In 2016, the US objected to the reappointment of a member of the WTO Appellate Body, ‘accusing’ him inter alia of having participated in a decision where the Appellate Body had indulged in unnecessary analysis in the nature of obiter dicta. Henry Gao has used the occasion to investigate, with a fresh approach, the very concept of obiter dicta in international jurisprudence.

The dispute at issue, between Panama and Argentina, concerned notably certain restrictions introduced by Argentina on the provision of financial services from Panama.Footnote ¹ According to the US statement at the Dispute Settlement Body (DSB) meeting of 23 May 2016, since the Appellate Body had reversed the legal findings and conclusions of the Panel on likeness, ‘this reversal rendered moot all the panel's finding on all other issues, including treatment no less favorable, an affirmative defense, and the prudential exceptions under the GATS’. The Appellate Body therefore should not have continued to examine the other claims by the appellant. ‘Yet, the Appellate Body report then went on at great length to set out interpretations of various provisions of the GATS. These interpretations served no purpose in resolving the dispute – they were appeals of moot panel findings. Thus, more than two thirds of the Appellate Body's analysis is comprised simply of advisory opinions on legal issues.’Footnote ²

The US went on stating that ‘The Appellate Body is not an academic body that may pursue issues simply because they are of interest to them or may be to certain Members in the abstract. Indeed, as the Appellate Body itself has said many years ago,Footnote ³ it is not the role of panels or the Appellate Body to “make law” outside of the context of resolving a dispute – in effect to use an appeal as an occasion to write a treatise on a WTO agreement.’

It is not our aim to deal with the action of the US which singled out one Appellate Body member on the occasion of the conclusion of his term to object to his reappointment, attributing to him personally the responsibility for three reports of the Appellate Body authored by divisions of which he had been a member and whose content the US found objectionable. Nor is it my intention to analyze whether the US was correct in considering that some of the findings of that report were unceccessary to resolve the dispute.Footnote ⁴

Before addressing some of the points made by Henry Gao in general, it is appropriate in any case to review critically the US statements above in the light of some specific, and also peculiar, provisions of the Dispute Settlement Understanding (DSU) of the WTO dealing with appeals against Panels’ reports and the task of the Appellate Body in examining them.

Article 17 of the DSU states quite concisely: ‘An appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel.’Footnote ⁵ The use of the term limited stresses, as is generally acknowledged, that issues and findings of facts cannot be appealed. On the other hand, the provision does not limit the object of an appeal to the findings or the conclusions (in law) of a panel report, that is to the legal holdings, or – to use a term that is used in the context of discussions on obiter dicta – to the ratio decidendi. This lack of precision in the text has led to the practice that appellants do not just appeal the final legal conclusions or holdings of a panel report, but often also ‘intermediate’ legal findings included in the body of a report that may not have a direct bearing on the ultimate conclusions. In other words, panels’ statements that could be considered to be obiter dicta are also subject to appeal.

This situation in turn increases the burden of the Appellate Body and the need for it to address issues such as those referred to above by the US in the light of paragraphs 12 and 13 of Article 17 of the DSU. According to paragraph 12, ‘The Appellate Body shall address each of the issues raised in accordance with paragraph 6 during the appellate proceeding.’ According to paragraph 13, ‘The Appellate Body may uphold, modify or reverse the legal findings and conclusions of the panel.’ The text of paragraph 12 limits the discretion of the Appellate Body not to address some challenges to a panel report should it consider them to be immaterial to its decision. Recourse to judicial economy or mootness should therefore be used sparingly. The fact that under paragraph 13 the Appellate Body is called to uphold, modify, or reverse just the findings and legal conclusions of a panel's report does not release it from the duty of addressing all the issued raised in appeal (as well as the defenses raised by an appellee) ‘in order to ensure effective resolution of disputes to the benefit of all Members!’.Footnote ⁶

This allows a first conclusion. Contrary to the US submission mentioned above, in view of the text of paragraph 13, the fact that the Appellate Body could have avoided examining a given appealed issue by finding it superfluous is not a reason for declining the findings of the Appellate Body on the issue as moot (obiter dictum) with less legal authority. A good example is the Appellate Body report in Peru − Additional Duty on Imports of Certain Agricultural Products. In this case, the Appellate Body addressed the parties’ arguments whether the Free Trade Agreement (FTA) between Peru and Guatemala had or could have derogated to WTO law – an issue expressly found to be ‘within the scope of this appeal’ − although it was uncontested that the FTA was not yet in force.Footnote ⁷

These specific provisions concerning appeals do not exhaust the relevant legal framework for dealing with the issue of whether the concept of obiter dicta is appropriate in the context of the WTO. Other provisions in the DSU point to a broader function of the dispute settlement system and of the decision-making of the Appellate Body than deciding narrowly in respect of any given appeal just those issues that would suffice to resolve the dispute at hand, without considering the context. Article 3.2 of the DSU famously states that ‘The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreement, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law.’ The function of ‘clarification’ goes beyond a narrow approach in deciding on an individual case. This does not contradict the principle that of course the Appellate Body has no power to make ‘advisory opinions’ or to exercise any role beyond the context of deciding appeals in respect of the challenges brought by the parties against a panel report.

In this context, one has to consider also the right of any WTO Member, that claims to have ‘a substantial interest’, to intervene as a ‘third party’ in any dispute, so that its interest ‘be fully taken into account during the panel process and in appeal (Article 10 and 17.4). The assertion of a ‘systemic interest’ in the legal issues raised in a dispute is considered sufficient for the participation of any WTO Member as a third party. This right is much broader than in other international courts, notably the International Court of Justice (ICJ) under Article 62 and 63 of the Court's Statute. Appellate Body reports are thus addressed to a broader audience in a legal sense.

Finally, the context in which to place a report and evaluate the limits of the adjudicatory function of the Appellate Body includes the lack in the DSU of a provision equivalent to Article 59 of the Statute of the International Court of Justice, which epitomizes the typical limits of the judicial function: ‘The decision of the Court has no binding force except between the parties and in respect of that particular case.’ I do not mean thereby that the Appellate Body's decisions are binding beyond the case at issue and between the parties thereto.Footnote ⁸

However, in a recent institution such as the WTO, equipped with a centralized adjudicatory body called to systematically interpret in accordance with the rules of interpretation of public international law a limited number of interconnected agreements, based on the procedural provisions recalled above, it is to be expected that the holdings of the Appellate Body would address all aspects of matters brought to it. This has been the basis for consolidating the coherence of the rule-based multilateral trade system so as to ensure ‘security and predictability’ for all its Members.Footnote ⁹

As to the specific matter of obiter dicta, one cannot but agree with Henry Gao that this concept has little place in international adjudication for a variety of other reasons. The first one is historical, as he correctly points out. The concept stems from the common law system and limits the power of the judges in their making of the law through the principle of binding precedents, of stare decisis. This powerful principle applies only insofar as the previous decision, the ‘precedent’, has stated a certain rule or principle as a basis for actually deciding a case. Peripheral statements, which serve to develop a reasoning but are not at the basis of the decision, do not have this authority; they are thus just obiter dicta. As such, they do not bind judges in a subsequent case.

The international judicial function works otherwise. The authority of a judgment for future cases is more based on the persuasiveness of the interpretation than on the mechanical reference to a previous decision just because it can be defined as a ‘precedent’. Stare decisis is not apt to govern the exercise of the judicial function internationally and has never been adopted for a variety of reasons, such as those listed hereafter. International courts are often faced with adjudicating disputes by application of sketchy provisions, as is especially the case for customary principles. The distinction between ratio decidendi and other arguments, and reasons which may lead the court to a given solution cannot be made rigorously, and there is no reason to require such an exercise.Footnote ¹⁰ Furthermore, the law changes over time (also due to political, social, and economic context) and this is an argument against constraining subsequent adjudicators. When full adherence to old decisions has been advocated, subsequent interpreters and adjudicators have found themselves in trouble in pinpointing the exact ratio decidendi of the previous old judgment. The very wisdom of an ‘originalist’ interpretation in international law has been put in doubt, and rightly so.Footnote ¹¹ The emergence of ‘soft law’, of new criteria and values (sustainable development, the protection of the environment), speaks against following precedents qua precedents.

Finally, hierarchical courts systems − which are the rule in domestic jurisdictions − are an exception in international adjudication. The principal function of the distinction between ratio decidendi and obiter dicta in the common law system has thus no application in international law. The principles of jurisdiction applicable to one court may be different from those applicable to the court which has previously expressed its view on a given matter. Therefore, a pronouncement by the first court that had no relevance for its decision and that could be labelled as an obiter dictum, may well be quite relevant for a different court, as a recent case before the International Court of Justice has shown.Footnote ¹²

It is true that a notable exception to the lack of a structured international judicial system is the WTO dispute settlement system. The principles followed in hierarchical civil law domestic systems are however adequate to govern the relationship between the Appellate Body and panels without the need to enter into the slippery distinction between rationale and obiter dicta.Footnote ¹³ Authoritative, well-reasoned statements of the law expressed for the purpose of deciding a case by the higher court (here, the Appellate Body) are all to be given the same respect, irrespective of their relation with the decisum.Footnote ¹⁴ Often several reasons underpin a legal finding, and the relevance of each of them for future decisions by different tribunals depends more on the reasoning by the later interpreter than by labeling one or the other reasons as ratio decidendi or obiter dictum.Footnote ¹⁵