TWN Info Service on WTO and Trade Issues (Oct23/11)
11 October 2023
Third World Network

WTO: Attempts to weaken dispute settlement system, enforcement function
Published in SUNS #9872 dated 11 October 2023

Yerevan, 10 Oct (D. Ravi Kanth) — The facilitator overseeing the informal discussions on reforming the World Trade Organization’s dispute settlement system issued a confidential zero draft text on 3 October that appears to stymie the enforcement function of the inter-governmental trade body, as seemingly sought by the United States, said people familiar with the draft text.

The zero draft text, seen by the SUNS, states in footnote one to the chapeau of the text that, “It is proposed that the document takes the form of a Ministerial Decision.”

However, “the final form shall be decided by the plenary, in view of the substantive content of the document.”

Effectively, the zero draft text appears to overwrite the Dispute Settlement Understanding (DSU) and turn the enforcement function into a “toothless, ineffectual exercise” that would benefit a major industrialized country, said a trade official, who asked not to be quoted.

The draft text appears to set stringent rules that would further constrict the role of the panel/Appellate Body.

For example, in paragraph 34, the zero draft text states: “A Party shall not rely on, or introduce as evidence, in other dispute settlement procedures under the DSU or any other agreement, nor shall a panel established under Article 6 or Article 21.5 of the DSU or an arbitrator appointed under Article 22.6 or Article 25 of the DSU or the Appellate Body take into consideration, any information exchanged during the course of the procedures pursuant to Article 5 of the DSU and this Decision, including any advice offered or solutions proposed by a mediator.”

ELEMENTS IN DRAFT TEXT

The zero draft text contains 20 elements for which it says that “factual or statistical information is required.”

The elements are:

1. Alternative Dispute Resolution (ADR) under WTO auspices for which the “number of disputes in which the parties used or attempted to use ADRs (including the number resolved) and the description of factual circumstances;

2. Establishment of panels at the first DSB meeting at which they are requested – statistical information on panel establishment;

3. Page limits for submissions – information relating to page limits set by panels, categorization of disputes, and the observance of page limits by the parties;

4. Time limits for oral submissions at meetings with adjudicators – information relating to time limits set by panels for oral submissions and their observance by the parties;

5. Requirement for panels to provide written questions in advance of any substantive meeting with parties – statistical information relating to the observance of this requirement by the panels;

6. Mandatory time limits for proceedings – information relating to the observance of mandatory time-frames for proceedings and any circumstances at the origin of any delays (with attribution of these circumstances to the parties or to panels);

7. Power of adjudicators to invite the parties to focus on certain claims or exclude certain claims – statistical information on the use of this power by panels and any follow-up by the parties;

8. Access to all submissions to all WTO members – statistical information relating to real-time or delayed access to submissions by all WTO members;

9. Hearings that are accessed by Members that are not third parties and mode of that access (delayed or real-time) – statistical information relating to the observance of hearings by Members who are not third parties;

10. Capacity building for developing and least-developed countries – Information relating to actions on capacity building, including on whether the demand is being met;

11. Services pursuant to Article 27.2 of the DSU for developing and least-developed members – Information on services provided pursuant to Article 27.2 of the DSU for developing and least-developed Members, including on whether the demand is being met;

12. Adjudicators focus on what is necessary for the resolution of the dispute and the exercise of judicial economy – Statistical information on instances of exercise of judicial economy (such as number of disputes concerned, number and type of claims, etc.);

13. Submission in disputes made available to the public – Statistical information on publication of submissions;

14. Publication of timetables and updates published on WTO Documents Online – Statistical information on the publication of timetables and updates thereto;

15. Diversity in panels and panel selection: Statistical information on geographical and gender representation on (i) panels; (ii) indicative list/roaster; (iii) persons proposed to the parties by the Secretariat for appointment to panels;

16. Panel composition – Statistical information on the panel composition process, such as the proportion of panelists agreed by the parties and appointed by the DG, proportion of candidates coming from the roster/ indicative list or outside, etc.;

17. Advisory working group (a mechanism to review legal interpretations) – Factual information on the operation of the advisory working group (such as interpretations that have been discussed, and output, etc.);

18. Guidelines on treaty interpretations – statistical information on how the guidelines on treaty interpretations have been implemented;

19. Relevance of adopted panel reports – factual description of how previous adopted panel reports have been addressed by panels; and

20. Referrals of interpretations in adopted reports to the Chair of other pertinent Committees; and discussions requested by Members of the policy implications of those interpretations in those other committees – Factual information relating to any such referrals and to any follow-up by the committees.

In short, the proposed elements will not only make it difficult for the panel and the adjudicators to exercise their functions in an independent and impartial manner, but will also undermine the binding nature of the two-stage dispute settlement system, said a former trade envoy, who asked not to be quoted.

The 31-page confidential zero draft text was tabled for further negotiations on 3 October by the facilitator, Mr Marco Molina, the deputy trade envoy of Guatemala. Apparently, it was prepared after an exhaustive drafting process that involved many meetings.

In footnote one and two, the facilitator explained that “this is a “zero-draft” that will allow the DS Reform Informal Process to move to text-based conversations.”

The facilitator claimed that “Delegates from all WTO Members were invited to participate in a collective drafting exercise.”

He suggested how the drafting process was carried out in 11 drafting groups. “Each drafting group was requested to draft one section of the text and peer-review other draft texts,” as well as “Delegations that chose not to participate in the drafting exercise but expressed interest in peer [reviewing] them also had an opportunity to exchange views with the drafting groups.”

“In total, 52 delegates participated in the drafting exercise,” said the facilitator.

CHAPEAU

The proposed language in the chapeau of the draft text largely reflects the proposals made by the United States, which appears determined to undermine the adjudicating role of the panels/Appellate Body, said a member, who asked not to be quoted.

The chapeau in the zero draft text reads as follows:

“Having regard to paragraph 4 of the MC12 Outcome Document (WT/MIN(22)/24), whereby Members committed to conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all Members by 2024,

Recalling that the aim of the dispute settlement mechanism is to secure a positive solution to a dispute and that a solution mutually acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be preferred,

Desiring to facilitate the avoidance or settlement of disputes via the voluntary use of alternative methods of dispute resolution,

Considering that the prompt settlement of disputes is essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members; and that limiting the length of written and oral submissions, while preserving due process, contributes to the prompt settlement of disputes and keeps the focus on what is necessary to resolve them,

Bearing in mind that the rights of the parties under the Understanding on rules and procedures governing the settlement of disputes (DSU) to make factual and legal arguments before the panel through their submissions must be preserved, in particular by adjusting the length of written and oral submissions to the complexity of disputes,

Noting that any categorization of a dispute as standard, complex, or exceptionally complex is to be used only for the purposes of procedural management of the dispute and shall not impact the case itself, including the analysis, interpretation or conclusions of the adjudicators or any future cases,

Recalling that the objective of this decision is to meaningfully reform the dispute settlement system so that it operates in a manner consistent with the interests of Members,

Determined to ensure that these reforms are fully implemented in practice and long-lasting,

Re-affirming the responsibility of the Membership, in the Dispute Settlement Body (“DSB”), for the administration of the rules and procedures of the DSU, without prejudice to the functions of adjudicators under the DSU,

Affirming their intention to regularly undertake a meaningful review of the operation of the dispute settlement system, in particular the implementation of the reforms to the dispute settlement system made in this decision (“Reforms”), and to take any corrective action considered necessary.”

Significantly, in a world where alternative facts seem to “rule the roost”, the chapeau suggests, “Desiring to facilitate the avoidance or settlement of disputes via the voluntary use of alternative methods of dispute resolution.”

Clearly, the alternative methods would invariably involve “arm-twisting” behind the scenes by those powerful countries against the powerless members, as happened in the General Agreement on Tariffs and Trade (GATT) before the establishment of the WTO in 1995.

Further, the chapeau states that “any categorization of a dispute as standard, complex, or exceptionally complex is to be used only for the purposes of procedural management of the dispute and shall not impact the case itself, including the analysis, interpretation or the conclusions of the adjudicators or any future cases.”

However, it is not clear who decides on the categorization of a dispute – whether it is the parties or the WTO Secretariat, said a former official of a developing country who handled trade disputes.

The zero draft contains language on “alternative dispute resolution proceedings and arbitration” in chapter one that includes (1) definitions; (2) General Principles; (3) Request for Information; (4) Initiation or Termination of Procedures; (5) Notification to the Dispute Settlement Body; (6) Appointment of Good Officer, Conciliator or Mediator; (7) Rules of Procedure in the Appendixes; and (8) Secretariat Support, among others.

It sets out the procedures on how these parts of the alternative dispute settlement proceedings can be used in the appendixes.

Barring the first chapter on “alternative dispute resolution proceedings”, the facilitator said that work is in progress on “Arbitration for Specific Disputes” in Chapter II,  “Appeal/Review Mechanism” in Chapter III, and “Compliance” in Chapter IV.

In Chapter V, the facilitator suggested guidelines for adjudicators, while Chapter VI includes the proposed language on treaty interpretations, namely, “focus on what is necessary to resolve the dispute”, “procedures to discuss and review legal interpretation,” and “advisory working group.”

Chapter VII covers Secretariat support, Chapter VIII focuses on transparency, Chapter IX on accessibility, and Chapter X on accountability.

In conclusion, the WTO’s two-tier dispute settlement system that was created at the end of the Uruguay Round is apparently being twisted and turned into an allegedly “toothless” enforcement pillar as per the dictates of one major country that incidentally created the system, said people, who asked not to be quoted. +