Jessica Cambiati , 2 juin 2020

The Multi-party Interim Appeal Arbitration Arrangement (MPIA) provides for an interim solution to the WTO’s Appellate Body crisis.

As early as 2011, the American administration has shown its dissatisfaction with the Appellate Body by impeding to fill the vacancies of this organ. According to the Understanding on rules and procedures governing the settlement of disputes (DSU), the Appellate Body is composed of seven judgeswho are elected for four years and can be reappointed once (Article 17 DSU). The appeals are heard by three rotating judges. Since the election of Donald Trump as President of the United States, the use of the veto became systematic and, on 11th December 2019, it led to the reduction to one member the Appellate Body. The WTO system is unable to hear any appeal to Panel reports. Due to the importance of having a functional international multilateral trade dispute system, the parties of the WTO have been looking for solutions to the crisis.

The MPIA will apply to all future and ongoing disputes between participating members, provided that an interim report has not been issued yet (§9 MPIA). The MPIA has today 21 participating members and is open to any member of the WTO (§11 MPIA). It will enter into force following the notification to the Dispute Settlement Body (DSB), which is expected in the following weeks. The MPIA is composed of three parts. The first part is a political declaration, in which the parties confirm their willingness to solve the crisis. The second and third parts contain the rules applicable to the arbitration procedure and the designation of the pool of arbitrators.

The parties to the MPIA want to preserve the main features and qualities of the Appellate Body procedure by referring to the DSU rules, which are directly applicable unless otherwise provided. Cases will be heard by three arbitrators, which will rotate out of a standing pool composed of ten members. The arbitrators will be subject to the same rules of conduct that normally apply to the Appellate Body members (§11 Annex 1 MPIA). The MPIA also maintains the collegiality system (§8 Annex 1 MPIA), as the three arbitrators may consult with the other seven to ensure consistency and coherence in their decisions (§5 MPIA).

The MPIA provides some answers to the criticism raised by the United States and other parties towards the duration of the WTO dispute settlement mechanism. Arbitrators should only address the issues that are necessary to the resolution of the dispute and they can take appropriate organizational measures to respect the 90-day limit to issue an award, including “page limits, time limits and deadlines as well as [measures] on the length and number of hearings required” (§12 Annex 1 MPIA). To this end, arbitrators are also able to propose substantive measures to the parties. For example, they might discuss with the parties and advise them to abandon some claims under Article 11 DSU (assessment of the facts), if they believe such claims are not likely to succeed (§ 13 Annex 1 MPIA).

The MPIA is meant to be an interim solution to overcome the void left by a paralyzed Appellate Body, by which the parties agree to temporarily replace the Appellate Body procedure by an arbitration procedure. The use of arbitration is not new to the WTO and the Appeal Arbitration Agreement (Annex 1 MPIA) refers to the procedure of article 25 DSU. Arbitration awards issued under this arrangement will be binding on the parties and will be notified to the WTO Dispute Settlement Body. Awards issued under Annex 1 of the arrangement will be enforceablethrough the usual means provided for by Articles 21 and 22 DSU, which apply mutatis mutandis. The effect of these MPIA awards in the WTO system is unclear under the MPIA,  it will be interesting to see in the future if WTO members or panels will refer to them.

The MPIA involves 21 States out of 164 WTO parties, but it includes some of the members that most frequently use the dispute settlement system in the WTO history (European Union, Brazil, Canada, China, Mexico). This number will probably increase in the coming months, thus extending the benefits of the new arrangement. Probably the MPIA will not cover disputes involving the United States since it is uncertain whether this country will join the arrangement. Although currently limited to 21 WTO Members, the MPIA is open to any other member willing to join the system. The MPIA will allow the participating members to benefit from a review mechanism of the Panel reports, avoid the risk of a party appealing into the void, and prevent non-compliance and the use of unilateral measures.

Jessica CAMBIATI, WTO Dispute Settlement Mechanism: an interim solution to the Appellate Body crisis, actualité du CEJE n°21/2020, disponible sur www.ceje.ch