In 1995, when the World Trade Organization (WTO) was established, members put in place a dispute settlement mechanism. Members wanted to ensure that the system was working properly, so, at the outset, they decided to conduct a review of the mechanism prior to January 1999. But no changes were ever made, and discussions have continued for more than 20 years.
Since December 11, 2019, the Appellate Body has not been able to hear new appeals because, since 2017, the United States has blocked the WTO membership from selecting new Appellate Body members to replace those whose terms have expired.
In this video, Valerie Hughes discusses the ways that some WTO members have been working around the Appellate Body paralysis and considers the future of dispute settlement at the WTO.
In 1995, when the WTO was established, WTO members put in place a new dispute settlement mechanism, which they praised as being more reliable and more effective than the dispute settlement system that had been used under the GATT. Members wanted to make sure that the system was working properly, so they determined at the outset to conduct a review of the mechanism prior to January 1999. But in fact no changes were made to the system. Nevertheless, discussions have continued for more than 20 years.
The current reform effort is taking place under the shadow of what has been called the “Appellate Body Crisis.” Since December 11, 2019, the Appellate Body has not been able to hear new appeals because, since 2017, the United States has blocked the WTO membership from selecting new Appellate Body members to replace those whose terms have expired. This means that a losing party can appeal a panel report and nothing happens. This has been called “appeal into the void.”
Necessity is the mother of invention, and WTO members have been finding workarounds to the “appeal into the void.” One of those workarounds is called “the non-appeal agreement.” Under these agreements, disputing parties agree — before they receive the panel report — that neither of them will appeal.
Another workaround is the Multi-party Interim Appeal Arbitration. On March 27, 2020, 16 WTO members agreed on an interim appeal arbitration procedure. It cannot be overlooked, however, that the most frequent participant in WTO dispute settlement — the United States — is not participating in the MPIA and is unlikely to do so in the future.
And what about the future of WTO dispute settlement? Some say that the shuttering of the Appellate Body signals the end of dispute settlement at the WTO. I don’t agree. I do believe the system can be improved, but I don’t believe it can be replaced. Perhaps the current crisis will encourage the members to make the changes that have long been needed.