WTO members to work on alternative mechanism for dispute settlement

In an unprecedented show of unity on the face of a potential crisis, most members of the World Trade Organisation (WTO), which includes India, have joined forces to work out a strategy to beat the US action of disrupting the working of the dispute settlement body (DSB) by blocking appointment of judges.

“A large group of countries has decided to opt for an alternative mechanism of dispute resolution, provided for in the WTO rules, which would allow them to have arbitration outside the DSB. A formal submission on the matter is likely soon,” a Geneva-based trade official told BusinessLine .

The rule being considered to get around the problem of inadequate number of judges at the DSB is Article 25 of the Dispute Settlement Undertaking, which offers an alternative means of dispute resolution contingent upon mutual agreement of the parties.

Under the dispensation, instead of approaching the DSB, the parties mutually agree on the procedures, including the selection of the arbitrators, and the judgment is enforceable in the same way as when adopted through Appellate Body reports.

“WTO members who are eager to ensure that the dispute resolution system of the WTO does not get affected want to reach a mutual understanding amongst themselves on the use of this alternative mechanism permitted under Article 25. Once the understanding is reached disputes between members who are part of the new understanding can be sorted out outside the DSB,” the official explained.

The 60 members who proposed to the DSB last month to start the process of appointing judges are all part of the group looking for an appropriate alternative mechanism. These include India, China, Australia, Canada, New Zealand, Argentina, Bolivia, Russia, Paraguay, Vietnam, the EU, Peru and Korea.

While resorting to Article 25 (arbitration outside the Appellate Body) will sort out part of the problem, the disputes involving the US might still stay unresolved.

Sorting grievances

“The US will certainly not agree to be part of an arbitration process that falls outside the DSB as it would defeat its very purpose of holding up selection of judges. Since the US is a part of many of the disputes, the countries party to such cases would not have access to the alternative mechanism to sort out their grievances,” a Delhi-based trade expert said.

The potential crisis in the DSB is largely due to the US blocking the appointment of new appeal judges which has resulted in the seven-member Appellate Body being reduced to just four. It could not only cause major delays in judgments but the WTO can eventually run out of judges and all work could come to a stand-still. The Trump regime has been blocking the appointment process as it argues that the Appellate Body’s functioning needs to be improved.

Using Article 25 to decide on WTO disputes will also give members enough time to over-haul the working of the DSB.

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