TradeLawGuide’s research tools are designed to comprehensively address the vital role of jurisprudence in the development of WTO law.

Governing Principles

The doctrine of stare decisis or binding precedent is not part of the WTO dispute settlement system. It is well settled that adopted panel and Appellate Body reports are not binding, except with respect to resolving the particular dispute between the parties. However, as stated by the Appellate Body in US – Shrimp (Article 21.5 – Malaysia) (paras. 107-110), adopted panel and Appellate Body reports must be taken into account where they are relevant to a dispute.

In US – Stainless Steel (Mexico) (paras. 158-160), the Appellate Body found that subsequent panels are not free to disregard the legal interpretations and the ratio decidendi contained in previous Appellate Body reports that have been adopted by the Dispute Settlement Body (DSB). It also found that the legal interpretation embodied in adopted panel and Appellate Body reports becomes part and parcel of the acquis of the WTO dispute settlement system. Further, ensuring " security and predictability" in the dispute settlement system, as contemplated in Article 3.2 of the Dispute Settlement Understanding (DSU), implies that, absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case. These findings were confirmed by the Appellate Body in US – Clove Cigarettes, US – Anti-Dumping and Countervailing Duties (China), and US – Continued Zeroing.

In US – Stainless Steel (Mexico) (para. 161), the Appellate Body also clarified that, while the application of a provision may be regarded as confined to the context in which it takes place, the relevance of clarification contained in adopted Appellate Body reports is not limited to the application of a particular provision in a specific case.

The foregoing review highlights two points. First, the findings and reasons in adopted panel and Appellate Body reports must be taken into account where they are relevant to a dispute. Second, in the case of adopted Appellate Body reports, in the light of the hierarchical structure contemplated in the DSU between panels and the Appellate Body (see e.g., US – Stainless Steel (Mexico) (paras. 161-162)), panels must follow the Appellate Body’s legal interpretations and ratio decidendi unless there are cogent reasons to do otherwise.

Ratio Decidendi and Obiter Dicta

The terms “ratio decidendi” and “obiter dicta” (singular: obiter dictum) are frequently used in the reasoning and arguments presented in WTO panel and Appellate Body reports. These terms were developed in the context of the common law legal system, wherein case law developed by judges has precedential value and, through the doctrine of stare decisis, is binding on future decisions.

While the doctrine of stare decisis is not part of the WTO system, the terms referenced above have been used as analytical tools to assess the relevance and the application of findings and reasoning in adopted Appellate Body and panel reports. For example, in US – Shrimp (Article 21.5 – Malaysia) (para. 107), the Appellate Body made the following statement concerning the ratio decidendi of its prior report:

Malaysia also objects to the frequent references made by the Panel to our reasoning in our Report in United States – Shrimp. The reasoning in our Report in United States – Shrimp on which the Panel relied was not dicta; it was essential to our ruling. The Panel was right to use it, and right to rely on it. Nor are we surprised that the Panel made frequent references to our Report in United States – Shrimp. Indeed, we would have expected the Panel to do so. The Panel had, necessarily, to consider our views on this subject, as we had overruled certain aspects of the findings of the original panel on this issue and, more important, had provided interpretative guidance for future panels, such as the Panel in this case.

Another example is provided in US – Gambling (para. 131), where the Appellate Body made the following statement concerning obiter dictum:

We disagree with the participants'' characterization of the Panel's' statement on " practice" , in paragraph 6.197 of the Panel Report, as a " finding" of the Panel. The Panel itself acknowledged that, in any case, Antigua was not challenging a practice, as such. In this light, the Panel's' statement on " practice" , in our view, was a mere obiter dictum, and we need not rule on it.

The ratio decidendi or ratio of a decision is the rationale, ground or reason of the decision. It is the legal principle upon which the decision is based. However, it is not always easy to identify. One must examine the principles of law underlying the decision which have been applied to the facts at issue. Under common law principles, the ratio of a decision is that part of the decision which has precedential value and is binding on future decisions.

The ratio is contrasted with obiter dicta or dicta (singular: dictum) which is the “other things said” (i.e., things other than the ratio) or “something said in passing”. It is often equated with academic or theoretical points of law. Under common law principles, dicta can be persuasive, but, since it is not essential to the decision, it is not binding.

Distinguishing Jurisprudence

Although developed in a common law system, the practice of distinguishing jurisprudence is useful in the WTO context. Distinguishing WTO jurisprudence means showing dissimilarities between the jurisprudence and the case at hand. The greater or more essential the dissimilarity, and the more material the distinctions are to the matter at issue, the less relevant the jurisprudence becomes. The corollary is that the more similar and less distinguishable the jurisprudence, the more relevant it becomes.

Jurisprudence is most often distinguished on the facts, but it can also be distinguished on the legal context or point of law.

In their arguments before panels, the Appellate Body, and arbitrators, parties often debate the relevance of particular jurisprudence to the case at hand. One party will cite jurisprudence as authority for a proposition, and the opposing party will try to distinguish this jurisprudence and argue that it does not support the proposition. For example, in their arguments to the Appellate Body in US – Tuna II (Mexico) (paras. 16, 53, 155, 162, 183, 197-198), the parties argued over the relevance of the panel and Appellate Body reports in EC – Sardines to the question of whether the “mandatory” element of the definition of “technical regulation” was met on the facts before the panel and Appellate Body.

Distinguishing jurisprudence relates to how jurisprudence should apply to the particular facts and circumstances of a dispute. This is different from deviating from the findings and reasoning in that jurisprudence because there are “cogent reasons”, even though the facts and circumstances are the same (see discussion of the Panel in India – Solar Cells (paras. 6.25-6.26 and 7.115-7.116)).

Questions& Answers

While adopted panel and Appellate Body reports must be taken into account where they are relevant to a dispute, and panels must follow adopted Appellate Body reports unless there are cogent reasons to do otherwise, certain questions remain unanswered.

When are adopted panel and Appellate Body reports “relevant”?

Relevancy must be judged on a case-by-case basis. Relevance will depend on whether and to what degree the jurisprudence can be distinguished from the case at hand. Where the legal issues and facts addressed in an adopted report are identical to those in the case at hand, the degree of relevance will be high. As the legal issues and/or the facts in the case at hand depart from those addressed in the report, the degree of relevance may decline. In some instances, legal interpretations in a report will be relevant, but the facts considered in the report will be sufficiently different from the facts in the case at hand that the application of the legal interpretation in the report will be less relevant.

What are cogent reasons to depart from legal interpretations and ratio decidendi in adopted Appellate Body reports?

The Appellate Body has not clarified what is meant by “cogent reasons”. The ordinary meaning of “cogent reasons” is reasons that are convincing and compelling. Cogent reasons could arguably include errors or omissions in legal analysis, evolution in relevant legal principles, and differences in facts and circumstances that affect the application of a particular point of law to the case at hand (e.g., a situation arises that was not foreseen when the original interpretation was rendered).

According to the Panel in United States – CV & AD Measures on Certain Products from China (para. 7.317), when faced with an interpretative issue that has already been resolved in an adopted Appellate Body report in another dispute, "cogent reasons" are reasons that could in appropriate cases justify a panel in adopting a different interpretation, would encompass, inter alia: (i) a multilateral interpretation of a provision of the covered agreements under Article IX:2 of the WTO Agreement that departs from a prior Appellate Body interpretation; (ii) a demonstration that a prior Appellate Body interpretation proved to be unworkable in a particular set of circumstances falling within the scope of the relevant obligation at issue; (iii) a demonstration that the Appellate Body's' prior interpretation leads to a conflict with another provision of a covered agreement that was not raised before the Appellate Body; or (iv) a demonstration that the Appellate Body's' interpretation was based on a factually incorrect premise.

In China – Rare Earths (para. 7.61), the Panel observed that where a party asks a panel to deviate from a prior Appellate Body finding on a question of law on the basis of novel legal arguments, a full exploration of those arguments may assist the Appellate Body in the event of an appeal, particularly where those arguments raise complex legal issues. The Panel referred to the ordinary meaning of "cogent" which is "[a]ble to compel assent or belief; esp. (of an argument, explanation, etc.) persuasive, expounded clearly and logically, convincing". The Panel considered that the expression "cogent reasons" may be understood as referring generally to a high threshold. The Panel referenced the following passage from the Appeals Chamber of the International Criminal Tribunal for the Former Yugoslavia in Prosecutor v. Aleksovski:

Instances of situations where cogent reasons in the interests of justice require a departure from a previous decision include cases where the previous decision has been decided on the basis of a wrong legal principle or cases where a previous decision has been given per incuriam, that is a judicial decision that has been "wrongly decided, usually because the judge or judges were ill informed about the applicable law."

The Panel also referenced the European Court of Human Rights in the Cossey Case:

Instances of situations where cogent reasons in the interests of justice require a departure from a previous decision include cases where the previous decision has been decided on the basis of a wrong legal principle or cases where a previous decision has been given per incuriam, that is a judicial decision that has been "wrongly decided, usually because the judge or judges were illinformed about the applicable law."

The compliance Panel in EC and certain member States - Large Civil Aircraft (Article 21.5- United States) (para. 6.1147) found that the fact that the legal reasoning underpinning a panel's' resolution of a particular matter may not have been based on the arguments advanced by the parties and third parties cannot be a "cogent reason" that would justify reviewing a panel's' unappealed and adopted findings.

Must the Appellate Body follow previous adopted Appellate Body reports?

In practice, the Appellate Body applies its previous findings and reasons where the same issue arises. This is consistent with ensuring " security and predictability" in the dispute settlement system. It is reasonable to expect that the Appellate Body will resolve the same legal question in the same way in a subsequent case (i.e., follow its own prior adopted reports) unless it has cogent reasons to do otherwise.

Must panels follow previous adopted panel reports?

Adopted panel reports must be taken into account where relevant. But what does “taken into account” mean? It is reasonable to expect that the same panel would decide the same issue in the same way, such as when a compliance panel that is established under Article 21.5 of the DSU rules on an issue that it addressed in the original proceeding. The compliance panel in EC and certain member States - Large Civil Aircraft (Article 21.5- United States) (paras. 6.1130-6.1144) applied an analysis similar to that applied to Appellate Body reports wherein it examined whether the original panel ruled on the interpretative issue at hand, whether there was a new "matter" that had to be addressed in the compliance proceeding, and whether there were cogent reasons to review the original panel's' interpretation. Other than in this narrow scenario, assessing the applicability of previous panel reports can be complicated.

Where a prior panel report has been appealed and ruled on by the Appellate Body, findings and reasoning of the panel that have been overturned or modified do not have to be taken into account. However, insight into the Appellate Body’s rulings may be found by examining what was overturned and the reasons for doing so. Attention should be paid to panel findings and reasoning that have been endorsed by the Appellate Body. Presumably, lesser or no attention should be paid to those declared “moot” by the Appellate Body. Findings and reasoning that have not been addressed by the Appellate Body should be taken into account where they are relevant.

A complication is introduced by the fundamental objective of WTO dispute settlement, which is to secure a positive solution to a dispute. Disputes will sometimes be resolved in a mutually satisfactory manner after the issuance of a panel report with no appeal. In such circumstances, a panel report will be adopted even if some of the findings and reasoning in the report may contain legal errors. In such circumstances, there may be cogent reasons not to apply the panel report.

What is the relevance of dicta?

Obiter dictais something said in passing that is not part of the ratio decidendi of a decision. It can be persuasive and provide guidance as to the meaning and application of WTO law. In the case of Appellate Body reports, it may also provide an indication of the direction the Appellate Body is leaning on a particular issue that it has not yet ruled upon.

Are arbitrators required to follow previous awards and decisions?

Awards concerning a reasonable period of time for implementation issued by arbitrators under Article 21.3(c) of the DSU and decisions concerning the level of suspension of concessions issued by arbitrators under Article 22.6 of the DSU are not binding on arbitrators in subsequent proceedings. However, arbitrators frequently refer to the principles articulated in previous awards and decisions for guidance.

What is the legal relevance of Pre-WTO GATT 1947 and GATT Code Jurisprudence?

In Japan – Alcoholic Beverages II, (DSR 1996:1, pp. 106-108), the Appellate Body stated that adopted GATT 1947 panel reports are an important part of the GATT acquis,which provides guidance to the WTO. Unadopted panel reports have no legal status in the GATT or the WTO, but could nevertheless provide useful guidance.