This article has been authored by Ashutosh Kumar Singh, Associate at Adhrit Legal, Noida
This paper illustrates the significance of arbitration in adjudicating the WTO disputes between the states. The idea behind writing this paper is to aware the audience about the arbitration mechanism which was used to be unheard of before the MPIA came into effect. MPIA came into effect in the backdrop of the dysfunction of the WTO Appellate Body where certain member countries formed an alternative mechanism i.e. Multi-Party Interim Appeal Arbitration Arrangement (MPIA) by virtue of Article 25 of the DSU as it empowers the states to resolve the disputes by means of Arbitration. This paper covers the entire journey of arbitration in WTO disputes from its origin to till now. This paper also covers the very recent WTO panel ruled against India in ITA disputes and consequently the EU proposed India to recourse the said dispute to MPIA, which India declined the same.
Arbitration is a private mechanism that is tailored for the settlement of disputes whereby an appointment of a third neutral party by the disputant parties themselves and that appointed party is responsible for adjudicating the disputes and then rendering its award which is binding on both parties.
Prior to arbitrating the dispute, there must be the consent of both parties which can be positioned in either agreement or treaty as the party autonomy is the grundnorm for the arbitration which implies that the said appointed arbitrator cannot go beyond the party autonomy and doing the same, it makes the award null and void. The award passed by the arbitrator is akin to the ruling of any judicial body. Moreover, the requirement of consent is not merely with regard to the appointment of the arbitrator, but it shall also be for the curial law.
The arbitration is not confined to its boundary up to commercial matters indeed it’s taking place in interstate disputes as well.
Disputes Settlement Mechanism under WTO
Whenever any member country is willing to file a complaint against another member country with regard to the violation of covered agreements, in that case, the complaining party approach the Dispute Settlement Body (DSB). The Dispute Settlement Body (DSB) would try to resolve the issue by means of consultation as per Article 4 of DSU.
In the event of failure of consultations, the Dispute Settlement Body (DSB) upon the request of aggrieved member countries would establish a panel, the panel is responsible to examine the entire dispute from every angle and then submitting its report to the DSB. 
Lastly, if any party is unhappy with the rulings of panel proceedings, then they have the liberty to knock the door of the Appellate Body of WTO, and the Appellate Body depending upon the case, can uphold, reverse or modify the ruling of the panel proceedings in its report. The Dispute Settlement Body (DSB) either accepts the findings of the Appellate Body or rejects the same. However, the latter can be done only through consensus.
Arbitration is the alternative to organized litigation that is standing in the middle of a power-oriented system and a rule-oriented system. This platform can be utilized to buttress compliance as the disputant parties already consented to the outcome of the arbitration. This kind of adjudication is incorporated under Article 25 of DSU. 
The institutionalized adjudication system under WTO i.e. Dispute Settlement Body stands on the same pedestal as litigation in any domestic country. DSB which is a judicial settlement body under DSU is often criticized by experts on the followings grounds:
- Bindingness of its Ruling
- Consideration of Geopolitical issues.
- Ineffective in politically difficult cases.
- DSU prohibits the appointment of a member in the panel who hails from any of the disputant parties, this led to non-consideration of local issues of member’s countries.
- Delay in the implementation of DSB’s ruling as the losing party would try to prolong the disputes by way of an appeal route.
- Possibility of the outcome of adjudication in favor of superpower countries.
However, despite the above shortcomings, the judicial settlement system in WTO still has a larger dominance over the arbitration under Article 25 of DSU. The main reason behind this is that the creation of the appellate body and review of the ruling of the panel makes a well-structured judicial settlement system for the adjudication of trade disputes.
The birth of arbitration for trade disputes can be traced to the year 1987 when the US proposed an improvement of the dispute settlement system which contained a binding arbitration mechanism. On 12th April 1989, Negotiating Group framed a draft with regards to the improvement of GATT disputes settlement which contained binding arbitration as well; the said decision on that day is commonly known as “Improvement of 1989”. The following three essential ingredients of Improvement of 1989 are namely as:-
- Arbitration as an alternative process for the manifestly defined issue,
- Mutual Agreement between the parties with regard to the procedures to be followed in arbitration, and
- Bindingness of an arbitration award and permitting the third parties to intervene in the arbitral proceedings subject to the consent of disputant parties.
The Uruguay Round i.e. 8th Round of multilateral trade negotiation revamped the disputes settlement procedures with regard to trade disputes; launched three forms of arbitration which are the following:-
- Article 21.3(c) of DSU– This clause comes into the picture when it is impracticable to implement the recommendation & rulings of DSB. In such circumstances, the arbitrator determines the reasonable period of time to comply with the recommendation & rulings of the panel or appellate body. However, the aforesaid determination of a reasonable period of time cannot be longer than 15 months from the date of adoption of the panel or appellate body report. This form of arbitration is commonly known as “Time frame Arbitration”. The reason for the application of this clause is that it is often seen that the offending state expresses its intention that the immediate compliance of the ruling is impracticable.
- Article 22.6 of DSU– This kind of arbitration comes into the picture when the DSB authorized the aggrieved member (complaining party) with regards to the suspension of the level of concession, which is enjoyed by the offending member country as a signatory to the WTO agreement. If the offending member country raises any objection to such suspension then the matter shall be referred to arbitration. This Arbitration is referred to as “Concession Arbitration”.
- Article 25 of DSU- Lastly, this form of arbitration is the only one which is the alternative to the judicial settlement system of trade disputes, as the above two-mentioned arbitration is characterized as mandatory arbitration which occurs only after the adjudication of disputes in accordance with the judicial settlement system which is envisaged under DSU.
As per Article 25 of DSU, the parties can skip the standard procedure of the DSU and further, it is required that before the commencement of arbitration, the disputant parties need to notify the other member countries; so that to enable them to become the party of the arbitration proceedings. In other words, the conjoint reading of the last sentence of Article 25.2 of DSU and the first sentence of Article 25.3 of DSU discern that all the members would have notice in advance with regards to the commencement of arbitration proceedings so that the interested members can also be impleaded as the party to the proceedings.
The award of the arbitrator under Article 25 of DSU is standing on the same pedestal as the outcome of the general panel procedure which implies that in the event of non-compliance; the parties can enforce the award in the same manner as it is the outcome of usual panel procedure of DSB such as the implementation of recommendations, compensation, suspension of concession &, etc. The aforesaid points can be inferred from the Article 25.4 of DSU.
So far this arbitration has occurred in a case that is popularly known as the US Copyright case in which the arbitrator determined the level of nullification or impairment of benefits to the EC on account of the effectiveness of Section 110(5) of US Copyright Act as the said provision allowed the playing of radio & television music in the public places such as bars, shops, restaurants and etc., without the payment of royalty. EC contended that such a provision is not in accordance with Article 9(1) of the TRIPS agreement which states that all members are obliged to comply with Articles 1-21 of the Berne Convention. On the other hand, the US was taking the shield of the exception clause i.e. Article 13 of the TRIPS agreement. The Arbitrator held in favor of EC and accepted the contentions of EC that the US violated Section 9 of the TRIPS agreement.
This was the first case whereby parties recourse to Article 25 of DSU. The main reason for the underutilization of this form of arbitration is that the arbitration track is structured for bilateral disputes whereas most WTO disputes are multilateral in nature. It can be effective in such bilateral disputes whereby the disputant parties have the international agreement coupled with the arbitration clause.
Multi-Party Interim Appeal Arbitration Arrangement (MPIA)
According to clause 4 of Article 16 of DSU, the panel report shall not be adopted, if any party notify their intention to DSB with regard to the appellate review of the findings of panel proceedings. In addition to that, Article 17 provides that the Appellate Body shall consist of a panel of seven judges, and at least three judges out of the said panel are required to take up the matter which has been referred by any of the parties for appeal.
However, due to the continuous blocking of the appointment of judges in the Appellate Body by the United States, the said body now became a dysfunctional body as it even have not a minimum of three judges to take up the matter for appellate review and adjudicate it. The dysfunctional Appellate Body also deteriorated the enforcement of the report of panel proceedings as the said report can’t be adopted if any party expresses their willingness to appeal the findings of panel proceedings.
In order to overcome this crisis, the EU along with the other member countries have made temporary arrangements i.e. Multi-Party Interim Appeal Arbitration Arrangement which is commonly known as MPIA, by virtue of Article 25 of DSU. Under this arrangement, for any dispute which may arise in the future among the signatories to the MPIA, the DSB first tries to resolve the same by means of consultations, and failure to do this the same would be examined by the Panel and ultimately if any party unhappy with findings of the panel would resort to the MPIA rather than knocking the door of Appellate Body as the MPIA is meant only for the purpose to replace the Appellate Body.
A very recent WTO panel ruled against India in the tariff case whereby the panel found that the levy of the tariff on the import of mobile and electronic devices, is non-conformity with the GATT, 1994 and Information Technology Agreement (ITA). Now India planning to appeal this at WTO Appellate Body when the said body becomes functional. Subsequently, India also declined the EU’s proposal to recourse the said dispute to MPIA.
Arbitration is now emerging as an avatar that gradually substituting the role of judicial bodies in settling disputes. The signing of MPIA is the watershed movement that actually bring the notice of Article 25 of DSU which was termed as underutilized or unnoticed. However, India is not a signatory to the MPIA which means that in the event that India is aggrieved with the findings of the panel report, India cannot resort to the MPIA.
On the other hand, taking MPIA as an exemplary arrangement, India with its allies such as African countries, Indian Ocean countries, Russia, and other trading partners can form a similar arrangement pursuant to Article 25 of DSU.
 Article 4 of the Dispute Settlement Understanding of the World Trade Organization (WTO), https://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm
 Article 4 and 6 of the Dispute Settlement Understanding of the World Trade Organization (WTO), https://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm
 Article 17, 18 and 19 of the Dispute Settlement Understanding of the World Trade Organization (WTO), https://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm
 David Jacyk, The Integration of Article 25 Arbitration in WTO Dispute Settlement: The Past, Present and Future, 15 AUIntLawJl 235, 235-266 (2008), http://classic.austlii.edu.au/au/journals/AUIntLawJl/2008/11.pdf
 Id. at 235-266
 Id. at 235-266
 Id. at 235-266
 Id. at 235-266
 2 RUDIGER WOLFRUM, WTO – INSTITUTIONS AND DISPUTE SETTLEMENT 566-71 (Koninklijke Brill NV 2006).
 European Communities V. United States, WT/DS160/ARB25/1, (November 9, 2001), https://www.wto.org/english/tratop_e/dispu_e/160arb_25_1_e.pdf
 WOLFRUM, supra note at 9.
 Article 16 and 17 of the Dispute Settlement Understanding of the World Trade Organization (WTO), https://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm