29 Apr 2022

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The First WTO Appeal Arbitration is Initiated, Although Not Directly Under the MPIA

On 28 April 2022, Turkey notified the WTO Members that is was appealing the report of the panel in the Turkey – Pharmaceutical Products dispute (DS583) using the arbitration procedures under Article 25 of the Dispute Settlement Understanding (DSU). Although similar in procedure, this appeal was not initiated under the recently established Multi-Party Interim Appeal Arbitration Arrangement (MPIA).

The MPIA was established on 30 April 2020 between 19 Members, including Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, the European Union, Guatemala, Hong Kong (China), Iceland, Mexico, New Zealand, Norway, Pakistan, Singapore, Switzerland, Ukraine, and Uruguay. Subsequently, Ecuador, Nicaragua, Benin, Montenegro, Macao (China), and Peru also joined the MPIA (see JOB/DSB/1/Add.12 and its seven supplements). The MPIA establishes a framework for appeal arbitration procedures on the basis of Article 25 of the DSU, which provides for “resort to arbitration” by mutual agreement of the disputing parties “as an alternative means of dispute settlement”.

While Turkey has not formally joined the MPIA, it agreed with the EU on a similar appeal arbitration arrangement under Article 25 of the DSU for the purposes of this dispute (WT/DS583/10) (and also for another dispute between the EU and Turkey, European Union – Safeguard Measures on Certain Steel Products (DS595) (WT/DS595/10). The agreed arbitration procedures are very similar to those in the MPIA, although they have been adjusted to reflect the circumstances of each dispute.

This is the first appeal to get underway using an alternative appeal arbitration mechanism under Article 25 of the DSU. The panel proceeding that led to the report was first suspended in December 2021 and, pursuant to the arbitration agreement between Turkey and the European Union, it will remain suspended indefinitely. The panel report has not been formally “circulated” to the WTO Members (the normal procedural step) and, instead, was attached to the notification of appeal and made public in that alternative manner.

As is the case in the MPIA, paragraph 16 of the agreed procedures provides that the “parties agree to abide by the arbitration award, which shall be final”, and that the award shall be notified to the DSB (pursuant to Article 25.3 of the DSU), but not adopted. Also, as with the MPIA, paragraph 17 provides that, pursuant to Article 25.4 of the DSU, the compliance requirements and procedures under Articles 21 and 22 of the DSU will apply the arbitration award.  This means that even though the arbitration award and the panel report will not be formally adopted, prompt compliance with any recommendations or rulings in the award will be required, and the enforcement tools of compliance proceedings under Article 21.5 of the DSU and/or countermeasures authorized under Article 22 of the DSU will be available.

In contrast to the initiation of an appeal arbitration process in Turkey – Pharmaceutical Products, neither Turkey nor the EU decided to file a Notice of Appeal in European Union – Safeguard Measures on Certain Steel Products. Although the Panel’s work was suspended by agreement of the parties to accommodate the possibility, the agreed procedures provided that the Panel would resume its work if neither party took steps to initiate an appeal arbitration process by 25 April 2022. Neither party filed a Notice of Appeal, so the Panel resumed its work and issued its report on 29 April 2022.

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.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com