A Bumpy Road Ahead? How International Standoffs Periodically Hold the WTO Dispute Settlement System Hostage



Christophe Bondy, Alexandre Genest | Steptoe & Johnson LLP

Recent events at the World Trade Organization (WTO) illustrate how decision-making activities of its Dispute Settlement Body (DSB) can easily be derailed, notably by political frictions spilling over into its meetings.  However, the rarity of instances in which the DSB found itself paralysed underlines the extent to which the WTO has developed coping mechanisms which should enable it to keep such frictions at bay and thus minimize disruptions to its continued functioning.

The penultimate DSB meeting, scheduled for March 26, 2021 was suspended due to the lack of consensus required for the adoption of its agenda.  Rules applicable to DSB meetings require that its proposed agenda be adopted by consensus before a meeting can take place.  The proposed agenda circulated ahead of the March 26, 2021 DSB meeting included a request by Venezuela for the establishment of a dispute settlement panel in respect of U.S. measures.

The United States objected to the inclusion of what it perceived to be an illegitimate panel request, on the grounds that representatives of the Nicolás Maduro regime do not speak on behalf of the Venezuelan people, and that this was a misuse of the WTO aimed at challenging U.S. sanctions that sought to restore human rights and democracy to Venezuela.  As a result of the U.S. objection, the agenda could not be adopted and the DSB meeting could not take place.  All remaining items for consideration at that DSB meeting could not move forward as long as that DSB meeting remained suspended.  These included a request for the establishment of a dispute settlement panel by Australia regarding measures adopted by China in relation to barley from Australia.

This recent occurrence raises two questions: first, how can there be so few suspensions of DSB meetings in light of all the simmering tensions among WTO Members?  And second, what can be done to avoid periodic paralyses of the DSB?  The answers to both questions are related and can be drawn in part from recent past instances when the DSB faced suspensions of its meetings.

Venezuela had attempted to place this panel request on the agenda of a DSB meeting once before, in March 2019.  Venezuela’s first attempt had similarly led to a DSB meeting being suspended.  Venezuela’s first attempt followed Juan Guaidó’s emergence in January 2019 as a competing head of the Venezuelan State.  Mr Guaidó was recognised by many other States, including the United States, as the legitimate representative of the Venezuelan people in the months that followed.

The tensions as to the recognition of either Mr Guaidó or Nicolás Maduro as Venezuela’s legitimate head of State in the international plane were voiced in part at the following regular DSB meeting held on April 26, 2019.  At the outset of that meeting, Venezuela’s representative stated that while it did not request the inclusion of an item on the agenda of that DSB meeting, Venezuela reserved its right to do so at any future DSB meeting.

In response, Peru (speaking on behalf of Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Panama and Paraguay) said that while the members of the Lima Group supported the continued functioning of the DSB, they did not recognize the legitimacy of the Maduro regime or that of its representatives.

The representative of Venezuela retorted that the DSB was not the appropriate forum to discuss this matter.  Russia voiced its support in favour of the Maduro regime and underlined that the WTO was not the appropriate forum to discuss issues raised by the Lima Group.

Venezuela’s first attempt at placing its panel request on the agenda of a DSB meeting came within 100 days of Guaidó’s emergence as a threat to the Maduro regime.  Its second attempt at doing so came within the first 100 days of the Biden Administration.  The first attempt might have been prompted by a desire to assert the legitimacy of the Maduro regime through the exercise of Venezuela’s rights under international law.  The second attempt might have been to assess whether the U.S. Government would maintain the previous U.S. administration’s resistance toward the Maduro regime.  In both instances, it seems that political considerations extraneous to trade came to the forefront of a DSB meeting.

The takeaway from this standoff is that representatives of WTO Members, as well as WTO Secretariat staff, often focus their efforts on depoliticising the functioning of the WTO, notably by seeking to retain the focus of its activities on trade matters.  Given this, it is relatively rare for political tensions to play out openly in a way that halts temporarily the activities of a key WTO organ.  The WTO offers a platform to help appease such tensions with the aim of minimising their disruptive impact on trade, including the day to day functioning of WTO bodies.

Thanks to these de-escalating efforts, the DSB was allowed to resume its meetings on 28 April 2021.  The newly appointed DSB Chair, Swiss Ambassador Didier Chambovey, initiated consultations with the United States and Venezuela on this issue.  While these consultations are ongoing, Venezuela agreed not to place its panel request on the agenda of a DSB meeting so as to allow DSB meetings to go forward.

Another instance of suspension of DSB meetings arose in the wake of the Appellate Body ceasing to operate in December 2019. At the end of February 2020, the Philippines sought to place on the agenda of a DSB meeting a request seeking the DSB’s authorisation to retaliate against Thailand in relation to a long-standing dispute regarding measures on cigarettes.

Thailand had previously appealed the relevant panel reports to the non-functioning Appellate Body.  These appeals remained pending when the Philippines formulated its request.  Thailand believed that the Philippines’ request to retaliate was premature in light of these pending appeals and objected to its being placed on the agenda of a DSB meeting.  In light of the lack of consensus for adopting its agenda, the February 28, 2020 DSB meeting had to be suspended to allow for further consultations between Thailand and the Philippines.  Upon resumption of the DSB meeting on March 5, 2020, the solution was to adopt the agenda of the DSB meeting while suspending the item regarding the dispute between the Philippines and Thailand.  Soon thereafter, both States entered into consultations facilitated by the DSB Chair that lasted more than half a year.  Both States and the DSB Chair reported back to the Membership on their consultations at each DSB meeting.  These consultations ultimately led Thailand and the Philippines to reach an agreement in December 2020 on a dedicated and confidential consultative process facilitated by Australian Ambassador George Mina.  This process is ongoing and runs in parallel with DSB meetings.  In a communication dated 31 March 2021, Ambassador Mina reported back to the DSB that he had met with representatives of both parties on six separate occasions, that he had sought direct engagement between the parties’ officials in capitals, and that he was planning to participate in a virtual meeting with customs officials of both parties to advance cooperation.

The takeaway from this second instance is that complex legal issues with political and systemic ramifications are best dealt with outside of the DSB in a dedicated process that does not hold up the continued functioning of the DSB and other dispute settlement activities in the interim.  The aim here is to circumscribe the DSB’s activities to issues whose complexity and contentiousness have been ironed out elsewhere.

Both recent disputes in respect of which suspensions of DSB meetings occurred underline the appeasing effect of representatives of WTO Members and WTO Secretariat staff engaging in back-channel communications that can take place thanks to the multilateral platform that the WTO offers.

It should further be noted that the current impasse of the Appellate Body also reflects the challenges of the consensus rule.  The nuance here is that the United States has never objected to the inscription on the DSB agenda of proposals to fill the vacancies in the Appellate Body.  Rather, the United States has simply objected to these proposals upon their substantive consideration so as to prevent consensus from leading to a DSB decision aimed at filling the vacancies in the Appellate Body.

Both its broad-based Membership and the widespread application of consensus in its decision-making apparatus have seared multilateralism onto the WTO.  While this endows the WTO with a large support base, it also exposes it to suffering through the consequences, even unintended, of many international conflicts, however small.  These events remind us that this gentle, Member-driven giant is also one with feet of clay.  In light of simmering tensions among some WTO Members that may touch upon, while also extending beyond trade, it is arguably remarkable that such suspensions do not occur with greater regularity.

Christophe Bondy is a Partner at Steptoe & Johnson LLP, and has been lead council to Canada in NAFTA negotiations, and senior council to Canada in European Union Comprehensive Economic and Trade Agreement (CETA), negotiations, with particular emphasis on services and investment chapters

Alexandre Genest focuses his practice on public international law, with an emphasis on international investment law and international trade law. Over the past 15 years he worked for the World Trade Organization (WTO), the International Court of Justice (ICJ), the Government of Canada, as a lawyer in private practice and as a university lecturer and researcher

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