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Temporary trade dispute appeal system agreed at Davos

The European Union, China and 15 other countries agreed today to develop a temporary system for appealing trade dispute rulings after the recent US-provoked collapse of the WTO appeals body. 

Ministers from the group published a joint statement announcing a “multi-party interim appeal arrangement”. 

The arrangement was reached during a meeting at the World Economic Forum in Davos.

It will allow all the participating parties to “preserve a functioning and two-step dispute settlement system at the WTO in disputes among them,” the EU explained in a statement.  

The move came after the WTO appeals panel, sometimes dubbed the supreme court of world trade, halted its operations last month after years of relentless US opposition. 

Washington, which accuses the court of serious overreach, has blocked the appointment of new judges, leaving it without the quorum of three needed to hear cases due to mandatory retirements.  

Ahead of the December 11 shutdown, Canada and the EU struck a bilateral deal last July to set up an interim panel to hear appeals in disputes that might arise between Brussels and Ottawa. 

In Davos, they were joined by more than a dozen other countries: Australia, Brazil, China, Colombia, Costa Rica, Guatemala, South Korea, Mexico, New Zealand, Norway, Panama, Singapore, Switzerland and Uruguay.

The countries stressed that the arrangement was temporary, and that it was open to any WTO member willing to join it. 

“This remains a contingency measure needed because of the paralysis of the WTO Appellate Body,” European Trade Commissioner Phil Hogan said in a statement.

“We will continue our efforts to seek a lasting solution to the Appellate Body impasse, including through necessary reforms and improvements,” he said. 

The system, which the countries argue is designed to preserve the principle enshrined in international trade law that governments have the right to appeal in any dispute, is based on Article 25, a rarely-used provision of the WTO Dispute Settlement Understanding. 

The article, used only once before in a 2001 dispute between the US and EU over music rights, allows WTO members to resolve disputes via external arbitration and to agree amongst themselves on the rules of procedure and choice of judges. 

The announcement came after US President Donald Trump earlier this week in Davos said “very dramatic” action to reform the WTO was in the works. 

The US has wide-ranging concerns about the WTO appellate branch, which predate Trump’s presidency. 

His predecessor Barack Obama’s administration began a policy of blocking the appointment of appeals judges over concerns that their rulings violated American interests. 

But Trump’s trade team has both extended that policy and escalated the fight, arguing in particular that the US Constitution does not permit a foreign court to supersede an American one. 

US concerns regarding the WTO appeals court include allegations of judicial overreach, delays in rendering decisions and bloated judges’ salaries. 

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