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  • Divyanshi Shukla

MAGNIFYING MPIA: Amplifying Trade Dispute Resolution Post-WTO India Ruling

This post is authored by Divyanshi Shukla, a third year student at the National Law Institute University, Bhopal


INTRODUCTION

On a request from India and the European Union (EU), the World Trade Organisation (WTO) members have agreed to provide additional time to its Dispute Settlement Body (DSB) to adopt the ruling of the WTO panel against India. This dates back to the WTO ruling wherein it was held thatIndia’s tariff policy is inconsistent with global trading rules in a dispute with the European Union, Japan and Taiwan over import duties on a wide range of information and communications technology (ICT) products.

Against this ruling filed by the European Union, the Commerce and Industry Ministry appealed in the WTO Dispute Settlement System that is the final arbiter on such disputes. However, this challenge will not succeed as and will lead to “appeal in void” as the WTO Dispute Settlement is not functional currently. India has already three pending appeals before the WTO. This halt dates back to 2018 when the US refused to allow the recruitment of new judges citing reasons of “judicial overreach”. The central contradiction of this system is the persistence of global trades on the one hand and grinding halt of the dispute resolution system on the other. Nevertheless, this stalemate does not mean that the WTO will run off the road. There are other alternatives such as Multi-party Interim Appeal Arbitration Arrangement (MPIA) are functional. MPIA was formed with the view to arbitrate any WTO dispute among themselves. Since, the EU and India have already felt the need to adjudicate the issue in an amicable way. They can resort to alternative ways like MPIA. However, due to reasons explained in the following section, nations like India have not signed for MPIA and do not intend to do so either.

With this background, this article analyses the stalemate at the WTO Dispute resolution system and other alternatives available currently in special reference to MPIA. In addition to this, this article discusses the reasons for which India is reluctant to sign MPIA. This article attempts to resolve the problems that India has with MPIA because these challenges are global but their impacts are also felt locally. With a reform-oriented approach towards research, this article aims to bring the current framework into a broader legal and scholarly conversation on its importance to resolve such disputes and ultimately provides way forward.


MPIA- A BEACON OF HOPE OR A FALSE PROMISE?

In December 2019, the United States blocked the appointment of new judges to the WTO's Appellate Body due to complaints over judicial activism at the WTO and concerns over U.S. sovereignty. It has been withholding approval of AB appointments, which requires consensus or agreement of all WTO member states. At that time only 3 members were left and after their terms ended, the Appellate body was rendered dysfunction as it lacks the requisite quorum. There is a crisis prevailing since then as the important phase of dispute resolution i.e., adjudication has been affected. This situation is further worsened by the increasing number pending of disputes. In response to the situation and to streamline the appellate process at the WTO, 16 WTO members set up a separate appeal system for trade disputes in March 2020. It is an alternative dispute resolution system in the absence of a functioning WTO Appellate body. Under Article 25 of the WTO Dispute Settlement Understanding, member states can approach through MPIA when they are unable to accept the adoption of the panel decisions. As of March 2023, 26 WTO members take part in this arrangement. The MPIA is envisaged to preserve the values of fairness, independence and impartiality. It was affirmed that the MPIA will cease to exist as soon as the WTO Appellate Body starts to function again as it is a temporary response to the temporary paralysis at the Appellate Body. As noted in US/Canada – Continued Suspension,[i] “consultations, mediation, good offices, and arbitration are, however, alternatives to compulsory adjudication and require the consent of the parties. In the absence of such consent, they cannot lead to a binding decision.” More than three years have passed since working of the Appellate Body has come to a halt, many countries are willing to participate in MPIA as an interim measure. Since, its functioning is flexible in nature, it can work to explore and test new ways of making WTO dispute settlement more efficient and in line with WTO Members' goals and interests. The dual goal of MPIA is to “preserve the system's binding character and two levels of adjudication.”

It should also be noted that MPIA is not a plurilateral agreement, rather MPIA should be invoked in each individual case between the parties by signing a dispute-specific appeal arbitration agreement. The flexibility and applicability have to be defined in each agreement. There is a pool of ten arbitrators.[ii] As noted in Turkey – Pharmaceutical Products (EU),[iii] according to the procedure of Article 25, the arbitrators are mandated to address only those issues raised by the parties that are necessary for the resolution of the dispute. Since, trade-related disputes are inevitable and the Appellate Body is not in session, more and more countries are resorting to the option of MPIA. Furthermore, another advantage of MPIA is in pursuance of Article 25(3), there is no need for formal adoption of Dispute Settlement Body’s resolutions, countries can adopt findings on the arbitrators in a way that also respects their WTO obligations. However, the award of MPIA cannot be adopted automatically by suspending the findings of the panel report. To do the same, the complainant party would be required to suspend the panel proceedings under Article 12.12 of Dispute Settlement Understanding. MPIA necessarily has to complete its procedure within 90 days. MPIA procedure provides a step-by-step roadmap as to how the member states should move forward with the same in specific disputes.


WHY HAS INDIA NOT SIGNED MPIA?

Although the interim solution of MPIA has been found to bring the dispute settlement of WTO back on the rails, many developing countries including India are reluctant to sign it. India is a rule-based trading system that is apprehensive of MPIA’s uncertainty regarding awards and its multilateral nature. Other developing countries also raised concerns as they think their interests will be sacrificed in pursuit of interests of developed nations. As normal arbitration awards filed under Article 25 can be subjected to surveillance by Dispute Resolution Body, however, it is not clear for MPIA that recourse would DSB adopt to give effect to MPIA’s award. Developing countries have constantly been disadvantaged in bilateral negotiations. These apprehensions are embedded in power imbalance in world politics. In the presence of MPIA, the participatory nations can become complacent to resolve the impasse present in the Appellate Body.

Moreover, the WTO Dispute Settlement Body had provisions for “special and differential treatment” for developing and developed countries. These include, for instance, “special attention” to particular problems and interests of developing countries,[iv] according sufficient time to prepare and present its defence,[v] and provision for accelerated DSS procedure on their request.[vi] If India signs MPIA, it will not be able to enjoy these rights, and hence get affected by power imbalance between developed and developing countries. Developed countries account for only for 25 per cent of the WTO membership, therefore, the rest 75 per cent will get affected by the adoption of the MPIA because of absence of “special and differential treatment.”

MPIA is a rule-based arrangement. The WTO Appellate Body Working Procedures and the DSU Code of Conduct provide the complex ruled governing it. MPIA can provide an array of options to the parties, it leaves room for innovations to test various reform proposals and channel the best way possible to resolve disputes that the member states can adopt even after the WTO Appellate Body is functional again. Moreover, if India opts for MPIA, the likelihood of unilateral sanctions will be minimized and the likelihood of compliance by other member parties to the MPIA will be increased.[vii] Third- party adjudication can be proved to more efficient because of its flexibility and equity in power sharing and decision-making. Nevertheless, the frequency in which the member states choose to resort to this mechanism will determine its efficacy.

Other choices available to India include signing a Comprehensive Economic Partnership Agreement (CEPA) with EU, Japan and Taiwan. CEPA can provide permanent safeguard for businesses of both countries. However, doing that could put India in a difficult position because before signing CEPA, India would have to abide by the WTO’s rulings and hence, make several changes in its duty structure. It may have severe consequences on domestic manufacturing initiatives.

CONCLUSION AND WAY FORWARD

As noted by the Chair of the Appellate Body, Ujal Singh Bhatia “if good solutions are to be found, the right questions must be asked. Members should carefully think about what kind of system they want, what its role and reach should be, and what core principles should govern its operation.”[viii] There are still a lot of discrepancies regarding the efficiency of MPIA, but the question arises, does India have a choice in these tumultuous times? The choices available to India are nebulous and multidimensional. However, these challenges are not insurmountable India must find ways to resort to other ways through the labyrinthine set of laws and policies that complicate the notion of resolution of trade disputes. Engagement in bilateral talks and negotiating a free trade agreement to resolve the matter. India will have to compromise with its policies of protectionism. These ways are politically and economically crucial for both sides.[ix] These steps will encourage the creation of global value chains in which production is split across India and Europe to exploit each nation’s comparative advantage, driving down costs while raising standards.[x] Currently, India is not a major place in value chains of Europe.

Since MPIA allows for ad-hoc arbitration, if EU and India consent to MPIA, the panel findings of the WTO regarding the tariffs on ICT products can be reviewed. Resorting to MPIA is no easy tightrope to walk but in such challenging times, it the “last best hope” for India before the Appellate body re-emerges from the storm. It also depends on the readiness and goodwill of the parties and the kind of bargaining strategies that they may use.

As the famous adage suggests, “future belongs to those who prepare for it today.” New strategies, born out of open dialogue and responsible leadership, can reinvigorate the legislative bases dealing with the issues of trade dispute resolution.

[i] Appellate Body Reports, US/Canada – Continued Suspension, para. 340. [ii] The list of MPIA arbitrators was communicated to WTO Members in JOB/DSB/1/Add.12/Suppl.5, 3 August 2020. See also https://wtoplurilaterals.info/plural_initiative/the-mpia/. (Accessed on July 1, 2023) [iii] Award of the Arbitrators, Turkey – Pharmaceutical Products (EU), paras. 2.2-2.3. [iv] Article 4.10, Dispute Settlement Understanding. [v] Article 12.10, Dispute Settlement Understanding. [vi] Decision of 5 April 1966 on procedures under Article XXIII, BISD 14S/18, World Trade Organization, https://www.wto.org/english/ tratop_e/dispu_e/disp_settlement_cbt_e/a2s1p1_e.htm. [vii] Raj, Vishakha and M. P., Ram Mohan, Appellate Body Crisis at the World Trade Organization: View from India, Journal of World Trade 55, no. 5 (2021). [viii] “Launch Of the WTO Appellate Body’s Annual Report For 2018: Address By Ambassador Ujal Singh Bhatia (2018 Chair Of The Appellate Body)”, World Trade Organization, (May 28, 2019). [ix] Sangeeta Khorana and Maria Garcia, “Procurement Liberalisation Diffusion in EU Agreements: Signalling Stewardship?”, Journal of World Trade, Volume 48, Issue 3, 2014, pp. 481–500, available at https://www.kluwerlawonline.com/abstract.php?area=Journals&id=TRAD2014016. [x] Sophie Powell, “The EU–FTA: initial observations from a development perspective”, Traidcraft, September 2008, pp. 1–21, available at http://www.indianet.nl/pdf/EU-IndiaFTAInitialObservations.pdf.

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