“Progressing” With The Wto Dispute Settlement Reform – Trials & Appeals & Compensation

India wants to retain the WTO Dispute Settlement Body in its
present two-step form, but is it the way forward?

With the conclusion of the 13^th Ministerial
Conference in Abu Dhabi, UAE (MC13), the future of
the dispute settlement system of the WTO, and as a result, the
effectiveness and relevance of the WTO remains ominous. With no
conclusion on the reform and the reinstatement of the Appellate
Body of the WTO, the question arises, what is the way forward?

The Past

As provided in the WTO Dispute Settlement Understanding
(DSU), the governing document that created the
dispute settlement system in 1996, the Appellate Body is comprised
of seven members having four-year terms, with reappointments to be
done by negative consensus.

Since 2016, the United States has been stalling the
reappointments, stating that the Appellate Body has been
overreaching its mandate and that reform is necessary.¹
Since 2019, there have been fewer than three members at the
Appellate Body, the minimum necessary to hear an appeal, resulting
in a stalemate.

With the Covid-19 pandemic causing further delay in arriving at
a solution, the countries finally agreed to have a fully
functioning dispute settlement system by 2024 at the
12^th Ministerial Conference last year in Geneva,
Switzerland (MC12).² However, the MC13
only concluded with a weak Declaration dated March 2, 2024, which
noted the “progress” so far on the discussions, welcomed
submissions from countries and instructed WTO officials to
accelerate discussions inclusively and
transparently.³

The “progress”, officially, is almost non-existent.
Since the MC12, there have only been informal discussions on
possible reform. Most notably, informal discussions led by Mr.
Marco Molina of Guatemala has gained traction to the extent that it
is reported to the Dispute Settlement Body (DSB)
at every second regular meeting of the DSB and has resulted in a
Draft Text dated February 14, 2024⁴ (Draft
Text).

The Draft Text suggested several radical reform to the WTO
dispute settlement system which essentially overturns the DSU
concluded in 1996 after years of GATT negotiations that began in
1947. For instance, it proposes allowing countries to engage in
alternate dispute resolution (good offices, conciliation,
mediation) and arbitration mechanisms before initiation of the
consultation procedure, while under the present system,
consultation marks the initiation of a WTO dispute which may be
resolved through alternate dispute resolution, arbitration or by
the constitution of the DSB. Other fundamental changes include
increasing confidentiality of the proceedings with disclosure only
of the existence of the dispute thereby reducing transparency and
consistency in the interpretation of WTO law. Notably and contrary
to Indian interests, the Draft Text also reduces the reference to
special and differential treatment of Developing and Least
Developed Countries in the process. It also sets procedural
restrictions on submissions, evidence, timelines, etc. for the DSB
procedures.

India and other Developing and Least Developed Countries have
pointed out that such informal discussions do not reflect the views
of all the countries.⁵ Further, these countries are
unable to effectively participate in the informal discussions, with
technological and operational limitations, inability to effectively
consult with their respective capitals and thoroughly prepare and
present their views and suggestions and submit comprehensive
proposals, and difficulty with reviewing progress. The discussions
also sometimes run parallel to official WTO meetings.⁶
In view of this, India’s proposal at the MC13 towards reform
was the introduction of a three-point action plan⁷ for
the “formalization” and “multilaterization” of
the reform process and a call to prioritize the restoration of the
Appellate Body.

Considering the “progress” to date has only been
informal discussions that do not adequately reflect the views of
all countries including India, there seems to be no
“progress”, especially from the Indian standpoint.

The Present

A common result of all the aforementioned discussions and the
ministerial conferences is also the absence of a solution for the
Appellate Body crisis. Even the Draft Text fails to mention a
solution, dubiously referring to the appeal/ review mechanism as a
“Work in Progress”.

Most recently, at the DSB Meeting dated January 26, 2024, 130
countries led by Guatemala, including India, circulated the
73^rd proposal for the appointment of the Appellate Body
members. In response, the US stated that it wished to continue the
stalemate, since while several members may prefer the status quo,
the old system was not working for the US and a reform of the

Appellate Body is necessary.⁸ This was opposed by
several countries who stressed the need to comply with the
obligations under the WTO to appoint Appellate Body members.

The Way Forward

Considering that a functional WTO is in the interest of
furtherance of international trade and development, especially for
India and other Developing and Least Developed Countries, it is
important to consider that agreeing to the tweaking of the WTO DSU
can be beneficial and conducive to India’s role as a consensus
builder at the WTO. Needless to say, India has had its fair share
of losses before the Appellate Body and has raised several concerns
over its functioning. Moreover, with the increased political and
economic relevance of India on the international platform, it seems
unlikely that India will need a stringent and binding dispute
resolution mechanism to resolve its disputes before the WTO or
otherwise. India has also always taken measures to reduce its
exposure towards compulsory jurisdiction, whether it be not
submitting itself to the mandatory jurisdiction of any
international adjudicatory body or removing itself from such
procedures under its own bilateral investment treaties. India has
also not joined the “Multi-Party Interim Appeal
Arrangement” created by several countries under Article 25 of
the DSU. Therefore, it is now time to reconsider India’s
consistent stand for the restoration and preservation of the
two-stage binding WTO dispute settlement mechanism with reform.

India has also suggested proceeding with the appointment of the
Appellate Body members without the agreement of the USA, the
singular outlier.⁹ While this may be a possible
solution, it cannot be ignored that India had initiated 11 out of
24 WTO disputes against the USA and has defended 8 out of 31 WTO
disputes initiated by the USA against it, none of which is pending
due to the recent diplomatic resolution of the WTO disputes given
the present stalemate.¹⁰ Therefore, it is not in the
best interest of India for the exclusion of the USA. Further, the
exclusion of the USA from the dispute settlement system may result
with the WTO becoming an irrelevant international body, much like
its predecessor, the International Trade Organization, which the US
refused to ratify and join in 1948.

Presently, with the current stalemate, countries are choosing to
appeal Panel reports into the void or resort to alternate dispute
resolution arrangements under the WTO regime, including the MPIA.
In this context, it is a good option for India to end the stalemate
by safeguarding and negotiating its interests, including the
special and differential treatment, into a functional WTO dispute
settlement system, even if it involves amending the DSU. Needless
to say, such a WTO with a functional, albeit newly organized,
dispute resolution system, will be more relevant to India than the
WTO of today.

Footnotes

1. [fn] US Report on the Appellate Body of the World
Trade Organization, https://ustr.gov/sites/default/files/Report_on_the_Appellate_Body_of_the_World_Trade_Organization.pdf
[/fn]

2. [fn] MC 12 Outcome Document,

https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/24.pdf&Open=True
[/fn]

3. [fn] MC 13 Ministerial Decision on DSB, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN24/37.pdf&Open=True
[/fn]

4. [fn] Draft Text introduced at Special Meeting of
General Council, February 16, 2024

https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/Jobs/GC/385.pdf&Open=True
[/fn]

5. [fn] Joint Communication dated November 24, 2023 from,
Egypt and South Africa titled Reflections on the reform of the WTO
Dispute Settlement System

https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/Jobs/DSB/7.pdf&Open=True
[/fn]

6. [fn] Minutes of the Dispute Settlement Body Meeting
held on December 12, 2023

https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/DSB/M485.pdf&Open=True
[/fn]

7. [fn] Official Press Release on India’s position at
MC13, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2009791
[/fn]

8. [fn] WTO News Report on Discussions concerning
dispute settlement reform,

https://www.wto.org/english/news_e/news24_e/dsb_26jan24_e.htm
[/fn]

9. [fn] Statement by India on Agenda Item 18 General
Council Meeting – 13 – 15 December 2023: Communication
From India

https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/GC/262.pdf&Open=True
[/fn]

10. [fn] Joint Statement from India and the United
States,

https://pib.gov.in/PressReleasePage.aspx?PRID=1955696
[/fn]

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