On 10th December 2019, the terms of two of the three remaining members of the WTO Appellate Body expired, leaving just one member and rendering the Appellate Body unable to function. According to reports, it is expected that four of the fourteen pending appeals will be decided despite the shutdown, including: two appeals brought by Honduras and the Dominican Republic in their disputes concerning Australia’s plain packaging measures for tobacco products (DS435 and DS441); one appeal brought by the United States in its dispute with Canada concerning US countervailing measures on supercalendered paper (DS505); and one appeal brought by Ukraine in its dispute with Russia concerning Russian measures restricting imports of railway equipment (DS499). It appears that the other pending appeals will be left in limbo. These circumstances, combined with a 95% reduction in the Appellate Body’s operating fund, have compelled some to question the viability of the WTO dispute settlement system going forward.

Although it is currently facing unprecedented challenges, the WTO dispute settlement mechanism has not been rendered unviable. It will continue to be used to resolve trade disputes between members, at least up until the conclusion of the panel stage. In addition to the interim WTO appeal arbitration model adopted by the EU, Canada and Norway (see “Norway joins Canada and the European Union in Establishing an Interim WTO Appeal Arbitration System”), other options being considered include procedural agreements between disputing parties to forego their appeal rights and allow for the adoption of panel reports by the Dispute Settlement Body. This would allow successful complainants to invoke the WTO enforcement mechanism, if necessary. Even if panel reports remain unadopted, and the enforcement mechanism is not applicable, the existence of such reports could assist in the mutual resolution of disputes by the disputing parties, as they did under the pre-WTO system.

The WTO dispute settlement system is invaluable to the stability of the world trading system. There is now a strong incentive for all Members to come together and resolve the issues that have led to this predicament. 2020 will be a challenging, albeit interesting, year for WTO dispute settlement.

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO dispute settlement proceedings. If you have any questions about the foregoing subject, please do not hesitate to contact us.