WTO Dispute Settlement Post 2019: What to Expect? What Choice to Make?

Abstract

What does the imminent demise of the WTO Appellate Body (AB) mean for the settlement of ongoing and future trade disputes? 

This paper discusses two “unlikely solutions”, at least in the short term: the US lifts its veto on AB appointments; a WTO organ unlocks the impasse. Appeals pending on 10 December 2019 will most likely be carried-over pursuant to (contested) Rule 15 of the AB Working Procedures. For panel reports released after that date, four scenarios emerge: 

(i) appeals “into the void” blocking the panel report,
(ii) no appeal ex post, or ex ante no appeal pacts (NAPs), 
(iii) Article 25 appeal arbitration, 
(iv) “floating” panel reports (interim or final), neither adopted, nor appealed/blocked. 

Only Article 25 appeal arbitration preserves both an appellate stage and automatically binding dispute settlement. No appeal or NAPs give up on appellate review but safeguard adoption by the Dispute Settlement Body (DSB) of panel reports by negative consensus. Appeals “into the void” and “floating” panel reports drop both an appellate stage and automatic bindingness of results. They also risk adding a considerable dose of power politics into the process. NAPs are hard to conclude politically. Members seem to hesitate to sign on to Article 25 arbitration. Although it may come with important reputation and other costs, appeals “into the void” must, therefore, be expected. 

The transformation from GATT to WTO took half a century. Regular veto rights in the settlement of trade disputes may be back in a matter of months. It is one thing to lose the AB (originally, a mere “afterthought”), quite another to return to pre-WTO dispute settlement where panel outcomes are not automatically binding and power relations play a greater role. At the same time, it would be wrong to equate a (temporary?) return to GATT-style dispute settlement with the collapse of a rules-based WTO system.

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