Appointment of Judges to the Appellate Dispute Settlement Body of the WTO: The Ongoing Impasse

[Jyotsana Singh is a fifth-year student at National Law School of India University, Bangalore]

The Dispute Settlement Body (DSB) of the World Trade Organization (WTO), popularly referred to as the ‘crown jewel’ of the said organization, is experiencing an unprecedented crisis. This crisis revolves around the issue of the American attempts at stalling the appointment of judges to the Appellate Board (AB) of the WTO. The underlying debate relating to this impasse is rooted in the structural framework on which the WTO is modeled, i.e., on consensus decision-making.

By means of this post, the question of the relevance of this consensus-based model has been addressed. Suggestions in the form of structural alternatives have been proposed, and expounded upon, to eventually weigh in the possibilities of emerging out of this contemporary quagmire. The option of three popularly advocated solutions has been explored, viz., (1) a shift to the majority voting rule, (2) the establishment of an arbitration mechanism and (3) invoking an exception to the consensus rule. Subsequently, it is concluded that a replacement of the consensus decision- making model, which serves as the keystone of the WTO and also its predecessor, The General Agreement on Tariffs and Trade (GATT), qualifies as an extreme measure and should be categorically shunned. ‘Waiver’ as an exception to the consensus rule should be adopted in the interim to salvage the AB from its impending demise. Concomitantly, the initiation of dialogue on the systemic issues flagged by the US, few of which are considered justified, has been advocated for.

As explained above, the US is culpable for inducing a paralysis in the DSB. The genesis of this problem lies in the consensus decision making rule which is states: “Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting.” This implies that each member state is well equipped to remonstrate against the passage of any decision at the WTO. Owing to this provision, the US has been successful in jeopardizing the interests of other member states, by strategically strangulating the process of constitution the AB.

An expansion of the majority voting rule offers an apparent solution, in addition to being a more efficacious replacement of the consensus model. The same is however characterised by several pitfalls. This makes a substitution of the consensus model in favour of a majority voting set up an avoidable choice. First, it is opined that the WTO was established with the purpose of serving as a democratic platform (which necessitates that all voices are heard) devoted to the cause of ensuring stability in international trade relations. Majority decision making hence violates the parameter of being democratic in nature. It is rather governed by a mechanism permitting en bloc pressure generation by a set group of states. For ensuring fairness, the WTO then will be required to construct organs and procedures accounting for the majoritarian pressures in decision making. In the light of an augmentation in the politicization of the WTO decision making under a majority voting expansion rule, the possibility of the dilution of ‘legitimacy and fairness’ of the WTO would also increase. Secondly, stemming from the first point, substantial political and economic costs will be incurred to secure such structures in place albeit the prospect of increased efficiency.

Another solution that is proposed by theorists is the establishment of a binding arbitration mechanism which can be harmoniously read with the provisions of Article 25. It is argued that a parallel dispute settlement mechanism operating within the WTO framework can be provided for. Disputing parties could thereby mutually agree to submit to this regime for the entirety of the dispute. Unlike in the case of AB, this dispute specific mechanism would be referred to personnel unanimously agreed upon the concerned parties. Furthermore, this path is appealing also given the factors of cost reduction and procedural simplicity that it guarantees.

Yet this solution is not bereft of its drawbacks. First, such a mechanism proffers merely an ad hoc solution which hinges upon the strategic circumventing of a non-cooperating state like the US. Secondly, it has been suggested that parties conclude an agreement latest by arrival of the interim report of the established panel. However, given that it is statistically favourable for the complainants to eventually win, this avenue guarantees negligible incentive for the party pre-empting an unfavourable ruling, to consent to a binding arbitration agreement. Thirdly, for achieving an effective end to arbitration, it is believed that a plurilateral general arbitration agreement is to be signed by the member states which would act as the definitive instrument laying down the scope, nature and procedures involved in the arbitration. Unfortunately, this exercise of charting out of a robust arbitration structure would require consensus among the member states.

 

Similar to the arbitration method discussed above, waiver can also be categorized as an ad hoc short term solution. Four exceptions have been envisaged in Article IX, which accommodate for situations wherein majority voting is permitted as per the WTO mandate. Although majority voting has not occurred till date at the WTO, it is argued that waiver, which is one of the aforementioned exceptions, can be sought to emerge out of the extant conundrum. One might argue that this end can be achieved even by invoking majority voting exceptions allowing for the adoption of authoritative interpretations and amendment proposals. Notwithstanding, the paucity of precedents vis-à-vis adoption of authoritative interpretations and amendment proposals, and in the light of established precedents and the purpose of ‘waivers’, the latter option seems like a more attractive choice.

Article IX (3) provides the legal basis for an obligation of the WTO Agreement or any of the Multilateral Trade Agreement to be waived in the face of “exceptional circumstances.” The crippling of the entire statutory framework of the AB is contended to qualify as an exceptional circumstance. Any non-compliant measure adopted by an individual is, hence, legalized by means of a waiver. Importantly, this exception is relevant not only as a safety valve mechanism to legally refrain from performance of obligations, but also as tool allowing for a broad usage by a member state.

Additionally, waivers are granted not merely to individual nation states but can also be granted as collective decisions permitting for a lapse of obligations of a group of state. In the past, waivers have been granted for justifying non-reciprocal trade preferences, enabling member states to adapt to their goods to alterations in the Harmonized Systems, etc. The same should now be invoked to permit appointment of judges to the AB by the DSB by reading Articles 2.4 of the Dispute Settlement Understanding with Article IX.1 of the WTO Agreement.

It is believed that consensus decision making is hypocritically a democratic framework. By the virtue of their economic bargaining power, the developed block represented by the US and the European countries possesses substantial coercive powers. This power is then wielded to politically pressurize the developing block to yield to the demands of the developed member states. Yet, the consensus decision making rule proves to be relatively safer option than the majority voting alternative. This is on account of the lesser degree to which the powerful blocks get antagonized in the consensus model. Additionally, theoretically, a level playing field is guaranteed to the developing nations with possibility of availability of concessions with simultaneous preservation of the democratic characteristic of the WTO.

Thus, the Indian demand of undertaking an administrative decision making to resolve the on-going impasse has a potential of antagonizing the US. Instead, a dialogue on issues like the AB adjudication of issues not originally raised by parties, overreach of the AB, as flagged by the US, should take place.

Jyotsana Singh

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