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Source: New Zealand Government

New Zealand and 18 other WTO Members have established an interim solution for hearing appeals in trade disputes between governments until the World Trade Organization (WTO) Appellate Body becomes fully functional again. 

Minister for Trade and Export Growth David Parker welcomed the announcement that includes Australia, China, the EU and Canada. The arrangement is open to any WTO member wishing to join. 

“New Zealand’s participation in this interim arbitration arrangement is another clear signal of our commitment to the multilateral rules-based trading system, which is so important at this time of global economic uncertainty made worse by the Covid-19 pandemic,” David Parker said. 

The WTO Appellate Body lost the ability to hear new appeals in December 2019, due to an impasse over the appointment of new members to sit on it.  

While remaining committed to resolving the impasse and restoring a fully-functioning Appellate Body as a priority, New Zealand and a group of other WTO Members have agreed the text of an interim solution.   

“The interim arbitration arrangement will ensure decisions on trade disputes between participants can still be enforced in the absence of a fully functioning Appellate Body,” David Parker said. 

“Ensuring trade rules remain enforceable is particularly important during this time of global turbulence. As a small, export-reliant economy New Zealand has a strong interest in preserving and strengthening the system of rules-based trade to support economic recovery once the health crisis passes.” 

Decisions of the dispute settlement system are binding on WTO Members and a failure to comply leads to approved, prospective trade sanctions. The late Mike Moore, as Director-General of the WTO, described the dispute settlement system as “the jewel in its crown”. 

New Zealand has used the WTO dispute settlement system sparingly but effectively, bringing eight successful cases against trading partners since it was set up in 1995.

Note to editors: Overview of the multi-party interim arbitration arrangement 

  • The WTO’s dispute settlement system only applies to trade disputes between WTO Members (i.e. countries and customs territories). It is not accessible by private investors. 
  • The interim arbitration arrangement preserves a second tier of review for participants in trade disputes, ensuring decisions can be enforced in the absence of a fully functioning Appellate Body.
  • The following WTO Members joined the interim arrangement at the time it was established: Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, the European Union, Guatemala, Hong Kong, Iceland, Mexico, New Zealand, Norway, Pakistan, Singapore, Switzerland, Ukraine and Uruguay.
  • Under the interim arrangement, instead of appealing a panel’s first-stage report to the (now non-functioning) Appellate Body, WTO Members that are in a dispute agree to enter into arbitration.
  • The procedures for arbitration – once entered into by disputing parties – closely replicate those for Appellate Review set out in Article 17 of the WTO Dispute Settlement Understanding.  This includes timeframes, limiting reviews to issues of law rather than fact, and preserving the ability for third party Members with an interest in the dispute to participate.
  • Disputing parties will agree to abide by the arbitrators’ findings.
  • Participants will now put in place a pool of 10 arbitrators with demonstrated expertise in law, international trade, and WTO Agreements.
  • Three arbitrators will hear an appeal.  If the Appellate Body is not restored in the short term, participants will partially re-compose the pool of arbitrators starting two years after composition.
  • Each participating Member can nominate a candidate for the pool within 30 days of the arrangement being established. The 10 arbitrators will be decided by consensus, after a pre-selection process to ensure nominees have appropriate qualifications and experience.
  • Members have agreed the final selection will also need to achieve balance, for example in gender and geographical representation.

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