The World Trade Organization’s (WTO) Appellate Body is the main pillar of the WTO dispute settlement system, but it is presently facing a crisis due to member state disagreement over the appointment of new members. Typically composed of seven members, the Appellate Body is likely to have only four members by December 2017 and may be reduced to three members by September 2018 unless the United States reconsiders its resistance to new appointments. The current deadlock exacerbates the problems of an increasing caseload, and it may ultimately prevent the Appellate Body from hearing cases and thus undermine the rule-based system that has facilitated international trade and minimized trade conflicts since 1995.

To explore practical solutions available to WTO Member States, the Graduate Institute’s Global Governance Centre convened a panel event on Monday 27 November 2017. Over 170 participants were in attendance, including policy practitioners from the WTO, Member State representatives, international trade lawyers, academics, students, and journalists. 

The panelists – Prof. Pieter Jan Kuijper from the University of Amsterdam, Nicholas Lockhart from Sidley Austin LLP, and Alice Tipping from the International Centre for Trade and Sustainable Development – explored the potential of three pathways to maintain an effective system for Appellate Body review of WTO panel reports:

1)    Resolving the impasse through the direct appointment of new Appellate Body members using majority voting, either in the Dispute Settlement Body or the General Council. Because Member States usually decide by consensus this is referred to as “the nuclear option”, but it potentially offers an emergency solution.

2)    Establishing a new agreement on dispute settlement outside the WTO, negotiated by a coalition of major trading powers to cope with a situation in which the membership of the Appellate Body has dropped so much as to make it impossible to deliver timely reports.

3)    Using the arbitration process under Article 25 of the Dispute Settlement Understanding (DSU) as a temporary solution to enable appeals of panel reports. This would closely resemble the existing Appellate Body process, and outcomes would be automatically binding on parties to the dispute.

The panel discussion – including the working paper and article presented – explored the benefits and drawbacks of the different pathways, and highlighted the implications for the WTO specifically, and processes of global governance more generally. A political solution, driven by WTO member states, was widely seen as preferable to one in which the Appellate Body itself would have to shoulder the burden of action by, for example, amending its rules of procedure to limit or block future appeals. On the other hand, participants held differing views on the importance of a consensual approach by member states as opposed to options in which some member states would go ahead with provisional or alternative solutions. There was a widespread fear that too confrontational of an approach might lead to a further fragmentation of world trade governance. At the same time, many participants urged steps forward to break the impasse even if these deviate from past practices.    

If a solution is not found within the WTO it might ultimately result in a shift away from the formally institutionalized rule-based system we have today towards a more politicized arrangement similar to the one that existed before the creation of the WTO. In the words of Prof. Nico Krisch, co-director of the Global Governance Centre and moderator of the panel: “If the crisis continues, the predictability and security of the multilateral trade system is bound to be jeopardized, and this will cast a long shadow over the modern order of multilateral governance and international law.”