This is a guest post from Caroline Glöckle, a PhD candidate at the University of Passau:
The replacement of the US’ Section 232 tariffs on steel and aluminum imports from the EU with tariff-quota rates on October 31, 2021 has been regarded as a major step in easing the tense trade relations between the US and the EU. Procedurally, the agreement has resulted in the suspension of the two panel proceedings (WT/DS548 and WT/DS559) that the EU and the US initiated against each other. Yet, rather than waiting for the panels’ mandates to lapse after 12 months, the US and the EU decided to submit both disputes to Art. 25 DSU arbitration. The main reason for this move was the parties’ aim to “fully preserve the work of the parties and the panels and procedural steps in these disputes.” The EU-US joint statement announced that it would agree on the detailed procedural rules for both disputes under Art. 25 DSU by December 17, 2021. Yet, it took both parties until January 21, 2022 to notify the DSB of their common procedural rules under Art. 25 (2) DSU for WT/DS548 and WT/DS559.
Considering the political fractures in transatlantic trade relations and the challenging legal questions that the disputes have caused, the arbitral rules are rather straightforward. The agreed procedures do not involve an extensive set of rules. All in all, they provide seven paragraphs of which the most striking one is the suspension of arbitration proceedings “immediately” and “indefinitely” upon the appointment of arbitrators (Annex, para. 3). The appointment of arbitrators is rather a formality given that arbitrators are supposed to be the panelists from the previously appointed WTO panel in each dispute (Annex, para. 2). The crux of the suspension rules is however that arbitration may resume upon notification by the respective complainant party after November 1, 2022 (Annex, para. 3). Thereby, a complainant may unilaterally revive the arbitral dispute at any given time (after November 1, 2022) “at the point at which the panel proceedings were terminated” (Annex, para. 5). This mechanism is the core deviation from the DSU and provides more flexibility than Art. 12.12 DSU which limits the suspension of panel proceedings to 12 months. The US and the EU have explicitly agreed to exclude this phase of Art. 12.12 DSU from the scope of applicable DSU provisions (Annex, para. 6). Apart from these modifications, the parties will follow the “rules, procedures and practices on panel proceedings” in their arbitral proceedings (Annex, para. 5).
The newly agreed arbitral rules leave a door open to return to arbitration at the unilateral discretion of the respective complainant. Criteria or requirements for such revival have not been established. Hence, the resort to arbitration and the newly agreed procedural rules function as a legal back-up for both parties but primarily serve to preserve political leverage.
The US and the EU have shifted to Art. 25 DSU to create procedural rules that serve their overall political interests while predominantly sticking to DSU rules. In this light, one may question whether the procedural rules in fact “facilitate the solution” of the parties’ disputes within the meaning of Art. 25.1 DSU. The unlimited extension of the suspension period does not help to cultivate security and predictability of dispute settlement in terms of Art. 3.2 DSU, but leaves the disputes at issue ultimately unsettled within the realm of the WTO. The parties, particularly the US, could have seized these controversial disputes to create a set of comprehensive arbitral rules that serve their interests in procedural terms, e.g. to settle a dispute in a particularly effective way and outline a path forward in the broader discussion on DSU reform.
