Updated: May 16, 2020
Manohar Samal and Siddharth Chittal,
Multilateral trade agreements make all State parties treat each other equally in the field of international trade. No country is permitted to provide better trade deals to one country than it does to another. This is extremely vital for emerging market countries. Many of them are smaller in size, making them less competitive. The Most Favored Nation (MFN) status confers the best trading terms a nation can get from a trading State partner. Few benefits of multilateral agreements are that developing countries significantly gain from such agreements, an increase in trade for every participant can be witnessed, companies of State parties that are members of such agreements enjoy low tariffs which makes their exports cheaper, standardization of commerce regulations for all the trade partners can exist, companies are enabled to save on humongous legal costs since they follow the same rules for each country and that State parties can negotiate trade deals with more than one country at the same time. Furthermore, a positive impact on emerging markets can also be witnessed due to the existence of multilateral trade agreements. Not only multilateral trade agreements, but multilateral trade dispute settlement agreements have also led to pivotal merits and advantages for State parties.
However, the failure mechanism of the dispute settlement system of the Appellate Body of the World Trade Organisation (WTO) and the recent standstill it came to, opened Pandora’s Box for the trade dispute settlement system and the States who had multifarious stakes involved. This has led to the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) to the WTO, officially notified by the European Union and the other WTO Members through Notification JOB/DSB/1/Add.12 on 30th April, 2020. This arrangement has been effectuated between Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, European Union countries, Guatemala, Hong Kong, Iceland, Mexico, New Zealand, Norway, Pakistan, Singapore, Switzerland, Ukraine and Uruguay. WTO’s Appellate Body has kept acceptance of additional State Members under this arrangement open for all and thus, additional nations wishing to be a part of it can also choose to elect it. The arrangement intends to formulate a two-step dispute resolution system including an independent and impartial stage of appeal. The MPIA is based on Article 25 of the WTO Dispute Settlement Understanding.
At the outset, it is important to state all the aspects covered under the parameters of MPIA and then indulge in any kind of analysis. On perusal of the title itself, it is manifestly clear that MPIA is an interim measure that acts as a substitute process of arbitration process until the Appellate Body of WTO is fully functional again with sufficient Appellate Body members. It has been specified that participating Members of MPIA cannot resort to appeals under Article 16.4 and Article 17 of the Dispute Settlement Understanding during the operation of the arrangement. The substantive and procedural facets of the MPIA are based upon Article 17 of the Dispute Settlement Understanding in addition to the procedure stipulated in Annexure 1. The MPIA procedure will consist of hearing by 3 appeal arbitrators from a pool of arbitrators not exceeding 10 as provided in Annexure 2 of the arrangement. In order to maintain independence and impartiality, in the pool of arbitrators, none of them can be a part of any government and have to be experts qualified in law, international trade and subject matter of agreements covered under the jurisdiction. It is provided that the manner of selection for a specific dispute, Article 17.1 of the Dispute Settlement Understanding and Rule 6(2) of the Working Procedures for Appellate Review will apply. The appeal arbitration procedure can only apply if State Members intend their interest to enter into the arbitration agreement and have to notify the agreement within 60 days of establishment of a panel of arbitrators. Further, in specific disputes, the State Members are permitted to depart from the procedures stipulated under the arbitration agreements. Provisions for review of MPIA after one year and cessation of participation in MPIA have also been provided. The MPIA also acknowledges that the Members of WTO and the European Union countries are committed to solving the deadlock and issues of the Appellate Body and that the MPIA will cease to operate once the Appellate Body begins functioning again but the arbitration agreements made in the MPIA regime can remain in effect unless expressly ousted.
It is pivotal to understand the background so that the reason for the establishment of MPIA can be showcased. The WTO’s Appellate Body has been paralysed since 11th December 2019. This is because the membership dropped below 3 members who are necessary for the adjudication of the case, resulting in the largest crisis faced since its establishment. The mechanism earlier was that the Dispute Settlement Board used to appoint members of the Appellate Body for a period of four years. It is believed that the block of new Appellate Body Members by the United States of America under the guise that its sovereignty is being affected and that WTO has indulged in judicial activism, has acted as a catalyst in the collapse of the process and this has attracted severe criticism. Therefore, the MPIA can be seen as a laudable effort to revive and act as an alternative to ensure the continuation of dispute settlement amongst State Members. Many new State Members and modification of procedures to improve the procedure, built on similar lines of the previous procedure of dispute settlement has been encompassed by the MPIA. The State Members have utilised the exigencies of Article 25 of the Dispute Settlement Understanding which enables arbitration as an alternative to traditional Appellate Body proceedings in forming the MPIA. The open membership might enlarge the amount of State Members in the near future and ensure that more disputes are resolved through the mechanism postulated by MPIA.
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