable primarily due to the evidentiary rules as well as ju-
dicial appointment procedures governing the entire adjudicatory process leading up to appeal. The first
report of the ICTY clearly states: ‘9. Certain basic traits of the Tribunal stand out to distinguish it not only
from war crimes tribunals of the past but also from any other mechanism for international dispute resolu-
tion’: Report of the International Tribunal for the Prosecution of Persons Responsible for Serious Violations of In-
ternational Humanitarian Law Committed in the Territory of the former Yugoslavia since 1991, ICTY Annual
Report, UN GA Forty-Ninth Session A/49/342 – S/1994/1007, 29 Aug. 1994, available at: http://www.
un.org/icty/rappannu-e/1994/index.htm. For lack of space, I will defer this discussion for another time.
9
To which I will refer throughout this article.
10
Bjorklund, ‘The Continuing Appeal of Annulment: Lessons from Amco Asia and CME’, in T. Weiler (ed.),
International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and
Customary International Law (2005), at 471.
The Concept of Appeal in International Dispute Settlement 45
a profound debate are rather deliberations on the purpose and role of appeal (and
finality) in general, and specifically in international law. Therefore, the focus will
be on (a) the meaning of finality in international trade and investment dispute set-
tlement (DS),11 and (b) the corollary designation of ‘appellate’ to adjudicative bodies
in international trade and investment law, which do not satisfy those characteris-
tics that make municipal12 appellate courts the institutions of justice that they are.
The main common denominator arising explicitly or implicitly in the discourse
is that an appeal instance is warranted as a means to harmonize an increasingly
11
Due to the recent proliferation of treaties and DS mechanisms and bodies, resulting in paralleling and com-
peting jurisdictions and awards, those experts focusing their attention on the subject of finality most typ-
ically concentrate on DS in trade and investment. In the report on The Fragmentation of International Law:
Difficulties Arising from the Diversification and Expansion of International Law (International Law Commis-
sion, UN GA Fifty-Eighth Session, 13 Apr. 2006, available at http://untreaty.un.org/ilc/summaries/...),
the Chairman, Martti Koskenniemi, addresses several issues pertinent to finality. Nevertheless, the report
does not discuss the issue of appellate review. Although reference is occasionally made to the role of
hierarchy, the report specifies as follows:
‘12. … But what does this do to the objectives of legal certainty and the equality of legal subjects?
13. The previous paragraph raises both institutional and substantive problems. The former have to do
with the competence of various institutions applying international legal rules and their hierarchical rela-
tions inter se. The Commission decided to leave this question aside. The issue of institutional competencies
is best dealt with by the institutions themselves’ (at 13). Other notable attempts at coming to grips with
the transformative evolution of international law have also left the appellate review outside their scope
of study: see, e.g., Teitel, ‘Humanity’s Law: Rule of Law for the New Global Politics’, 35 Cornell Int’l LJ
(2002) 355.
12
Throughout the article, I use ‘municipal’, ‘domestic’, and ‘national’ interchangeably.
13
Secretariat. North American Free Trade Agreement 1994, available at: www.nafta-sec-alena.org/
DefaultSite/index_e.aspx?DetailID=78.
46 EJIL 19 (2008), 43–65
2 Finality
What constitutes finality in international law was and remains ‘still unclear’.14 Hart’s
characterization may offer the closest definition: ‘[a] supreme tribunal has the last
word in saying what the law is, and when it has said it, the statement that the court
was “wrong” has no consequence within the system: no one’s rights or duties are
thereby altered’.15 Much of the literature addressing finality discusses the interest of
the international community, and consequently of international law, in finality;16
14
J. Jackson quoted in Y. Shany, The Competing Jurisdictions of International Courts and Tribunals (2003), at
253, n. 114.
15
H.L.A. Hart, The Concept of Law (2nd edn., 1994), at 141.
16
E.g., Shany, supra note 14, at 170.
17
E.g., indirectly, R. Dworkin, Law’s Empire (1986), at Ch. 7.
18
E.g., R. Muellerson, Ordering Anarchy. International Law in International Society (2000).
19
Although there is ample discussion of res judicata, which represents one component of finality. Most re-
cent and significant is the treatment of res judicata by the International Court of Justice (ICJ) in Case Con-
cerning the Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia
and Herzegovina v. Serbia and Montenegro), Judgment of 26 February 2007, General List 91, available at:
www.icj-cij.org/homepage/index.php?lang=en.
20
Here, too, there is a growing literature about procedures that may be considered as necessary compo-
nents of an appeal process, but I have not seen any discussion of the link of appeal to finality in public
international law. Bjorklund mentions the dichotomy of correctness and finality as a tension governing
arbitration, not appeal (supra note 10, at 504–505, 512).
21
I am not ignoring the importance and right to justice of non-state actors (NSAs) in the international sys-
tem. I am simply acknowledging the origins of that legal system. See T.M. Franck, Fairness in International
Law and Institutions (1995). Teitel, like many others by now, identifies an ethos of a new global rule of law
that ‘challenges the international legal system’s prevailing bases and values in a number of ways’ (su-
pra, note 11, at 359). She provides an important analysis of several theoretical tensions with conflicting
practical outcomes, e.g. between domestic and international law, humanitarian and human rights law,
international criminal law and the law relating to national self-determination. These suggest a possible
departure from a positivist approach governing international law to what she refers to as a humanitari-
anist’s approach. See, for instance, also Gal-Or, ‘Private vs. Public International Justice: The Role of ADR
in Global and Regional Economic Treaties’, in R.C. Thomsen and N.L. Hale (eds), Canadian Environments:
Essays in Culture, Politics and History (2005), xx, 205–229 (hereinafter ‘Private vs. Public International
Justice’); Gal-Or, ‘Outsourcing of Justice: Applying the Legitimacy Test of Fairness to the Institutionalisa-
tion of International Commercial Arbitration’, in J. Meyer et al. (eds), Reflexive Representations: Politics,
Hegemony, and Discourse, in Global Capitalism (2004), at 127–139 (hereinafter ‘Outsourcing of Justice’).
The Concept of Appeal in International Dispute Settlement 47
22
Regardless of the variety of socio-cultural specific substantive moral and ethical underpinnings of
fairness.
23
E.g. Bjorklund, supra note 10; Sosnow, Morellato, and Millen, ‘Softwood Lumber as Case Study: Canada–
U.S. Dispute Resolution under NAFTA and the WTO’, 6(3) Canadian Int’l Lawyer (2005) 131 (hereafter:
Sosnow et al.).
24
In the sense that the court interprets (and, according to a branch of international legal experts, also cre-
ates) the law, and the subjects of the law are bound to adhere to it. See Teitel, supra note 11, and ‘Private
vs. Public International Justice’ and ‘Outsourcing of Justice’, supra note 21, on the need for new interpre-
tive principles and the shift in legitimacy and authority, as well as Gal-Or, ‘Towards a Transdisciplinary
Discourse on the Link of Trade and Investment, International Law, and Global Governance: Is a New
Terminology Needed?’, presented at several conferences 2004–2006, currently under consideration for
publication (hereinafter ‘Towards a Transdisciplinary Discourse’).
25
I find this distinction by Dworkin (supra note 17, at 227) useful, although in a different manner from that
employed by him.
26
Ibid.
27
This principle is a pillar of the common law legal system, whereas in civil (continental) law, precedent
performs a secondary role. Of course, in practice, civil law courts refer to earlier judgments, which is
important. However, they may depart from earlier judgments the next time, and are not bound to them
as common law is bound to stare decisis. I thank Claudia Kissling for clarifications on this point.
48 EJIL 19 (2008), 43–65
28
Koskenniemi addresses the theoretical postulate about the ‘“horizontal” nature of the international legal
system’ (supra note 11, at 166) in the sense that there is ‘no general order of precedence between interna-
tional legal rules’ (ibid.). Yet he maintains that ‘[t]here has never been any doubt about the fact that some
considerations in the international world are more important than others, and must be legally recognized
as such – although how that sense of importance could be articulated has been the subject of lasting aca-
demic controversy. Here it is not suggested to take a position on that controversy –…’ (ibid., at 167).
29
See Bhala, ‘The Myth about Stare Decisis and International Trade Law (Part One of a Trilogy)’, 14
American University Int’l L Rev (1998–1999) 845 (hereafter: Bhala I). Koskenniemi comes close to such
view (yet not identical, because he refers to norms only, e.g. not rules) when acknowledging that ‘[t]here
is an important practice that gives effect to the informal sense that some norms are more important than
other norms and that in cases of conflict, those important norms should be given effect to. … [P]ractice
has developed a vocabulary that gives expression to something like an informal hierarchy in interna-
tional law’ (supra note 11). He then goes on to elaborate on this problem when discussing conflict be-
tween successive norms (in Part D), and relations of importance regarding Art. 103 of the UN Charter,
jus cogens, and obligations erga omnes (in Part E).
30
Bhala I, supra note 29; Ninatti, ‘How Do Our Judges Conceive of Democracy? The Democratic Nature of
the Community Decision-making Process under Scrutiny of the European Court of Justice’, 10/03 Jean
Monnet Working Paper (2003); ‘Private vs. Public International Justice’ and ‘Outsourcing of Justice’,
supra note 21.
31
Unsustainable in the sense that the separation of substantive and procedural grounds is basically a fiction.
32
I will not identify them here as this will trigger a discussion which is beyond the scope of the article.
33
Dworkin, supra note 17; M.W. Riesman, Systems of Control in International Adjudication and Arbitration.
Breakdown and Repair (1992).
The Concept of Appeal in International Dispute Settlement 49
authority, which is given (or when merely formal, appropriates for itself) the power
to control, has the last word as manifestation of itself, namely of authority. Dworkin
identifies a tension underlying this order of control, consisting of finality (represent-
ing the ‘formalism’ and determinism of authority) juxtaposed with the expectation of
infallibility (representing the uncertainties of communication and interpretation of the
law, ‘rule-scepticism’).34 Put simply, it is the human desire for reassurance through
determinism and certainty which facilitates predictability, and hence control versus
the human natural faculty to err. How can a justice system reconcile this strain?
34
Dworkin, supra note 17, at 141 and Ch. 7 generally. Infallibility relates also to correctness of decision.
35
Harnon, ‘Res Judicata and Identity of Actions. Law and Rationale’, 1 Israel L Rev (1966) 539.
36
Ibid., at 540.
37
Ibid.
38
For a more detailed discussion of conditions to assure res judicata see the doctrine of lis alibi pendens, which
prohibits parallel proceedings while a first set of proceedings is pending, and the doctrine of electa una
via, which is designed to bar multiple petitions by the same applicant. See Shany, supra note 14, and
Bjorklund, supra note 10, at 509, 519. These doctrines are less relevant to the point I wish to make in this
article and are therefore beyond its scope.
39
This was reiterated by the ICJ in Bosnia and Herzegovina v. Serbia and Montenegro: ‘[t]wo purposes, one
general, the other specific, underlie the principle of res judicata, internationally and nationally. First, the
stability of legal relations requires that litigation come to an end. … Secondly, it is in the interest of each
party that an issue which has already been adjudicated in favour of that party be not argued again’: supra
note 19, at 44.
40
To which I will attend later in this article. This tension became apparent during the latest debate of the In-
ternational Commercial Arbitration Committee of the International Law Association on its Draft Resolu-
tion No. 1/2006, including Annexes 1 and 2; The World Is Here, the 72nd Conference of the International
Law association, 4–8 June 2006, Toronto, personal notes. Teitel, who focuses on the transformation of
international law arising from the humanitarianist legal regime, observes similar conceptual complica-
tions wherein the private and the ‘collective’ (although not the institutionalized ‘public’) are pitched one
against the other in what she refers to as a ‘minorities regime’ (supra note 11, at 378–379) and ‘cosmo-
politan’ schemes (at 383).
50 EJIL 19 (2008), 43–65
the same matter, the purpose is to promote stability and assure the litigant that he
may rely on it knowing that his rights and duties have been finally determined by a
competent tribunal’.41 For instance, applying this rationale to the arena of interna-
tional adjudication, the sentiments expressed by affected stakeholders in the softwood
lumber ‘saga’42 are telling. A recent ruling by the WTO AB, which left the debate about
whether the Canadian lumber imports represented a threat of injury to the American
industry unresolved,43 exemplifies the problem of res judicata from a private interest
perspective. The Canadian executive vice-president of the Free Trade Lumber Council
41
Harnon, supra note 35, at 543 (original emphasis).
42
Sosnow et al., supra note 23. The recent specific case in the softwood lumber sequel revolved around US
complaints that Canada was dumping its subsidized softwood lumber exports into the US market, thereby
posing a threat of injury to the same industry in the US. The ‘saga’ represents a three centuries long dis-
pute between Canada and the US, with an over two decades ‘modern’ incarnation, and a ‘mere’ decade of
adjudication in the WTO and NAFTA.
43
United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, Re-
course to Art. 21.5 of the DSU by Canada, AB-2006-01: World Trade Organization, WT/DS277/AB/RW
(06-1735), 13 Apr. 2006, available at www.worldtradelaw.net/reports/wtoab/us-lumberitc(ab)(21.5).
pdf. The WTO AB did not reverse the WTO panel’s ruling, but at the same time also communicated its
reservation from the lower body’s finding by observing that ‘the panel placed an “undue burden” on
Canada’: Hamilton, ‘“Canada Goofed” on Softwood Appeal to WTO’, Vancouver Sun, 14 Apr. 2006, H1-2.
The case was intricately linked to parallel proceedings in another international tribunal, the NAFTA, and
one municipal court, the US Court of International Trade, and consequently represented a res judicata
challenge.
44
Ibid.
45
Ibid.
46
Harnon, supra note 35, at 543.
47
Sosnow et al., supra note 23.
48
Ibid., at 140–141. The term ‘litigation’ is a misnomer, which I discuss later.
The Concept of Appeal in International Dispute Settlement 51
Res judicata is endogenous to the concept of appeal. First, to find fault with a judg-
ment (for whichever ground – substantive or procedural), the judgment must be of a
binding nature. Otherwise, why appeal and not simply disregard? At the same time
however, res judicata tolerates dissenting opinions and also allows for staggered types
of finality. Normally, in the case of a judgment with divergent opinions, the major-
ity opinion is recognized as the res judicata. Also, the right of appeal per se represents
the recognition that finality may be compromised by infallibility which may require
correction. Indeed, the persistence of such inconsistencies can be tolerated precisely
49
Harnon, supra note 35, at 544. The ICJ tentatively proposes a res judicata test: ‘[i]n the view of the Court,
if any question arises as to the scope of res judicata attaching to a judgment, it must be determined in each
case having regard to the context in which the judgment was given. … For this purpose, in respect of a
particular judgment it may be necessary to distinguish between, first, the issues which have been decided
with the force of res judicata or which are necessarily entailed in the decision of those issues; secondly,
any peripheral or subsidiary matters, or obiter dicta; and, finally, matters which have not been ruled upon
at all. Thus an application for interpretation of a judgment under Art. 60 of the Statute may well require
the Court to settle ‘[a] difference of opinion [between the parties] as to whether a particular point has or
has not been decided with binding force’: Bosnia and Herzegovina v. Serbia and Montenegro, supra note 19,
at 48.
50
Shany, supra note 14, at 223. Harnon uses the term ‘relative res judicata’: supra note 35, at 560.
51
I will come to discuss these points later. They refer to (a) the difference between international and munici-
pal law, and (b) the difference between public and private law.
52
Harnon, supra note 35, at 550.
53
Shany, supra note 14, at 225.
54
In Bosnia and Herzegovina v. Serbia and Montenegro, supra note 19, the ICJ firmly adheres to this orthodoxy:
‘[f]or the Court res judicata pro veritate habetur, and the judicial truth within the context of a case is as the
Court has determined it, subject only to the provision in the Statute for revision of judgments. This result
is required by the nature of the judicial function, and the universally recognized need for stability of legal
relations’: supra note 19, at 53. And any interpretation of the principle is on a case-by-case basis: supra
note 49.
52 EJIL 19 (2008), 43–65
55
Most reasons allowing an exception to res judicata are of a procedural nature, and it is still being de-
bated whether ‘manifest and essential error’, i.e. a finding of misinterpretation of the law, should also
be included. Shany argues that this ground for exception, which is nowhere to be found in conventional
law, does also not qualify as a customary norm of law, and ‘it can hardly be argued that recourse to
the substantive review of judicial errors can be viewed as a general principle of law’: supra note 14, at
247. The constituting document of the WTO DS states that ‘6. An appeal shall be limited to issues of
law covered in the panel report and legal interpretations developed by the panel’: ‘Article 17. Appellate
Review’,Agreement Establishing the World Trade Organization, Annex 2, Uruguay Round Agreement.
Understanding on Rules and Procedures Governing the Settlement of Disputes, available at: www.wto.
org/english/docs_e/legal_e/28-dsu_e.htm (hereafter: DSU). This is indeed very general and puts Shany’s
observation in question. See also Bjorklund (supra note 10), when comparing grounds for annulment
with grounds for appeal throughout her article.
56
I am not concerned here about matters pertaining to standard of review but with the fact of review
per se.
57
I will not elaborate here on the debate surrounding the interface between substantive and procedural
law, which is beyond the scope of this article. It is, however, interesting to note the rhetoric employed to
circumvent this dilemma, e.g. a court is said to be ‘engaging in a more searching analysis of the award
than was contemplated by the applicable standard of review’: Bjorklund, supra note 10, at 501 n. 109
(emphasis added).
58
DSU, supra note 55. It represents a judicial discretion the clarification of which has figured as an ongoing
focus of debate.
59
‘Possible Improvements of the Framework for ICSID Arbitration’, 22(1) News from ICSID (2005) 11/16,
available at: http://www.worldbank.org/icsid/news/news_22-1.pdf, and supra note 3.
60
Convention on the Settlement of Investment Disputes between States and Nationals of Other States (as
Amended and Effective 10 Apr. 2006), available at: www.worldbank.org/icsid/basicdoc/basicdoc.htm
(hereafter: ICSID Convention).
The Concept of Appeal in International Dispute Settlement 53
cannot operate without review of the first panel award, and which de facto amount to
an appeal on procedural grounds.61 The NAFTA Chapter 19 Review and Dispute Set-
tlement in Antidumping and Countervailing Duty Matters62 also provides for a limited
review, which is explicitly distinguished from appeal.63 That developing the concept
of appeal is bound to arise as a challenge that international law experts could not by-
pass was recognized already prior to the establishment of the WTO AB and NAFTA:
The choices before us are simple. One alternative is that we have no appeals at all – in the sense
B Stare Decisis
I am now turning the discussion to the role of precedent as the other necessary
component of the concept of appeal, a principle which currently is still considered
foreign to international law, consequently rendering the appeal ‘in the sense of
review of the merits’65 indeed – and formally – an ‘impractical alternative’. Appeal
presumes review and review presumes measurement against existing standards.
A standard is an ‘[e]xemplar or measure or weight. … An authoritative or recog-
nised exemplar of correctness, perfection, or some definite degree of any quality. …
61
Ibid., ‘Section 5 Interpretation, Annulment, and Revision of the Award’.
62
NAFTA, supra note 13.
63
‘Although Chapter 19 panel decisions are binding, there is one level of review of binational panel decisions
that a NAFTA government may initiate in extraordinary circumstances. This is known as the Extraordi-
nary Challenge Committee (ECC) procedure. The challenge is not an appeal of right but a safeguard to preserve
the integrity of the panel process. If either government believes that a decision has been materially af-
fected, by either a panel member having a serious conflict of interest, or the panel having departed from
a fundamental rule of procedure or having exceeded its authority under the Agreement, either govern-
ment may invoke review by a three-person, binational Extraordinary Challenge Committee, comprised
of judges and former judges. ECC decisions, like Chapter 19 binational panel decisions, are binding as to
the particular matter addressed’: Extraordinary Challenge Procedure, Ch. 19, Annex 1904.13, NAFTA,
ibid. (emphasis added). NAFTA Ch. 11 on investment provides the parties with a choice of existing con-
ventional procedures for the purpose of setting aside of an award. Thus, NAFTA members which were
not parties to ICSID (then Canada and Mexico) were able to invoke the ICSID Additional Facility Rules on
investment which directed them to a municipal court for the purpose of setting aside of an award, e.g. as
in United Mexican States v. Metlaclad Corp., 89 British Columbia Law Review (2001) 664. For the purpose
of this article, I will contend with these examples and will not discuss the Permanent Court of Justice,
International Court of Justice, other regional courts and tribunals, nor courts in matters of human rights,
international criminal law, and administrative agencies. See also supra note 8.
64
E. Lauterpacht cited in Bishop, ‘The Case for an Appellate Panel and its Scope of Review’, PowerPoint
presentation, King & Spalding, British Institute of International and Comparative Law, 7 May 2004,
at 18 (emphases added). See also Koskenniemi on lawyers’ perception concerning the fragmentation of
international law into self-contained regimes and the resulting ‘loss of an overall perspective on the law’:
supra note 11, at 11.
65
Lauterpacht, supra note 64.
54 EJIL 19 (2008), 43–65
A commodity the value of which is treated as invariable, in order that it may serve
as a measure of value for all other commodities.’66 These attributes of ‘standard’
suggest continuity, legitimacy, certainty – all qualities that congeal and acquire
their value over time. They represent the accumulation of repetitive and consist-
ent experiences, or precedents, leading to the determinative conclusion of a given
standard. Indeed
it would be erroneous to believe that ‘subsequent practice’ of a tribunal that is consistent
If the WTO AB is to review a panel ruling based on issues of law addressed in the
panel report, how can it do so without referring to an existing set of authoritative
standards which, to be sure, represent the law?68 And how do these standards gel
into law if not through repetitive and universal experience? And how can the panel
develop legal interpretations, and the WTO AB follow the instruction to review the
panel’s legal interpretations,69 or the NAFTA Chapter 19 Extraordinary Challenge
Committee perform its function, if there is no standard measurement against which to
interpret the law? The denial of precedent would suggest that the law is ad hoc, capri-
cious, biased, fragmented, unpredictable, perhaps irrelevant because there is nothing
to orient one’s actions to.70 Consequently, the very notion of appeal, of the assessment
and evaluation of a previous ruling, presumes a lineage of decisions which are inter-
connected precisely because of their binding or persuasive nature.71
66
The Shorter Oxford English Dictionary (1968) (emphasis added).
67
Bhala, ‘The Power of the Past: Toward De Jure Stare Decisis in WTO Adjudication (Part Three of a Tril-
ogy)’, 33 George Washington Int’l L Rev (2000–2001) 930 (hereafter: Bhala III).
68
I will leave the discussion of what is law to another time, but suffice it to say that even proponents of the
constructivist and social approach to law ‘as a living law’ do not discard the role of precedent.
69
‘Notwithstanding the efforts of drafters of rules, including the Statute of the International Court of Jus-
tice, the NAFTA, and others to provide that a decision is binding only on the parties and in respect of the
particular case, and has no effect as stare decisis, in fact counsel in an international arbitration cite every
precedent they can find, and arbitrators do try to follow precedents or explain why a particular precedent
is inapt or unpersuasive’: Lowenfeld, ‘Public Policy and Private Arbitrators: Who Elected Us and What
Are We Supposed to Do?’, J.E.C. Brierly Memorial Lecture, McGill University, Faculty of Law, 30 Mar.
2005, at 17 (on file with the author).
70
Koskenniemi indirectly alludes to this sentiment when arguing that ‘the principle of systematic integra-
tion goes further than merely restate the applicability of general international law in the operation of
particular treaties’ (supra note 11, at 209) and addressing the inter-referencing of treaties (ibid).
71
The adherence to a doctrine is per se recognition of established practice, i.e. a lineage of precedents. It
would be redundant to rehash the long list of arguments (including the discussion regarding institutional
balance and design) raised by Bhala (supra notes 29 and 67) which make this point amply clear.
The Concept of Appeal in International Dispute Settlement 55
72
I elaborated on this in ‘Towards a Transdisciplinary Discourse’, supra note 24.
73
Hu, ‘The Role of International Law in the Development of WTO Law’, 7 J Int’l Econ L (2004) 166. Accord-
ing to Teitel, the present shift in international law ‘complements the prevailing state-centered approach
and its attention to the protection of state borders with an approach that is predicated on alternative
humanitarian concerns’: supra note 11, at 370. Nevertheless, she cautions that control may be lost in
the process for ‘humanitarianism walks a thin line [and] threatens to “erode the human rights discourse
and value system”’: at 387.
56 EJIL 19 (2008), 43–65
ICJ),74 the recent decade signals a revolutionary change. Thus, while in practice we
do adopt municipal concepts and transplant them into the international legal envi-
ronment, we are still reticent to admit so theoretically. Such confession75 would force
us to face the inherent paradox of our identity as members (citizens) of sovereign yet
distinct collective units.76
The pursuit of reconciling the tension between the national and international is not
new. International law has incorporated domestic law models only with great reluc-
tance, half-heartedly, and therefore in an inconsistent, unclear, and uncertain manner.
74
‘The transposition of the appellate function to the international arena is a relatively novel development.
There have been few examples of international tribunals exercising an appellate review over interna-
tional judicial bodies. … Since there is no general guidance in international law on such matters as the
scope of the appellate function the nature of appellate procedures and the role of appellate judges, the
practice in the WTO appellate review is particularly contributory to the development of international
jurisdiction’: ibid., at 164–165. ‘[T]he WTO Appellate Body had few models on which to draw’: McRae,
‘What is the Future of WTO Dispute Settlement?’, 7 J Int’l Econ L (2004) 14.
75
For instance, that ‘[a] closer approximation to a domestic model would mean better transparency
through opening proceedings to the public and a more coherent basis for an intervener or amicus brief
process. It would also mean that the litigation process could be enhanced by the addition of alternate
forms of dispute resolution, such as mediation, as an integral part of the litigation procedures. Or it could
lead to the development of alternate forms of dispute resolution that could take the place of litigation’:
ibid., at 21. It is perhaps noteworthy that the Ontario Superior Court of Justice opined that ‘[m]ost, if not
all, international commitments entail some compromise of sovereignty’: The Council of Canadians, and
Dale Clark, Deborah Bourque, and George Kuehnbaum on their own behalf and on behalf of all members of the
Canadian Union of Postal Workers, and Bruce Porter and Sara Sharpe, on their own behalf and on behalf of all
members of the Charter Committee on Poverty Issues v. Her Majesty in Right of Canada, as represented by the
Attorney General of Canada, Court File No: 01-CV-208141, 8 July 2005, 17. Reported as R. v. Council of
Canadians, 2005 CanLII 28426 (Ont SC).
76
The paradox becomes further pointed when enforcement is being sought. For instance, under the New York
Convention on the Recognition and Enforcement of Arbitral Awards, 1958 (330 UNTS, Art. III, available
at: http://faculty.smu.edu/pwinship/arb-31.htm), the court of the enforcing country must follow a pre-
scribed standard of review. There are, however, ‘deviations’, e.g. the US provides in its Federal Arbitration
Act for an additional ground, namely ‘manifest disregard of the law’: Bjorkland, supra note 10, at 505.
77
Giving rise to the notions of ‘de-bordering’ and ‘post-nationalism’. See also Teitel’s discussion of ‘humani-
tarianism’, especially regarding the shifting interpretation of extra-territorial jurisdiction: supra note 11.
78
C. Cutler, Private Power & Global Authority: Transnational Merchant Law in the Global Political Economy
(2003).
79
Friedrichs, ‘The Neomedieval Renaissance: Global Governance and International Law in the New Middle
Ages’, in I.F. Dekker and G.W. Wouter (eds), Governance and International Legal Theory (2003).
The Concept of Appeal in International Dispute Settlement 57
and institutions ‘upwards’, to the inter-national macro level. On the other hand, the
neo-medieval approach, which seeks to reconcile tensions arising from the plurality
of collective state and non-state actors, offers a different mixed re-conceptualization of
sovereignty. Both approaches, however, are reflections of a broader reality in which
the private international commercial Law Merchant (lex mercatoria), with sources in
the Middle Ages – and the burgeoning humanitarianist regime – are de facto trans-
forming international law into what some have termed transnational law.80 These
developments occur in an ad hoc and haphazard (and regime-specific) manner and are
80
Which consists, at the end of the day, of the incorporation of municipal models within the international
realm, e.g. alternative dispute resolution (ADR) (K.-P. Berger, Formalisierte oder ‘schleichende’ Kodifi-
zierung des nationalen Wirtschaftsrecht. Zu den methodischen und praktischen Grundlagen der lex mercatoria
(1996)) or evidentiary rules from national criminal legal systems.
81
‘Given these concerns [“some extant public scepticism about the wisdom of ad hoc arbitral bodies decid-
ing matters of potential public import”], it is not surprising that calls for a standing “appellate body” for
arbitration are gaining in both volume and vigour’: Bjorklund, supra note 10, (both) at 510.
82
‘An arbitrator is not called upon to make detailed analysis of the legal principles canvassed before him
or to review in any detail the legal authorities cited’: Bingham LJ (as he then was), quoted in Helfer and
Slaughter, ‘What States Create International Tribunals: A Response to Professors Posner and Yoo’, 93
California L Rev (2003) 35.
83
To be sure – only partly. In municipal law, arbitration is arbitration whether the process is governed
by one arbitrator or by a panel of several arbitrators. However, in international law, lawyers have been
distinguishing panel proceedings from arbitration, arguably reiterating the language in the treaty pro-
visions establishing these proceedings. Substantively, there is no essential difference. See also Gal-Or,
‘NAFTA Chapter Eleven and the Implications for the FTAA: The Institutionalisation of Investor Status in
Public International Law’, 14 Transnat’l Organisations (2005) 121 (hereafter: Gal-Or (d)).
58 EJIL 19 (2008), 43–65
84
See Vagts, ‘The International Legal Profession: A Need for More Governance?’, 90 AJIL 250.
85
I am providing here several examples only because an abundant analysis of the problem, and various is-
sues it gives rise to, is easily retrievable in the literature: e.g. Steinberg, ‘Judicial Lawmaking at the WTO:
Discursive, Constitutional, and Political Constraints’, 98 AJIL (2004) 247; Kennedy, ‘Parallel Proceed-
ings at the WTO and under NAFTA Chapter 19: Whither the Doctrine of Exhaustion of Local Remedies in
DSU Reform?’ (2006) (unpublished, on file with the author).
86
For the sake of the argument, and because it is beyond the scope of this article, I am leaving aside the
question of which type of system – civil or common law. For instance, regarding the WTO system it has
been noted that ‘[s]ince the WTO system is a self-contained system of rules codified in the covered agree-
ments, it resembles a civil law code. To the extent that panels and the Appellate Body look beyond the
specific rules of the covered agreements to principles of public international law, their process is more
akin to that of a common law court seeking to ascertain the content of common law’: McRae, supra note
74, at 8.
The Concept of Appeal in International Dispute Settlement 59
system, as a template for adoption.87 Consequently, also for the purpose of appeal, the
litigation model was side-stepped in favour of an alternative, non-existent in munici-
pal ADR, hence yet untested system.88
To be sure, in the municipal ADR system which provides for staggered levels of
finality (e.g. within administrative adjudicatory systems), the ultimate authority for
finality still remains within the court system (e.g. contesting the jurisdiction of an
arbitral tribunal). International law drafters, however, have adopted only part of the
municipal system and inserted it within a new appeal formula.89 Thus, they preserved
87
It should be noted that the ADR system is rooted in the logic of private contract, and administrative, law,
which form an integral part of the municipal system. This is not the case in international law, where until
recently a relatively clear demarcation separated the private from the public realm of law. The distinction
between contract and treaty (concession agreement and bilateral investment treaties (BITs)) is important
in this context, however beyond the scope of this article. See Waelde, ‘The “Umbrella” (or Sanctity of
Contract/Pacta Sunt Servanda) Clause in Investment Arbitration: A Comment on Original Intentions
and Recent’, BIICL Paper (2004) (on file with the author).
88
Another myth consists in attributing a different meaning to terms that largely denote the same thing:
alternative dispute resolution, alternate dispute resolution, and ‘simply’ dispute resolution (dropping the
‘alternative’) which intends (among other things) also to distinguish the approach when employed in the
international, as compared with the municipal, system.
89
Another aspect of finality relates to enforcement, where courts are endowed with powers to enforce the
arbitral award.
90
‘In many respects the international model of dispute settlement has been one of alternative forms of dis-
pute settlement, involving “good office”, conciliation and mediation, and DSU Article 5 provides for such
processes. [and yet it summarises the idea that the WTO, unlike other models, does not make it clear that
its DR is “alternative”]. The place of alternative forms of dispute settlement within the WTO dispute settle-
ment process is unclear. … In this regard, domestic law experience in forms of dispute resolution developed
as an alternative or supplement to litigation needs careful consideration’: McRae, supra note 74, at 9–10.
91
Bjorklund acknowledges this concern as central to the investor–state arbitration system suggesting that
‘the possibility of appeal, of which most losing parties would be likely to avail themselves, would put an
end to any advantage still retained by arbitration’: supra note 10, at 513.
92
‘Should there, then be an appellate tribunal for investor–state or similar arbitrations, along the lines of
the Appellate Body established pursuant to the Understanding on Dispute Settlement of the World Trade
Organisation? There is a good deal to be said for such a suggestion … for a closed system, such as the
three-member NAFTA, creating a standing appellate tribunal would be easier’: Lowenfeld, supra note
60 EJIL 19 (2008), 43–65
69, at 23–24. And yet, ‘[a]s an arbitrator, I would like to be able, with my co-arbitrators, to decide the
controversy before us, without finding out a year later that what we had carefully worked out in crafting
our award was overturned by a higher instance that almost certainly had not given as much attention to
the case as my fellow arbitrators and I did. … But in the end, I am stuck with the question …: Who elected
me? Who elected us? Who elected them?’: ibid., at 25.
93
Regarding the WTO AB – enhanced transparency, amicus curiae; regarding the NAFTA Chapter Eleven
– the joint interpretative statement of the Commission (Notes of Interpretation of Certain Chapter 11
Provisions, NAFTA Free Trade Commission, 31 July 2001, available at www.dfait-maeci.gc.ca/tna-nac/
NAFTA-Interpr-en.asp; regarding ICSID see supra note 3).
94
See Koskenniemi regarding the purpose of legal interpretation and reasoning, supra note 11 at 24, 25.
While the report’s second conclusion cautions against rising expectations regarding coherence and co-
ordination – ‘no homogenous, hierarchical meta-system is realistically available to do away with such
problems’ (ibid., at 249), the future work of the Study Group to be based on the Vienna Convention on
the Law of Treaties (available at: http://web.archive.org/web/20050208040137/http://www.un.org/
law/ilc/texts/treatfra.htm), and the emphasis on the further conceptualization of regimes and general
international law, may prove remedial and reformative.
95
In the sense of reflecting norms which encourage voluntary compliance.
96
This discussion is beyond the scope of the article. See, for instance, Steinberg, supra note 85.
97
Franck, supra note 21; ‘Private vs. Public International Justice’ and ‘Outsourcing of Justice’, supra note
21.
The Concept of Appeal in International Dispute Settlement 61
for multiple proceedings within their closed systems as well as between the two
systems.98 The outcome contradicts the expectation for justice for it falls foul of
the promise of ADR proceedings to deliver closure, certainty, and efficiency. More-
over, the current state of international trade and investment law sends the parties
back to the municipal system for clarification purposes (US International Trade
Court) and enforcement of awards.99 Nevertheless, because treaties had already
adjusted ADR provisions to meet international requirements, e.g. specifications
limiting the contractual scope of the ‘alternative’ adjudication agreement (juris-
Arguably, in the long run, incorporating the principle of lis alibi pendens (postulat-
ing succession and not paralleling of proceedings) and electa una via (regarding choice
of jurisdiction) will move the legal trade and investment DS regime (as well as other
legal regimes) a fraction closer to meeting the onus of the principle of res judicata.103
It may contribute to the establishment of a de facto hierarchy of adjudicative bodies,
based on the types of disputes they are empowered to handle.104 This would be a step
forward towards an eventual legalization (constitutionalization?) of such order.
• Horizonal consistency – stare decisis. Another factor in revamping the international
legal system relates to the need to reform the type of forum. That ‘there is a distinct
98
Other notable examples of parallel and conflicting jurisdictions but which apply to investor–state DS are
the Amco Asia and CME cases thoroughly analysed by Bjorklund, supra note 10.
99
E.g., Sosnow et al., supra note 23.
100
For instance, an essential difference is that in international law the parties to a panel proceeding are
bound by the terms of the treaty governing DS. They do not re-negotiate a new ‘arbitration’ agreement
with every new dispute, as is often the case in municipal law.
101
Which represents yet another problem, namely the empowering of international tribunals to examine
national law.
102
Sosnow et al., supra note 23, at 138.
103
Different tribunals require different adjustments. For instance, the relationship between the WTO AB
negative or reverse consensus rule (barring rejection of decision) and the possibility for overturning WTO
AB decisions (by rendering the consensus obsolete due to amendments to treaty provisions regarding
which the tribunal expressed itself, or by issuing a majority ‘authoritative interpretation’ of the provision
in accordance with Art. IX.2 of the WTO agreement) (McRae, supra note 74) represent yet another area
which will require res judicata relevant correction.
104
An analogy may be the federal court system. ‘Dividing departments of law to match that sort of opinion
[compartmentalization] promotes predictability and guards against sudden official reinterpretations that
uproot large areas of law, and it does this in a way that promotes a deeper aim of integrity [and] allow
ordinary people as well as hard-pressed judges to interpret law within practical boundaries that seem
natural and intuitive’: Dworkin, supra note 17, at 252. Shany makes some relevant suggestions under
‘increased judicial co-operation’: supra note 14, at 278–281). ICSID appellate body drafters were aiming
at exclusivity of this body: Bjorklund, supra note 10.
62 EJIL 19 (2008), 43–65
need to place greater precedent value on NAFTA decisions … [to discourage] unnec-
essary litigation by permitting issues to be tried and re-tried by the same parties
on the same facts and legal issues’105 implies a retreat from ADR in favour of court
litigation, teleology, and an end to public international law’s denial of stare decisis.
ADR’s constitutive principle dictates that whether arbitration or other method
(e.g. facilitation, negotiation, mediation) – each set of proceedings in any par-
ticular case represents an independent unit in itself and bears no consequences
for other cases; none of these various proceedings constitutes a precedent and is
105
Sosnow et al., supra note 23, at 139.
106
E.g. in investment disputes.
107
‘WTO dispute settlement contrasts with domestic dispute settlement processes where the dividing line
between public access to pleadings and oral proceedings and the right to intervene and make submissions
is clear’: McRae, supra note 74, at 12.
108
Particularly regarding submission of amicus curiae briefs.
109
Gal-Or (d), supra note 83.
110
It therefore comes as no surprise that the EU and Canada have made suggestions with regard to the
creation of a WTO standing body of professional panellists: ‘Private vs. Public International Justice’ and
‘Outsourcing of Justice’, supra note 21.
The Concept of Appeal in International Dispute Settlement 63
111
‘Effective’ in the context of this article is interpreted as authoritatively final. Dependent tribunals are ‘ad
hoc tribunals staffed by judges closely controlled by governments through the power of reappointment or
threat of retaliation’, whereas independent tribunals are ‘staffed by judges appointed on terms similar to
those in the domestic courts’: Helfer and Slaughter, supra note 82, at 5–6. The softwood lumber dispute
brings several of these distinctions – and their presumed benefits – into question, e.g. the argument that
bilateral disputes are more suited for dependent international adjudication: ibid., at 42, 43. For lack of
space, I will not comment on this question here.
112
Or arbitrators, panellists.
113
Helfer and Slaughter refer among others to Robert O. Keohane’s classification of dependence: supra note
82, at 9–10.
114
See Raustiala, ‘Form and Substance in International Agreements’, 99 AJIL (2005).
115
‘The most familiar type of review structure is a court. Third-party adjudication strikes many lawyers as
an essential component of a legal system. Yet the international legal system is distinguished by the rarity
of courts and the weakness of those that exist. In practice, most agreements neither create courts nor
employ sanctions as enforcement tools. The dispute settlement clause in many of the agreements that
do contain it has never been invoked. In addition, international courts clearly lack the authority and
coercive bite of domestic courts. Yet the number of international courts is rising. … No matter which the-
oretical approach one favours [to explain choice of structure], the empirical impact of different structures
should be understood. Yet the dearth of research on this topic makes any such claims tentative’: ibid., at
605–606.
116
I refer here to the quality of the judicial decision which, among other things, serves also to induce compli-
ance, and which should not be confused with actual compliance and enforcement.
117
‘Consider the procedures by which states appoint judges and tribunal members. Often these appointment
rules differ radically from the formal appointment rules specified in the agreement establishing the court
or tribunal. The Appellate Body provides a notable example’: Helfer and Slaughter, supra note 82, at 49.
However, the deviation may be intended to enhance independence: ibid. See also Steinberg, supra note
85.
118
C.L. Ostberg and M. Wetstein, Attitudinal Conflict in the Post-Charter Canadian Supreme Court (on file with
the author).
119
‘In general, the analysis here suggests that concerns about reputation, credibility, and uncertainty often
lead states to negotiate international commitments that may be legally binding but are shallow and lack
strong review structures. As a result, compliance with these commitments may be high, but their impact
on actual behaviour is low’: Raustiala, supra note 114, at 609. While Raustiala deplores the ‘overly deep
contract’ (at 613) of the WTO, I locate the major problem in the fuzziness of the contract.
64 EJIL 19 (2008), 43–65
over time, fill in the above-mentioned standards by way of joint interpretations and
clarifications by the parties, and based on their satisfaction with the tribunal’s
jurisprudence.120
• Conflict of interest. A source of pressing concern is the disturbing re-occurrence of
conflict of interest which falls foul of the imperative of legitimacy, independence,
impartiality, accountability, and transparency121 underlying any public adjudica-
tive body and process. Conflict of interest and credibility arise in investment disputes
6 Conclusion
‘The undesirable phenomenon of ambiguity rising from the multiple use of the
same term could be avoided by a new and separate terminology for each and every
120
The lack of democratic legitimacy is, of course, an underlying subject of concern which is raised in mat-
ters ranging from the appointment of judges to the controversy regarding whether judges interpret or
also create law. The American approach of elections of judges is not the sole option and yardstick for
democracy. See Pauwelyn, ‘The Transformation of World Trade’, 104 Michigan L Rev (2005) 1, for a
detailed discussion of these issues including legitimacy and Steinberg, supra note 85, for the role of power
politics in international DS.
121
Principles listed in Mann et al., ‘Comments on ICSID Discussion Paper, “Possible Improvements of the
Framework for ICSID Arbitration”’, International Institute for Sustainable Development (IISD), Dec.
2004, available at www.iisd.org.
122
Howard Mann reports about a 2004 conflict of interest case heard by the Dutch District Court in The
Hague relating to the doubling of functions of a person – once as arbitrator in an investor–state case, the
other as counsel in another case addressing relating legal issues. According to Mann, ‘[t]he Dutch case is
clearly just the first known instance of many such challenges to come’: ‘The Emperor’s Clothes Come Off:
A Comment on Republic of Ghana v. Telekom Malaysia Berhard, and the Problem of Arbitrator Conflict of
Interest’, TDM 2004, available at: [email protected] or www.howradmann.ca, at 5. Similarly, ‘I think
the distrust of arbitrators disclosed in the episode of the NAFTA “clarification” may be well more wide-
spread than we – i.e. the international arbitration community – want to admit’: Lowenfeld, supra note
69, at 16, which raises also issues regarding conflict of interest: ibid., at 17–20.
123
Mann et al., supra note 114, at 13.
124
Ibid. See also New Amendments to the ICSID Rules and Regulations and the Additional Facility Rules,
effective 10 Apr. 2006, supra note 3.
The Concept of Appeal in International Dispute Settlement 65
125
Harnon, supra note 35, at 552.
126
See Bjorklund for an analysis of the pros and cons of an appellate body in investor–state disputes: supra
note 10.