WTO Interim Appeal Arrangement: Enhancing the International Trading System

On May 12, 2020, Posted by , In International Analysis,

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Despite the crisis affecting the World Trade Organization (WTO), the States’ action is not at a standstill, and some Members like Canada actively contribute to the development of solutions aiming to uphold the Multilateral Trading System. On account of the blockage impeding the WTO’s Appellate Body (AB) to operate, Canada, the European Union and seventeen other Members including Australia, Brazil and China agreed at the end of March to implement a provisional appeal mechanism for reports issued by panels. The Multi-party interim appeal arbitration arrangement (MPIA) does not constitute per se an agreement: it is an arrangement of political nature affirming the intent of the participating Members to resort to this mechanism should a dispute arise between them. The attainment of such an agreement among major actors of the world trade sends a positive signal regarding the future of the Multilateral System. The object of the arrangement is to ensure the upholding for Members of the ability to assert their rights under the WTO Agreements while preserving the possibility of appealing, as appeals constitute key elements of the two-tier dispute settlement system of the WTO.

The three parts of the Arrangement

The MPIA consists of three separate parts: the first part specifies the object of the arrangement, and the two others govern procedural issues and the creation of a pool of ten arbitrators designated to hear appeals.  The first pillar of the arrangement consists of a statement of principle through which Members announce their intent to resort to the mechanism via an arbitration envisaged by article 25 of the Dispute Settlement Understanding (DSU). The MPIA participating Members highlighted the provisional character of the procedures and transposed almost all of the provisions governing the functioning of the AB. The MPIA procedures mirror those of the AB in order to maximize the legitimacy of the awards to be issued by the arbitrators. The MPIA will be reviewed one year following its implementation.

The second pillar, the Annex I, is an agreement template which the MPIA participating Members pledge to use as a basis to carry out arbitration appeals pursuant to article 25 of the DSU. The parties then need to jointly notify the agreement to the Dispute Settlement Body (DSB) in accordance with the MPIA, as the arrangement is not binding as such. Prior to initiating the arbitration, the parties must seek the suspension of the panel proceedings for twelve months and do so between the internal publication of the report and the moment of its external circulation. The arrangement incorporates the rules governing the regular appeal procedure within the Annex I template, including the rules on work procedures and rules of conduct applicable to arbitrators to ensure their independence and impartiality. The procedural guarantees inherent to appellate review in WTO are thus entirely safeguarded, notably the possibility for third parties to be heard during appeal proceedings. The collegiality intrinsic to the AB is maintained altogether, the three designated arbitrators having to consult the seven others to the extent possible. The arrangement, moreover, includes some innovations aiming to overcome certain shortcomings of the regular appeal procedure. The arbitrators will be able to limit the number of hearings, the length of communications or set time limits to assure the completion of the proceedings in the provided 90-days timeframe. Without any prejudice for the parties, arbitrators will also be entitled to make recommendations regarding the withdrawal of particular allegations so as to respect the prescribed timeframe.

The last pillar, the Annex II, includes the specifics surrounding the selection of arbitrators. The Annex provides for a list of ten arbitrators to be constituted three months after the MPIA’s circulation, that being by July 2020. Each participating Member of the mechanism will designate a candidate. A committee notably made of the WTO Director-General and the DSB chairman will screen said applications to ensure the candidates’ fitness. The list of arbitrators will in fine be established by consensus and be valid for two years. Notwithstanding Canada’s proposal, the pool of potential arbitrators is not per se limited to former AB members. In case of an appeal, the three arbitrators will randomly be drawn from the pool, in accordance with AB practice.

An Arrangement open to non-participating Members

The number of participating Members to the MPIA will undoubtedly grow over the next few months as per the possibility for non-participating Members to join the arrangement at any moment. The upholding of Members rights – including third party rights – in dispute settlement proceedings pursuant to the mechanism and congruity with regular AB procedures should significantly contribute to increasing the number of participants.

A step towards the reform of the Appellate Body

Ultimately, the MPIA is not merely a mechanism to provisionally remedy the AB’s hiatus. It is likewise an experiment aiming to test different reform proposals for the AB issued over the years, one of the main grievances of the Members – particularly the United States – relating to lengthy delays needed for a report to be issued. The implementation of this arrangement is, therefore, good news: it will enable Members attached to the Rule of Law, like Canada, to assert their rights under the WTO Agreements while bringing some innovations that might lead to a way out for the AB. The main difficulty nevertheless remains to convince the United States to restore the AB’s functioning, the MPIA only being temporary by nature.

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