Examination of Witness (Questions 427-439)
Thursday 8 May 2003
MR FRIEDER
ROESSLER
Q427 Chairman: As I am sure has been
explained to you, we are a committee of the House of Commons that
focuses very much on international development, so we monitor
and scrutinise Clare Short's department. We have been interested
in the Doha Round, by way of its impact on development and the
WTO. We would be very interested to know a little more about the
mechanics of this Centre and also about the mechanics of WTO dispute
procedures. Do they work on the basis of precedents? What is the
working language? How do they function? Who adjudicates? You clearly
help developing countries. Do you have your own team of in-house
lawyers or do you get specific lawyers for particular topics?
Who appears in these disputes? Is there a body of international
lawyers? We would be interested in the mechanics of all of that,
before we go on to some other questions, if you would not mind.
Mr Roessler: I would be very happy
to do that. The Centre was established in order to help developing
countries deal with the complexities of WTO law and WTO dispute
settlement procedures in particular. Under the old GATT, the dispute
settlement procedures were relatively simple. Everything was consensual
and there was a strong diplomatic element in the procedures, and
developing countries could relatively easily handle those procedures.
In the meantime, however, things have become so complex; even
we cannot answer all the legal questions, because WTO law is laid
down on 22,000 pages. It comprises the whole of the legal history
of the GATT that is part of the WTO law. Therefore, every time
you give advice you have to check the whole 50-year history of
the world trade order, and all of the agreements that were concluded
at the conclusion of the Uruguay Round. The dispute settlement
procedures are complex because they are now binding dispute settlement
procedures. A panel, normally composed of persons agreed between
the parties, but more and more frequently composed of persons
nominated by the Director-General of the WTO, initially examines
the matter; then presents an interim report which can be commented
upon by the parties; then there is a review possible by a standing
body, the Appellate Body. That is a body composed of seven members
nominated by consensus by the membership of the WTO. That body
only reviews legal issues, not factual issues. Once these procedures
are over, there may be a dispute on the period of implementation
available to you. An arbitration procedure is available to settle
those disputes on the implementation period. Finally, there may
be cases—and that has arisen in about 5% of the total of
the cases—of non-implementation, in which case you have
the right to retaliate. As you may have read in the newspapers,
the EC has just received a very generous right to retaliate in,
I would say, an almost enormous proportion against US trade, because
of the failure of the United States to implement a ruling on export
subsidies granted by the United States. There may be disputes
about the amount of retaliation for which you requested authorisation.
Again, there is an arbitration possible. Effectively, therefore,
there are four different procedures in which legal advice is required.
It is easy to understand that a developing country that is only
infrequently involved in disputes does not have the legal expertise
that the United States or the EC have, which both have a team
of several dozens of lawyers exclusively dealing with WTO law.
That creates an imbalance in the possibility to invoke rights
of the WTO, and the Centre was created to ensure that this playing
field is levelled again. How do we operate? We now have a team
of seven lawyers that assists developing countries by providing
legal expertise outside dispute settlement, and by acting as the
advocate for the developing countries in the dispute settlement
procedures. Sometimes, when the interests of two members of the
Centre are in conflict, the Centre will have to decide which of
the two parties it supports. Its practice is to support the one
who comes first, and the other one will be given legal assistance
through external legal counsel. This has happened only once so
far, namely in the dispute brought by India against the GSP of
the EC. There, the beneficiaries of the preferences that are being
challenged by India wanted to make a third party submission. We
had to hire an external legal counsel to provide that support,
because we could not provide support to two parties with diverging
interests in the same legal proceeding. However, of the 12 cases
in which the Centre has been involved, this problem of conflicts
of interests has so far arisen only once. The reason for this
is that most of the disputes we are asked to be involved in are
disputes of a North-South nature. Since developed countries do
not have access to our services, the question of conflict of interest
does not arise in that case. The Centre has a relatively complex
legal institutional structure. There is the staff, headed by an
executive director—myself—and my immediate supervisor
is a management committee composed of seven persons. We have a
representative from the least developed countries. The least developed
countries do not have to be members, but nevertheless can be institutionally
represented and are also entitled to our services. They are even
entitled to our services on a priority basis. Above the Management
Board is the General Assembly. There is also an auditor who looks
into our books every year. I think that there are more people
controlling than those who are controlled! So you can be confident
that the aid that your government has given by becoming a member
of the Centre is properly used. Perhaps I may conclude with some
things that we are currently doing at this very moment. I have
just come back from the luncheon that we organise on an annual
basis, where we invite an eminent speaker. This time it was Professor
Ellerman, who held important positions in the European Commission
and was also a former Appellate Body member, who spoke. Altogether,
60 people came to listen to him. Of course, this is somewhat of
a public relations exercise for us. By this means we want to make
the Centre better known among the members of the WTO. What have
I done this morning? With colleagues, I set about preparing the
oral statement of India in the dispute involving India and the
EC on the EC's drug regime, which provides for preferences to
Latin American countries and Pakistan.
Q428 Chairman: The drug regime?
Mr Roessler: Yes, it is called
a drug arrangement. Another colleague is analysing a request by
Oman regarding subsidy practices of another country, and they
want us to find out whether or not those subsidy practices are
consistent with WTO law. We are also examining whether an appellate
review of a panel report which has just been issued would be appropriate.
Two of my staff members are now in their offices, examining that
particular issue. A few weeks ago, we completed a training course
which we have given over a six-month period on every Thursday
during the lunch hour. Altogether, 22 delegates came here to receive
lectures on the dispute settlement procedures of the WTO. It is
a very detailed course, where the persons here in the missions,
responsible for dealing with dispute settlement, can inform themselves
on the dispute settlement procedures. These are just a few of
the examples of what is being done in this institution. We have
existed for less than two years. At the beginning, I was here
all by myself with my office manager. I felt like a young dentist
who has just opened his office and who is waiting for clients!
But clients poured in, and now I am very happy to be assisted
by a competent staff that is gaining enormous experience. I think
I can say that there is perhaps nowhere outside the WTO where
so much expertise in WTO law is concentrated, and accessible to
developing countries.
Q429 Tony Worthington: Starting from
where you finished, when we came here three or four years ago
you did not exist, and everyone was talking about the need for
much better-quality assistance to developing countries in coping
with the WTO. Since then, a great deal has happened, and you are
one response. Should we build upon you, in the sense of, is this
the right model? Obviously, you will say yes, but why are you
the right model? I know that DFID has funded particular projects
and so on. Is it right, for example, to bring together all the
forms of assistance that are available to under-resourced developing
countries and bring it into a coherent framework?
Mr Roessler: About three months
ago, I was in South Africa and was asked to answer exactly that
question. The South African Free Trade Area has established a
centre that also provides advice on legal matters involving trade
in the South African region. One of their questions was whether
that should be extended to legal advice in dispute settlement
procedures, and whether this model that we provide could be extended
to them. In that context, I prepared a paper in which I evaluate
the various legal forms that now exist to provide assistance to
countries that are too poor to pay for lawyers in dispute settlement
procedures. There is the model of the International Court of Justice,
which has a trust fund to finance the lawyers defending the interests
of developing countries before the International Court of Justice.
There the model is that the UN Secretariat has at its disposal
a trust fund and disburses money, and there is a panel that reviews
to what extent the fees charged by lawyers are reasonable. I believe
that one of the disadvantages of that formula is that you resolve
the immediate problem of the developing countries, namely to defend
themselves effectively in a case before the International Court
of Justice, but you do not transfer legal expertise to them. We
conceive of our task not only as helping the developing countries,
but to help them learn by doing and to give them courses. It is
a combined effort to resolve the immediate problem and, indirectly,
to make ourselves superfluous in the long run, by transferring
our expertise to them in that process. That is a long-term proposition,
of course, but that is the basic idea. Another model in the WTO
is simply to ask the WTO Secretariat to deal with the matter.
In fact, the dispute settlement procedures of the WTO state that
the WTO Secretariat shall provide legal assistance—however,
subject to a very important proviso, namely that the WTO Secretariat
does not impair its impartiality in that process. That effectively
means that it cannot defend the interests of one member against
another; that, while it can give legal information prior to a
dispute settlement proceeding, it cannot institutionally do what
we are doing. In a way, we step in where the WTO Secretariat cannot
go further. That model, therefore, is not transposable and has
its severe limits. The African Group has proposed, in the discussions
on the reform of the dispute settlement procedures that are currently
taking place, that funds may be made available to the WTO Secretariat
which could then be used to hire lawyers. However, I believe that
proposal overlooks the fact that you cannot simply create a fund.
The fund has to be administered. There must be a body that decides
how much money can be spent on a case, and whether or not a case
is frivolous. Therefore, effectively you would have to establish
an institutional structure around such a proposal to establish
a fund within the WTO which would ensure independence in the distribution
of the funds. Who can administer such a fund? Probably only people
who are familiar with WTO law. In the end, you would probably
have something like the Advisory Centre established once more
in the WTO. I think that one of the main limitations of the model
that we are following is that it creates problems when there are
disputes between two members. About a quarter of the disputes
currently are between developing countries. The countries most
involved in those disputes, however, like Brazil, Chile or Mexico,
are not members. So this phenomenon has not really given rise
to problems. If one were to extend this and these countries also
became members, however, the inherent limitation in this model
would become more severely felt. So each of these models has its
advantages and disadvantages. I think that the Centre's model
has a very important role, in any case.
Q430 Mr Battle: I wonder if I could
ask a question about the WTO governance and its capacity, particularly
for poor countries. In the conversations I have heard today, I
have the impression more and more that it is really bilateral
negotiations and people struggling to hold what they can—so
the powerful will always win. What is the reality of the hard
bargaining capacity in an organisation where there are massively
unequal partners within the whole organisation? How would the
notion of "development round" be compatible with that
inequality in capacity to negotiate?
Mr Roessler: You are raising a
very fundamental issue which really goes beyond the scope of the
functions of this Centre. My own view on this is that, as long
as the rules of the WTO are generally applicable and can be invoked
by anybody, the developing countries will very often benefit from
the enforcement of rules of others. To give you an example, when
the United States violated a generally applicable rule of the
GATT, prohibiting customs' user fees that go beyond the costs
of the services rendered, all countries were affected by this.
Canada and the EC complained. The developing countries simply
benefited from the implementation of that report. In other words,
in a system of generally applicable rules, enforced by neutral
judges, the differences are attenuated. I believe that the moment
there is discrimination, either in favour or against developing
countries, their lack of bargaining power comes to the surface.
For instance, they benefit from the GSP—the generalised
system of preferences—where preferences can be withdrawn
at any time and, for many reasons, have been withdrawn at any
time. For instance, if India and the United States have a dispute
on intellectual property rights and the United States says, "You
will no longer get any GSP unless you do this", then of course
the result will be determined on the basis of the inequality in
the bargaining position. But if you have the invocation of a generally
applicable rule, or the violation of a generally applicable rule,
then I think that the way the WTO dispute settlement procedures
operate help tremendously to attenuate that difference.
Q431 Mr Battle: Even in my own neighbourhood,
a person who can afford a very good lawyer and barrister may have
more power and weight than someone who cannot get a lawyer at
all. There then have to be the resources to get them to the court,
to balance it in some way. Then you can say that the rule of law
is neutral; but, without those balancing factors, how can it be
done?
Mr Roessler: Absolutely, and what
we do is comparable to what happens within states, where poor
persons who might be accused of a crime will get a lawyer to defend
their interests. I do not know whether that eliminates all inequalities.
Q432 Mr Battle: Will you, from your
experience, be advocating changes within the structure of the
operations or processes of the WTO, to say, "It could run
better by doing this"?
Mr Roessler: Maybe this is because
of my age, but I think that one has to take into account that
there are realities out there. If you change the rules of the
WTO in a particular manner which completely ignores those realities,
you will achieve nothing. Whereas if you attempt to do what I
think is being done, namely to attenuate the effect of those realities,
you can achieve something. Therefore, I think that if one goes
all the way, one may achieve nothing; if one goes halfway, one
may achieve a lot.
Q433 Mr Battle: You emphasise the
word "attenuate".
Mr Roessler: Yes.
Q434 Mr Battle: One last question.
If there is a dispute and the dispute is then to be settled in
favour of one nation state against another nation state, is the
penalty in the form of a fine? I sometimes read that it is in
the form of a fine. Who gets the money?
Mr Roessler: There is no fine
under the current procedures. There is a proposal that fines be
imposed or that monetary compensation be paid to developing countries
and least developed countries that have won a case, and where
the developed country has not implemented. However, I believe
that this proposal by itself also creates an enforcement problem.
How do you enforce the payment if the original ruling is not implemented?
Moreover, it creates the danger of large countries simply buying
themselves out of their obligations towards the developing countries.
This proposal to have fines is a very old one, made for the first
time about 30 years ago. For these two reasons, however, I think
that it has never been accepted. I do not believe that this current
emphasis in the discussion on the DSU, on the remedial actions
that can be taken in the case of non-implementation, is really
warranted. There have been serious cases of non-implementation,
but they have not been numerous. They are the ones you read about
in the newspapers, because newspapers never report that the trains
are on time—and the trains are on time most of the time!
In about 95% of the cases there have been no disputes. I think
that the record of the WTO is extraordinary, compared with the
record of other legal systems. I once read a parliamentary report
that a third of the rulings of the EC Court of Justice are not
being implemented. Of course, EC law is largely implemented through
domestic courts; but, to the extent that there are disputes between
members, the implementation rate has been very unsatisfactory.
The implementation rate within the WTO is also higher than the
implementation rate resulting from the rulings of the International
Court of Justice. There too, about a third of the cases are not
being implemented. Apparently the money in the famous Corfu Channel
case has still not been paid. I believe, therefore, that one overemphasises
this aspect of the procedures. They are important, but they have
not been important in many cases. What I believe is rather worrisome
is that, right now, the cases of non-implementation are concentrated
in the United States. It is all cases where I personally have
very little sympathy for non-implementation, because it is all
money that is involved—money for big companies. The benefits
of getting subsidies for companies involved and dumping procedures
are issues. Money that mainly large multinational firms have benefited
from, under the export subsidy scheme that was found to be inconsistent.
I have very little sympathy for them. I have a little more sympathy
when the EC is reluctant to implement the hormones case, where
the panel found that the EC could not, without advancing scientific
evidence, prevent the importation of meat produced with hormones.
There, it is not money but the perception of the population that
constrains the politicians. But the situation in the United States
is worrisome, and sad at the same time.
Q435 Mr Walter: We talked about fines,
but let us look at the scenario of a case where you were, let
us say, defending the interests of a developing country or a series
of developing countries, and you lost. Could compensation be awarded,
in terms of costs? Can they say that the costs of the developed
country have to be met? Vice versa, if there is a dispute that
you win, can you recover your costs from the developed country?
Mr Roessler: That has been proposed
but it does not exist under the current rules. Under the current
rules, there are no fees charged by the WTO for the proceedings.
It is not like in a domestic court, where the first thing you
have to do is pay, before they even accept your plea. That is
not the case in the WTO. The other rule is that each party bears
its own legal costs.
Q436 John Barrett: The negotiating
capabilities of developing countries must very much depend on
them knowing that they have the legal support, which you mentioned
earlier on, to deal with the complexity of WTO law; but you also
mentioned that the US and the EU can have teams of dozens of lawyers
dealing with this. Is strengthening your own hand something that
will need to be thought about in the near future? You may be able
to offer assistance, but if you have this sort of supercharged
team to cope with on the other side, is the balance still very
uneven?
Mr Roessler: We do not help in
negotiations. Our task is to help on legal matters and in dispute
settlement procedures. In other words, our domain is the existing
law, not the law to be negotiated. I think you are right that
the inability of developing countries in these areas is tremendous.
They often have difficulties. First, in getting the information
required to develop a national position, to define views; also,
in the institutional capability of defining what your national
position on a particular issue should be; then the power to assert
those views within the negotiations. Here again, it helps if things
are generalised. Norway is also a small country and they have
never complained that they are being left out, because in many
instances other countries are negotiating for them and they just
reap the benefits of the results. As long as you have a strict
application of the most favoured nation principle, these inequalities
are reduced. However, they are increased by the fact that negotiations
are now product-specific and tend to concentrate on products that
are of interest to the more powerful countries. The highest levels
of protection are still found in the area of agriculture and textiles—which,
of course, is not only related to the unequal power relationship
in the negotiations. It is also related to unequal power relationships
within the countries that adopt these protectionist measures.
Obviously, farmers are very powerful, and more powerful than consumers.
That power relationship may more effectively explain why the structure
of trade liberalisation tends to be unfavourable for developing
countries.
Q437 John Barrett: Advice during
the dispute settlement procedures is one thing, but advice before
problems get to that stage—are you able to offer countries
advice at an early stage, to avoid conflict later on?
Mr Roessler: Yes, absolutely.
In our short existence, we have already prepared 35 written legal
opinions. I looked at the list the other day and there were six
cases where we analysed national legislation by developing countries
before it entered into force. One delegation made this public,
therefore I can mention that example here. Guatemala came to us
and asked whether a particular new law in the area of intellectual
property rights was consistent with WTO law. We looked at it,
came to the conclusion that it was not, and sent them a legal
opinion on this. They sent it home and, as a result, the president
did not sign the bill into law. There are already six such cases.
I find that type of activity particularly satisfying, because
you prevent the problem from arising instead of dealing with a
problem that could have been avoided. There have also been a number
of cases where we were asked to examine whether the countries
should be bringing a dispute at all. In two cases they came with
opinions by private lawyers, recommending that the case be brought.
We looked at these cases and came to the conclusion that it would
not be worthwhile. These cases made me realise that we provide
a very important service to the developing countries that I do
not think even the founders had in mind, namely the service of
providing a legal opinion that is not tainted by commercial interest.
A lawyer will always tell you to go ahead and try, because that
is how they make money. My staff do not earn more or less and
I do not earn more or less, depending on the number of disputes
we do. Of course, we happily do that but, if we come to the conclusion
that it would not be worthwhile bringing disputes, we say so,
objectively and openly. That is a service the developing countries
cannot buy. They cannot evaluate it themselves because they do
not have the legal capacity themselves, and they can buy that
service nowhere in the world. So far, we have the monopoly in
that particular area, and I consider that to be particularly important.
Q438 John Barrett: Is the proposal
to produce a fund for lawyers probably not a good idea, therefore,
because the fund will never be big enough?
Mr Roessler: At least that fund
would not resolve this issue. I could not imagine that a fund
for lawyers would operate in such a way that the countries that
used that fund had to pay nothing. Therefore, there will always
be a need to evaluate the chances of a success. We can provide
an objective assessment. Of course, we are not always right. There
have been cases where, to our great surprise, the ruling did not
come out the way we had expected. On the other hand, we recently
had a very satisfying experience. We were asked by a member, who
was being advised by a private lawyer in a case, to evaluate whether
or not they should appeal. The private lawyer had recommended
appeal on five issues. We recommended appeal on one issue. They
went ahead and appealed on three issues and, to our great satisfaction,
the Appellate Body found only on the issue on which we had recommended
an appeal. So they would have saved money if they had used our
advice, but they followed, at least partially, the advice of the
commercially motivated lawyer. That is very important, and I think
it is an important function that only an institution like this
one can provide.
Q439 Mr Khabra: At the moment you
are doing a wonderful job by providing legal counsel free of charge
on matters of WTO law to developing country and economy-in-transition
members, and all least developed countries. I would seek some
clarification from you on a proposal, which is that Article VI.4
of GATS requires countries to develop rules aimed at restricting
their domestic regulation to measures which are not more burdensome
than necessary. Who will ultimately decide, how, and in what forum,
whether regulations are "not more burdensome than necessary"?
Are you satisfied that the WTO is the right forum for such decisions
to be taken in?
Mr Roessler: You are quoting from
the GATS?
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