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‘Regional Trade Courts’ in the Shadow of the WTO Dispute Settlement System: The Paradox of Two Courts

Document Cited authorities 1 Cited in Related
Vincent
DOI10.3366/ajicl.2020.0300
Published date01 February 2020
Pages30-49
Date01 February 2020
INTRODUCTION

The fast-moving political economy of international relations in recent years has confirmed the willingness of nation-states to readily cede/share aspects of their economic sovereignty with other states or supranational institutions. While the notion of state sovereignty has been debated vigorously within academic scholarship over the years,1 there is little doubt that states are more willing than ever before to ‘share’ with each other aspects of their external economic sovereignty in the form of trade liberalisation.2 This readiness to open up what would have been seen several decades ago as being within the exclusive province of individual states is necessitated by what is seen as the contemporary world of interconnectivity.3 At the same time, it is worth noting that the clustering of states by a common bond of policy has occurred for many decades,4 although the current fragmentation of international trade rules has generated a lot of concern about the effectiveness of multilateralism.5 It may be seen that regionalism par excellence allows like-minded states or states with simi lar concerns, such as security or trade, to align themselves with each other. Yet, whenever multilateral trade negotiations move toward reducing most-favoured nation (MFN) tariffs, developing countries benefiting from such trade preferences worry about the impacts of such reductions on their trade preferences in key markets. There has been an unprecedented increase in the number of preferential trade agreements being concluded by World Trade Organisation (WTO) members. These include free trade agreements (FTAs), agreements establishing customs unions and partial scope agreements. According to the WTO Secretariat, as of May 2018, over 650 notifications of regional trade agreements (counting goods, services and accessions separately) had been received by the GATT/WTO. Of these, 287 were in force.6

In order to ensure that the increase in the number of regional trade agreements (RTAs) does not diminish the overarching object and purpose of the WTO, in December 2006, the General Council of the WTO adopted a Transparency Mechanism to clarify and strengthen RTA notification obligations of WTO members.7 Consistent with paragraph 47 of the Doha Ministerial Declaration, the 2006 enhanced Transparency Mechanism is to be implemented on a provisional basis pending a more permanent mechanism to be adopted as part of the Doha Round of Trade Negotiations.8 Transparency as one of the fundamental aspects of the WTO trade liberalisation agenda is defined as ‘the degree to which trade policy and practices, and the process by which they are established, are opened and predictable.’9 Apart from promptly making available relevant information to the relevant committees, WTO members are also required to ensure that the implementation of any RTAs is done in a way that will not be counterproductive to the trade liberalisation objective of the WTO. As explained below, the objective of this article is not to review the effectiveness of the WTO transparency mechanism on RTAs but to locate the debate on these RTAs in the context of emerging dispute settlement provisions under these RTAs vis-à-vis the WTO dispute settlement in particular and international law in general.10

The fragmentation of international trade rules has also not been without consequences in terms of the number of ‘court-like’ structures or third-party tribunals that have appeared.11 Most regional trade agreements (RTAs) contain specific provisions on political, quasi-judicial or judicial methods of resolving disputes.12 While the WTO's Dispute Settlement Understanding (DSU) has largely been replicated in most of the quasi-judicial and judicial methods of settling disputes under RTAs, certain emerging features of some of these RTAs are substantially out of line with the Uruguay Round project on global trade dispute settlement. While some RTAs cover aspects currently alien to the WTO, liberalisation within some of the RTAs seems at face value to be deeper than under the multilateral trading system.13 At the same time, a few of the RTAs substantively contain provisions that are in conflict with the provision of some WTO covered agreements.14 Two distinct questions are therefore addressed in this article. The first of these is whether the proliferation of RTAs threatens in any way the existence of the WTO dispute settlement system, while the second concerns the extent to which this fragmented patchwork of ‘regional trade courts’ contributes to the development of international law. In order to tackle these issues, the article will first make a brief remark on the GATT/WTO rules on regional trade agreements. The article is structured as follows: section II briefly revisits relevant WTO rules relating to RTAs. The purpose of revisiting these rules is to demonstrate the nexus between the WTO dispute settlement system and the juridical bodies of RTAs and to establish the basis of the discussion that will follow in the subsequent sections. In this regard, section III discusses the relevance of third-party tribunals in trade and investment agreement while section IV examines the nexus between the proliferation of regional dispute settlement mechanisms and the future of the WTO dispute settlement system. This section discusses whether the proliferation of RTAs with dispute settlement provisions in anyway threatens the smooth functioning or the existence of the WTO DSM. The word threaten in this article is used to refer to jurisdictional conflicts where disputing parties may elect to bring their dispute before a dispute settlement mechanism under an RTA instead of the WTO. Section V explores the contributions of regional dispute settlement to the development of international law. The article ends with brief concluding remarks.

 BRIEF REMARKS ON WTO RULES ON REGIONAL TRADE AGREEMENTS

The notion of consent and the principle of the equality of states under international law imply that states are free to enter into as many international agreements as they wish. It is worth noting that from the perspective of international organisations law, there may be a hierarchy between the constituent documents of the organisation and related treaties adopted under the auspices of the organisation. However, with the exception of rules that have the status of jus cogens from which no derogation is permitted,15 from a treaty law perspective, there is generally no hierarchy between international agreements signed by sovereign states or independent territories, whether bilateral, plurilateral or multilateral.16 As has been repeatedly discussed in previous literature, the GATT/WTO rules are exceptions to this general rule because, under the MFN principle enshrined in the WTO treaty system, on joining the WTO each country or separate customs territory agrees not to enter into a preferential trade regime that is inconsistent with GATT/WTO obligations.17 In other words, by joining the WTO, members in principle agree not to discriminate against each other's citizens18 as well as the general notion of treating each other equally.19 As a consequence, Article I (MFN) of GATT is regarded as a cornerstone of the multilateral trade system (MTS) as it obliges all 164 WTO members to treat each other equally.20 Consequently, to ensure that RTAs operate in a manner supportive of the MTS, the WTO has rules which have to be followed by its members when concluding such agreements. These rules are laid down in Article XXIV of GATT 1994, Article V of GATS and the Enabling Clause21 and are binding on the 164 members of the WTO.22 As there is an established body of scholarship on WTO rules on RTAs,23 this article will not examine the content of these rules here. However, it suffices to mention here that there are three legal bases for the formation of preferential trading arrangements in the WTO. These are Article XXIV of GATT 1994, which regulates agreements covering trade in goods; Article V of GATS relating to agreements covering trade in services; and the Enabling Clause which authorises the exchange of tariff preferences among developing countries as well as non-reciprocal preferences between developed countries on the one hand and developing countries and LDCs on the other.

 THE RELEVANCE OF THIRD-PARTY TRIBUNALS IN TRADE AND INVESTMENT AGREEMENTS

We now turn our attention to the concept of dispute settlement or third-party tribunals in trade and investment agreements. Addressing the concept of dispute settlement is very relevant to addressing the core research questions of this article, i.e. the possible threat posed by regional disputes settlement mechanisms to the functioning of the WTO DSM and their possible contributions to the evolution or development...

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