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Info Service on WTO and Trade Issues (Jun23/02) Geneva, 1 Jun (D. Ravi Kanth) — Several countries apparently pushed back against the controversial options proposed by the United States in the ongoing informal consultations on reforming the World Trade Organization’s dispute settlement system, particularly on the “sunset provision” tabled by the United Kingdom and supported by the US, said people familiar with the discussions. The facilitator overseeing the informal consultations on reforming the WTO’s dispute settlement (DS) system has issued a confidential “yellow table” of proposals, options, and observations in the ongoing informal consultations on reforming the dispute settlement system. The facilitator, Mr Marco Molina of Guatemala, suggested that the “yellow table” of proposals in cluster three contains more refined and elaborated proposed solutions for the issues identified by members. In paragraph four of the outcome document of the WTO’s 12th ministerial conference (MC12), trade ministers had mandated members to conduct discussions with the view of having “a fully and well-functioning dispute settlement system accessible to all Members by 2024.” The two-tier dispute settlement system, which was negotiated towards the end of the Uruguay Round of trade negotiations from 1986 to 1993, has been paralyzed by one major industrialized country, namely the US, since 2019. That country had played a central role in creating the Appellate Body whose rulings can only be reversed through the principle of negative consensus. Despite sustained efforts by former New Zealand trade envoy Ambassador David Walker to address the concerns raised by the US, which had made the Appellate Body dysfunctional, Washington opposed Ambassador Walker’s recommendations, even though the entire membership rallied behind his report. Against this backdrop, the latest “yellow table” in cluster three highlighted by Mr Molina includes several proposals. It includes: (1) alternative dispute resolution mechanisms; (2) streamline(d) panel process; (3) accessibility; (4) accountability; and (5) focus on what is necessary to resolve the dispute. Among the five, the proposal on sunset provision under “accountability” seems to have raised considerable push- back from members. The sunset provision proposed by the United Kingdom, which is strongly supported by the US, appears to be the most divisive one. The UK introduced the proposal with the interests here pivoting around maintaining the integrity of the system, so the system does not shift from its original purpose. Apparently, it includes two sets of proposals: (1) a mechanism to review the DSS (dispute settlement system) including reforms in order to monitor it on a systemic basis; and (2) it calls for adjudicative provisions to come to an end by “X” number of years. The proposal on “sunset provision in which the adjudicative provisions of the dispute settlement mechanism would sunset after “X” years unless members agree by consensus to extend”, appears to have raised several observations. The observations on the sunset provision made by the facilitator include: 1. To consider how to prevent abuse of this provision by any Member. 2. To consider the scope of “adjudicative provisions” to which the sunset would apply. 3. To consider whether the extension would be by (negative) consensus or by reference to another threshold. 4. To consider whether one Member should be able to sunset adjudicative provisions for all Members. 5. Impact on the predictability and security of the rules-based system to be considered. 6. To consider whether transitional provisions are required to apply in the event that the sunset provision is exercised. At the meeting, the US is understood to have said that the idea of a sunset review is interesting, suggesting that there could be certain divergences, as all would like to agree on something that would help avoid the abuse of the system. But several members such as Russia, South Africa, Canada, Pakistan, the European Union, Australia, Norway, India, Thailand, Japan, and China apparently expressed opposition to the sunset provision for terminating the adjudication process after “X” number of years. Russia said that it cannot support the sunset provision proposal, while South Africa maintained its opposition on the ground that the provision will not help in creating accountability. Instead, it will create more uncertainty and slowly kill the Dispute Settlement Understanding (DSU), South Africa appears to have observed, according to negotiators who took part in the consultations. Canada seems to have said that it is not in favour of the sunset clause, while Pakistan also indicated its opposition to the provision. Pakistan also said that the provision will bring unwanted political disadvantages to the process and disfavour the developing and least-developed countries. The EU apparently said that it strongly objects to the sunset provision, a stand shared by Australia, said negotiators who took part in the meeting. India asked the proponents to explain the intention and purpose of the sunset clause proposal as, according to India, it will put the system at risk instead of strengthening it. India said that the US could better elaborate on the sunset clause in more detail. Japan apparently said the sunset clause is like offering a veto to all members, while China opposed the proposal somewhat vehemently, said negotiators, who asked not to be quoted. China also said that the sunset provision is a dangerous idea. In response to the sharp criticisms of the sunset provision, the US apparently defended the proposal by adding additional language suggesting that, “THE PURPOSE IS TO PROVIDE MEMBERS THE ABILITY TO UNDERTAKE A MEANINGFUL CHECK ON THE SYSTEM ADHERENCE TO THE AGREED RULES AND FUNDAMENTAL REFORMS,” said negotiators, who asked not to be identified. ALTERNATIVE DISPUTE RESOLUTION MECHANISMS Under Alternative Dispute Resolution Mechanisms (ADRs), the facilitator has clubbed two proposals under the headline of “definition of rules, procedures, and guidelines for ADRs” and “rules for specific uses of ADRs.” The proposed options to address the two proposals under ADRs include general/additional rules + model rules of procedure. Format to be decided later (e.g. DSB decision, practice document, etc.). The observations made by members include the following: * Members may institutionalize a set of overarching rules to facilitate the use of ADRs, which may be complemented by rules tailored to specific stages of disputes. * There is a general understanding that the use of ADRs will remain voluntary, with some proposals to make them mandatory in certain instances. * Due consideration is being given to the fact that not all disputes are suitable for resolution through ADRs. * Need to consider the need of keeping the dispute settlement mechanism streamlined and avoiding the additional unnecessary phases to the process. * Need to further explore the sequences and interaction between existing DSU mechanisms, such as DSU Article 4 and Article 5. (Article 4 of the DSU is about consultation, while Article 5 deals with good offices, conciliation, and mediation). As regards the second proposal concerning the rules for specific uses of ADRs, the facilitator’s “yellow box” provides options such as deciding the format (e.g. DSB decision, practice document). Members’ observations on this proposal are the following: * The use of a facilitator in consultations might be encouraged through different means. Still under consideration whether the use of a Facilitator in consultations would be voluntary or mandatory. * There is an interest to give more “visibility” to the concept of a Facilitator. * Recognition that not all disputes are suitable to be resolved with the assistance of a Facilitator. * The use of ADRs is being discussed also under Cluster 2. STREAMLINED PANEL PROCESS The proposals under this heading relate to: (1) the panel establishment at the first DSB meeting; (2) page/word limits for written submissions and time limits for meeting with the panel; (3) a single meeting with the panel; (4) advance written questions in advance of meetings; (5) adherence to time-frames; and (6) power for the panel to invite parties to focus on certain claims or exclude certain claims. The option for panel establishment, according to the facilitator, is to ensure that the panel is established at the first DSB meeting where it is requested. Surprisingly, members did not express any reservations about this option, as per the “yellow table.” On the issue of page/word limits for written submissions and time limits for meeting with the panel, the options suggested are: (1) indicative page/word limits; (2) mandatory page/word limits; and (3) time limits for oral submissions. Members made the following observations: * With respect to both options 1 and 2, the possibility of defining two (standard, complex) or three (standard, complex, exceptionally complex) categories with associated page/word limits. * Factors to be provided to the panel to guide decision (e.g. legal or factual complexity of the dispute, including the complexity of measures at issue and of analysis required to determine whether there is a violation or defence or justification). * Page/word limits should also be applied to parties’ comments on the interim report and to requests for preliminary rulings (e.g. under DSU, Article 6.2 dealing with the establishment of a panel). As regards the third proposal on a single meeting with the panel, the options include (i) standard Appendix 3 process (two meetings) with the possibility of only one meeting, between two sets of written submissions, and (ii) two sets of sequentially written submissions, followed by a single meeting. Apparently, members observed that it is “worth examining differences and gains in efficiency under each model for parties and panel.” On the fourth proposal on advance written questions in advance of the meeting, the option suggested is “mandatory written questions in advance of the meeting, with the possibility for a panel to ask post-meeting questions.” Members did not raise any reservations and also observed that there is “no requirement for the panel to ask post-meeting questions tracking those asked at the meeting.” On the issue of “adherence to time-frames”, the option suggested in the “yellow table” is “mandatory time limits for issuance of panel report (e.g. 9 months with possibility of extension to 12 months), bearing in mind the considerations in the observations.” The facilitator listed the following observations on this issue: * Starting point would be panel composition and the endpoint of the issuance of the report to parties as this is part of the proceedings over which parties and panels have control. * Useful to have a discussion with the secretariat about translation to inform possible guidelines. * Relationship between time-frame and page/word limits for written submissions. * Possibility to extend the time-frames by agreement of the parties. * Panel can extend in exceptional circumstances beyond the control of parties or panel (e.g. pandemic, accident). * Explanation to be provided for delays. As regards the power for the panel to invite parties to focus on certain claims or exclude certain claims, the option offered in the “yellow table” is “give power to a panel to invite parties to focus on certain claims or exclude certain claims.” The observation made by members is that “there would be no consequences for the parties of not accepting the invitation of the panel.” In short, the reform of the dispute settlement system seems to be pushed into a maze of controversial proposals such as the sunset provision, which may raise further issues about the intentions of the proponents, said negotiators familiar with the discussions. +
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