WORLD TRADE
ORGANIZATIONWT/BFA/W/96
5 May 2003
(03-2387)
Committee on Budget, Finance and Administration
APPELLATE BODY OPERATING FUND
At the meeting of the Committee on 21 March 2003, the delegation of Germany submitted a list
of written questions to the Secretariat on the Appellate Body Operating Fund (ABOP) and requested thatthe responses be presented to the Committee.  Following are replies from the Secretariat.
1. Does the finance for the Appellate Body Operating Fund (ABOF) come exclusively out of
surplus amounts from the budget of  the preceding year or are there further sources of funding and
if so, which ones?
It is recalled that the Appellate Body Operatin g Fund was established in order to finance the
variable costs related to the number of appeals brought before the Appellate Body, and was initiallyfinanced from an extra-ordinary expenditure in  the 1996 budget in the amount of CHF 2,500,000.  Since
then, the ABOF has been replenished exclusivel y from the Surplus Accounts in (i) 1997: CHF 1,500,000
from the 1996 Surplus (ii) 1999: CHF 2,200,044 from the 1998 Surplus, (iii) 2000: CHF 1,627,110 from
the 1999 Surplus, and (iv) 2001: CHF 1,800,000 from the 2000 Surplus.
2. How did the magnitudes of the budgetary surplus develop over the period since 1995?
The magnitudes of the overall surplus
1 since 1995 are as follows:
Year CHF1995 nil
1996 10,127,4561997 nil1998 6,485,3161999 1,627,1102000 3,400,4972001 nil
3. How has financial endowment of the ABOF and the financial requirements developed
since 1995?
Year Fund at beginning of year CHF Expenditure CHF
1997 2,500,000 1,102,769
1998 2,930,487 1,730,3381999 1,228,730 1,561,0522000 1,874,662 1,643,6182001 1,886,192 2,007,1022002 1,711,018 1,268,9732003 476,805 302,832 (to 31.03.03)
N.B. The attached table (Annex 1) provides complete information with regard to the
financial history of the ABOF fro m its inception in 1997 to 31 March 2003.
                                          
1 The budgetary surplus is only one of the elements which form part of the Surplus Account .WT/BFA/W/96
Page 2
4. The variable costs of the Appellate Body are shown in the annual draft budget. What
then is to be made of the statement that the pres ent financing of the scheme for the ABOF does not
guarantee the financial requirements all through the end of the respective year?  Is the Fund beingreplenished only to the extent of  availability of budgetary surpluses or is it a matter of the number
of disputes rising dispro portionately?  In the later case – in  case of unforeseen increases of the
number of disputes brought to the WTO – can budgeting of the Fund in the regular WTO budgetward off financial squeezes?
For the rest, the Federal Ministry of Fina nce understands that integration of the ABOF
in the regular WTO budget will result in fina ncial resources from budgetary surpluses freed
thereby flowing back to the Member States, e.g. to apply against their assessed contributions.
It will be recalled that the Director-General proposed in his budget estimates for 2003 that an
amount of CHF 1.7 million be included to replenish th e ABOF in 2003.  In the ensuing discussions on the
budget proposals, this amount was deleted.  Th e report of the Committee (WT/BFA/63, footnote 4)
indicates that “The needs of the Appellate Body Operating Fund in 2003 would be monitored on a regular
basis and, if needed, alternative sources  of funding would be investigated.”
As can be seen from the attached table, as ide from the initial financing of the ABOF,
replenishments have come exclusively from the Su rplus Account.  When the proposed replenishment of
CHF 1.7 million for 2003 was deleted from the budget which was recommended to the General Council,the status of the 2002 Surplus Account was not yet known, but an eventual surplus was not excluded at
that time.  The final accounts, which are in the pr ocess of being audited, did not, however, result in an
overall surplus.
The replenishments of the ABOF which have b een made in the past from the Surplus Accounts
have been based on the availability of funds in the Surplus Account, on the one hand, and estimated levelsof expenditure on the other hand. Efforts have been ma de to provide the ABOF with the necessary level
of resources to meet what is ultimately a variable level of expenditure, which is in the nature of the
Dispute Settlement Process.  For the years 1997 to 2002, annual expenditure has varied from a low ofCHF 1.1 million to a high of CHF 2.0 milli on, with an average of CHF 1.6 million.
There is no absolute guarantee that including the ABOF funding in the regular budget can meet
an exploding increase in the number of appeals broug ht before the WTO Appellate Body.  Nevertheless,
the inclusion of funding Dispute Settlement Panels, the first stage of the Dispute Settlement Process,
which has always been in the regular budget, has not posed any significant problem in the past.  There is
no reason to believe that reasonably accurate estimates cannot be made.
It should also be recalled that the WTO Financia l Regulation 29 (see extract of Chapter VII of the
Financial Regulations in Annex 2) could be utilized, with the approval of the General Council, in anyextraordinary situation.
The decision with regard to any positive balan ce in the Surplus Account at the end of the
financial year is taken by the General Council, on th e basis of a proposal by th e Director-General and a
recommendation by the Committee on Budget, Finance a nd Administration.  As can be see from Chapter
VI of the WTO Financial Regulations (see Annex 3) , one of the possible uses of a positive (credit)
balance in the Surplus Account is “application as in come against the budget for the second year following
that in which the surplus occurs, th ereby reducing Members’ contributions.”WT/BFA/W/96
Page 3ANNEX 1
STATEMENT OF ABOF AS AT 31 MARCH 2003
APPELLATE BODY OPERATING FUND
1997 CHF 1998 CHF
Opening Funds12,500,000 Opening Balance 2,930,487
Expenditure (1,102,769) Expenditure (1,730,338)
Accrued interest 33,256 Accrued interest 28,581
Replenishment21,500,000 Replenishment _______-
Balance 31 Dec. 97 2,930,487 Balance 31 Dec. 98 1,228,730
1999 CHF 2000 CHF
Opening Balance 1,228,730 Opening Balance 1,874,662
Expenditure (1,561,052) Expenditure (1,643,618)
Accrued interest 6,940 Accrued interest 28,038
Replenishment32,200,044 Replenishment31,627,110
Balance 31 Dec. 99 1,874,662 Balance 31 Dec. 00 1,886,192
2001 CHF 2002  CHF
Opening Balance 1,886,192 Opening Balance 1,711,018
Expenditure (2,007,102) Expenditure (1,268,973)
Accrued interest 31,928 Accrued interest 34,760
Replenishment51,800,000 Replenishment ________-
Balance on 31 Dec.01 1,711,018 Balance on 31 Dec.02  476,805
2003 CHF 1 Funded as extra-ordinary expenditure under 1996 budget
Opening Balance 476,8052 Transfer from 1996 Surplus
Expenditure (302,832)3 Transfer from 1998 Surplus
Accrued interest          -4 Transfer from 1999 Surplus
Replenishment _______-5 Transfer from 2000 Surplus
Balance on 31 March 03  173,973 WT/BFA/W/96
 Page 4
Expenditure CHF
 1997 1998 1999 2000 2001 2002 2003
        
Interpreters 18,545 9,966 2,389 20,494 7,995 52,480 0
Transcribers 56,402 185,504 93,373 48,333 64,457 24,974 61,261
Temporary Assistance 44,365 140,173 83,006 125,983 142,960 149,445 393
Members' Travel and Per Diem 404,457 614,327 528,988 682,104 804,205 491,258 179,599
Members' Fees* 579,000 763,200 844,200 748,800 963,600 539,400 59,400
Reports/Miscellaneous  7,322 8,669 16,342 259 0
Postage              9,846 9,096 9,235 7,543 11,157 2,179
 1,102,769 1,730,338 1,561,052 1, 643,618 2,007,102 1,268,973 302,832
Days worked by Members 1,249 1,162 1,229 1248 1,617 884 99
* Members' Fees 2003 include expenditure to 28 February 2003WT/BFA/W/96
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ANNEX 2
FINANCIAL REGULATIONS OF THE WORLD TRADE ORGANIZATION
CHAPTER VII.    THE WORKING CAPITAL FUND
Regulation 27
The Working Capital Fund shall be constituted by:(a) assessed advances made by Members.  Such sums shall be carried to the credit of the
Members which have paid them;
(b) any sums which the General Council may cau se to be paid into  it from time to time. 
Such sums shall be carried to the credit of the organization.
Regulation 28
Any government acceding to the WTO shall make  an advance to the Fund in accordance with
the scale of contributions applicable to the budget  for the year of its accession.  The minimum advance
to the Working Capital Fund amounts to 0.5 per cent of the principal of the Fund for countries or
separate customs territories whose share of th e total trade of Members is 0.5 per cent or less.
Regulation 29
The Director-General is authorized to  advance from the Working Capital Fund:
(a) such sums as may be necessary to fina nce budgetary appropriati ons pending receipt of
contributions;
(b) in exceptional circumstances and subject to prior authorization of the General  Council,
such sums as may be necessary to fina nce commitments relatin g to extraordinary
expenditure.
Regulation 30
Sums advanced under Regulation 29(a) above sha ll be reimbursed to the Working Capital Fund
as soon as receipts from contributions are ava ilable for the purpose.  Sums advanced under
Regulation 29(b) shall be reimbursed to the Working Capital Fund by including an appropriate credit in
the budget for the next earlie st possible financial period. 
Regulation 31
The General Council may liberate all or part of  the sums constituting th e Working Capital Fund,
and the sums so liberated in so far as they  are derived from monies placed in the Fund under
Regulation 27(a) shall be returned in Swiss francs to the Members which have contributed to the Fund
in proportion to their respective shares in the Fund.
Regulation 32
Subject to a decision of the General Council, count ries or separate customs territories which for
any reason cease to be Members of the WTO shall be  entitled to the reimbursement of the total Swiss
franc amount of their shares in the Working Capital Fund under Regulation 27(a).
Regulation 33
Interest accrued on the Working Capital Fund sha ll be added to the Working Capital Fund and
carried to the credit of the Orga nization under Regulation 27(b) above.WT/BFA/W/96
Page 6
ANNEX 3
FINANCIAL REGULATIONS OF THE WORLD TRADE ORGANIZATION
CHAPTER VI.    THE SURPLUS ACCOUNT
Regulation 26
1. Budgetary surpluses shall be transferred to  the Surplus Account pending decision by the
General Council on their use.
2. Increases and decreases of the provision for cont ributions in arrears shall be effected by means
of the Surplus Account.
3. If at the end of a financial year the Surplus Account shows a credit balance , the Director-
General shall make proposals to the Committee on B udget, Finance and Administration with regard to
its use which may be:
(i) application as income against the budget for the second year following that in which the
surplus occurs, thereby reducing Member's contributions;
(ii) transfer to the Working Capital Fund; or(iii) use for any other purpose decided upon by the General Council.
4. A  deficit in the Surplus Account at the end of a fina ncial period shall be covered, to the extent
possible, by transfer from the Working Capital Fund.  Any part of the deficit left uncovered after
transfer from the Working Capital F und shall be included as an appropriate credit in the budget for the
next earliest possible financial period.
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