WTO DISPUTE SETTLEMENT MECHANISM
On 10 December 2019, the WTO Appellate Body, the appeals mechanism of the WTO’s dispute settlement system, closed to new appeals. After issuing its latest report in Australia – Plain Packaging on 9 June 2020, the Appellate Body is now no longer operational — it has been reduced to its last Member, down from the quorum of three. This is the result of the US blocking Appellate Body Member appointments for over three years. However, 22 WTO members1 have now created an alternative appellate mechanism designed to fill the gap until the Appellate Body is able to resume operations – the Multiparty Interim Appeal Arbitration Arrangement (the “MPIA”). In terms of their proportion of world trade, the MPIA includes large entities such as the EU and China, but not the United States, Japan or Korea.
The MPIA is created under Article 25 of the WTO Dispute Settlement Understanding (DSU), which provides for arbitrations within the framework of the overall WTO dispute settlement system. It was officially notified to the WTO on 30 April 2020 and will be in place as long as the Appellate Body is non-operational.
The MPIA aims to preserve existing WTO dispute settlement mechanisms, including two levels of adjudication. For the purposes of the analysis below, the MPIA’s key aspects may be divided into (i) structural features; and (ii) notable changes from Appellate Body practice and procedure. Applies to existing or future disputes: the MPIA applies to any existing or future dispute between two or more MPIA parties provided that, (i) the Appellate Body is inoperable and (ii) an interim panel report has been issued (Article 9).
MPIA parties have agreed not to pursue appeals to the Appellate Body (Article 2). This feature prevents parties from appealing a panel report into the “void”, i.e., to the non-operational Appellate Body. This is relevant in light of recent developments in the dispute between India and the US over the latter’s countervailing duties on certain steel products from India. After a WTO compliance panel held that the US failed to implement certain aspects of the DSB’s recommendations and rulings, the US notified the DSB of its decision to appeal issues of law and legal interpretations developed by the panel. While both parties recently agreed to amicably resolve this issue, a US decision to take the next step of filing a notice of appeal or an appellant submission into the “void” could effectively act as a veto to this resolution.
Pool of arbitrators: appeals will be heard by 3 arbitrators selected from a pool of 10 standing arbitrators. Importantly, arbitration under Article 25 of the DSU is a process within the current WTO framework. However, the MPIA allows each signatory to nominate one arbitrator2 to hear appeals – preventing a US style unilateral paralysis of the Appellate Body process. The MPIA also envisages a screening process by the WTO Director General, the DSB Chair and the Goods, Services, TRIPS and General Council Chairs. The pool of arbitrators will be created by “consensus” of the MPIA parties. The aim is to have the pool of standing arbitrators drawn up by the end of July 2020, i.e. within three months following the notification to the WTO.
By Ms. Aradhana Jain, Legal Intrern at S.Bhambri & Associates (Advocates), Delhi.