Is WTO Dispute Settlement Really “Busier Than Ever”?

By: Joost Pauwelyn
Professor of Law, Graduate Institute, and Georgetown University Law Center
Co-Director of the Centre for Trade and Economic Integration
joost.pauwelyn@graduateinstitute.ch

 

In Geneva trade circles one often hears that WTO dispute settlement is “busier than ever”, “a victim of its own success”. In a new paper with Weiwei Zhang we double-check this conventional wisdom.

It turns out that WTO dispute settlement does, indeed, currently experience a peak in terms of the total number of cases pending before panels and the Appellate Body (as of 30 April 2018, respectively, 18 and 8). However, this is not due to an increase in new cases filed (new consultation requests markedly reduced, from a high of 50 in 1997 to “only” 17 in 2017, see Figure 1 below), but rather because pending cases take much longer to conclude as they have become more complex and are often delayed for lack of human resources.  In addition, fewer cases filed get formally settled (from 20% in the first five years of the WTO to almost zero after 2014), appeal rates remain very high (on average 68%), and the share of follow-up disputes over compliance (DSU Art. 21.5) has markedly increased, all three factors leading to more (pending) caseload without actually more (new) cases treated. Indeed, the number of panel and Appellate Body (AB) reports issued per year is trending downwards, not upwards (dropping from a peak of 26 panel reports and 13 AB reports in 2000, to “only” 13 panel reports and 6 Appellate Body reports in 2017).

 

Figure 1

Figure 1: New WTO dispute settlement cases filed per year

 

WTO dispute settlement is also predominantly used (i) for certain types of disputes (45% of cases filed between 2012-2016 are trade remedy disputes, compared to only 23% between 1995-1999) and (ii) for disputes between a small subset of WTO members (20 WTO Members represent 85% of DSU participation as main party).

Measuring “success” of the system therefore varies depending on the angle taken.

More cases are pending than ever, the system is attracting especially trade remedy disputes and the WTO Secretariat has more than doubled its legal support staff assisting panels and the AB. At the same time, fewer new cases are filed, fewer disputes achieve the preferred goal of settlement, cases take increasingly longer to wind their way through the system (with no retroactive remedies as a backstop), appeal rates remain high, the need for panels to decide compliance disputes has increased and fewer panel and AB reports are issued per year.

Looking forward, we forecast that the current glut in WTO caseload will not last.

 

Figure 2

Figure 2: Forecast Under “Business As Usual” Scenario

 

More specifically, after a temporary drop in 2019, we forecast a record-breaking spike in 2020-2022 (with a peak of 36 concurrent panels and 11 concurrent AB proceedings), after which WTO caseload will fall back and stabilize at numbers we have seen before: under a “business as usual” scenario (using the lengthy, average timeframes since 2016), 21-22 panels and 6-7 AB proceedings (similar to panel/AB averages of the last five years). Under more optimistic scenarios (“back to normal”, using average timeframes for the first 10 years of the WTO, and “more settlements, less appeals”, assuming only 46% of consultation requests move to a panel and an appeal rate of only 50%, see Figure 3 below), stabilization occurs earlier (2021) and at considerably lower levels: for panels, respectively, around 10-12 and a mere 6-7 cases; for the AB, respectively, around 2-3 and a mere 1-2 cases.

 

Figure 3

Figure 3: Forecast Under “More Settlements, Less Appeals” Scenario

 

In other words, in none of the scenarios we looked at is there reason to panic today (e.g. to massively hire additional, long-term WTO Secretariat staff; temporary hires to address the 2020-2022 spike would suffice). Moreover, relatively small improvements — panels and the AB renewing compliance with timeframes set out in the DSU; the system improving on its “clearly preferred” solution of settlement, and parties exercising restraint when it comes to appealing panel reports — would bring WTO caseload down to surprisingly low levels.

But there is also a “worst case scenario”: if WTO Members continue to fail to fill vacancies on the Appellate Body, WTO dispute settlement will grind to a halt in December 2019, at which time only 1 individual would remain on the AB, making it impossible for the AB to function (an AB division hearing an appeal must be composed of 3 members).  As of that date, any WTO Member could then block the adoption of an adverse panel report by simply appealing the report.

You can find the full paper here.

 

This post also appears on linkedin. For more insights on global trade and economic governance, consult the Graduate Institute’s Centre for Trade and Economic Integration Working Papers.

 

Interested in contributing to the Global? Please consult the submission criteria or simply drop us a line at globalgovernance@graduateinstitute.ch.

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