TWN Info Service on WTO and Trade Issues (Jan24/01)
11 January 2024
Third World Network

WTO: Informal talks on dispute settlement reform exclude appellate review
Published in SUNS #9923 dated 11 January 2024

Geneva, 10 Jan (D. Ravi Kanth) — The facilitator overseeing the informal discussions on the reform of the World Trade Organization’s dispute settlement system has issued a seemingly “feel-good” statement about the progress of the discussions, even though critical issues concerning the appeal review mechanism as well as the continuation of the two-tier adjudication system remain in limbo, said people familiar with the discussions.

In kick-starting the informal discussions on 10 January, the facilitator, Mr Marco Molina, the deputy trade envoy of Guatemala, has issued a revised chapter on “compliance” and “panel composition” as part of the confidential 63-page draft third version of the Ministerial Decision issued on 5 January.

The draft “dispute settlement decision” does not include any language on Appeal/Review mechanism.

Incidentally, attempts are apparently underway by a major industrialized country to do away with Article 17 of the “Understanding on Rules and Procedures Governing the Settlement of Disputes” concerning the “Appellate Review/Standing Appellate Body”, which undergirds the binding enforcement function, said people familiar with the discussions.

In an email sent to members on 2 January, seen by the SUNS, the facilitator said: “As we slowly come back and prepare for the final phase of our process, I would like to ask you to reflect on how much we have achieved together during the last year.”

Without letting members answer the question he posed, the facilitator went on to say, “This was only possible thanks to your commitment, dedication, and constructive participation.”

He said that “in this pivotal moment, as we stand on the brink of our journey’s conclusion, we must reflect on our collective accomplishments. Our shared dedication and perseverance have propelled us forward, making significant milestones along the way.”

The facilitator, who was particularly supported by the United States to lead the informal discussions, seems to have resorted to some rather glib pronouncements without explaining what was the substantial progress made during the last year, said people familiar with the discussions.

The informal process has been severely criticized for lack of transparency and inclusiveness by several developing countries drawn from the Africa Group, as well as India, Indonesia, and South Africa among others.

Several other countries also demanded that the discussions are formally open-ended and led by the chair of the Dispute Settlement Body (DSB), said people familiar with the discussions.

CHALLENGES

The facilitator, however, acknowledged that “the path ahead is not without challenges.”

Surprisingly, he did not spell out these challenges, nor on what would be involved in reforming the current two-tier dispute settlement system based on the principle of negative consensus as set out in Article 17 of the Dispute Settlement Understanding (DSU).

The former US Trade Representative Ambassador Robert Lighthizer and the current US trade policy dispensation seem to be opposed to the restoration of the Appellate Body.

In his book “No Trade is Free: Changing Course, Taking on China, and Helping America’s Workers“, Ambassador Lighthizer said that “experience that I had had with the WTO’s Appellate Body, which, as discussed, had time and again interpreted the WTO rules in ways the parties never intended.”

Without a strong enforcement function to ensure that the WTO’s current and prospective agreements are implemented and subjected to judicial review, there is little merit in having binding agreements, said people familiar with the discussions.

The facilitator also issued a set of rather verbose claims in his email.

He said the “upcoming weeks will demand unwavering commitment and diligence on our part. It is through our unity, dedication, and collaborative efforts that we shall overcome these challenges. Let us recognize the significance of this moment and appreciate the impact that we can make together. The pages of history await the narrative that we will collectively write.”

It remains to be seen what these claims would amount to and whether WTO members would need to make a payment to satisfy one member, namely, the United States, to have its priorities built into the dispute settlement system, said a developing country negotiator, who asked not to be identified.

The facilitator assured members that, “On my part, I am fully committed to helping in any way I can, especially to those small delegations with capacity constraints. To explain the content of our discussions and seek their views, I will make myself available before and after each cluster of meetings, even outside office working hours, to meet at their request. I am also available to meet with Capital officials and regional groups, if useful, in the coming weeks.”

The Guatemalan deputy trade envoy announced that the next cluster of plenary meetings will take place from 10 to 12 January, in Room E, every day from 10h00 to 13h00 and from 15h00 to 18h00.

He said, “During this cluster of meetings, we will review version 3 of the draft consolidated text. Please note that a revised chapter on “compliance” and “panel composition” will be sent in the next few days and these chapters will be reviewed separately after finalizing the revision of the rest of chapters of the draft consolidated text.”

Finally,  he urged members to note that “we will continue our conversations on appeal/review mechanism, on Friday 12 [January], from 10h00 to 13h00. Depending on progress, on Friday afternoon, we might continue with the draft consolidated text or with the conversation on the appeal/review mechanism.”

THIRD DRAFT CONSOLIDATED TEXT

The facilitator on 5 January issued a confidential third version of the 63-page consolidated draft text that includes several changes.

The confidential text, seen by the SUNS, seems to set some controversial goals, which will become clear when members discuss the appeal/review mechanism, said another negotiator who asked not to be quoted.

For example, the facilitator brought paragraph 1 of Article IX of the Marrakesh Agreement into the chapeau.

The first paragraph of Article IX, concerning the decision-making process, states: “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947. Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting. At meetings of the Ministerial Conference and the General Council, each Member of the WTO shall have one vote. Where the European Communities exercise their right to vote, they shall have a number of votes equal to the number of their member States which are Members of the WTO. Decisions of the Ministerial Conference and the General Council shall be taken by a majority of the votes cast, unless otherwise provided in this Agreement or in the relevant Multilateral Trade Agreement”.

It is somewhat puzzling that by referring to paragraph 1 of Article IX of the Marrakesh Agreement, the chair is apparently trying to bring in the principle of positive consensus, wherein any one member can block a ruling issued by the Appellate Body.

The draft text did not even mention the “Understanding on Procedures Governing the Settlement of Disputes” of the Results of the Uruguay Round of Multilateral Trade Negotiations, particularly paragraph 14 of Article 17 concerning “Appellate Review, Standing Appellate Body.”

According to paragraph 14 of Article 17,  “An Appellate Body report shall be adopted by the DSB and unconditionally accepted by the parties to the dispute unless the DSB decides by consensus not to adopt the Appellate Body report within 30 days following its circulation to the Members. This adoption procedure is without prejudice to the right of Members to express their views on an Appellate Body report.”

Effectively, this provision, based on negative consensus, wherein all the members present at the DSB meeting decide to oppose the decision, appears to be undermined.

The chapeau reads as follows:

“The Ministerial Conference,[1],

Having regard to paragraph 1 of Article IX of the Marrakesh Agreement Establishing the World Trade Organization and, paragraph 4 of the Twelfth Ministerial Conference 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,

Prompting the objective of meaningfully reform the dispute settlement system so that it operates in a manner consistent with the interests of Members,

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

Recalling that Article 25 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) provides for arbitration within the WTO as an alternative means of dispute settlement that can expedite the solution of certain disputes,

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 streamlining panel proceedings and strict adherence to timeframes contribute to the prompt settlement of disputes and keeps the focus on what is necessary to resolve them,

Acknowledging the importance of selecting highly qualified experts while fostering diversity in the composition of panels, with a specific emphasis on achieving gender balance, geographical representativeness, and a diverse range of legal backgrounds,

Bearing in mind that the rights of the parties under the 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 dispute itself, including the analysis, interpretation or the conclusions of the adjudicators or any future disputes,

[Appeal/review mechanism]

Taking into account that prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members,

Recognizing the importance of stating Members’ understandings and expectations about how the dispute settlement system should operate,

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

Reaffirming 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,

Recognizing the need and importance to facilitate greater accessibility of developing and least developed country Members to the dispute settlement system, including through streamlined proceedings, improved transparency, better and tailor-suited capacity building and technical assistance activities, enhanced legal advisory support and expanded range of options to avoid and settle disputes; and improved compliance procedures, among others,

Acknowledging the imperative and significance of promoting increased accessibility for developing and least developed country Members to the dispute settlement system, including through the implementation of streamlined proceedings, enhanced transparency, more effective and tailored capacity-building initiatives, improved provision of legal advisory support, the extension of a broader array of options for preventing and resolving disputes, and the enhancement of compliance procedures, among other considerations,

Recognizing the contribution of other organizations, including the Advisory Centre on WTO Law (ACWL), to the accessibility of developing and least developed country Members to the WTO dispute settlement system and noting the importance of supporting their work,

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

Decides as follows,” ——– Note: 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.

[1] Note: The preamble has been revised following the direction given by the plenary at the meeting that took place on 1 December 2023. The paragraphs in the preamble follow the sequence of the different titles and chapters. +