A blueprint for a plurilateral WTO Arbitration Agreement under Article 25 of the Dispute Settlement Understanding

As highlighted in recent months, the United States has been holding the WTO dispute settlement system hostage by refusing to approve the start of the selection process for new members of the WTO Appellate Body, unless it gets its way on unspecified changes to that system. Since there must be at least three members to hear a case, the Appellate Body could cease to function in case of unfilled vacancies accumulate. Moreover, without the full number of members the workload may soon become overwhelming and unsustainable, with the prospect of significant delays. This might well coincide with a spike in new cases, as the United States sets about to implement the top priorities of President Trump’s trade policy agenda which includes strict enforcement of U.S. trade laws, including anti-dumping duties, that are likely to be challenged in Geneva.

A solution to this impasse, which may avert the risk of systemic collapse, may be an oft-overlooked provision in Article 25 of the WTO Dispute Settlement Understanding, which provides for arbitration as an alternative means of binding dispute settlement. To date, this provision has only been invoked once. The main impediment to resorting to Article 25 arbitration is that the parties to the dispute must agree in advance on the procedures to be followed and to abide by the arbitration award.

This chapter explores how to practically apply Article 25 of Dispute Settlement Understanding as an alternative and emergency means of appellate review of panel rulings in case of Appellate Body gridlock. It does so by proposing a blueprint of what such a plurilateral arbitration agreement might look like. The chapter sets forth two arguments. First, to render effective Article 25 requires WTO Members that wish to make continued use of the WTO dispute settlement system to enter into a binding arbitration agreement in respect of future disputes. Second, many WTO Members are currently keen users of the dispute settlement system, equally often as a complainant as in the capacity of a respondent, and may have strong incentives to ensure ex ante that arbitration is available as a fall-back option in case Appellate Body proceedings are not available. Reaching such agreement after a dispute has arisen may not be a viable option for obvious reasons.