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TWN
Info Service on WTO and Trade Issues (Jan24/10) Geneva, 24 Jan (D. Ravi Kanth) — The prospects for restoring the World Trade Organization’s two-tier dispute settlement system (DSS), with the Appellate Body being the final adjudicating body, seem rather bleak at the upcoming WTO’s 13th ministerial conference (MC13) that gets underway in Abu Dhabi on 26 February. However, an attempt appears to be underway to declare a partial victory at MC13 with further negotiations likely to continue after the ministerial meeting. As per the mandate of the WTO’s 12th ministerial conference (MC12) held in Geneva in June 2022, trade ministers acknowledged “the challenges and concerns with respect to the dispute settlement system including those related to the Appellate Body, recognize the importance and urgency of addressing those challenges and concerns, and commit to conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all Members by 2024.” What began as an informal process of discussions on dispute settlement reform conducted by the United States with select countries after MC12, sought to be continued by a facilitator from Guatemala, who seems to have been handpicked by the US, said people familiar with the discussions. DG ON DSS An early indication of what is likely to emerge on dispute settlement reform came from the WTO’s Director-General, Ms Ngozi Okonjo-Iweala, during a discussion on “Tackling Global Trade Challenges – Is multilateralism still the answer?” in Brussels on 22 January. Expressing her views on the likely agreements she would like to see at MC13, the DG flagged the issue of dispute settlement reform as a possible candidate. She said: “We are working on the reform of the WTO, including the dispute settlement reform that would take some doing and would take some time, a movement in a positive direction.” “If we can clean up some parts of the problem (of dispute settlement reform) (and) be able to deliver that (at MC13), that would be a big contribution as well.” However, she did not specify what the “some parts” are going to be as part of an outcome at MC13. Speaking along with the DG, the European Commission’s Executive Vice-President Valdis Dombrovskis said rather unambiguously that we are working on “WTO reforms and especially the first (on) the restoration of a functioning dispute settlement system that is clear for the legitimacy of the organization and avoid further erosion of the rules-based trading system.” He continued: “As you know, currently the WTO’s dispute settlement system is not working because the Appellate Body is blocked (by the US since December 2019) and we are engaged in intensive negotiations to see how we can unblock the situation to restore the dispute settlement system.” But the realities of the ongoing informal discussions suggest that the US may agree to a “toothless”, non-binding Appellate Body, which goes against the binding dispute settlement system as a cardinal part of the WTO’s enforcement function, said people familiar with the discussions. Further, with the US unlikely to agree to a robust Appellate Body that could effectively undergird the enforcement function, there is little point in negotiating any multilateral agreements at the WTO, said several people from developing countries. Perhaps, the growing fragmentation of the multilateral trading system may not need a strong multilateral enforcement function at the WTO. Against this backdrop, the facilitator seems to be focusing more on the rather “mundane” issues of the dispute settlement system rather than the core issues like the Appellate Body and Appellate Review. Since 2020, several attempts have been made by the previous WTO’s General Council chair Ambassador David Walker of New Zealand to specifically address the concerns raised by the US but Washington rejected his recommendations on one ground or the other. FACILITATOR’S LATEST DRAFT The facilitator overseeing the informal discussions on dispute settlement reform, Mr Marco Molina, the deputy trade envoy of Guatemala, on 22 January issued a revised fifth version of the confidential draft ministerial decision that continues to suggest that work is in progress on the Appeal/Review mechanism. In an email sent to members on 22 January, the facilitator said that he would convene almost day-long meetings on 24 and 25 January, before the DSB meeting on 26 January. He said: “I am incorporating the comments and feedback received last week into the consolidated text. A revised version (Version 5) will be circulated tomorrow (Monday) evening or Tuesday morning at the latest. The objective of the meetings is to review all changes made to the text. Additionally, time will be allocated to continue our discussion on the appeal/review mechanism.” He told members that there will be a comprehensive review during the plenary meetings on 24 and 25 January. The facilitator said that “the chapter on compliance has undergone significant revisions, leading to the replacement of the previous version with a new one.” “Consequently, adjustments have been made to Appendix 4 to ADR (Alternative Dispute Resolution Procedures and Arbitration), and a new section on compliance under the model rules of procedure for simplified arbitration has been introduced,” the facilitator wrote. He said, “Regarding accessibility, I encountered challenges reconciling the different comments and proposals received. These comments and proposals warrant further discussion, and I propose that we return to the plenary seeking additional guidance.” While he thanked the drafters and interested delegates who provided comments in writing on the revised versions of their chapters, the facilitator has so far not disclosed the names of the drafters. However, he said that he assumes “full responsibility for any error or omission in the consolidated text, which will be corrected as a result of our conversations in plenary session.” Significantly, the current “Understanding on Rules and Procedures Governing the Settlement of Disputes” contains no chapeau. But a seemingly controversial chapeau is being attached to the draft ministerial decision, seen by the SUNS. The text of the chapeau is as follows: “The Ministerial Conference, Having regard to paragraph 1 of Article IV and paragraph 1 of Article IX of the Marrakesh Agreement Establishing the World Trade Organization, as well as 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, Underscoring the objective of meaningful reform of the dispute settlement system so that it operates in a manner consistent with the interests of Members, Desiring to facilitate the settlement 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 and word limits 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 adjudicators 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 extraordinarily 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] Recognizing the imperative of prompt compliance with the recommendations or rulings of the DSB for the purpose of ensuring effective resolution of disputes to the benefit of all Members, 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, 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.” Surprisingly, the language in the chapeau does not seem to mention the binding nature of the Dispute Settlement Understanding (DSU) as set out in paragraph 14 of Article 17 of the DSU on Appellate Review. Instead, the draft decision only emphasizes the resolution of disputes. It is also not clear why the first paragraph of the draft decision excluded any language on the continuation of the negative consensus principle. It seems to suggest a positive consensus principle wherein any one member can decide not to adopt the DSB recommendations. In a nutshell, the dispute settlement reform is seemingly aimed at attenuating the existing DSU as demanded by one major member, said people, who asked not to be quoted. +
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