WTO dispute settlement system: reform and development

WTO members are required to follow the Dispute Settlement Body’s decisions based on the findings of the Panel and Appellate Body. WTO dispute settlement mechanism is an independent system which uniquely provides effective enforceability. It has proved to be the most effective institution preventing states from trade wars. The system is comprised of several stages providing WTO member-states with opportunity to resolve their disputes in any possible way, e.g. by providing a platform and legal framework for consultations, dispute settlement and possibility of review which is currently blocked. As to the enforcement, not only does the DSU provides for a coherent mechanism employed to oversee the implementation of DSB rulings, but it also offers several legal tools for member-states to protect their economic interests, i.e. trade compensation or withdrawal of inconsistent measures.
In the context of WTO’ dispute resolution a regional integration aspect should be taken into account. Even though regional forums and WTO’ DRS de jure exist as separate entities, still their functioning is quite intertwined. The most problematic issue in that regard is the conflict of jurisdictions since legal framework of regional integration is tied closely to WTO regulations. The AB crisis greatly contributed to the issue. Prior to the existing constraints states usually chose the WTO system due to its well-known advantages, e.g. sufficient time restrictions, predictability, high percentage of implemented decisions and etc. State’s ability to file an appeal was a critical factor for disputing parties. Currently, since such an option is blocked, regional forums in some cases (whenever the issue’s review requires deep evaluation in the regional context) may become a much more preferable choice. Thus, in order to avoid possible ambiguity in the future it is proposed that a forum exclusion clause should be added to international treaties stating that once a dispute has been submitted to the WTO or a regional justice body, the same issue cannot be reexamined by a different judicial body.
In any case the issue of Appellate Body’s crisis seems to be the main stumbling rock preventing WTO dispute settlement system from efficient operation and development. The US have been limiting AB’s functions for quite some time. In 2016­2019 their actions have finally led to AB’s practical blockage. Overall, the US objections concerned the time frame for dispute adjudication by the AB, wrong interpretation of WTO provisions, giving previous AB’s reports a binding precedential status and reviewing factual findings of the panels outside of the Article 17.6 of the DSU scope. The issues raised by the United States were controversial which resulted in numerous debates among WTO member states. General reaction, however, appeared to be negative. WTO members have been actively trying to settle the existing problems for the US suggesting different approaches to resolve these issues. These attempts remained fruitless. To date the prospects of AB’s renewal are unclear.
WTO member states have employed a temporary solution to fill the existing vacuum in appeal proceedings. Article 25 of the DSU has provided for an institutional substitute needed to address the AB’s crisis. Pursuant to this DSU provision, a great number of WTO member-states have entered into the Multi-Party Interim Appeal Arbitration Arrangement under which states agreed to appeal WTO panel reports resorting to appellate arbitration pursuant to Article 25 of the DSU established within the MPIA forum. Notwithstanding, that to this date, only a few disputes have been appealed under the MPIA, it presents a promising alternative to Appellate Body’s proceedings within the WTO system and essentially resolves the issue of AB’s paralysis for now.
In the context of WTO dispute settlement system, the issue of developing states’ participation is quite significant. Even though the number of developing countries in WTO is relatively higher than of developed states, rates of actual participation show a completely different picture. That is due to the fact that developing states face serious limitations when it comes to dispute resolution within the WTO, e.g. they cannot afford high legal and administrative costs of the dispute settlement procedure; in some instances these states are not willing to harm or in any way upset their international relations with more powerful countries; in case the respondent of the developing state does not comply with panel’s report, it may be quite difficult for a small economy to impose retaliation measures; governmental representatives and legal counsels of developing states are not sufficiently informed about perspectives of dispute resolution under WTO’s proceedings. In order to address these limitations, the Advisory Centre on WTO Law was created. It is an organization which is mostly funded by developed states to assist developing nations in WTO dispute resolution and provide legal assistance and WTO law training. ACWL is a unique centralized institution operating within discretion and relying on certain principles. It has positively influenced developing states’ level of participation in dispute settlement by strengthening their position and bringing balance into the whole dispute resolution system.
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