‘Precedential’ Value of MPIA Awards
Introduction
The WTO dispute settlement goes through three phases. First, consultation between the parties. Second, adjudication by Panels, and if appealed, by the Appellate Body (‘AB’), and third, implementation of the rulings. This process was disrupted when two out of three members of the AB retired on December 10, 2019, and the AB became dysfunctional [[1]]. On April 30, 2020, 19 Members (later joined by three other Members) of the WTO, notified the Multi-Party Interim Appeal Arbitration Agreement (‘MPIA’) to the WTO [[2]]. MPIA is an interim arrangement for appeals to a standing pool of 10 arbitrators under Article 25 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (‘DSU’), till the Appellate Body (‘AB’) is non-functional. To date, there has only been one arbitration under Article 25 of the DSU, US —Section 110(5) Copyright. That too was not as an alternative to Panel/AB proceedings but was utilised at the implementation stage. Thus, this is the first time that Article 25 arbitration will be used as an alternative to panel or AB proceedings.
As explained below, the WTO dispute settlement system has developed a de facto stare decisis for AB reports. One question thus arises concerning MPIA awards: what will be the ‘precedential’ value of these MPIA awards? This question is important since unlike the AB, MPIA is not a body supported by all WTO Members. This post tries to address this question based on AB jurisprudence.
Analysing ‘Precedential’ Value of MPIA Awards
WTO does not have a formal system of stare decisis. But it has developed what some scholars call a de facto practice of stare decisis [[3]], based on Article 3.2 of the DSU. This practice has been objected to by the US [[4]]. To address the concerns regarding the ‘precedential’ value of the MPIA Awards, we first need to understand how the AB has developed this de facto stare decisis. The AB in Japan— Alcoholic Beverages (Page 14-15), noted that adopted panel reports are an important part of GATT acquis. Adopted panel reports create legitimate expectations among members, which must be taken into account [[5]]. This reasoning was extended to adopted AB reports in US — Shrimp [[6]]. In US— Stainless Steel, the AB laid down its much-debated cogent reasons test which provided that absent cogent reasons, the rulings of previous panels and AB should be followed [[7]].
As per AB, the ‘precedential’ value of the AB reports stems from the obligation of the WTO’s two-tier dispute settlement system to provide “security and predictability to the multilateral trading system” [[8]]. However, this does not apply to MPIA. The MPIA provides, “[r]e-affirming that consistency and predictability in the interpretation of rights and obligations under the covered agreements is of significant value to Members…” [[9]]. But it remains an arrangement between certain Members, and the mandate for consistency and predictability has been provided by these participating Members, and not by all WTO Members. It has even been objected to by the US which argues that it “incorporates and exacerbates some of the worst aspects of the Appellate Body practices” [[10]].
To understand this better, we need to see MPIA in the framework of DSU, i.e. as Article 25 arbitration. Arbitration under Article 25 is an inter-party affair. The parties must agree on arbitration; the procedure under DSU may be departed from; third party participation is contingent upon the parties to the arbitration. Most importantly, while the award needs to be notified to the DSB, it immediately becomes binding and does not need to be adopted by the DSB. The importance of DSB adopting the reports may be understood by looking at how the AB has treated unadopted reports.
In Japan — Alcoholic Beverages [[11]], the AB noted that adopted panel reports create legitimate expectations among WTO Members, which was extended to adopted AB reports in US — Shrimp [[12]]. In US — Stainless Steel, the AB noted that “the legal interpretation embodied in adopted panel and Appellate Body reports becomes part and parcel of the acquis of the WTO dispute settlement system” [[13]].
However, the AB in Japan — Alcoholic Beverages (Page 16), also noted that “a panel could nevertheless find useful guidance in the reasoning of an unadopted panel report that it considered to be relevant.” The panels in US — Lamb [[14]], and US — 1916 Act (Japan) [[15]] have relied upon unadopted reports. Further, while the awards under Article 25 do not have to be adopted, they have to be notified to the DSB and relevant Council/Committee. Here, any Member may raise any point (Article 25.3 of the DSU), which at least according to one scholar [[16]] is because the awards may affect the interpretation of the WTO Agreement. Thus, while the MPIA awards do not create legitimate expectations for all WTO Members, and are not ‘multilateralized’, which would affect their ‘precedential’ value, their reasoning may still be relied upon if it is considered relevant.
Legitimacy Concerns
The WTO, being an agreement between States, is a subset of public international law (‘PIL’) [[17]]. It is generally accepted that all the subparagraphs of Article 38(1) of the ICJ Statute are potential sources of law [[18]] for WTO Dispute Settlement, and the WTO has in many cases relied on decisions of other tribunals [[19]]. The MPIA awards, being ‘judicial decisions’, would be relevant as subsidiary means for the determination of law under Article 38(1)(d). Hence, these awards would constitute potential sources of law for WTO dispute settlement. A question however arises as to the weight that these awards would hold.
The question of the ‘precedential’ weight of these awards under PIL can be answered, at least in part, by assessing the legitimacy of MPIA. The legitimacy of an adjudicating body depends on whether it fulfils certain defined standards when executing its mandates [[20]]. It would depend on various factors such as procedural issues (selection of judges, the extent of transparency, etc.); judicial behaviour in the form of style of legal interpretation and fact-finding, etc. However, a distinction has to be made between internal and external legitimacy. While internal legitimacy underlines the institutional and operational aspects of the adjudicator itself, external legitimacy is the influence that an adjudicator (in this case MPIA) has on norms, institutions, and the regime that the adjudicator is embedded in. Internal legitimacy is a prerequisite for external legitimacy that the adjudicator holds [[21]].
The Members, in setting up this arrangement, have tried to keep it legitimate and transparent. The procedure and criteria for the selection of arbitrators are similar to that of the selection of AB members [[22]]. The board of arbitrators appointed is composed of highly qualified people with experience in the dispute settlement system of the WTO [[23]]. Furthermore, third party participation (as under Article 10.2 of the DSU) has been allowed by the participating Members.
Thus, these factors, along with how MPIA would work and the acceptance it gains from WTO Members, would determine its legitimacy, and thus the ‘precedential’ value of its awards.
Conclusion
What ‘precedential’ value the MPIA awards will hold cannot be conclusively answered at this point. This post, however, tries to address what factors would be relevant to address this issue. While the MPIA awards will probably not hold as much value as adopted AB reports, guidance could be taken from the reasoning provided in the awards. Further, they would constitute a source of law, the value of which would depend upon the legitimacy it holds. Considering the United States’ objection to WTO’s practice of de facto stare decisis, it is difficult to predict what kind of dispute settlement system would come into existence in a post-AB/MPIA world. Three ways have been suggested in the past for dealing with this situation. First, the WTO Members could acknowledge the de facto contribution to the acquis. Second, dialogue could be promoted between all relevant parties: the new DSS judges, the MPIA members, and the MPIA non-members to address the question of MPIA’s contribution to the acquis. Third, there could be an amendment of the WTO agreements/DSU to deal with it [[24]]. It remains to be seen how the MPIA awards would be treated in practice.
[1] ‘WTO’s appellate body becomes dysfunctional’ (The Economic Times, 10 December 2019) <https://economictimes.indiatimes.com/news/economy/foreign-trade/wtos-appellate-body-becomes-dysfunctional/articleshow/72461556.cms> accessed 31 August 2020.
[2] Statement on a Mechanism for Developing, Documenting and Sharing Practices and Procedures in the Conduct of WTO Disputes (30 April 2020) JOB/DSB/1/Add.12.
[3] Raj Bhala, ‘The Myth About Stare Decisis and International Trade Law (Part One of a Trilogy)’ (1999) 14 American University International Law Review 845.
[4] United States Trade Representative, Report on the Appellate Body of the World Trade Organization (February 2020).
[5] WTO, Japan — Taxes on Alcoholic Beverages (4 October 1996) WT/DS8/AB/R, WT/DS10/AB/R and WT/DS11/AB/R [14]-[15].
[6] WTO, United States — Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia (22 October 2001) WT/DS58/AB/RW [108]-[109].
[7] WTO, United States — Final Anti-Dumping Measures on Stainless Steel from Mexico (30 April 2008) WT/DS344/AB/R [160].
[8] Ibid.
[9] Conduct of WTO Disputes, Recital 6 (n 2).
[10] D Ravi Kanth, ‘US rejects EU-led interim appeal arbitration arrangement’ (Third World Network, 9 June 2020) <https://www.twn.my/title2/wto.info/2020/ti200608.htm> accessed 10 August 2020.
[11] Japan — Alcoholic Beverages (n 5).
[12] US — Shrimp (n 6).
[13] US — Stainless Steel (n 7).
[14] WTO, United States — Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia (21 December 2000) WT/DS177/R and WT/DS178/R, Footnote 113.
[15] WTO, United States —Anti-Dumping Act of 1916 (29 May 2000) WT/DS/162/R [6.189].
[16] Yoshifumi Tanaka, The Peaceful Settlement of International Disputes (Cambridge University Press 2018) 304.
[17] Joost Pauwelyn, ‘The Role of Public International Law in the WTO: How Far Can We Go?’ (2001) 95(3) American Journal of International Law 535.
[18] David Palmer and Petros C. Mavroidis, Dispute Settlement in the World Trade Organization (2nd edn, Cambridge University Press 2012) 50.
[19] Anja Lindroos and Micheal Mehling, ‘Dispelling the Chimera of ‘Self-Contained Regimes’ International Law and the WTO’ (2005) 16 European Journal of International Law 857.
[20] Robert Howse et al., ‘Introduction’ in Robert Howse et al. (eds), The Legitimacy of International Trade Courts and Tribunals (Cambridge University Press 2018) 6.
[21] Ibid.
[22] Conduct of WTO Disputes, arts. 4, 6; Understanding on Rules and Procedures Governing the Settlement of Disputes 1994, art 17(3).
[23] Simon Lester, ‘The MPIA Pool of Arbitrators Has Been Announced’ (International Economic Law and Policy Blog, 3 August 2020) https://ielp.worldtradelaw.net/2020/08/the-mpia-pool-of-arbitrators-has-been-announced.html> accessed 7 September 2020.
[24] Mattijs Kempynck and Akhil Raina, ‘Update from ‘the Void’: Questions for the new Interim Appeal Agreement (IAAA)’ (International Economic Law and Policy Blog, 30 January 2020) <https://ielp.worldtradelaw.net/2020/01/guest-post-update-from-the-void-questions-for-the-new-interim-appeal-agreement-iaaa.html> accessed 30 July 2020.