The Turkey - Pharmaceutical Products Article 25 arbitration award, which functioned as an alternative appellate review mechanism while Appellate Body appointments are still blocked, was discussed at the August 29 DSB meeting. Here's how the WTO web site summary of the meeting described comments from WTO Members on the systemic issues related to using Article 25 in this way:
The EU said it was particularly pleased with the appellate review proceedings, which demonstrated that there is a functional and efficient alternative to preserve the right of appeal for the parties, which is very similar to the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). The EU said it expects that Türkiye will take the necessary steps to implement the arbitrators' findings promptly and stands ready to discuss and agree on a reasonable period of time for implementation.
The United States said it welcomed the agreement of the parties on a way forward in this dispute, which led to Türkiye’s announcement of its intention to comply with the panel’s and arbitrators' recommendations. The aim of dispute settlement is to facilitate the prompt settlement of a dispute between members, the US said, and it does not object to members utilizing Article 25 of the DSU or other procedures to help resolve disputes.
Under a separate item, Japan said it welcomed members' use of the Article 25-based arbitration as a means of dispute settlement under the current situation. The arbitration has played a provisional complementary role to review the appealed findings of the panel report during the time of the Appellate Body dysfunction, Japan said. Moreover, the arbitration award was issued within the prescribed 90-day period, contributing to the prompt resolution of the dispute.
And here is the full reaction by the U.S. in its statement to the DSB:
The United States welcomes the agreement of the parties on a way forward in this dispute, which led to Türkiye’s announcement today with respect to implementation of the arbitrator Award.
The aim of dispute settlement is to facilitate the prompt settlement of a dispute between Members.
Members have a variety of means under the DSU through which they can achieve a resolution, including pursuant to Article 4, “Consultations”; Article 5, “Good Offices, Conciliation, and Mediation”; Article 6, “Establishment of Panels”; and Article 25, “Arbitration.”
The United States does not object to Members utilizing Article 25 or other procedures to help resolve disputes. If any Member considers that use of the arbitration provision may assist it in securing a positive solution, then the United States in principle supports such efforts.
In this instance, the parties entered into “Agreed Procedures for Arbitration under Article 25 of the DSU.” The agreement provided for an arbitration that incorporated many of the most troubling practices of appellate review under the Appellate Body.
The U.S. concerns with certain practices of the Appellate Body are well known. We encourage Members to consider different approaches to resolving a dispute, rather than furthering the Appellate Body’s problematic interpretations or conduct. If a Member supports dispute settlement reform, then a bilateral arrangement presents a unique opportunity to explore alternative approaches.
Nevertheless, we welcome the engagement between the parties to this dispute that led to the agreement.
We also want to draw attention to another issue of systemic importance. In accordance with the parties’ agreed procedures, and consistent with Article 25.3 of the DSU, the arbitration award has not been adopted by the DSB.
Accordingly, the arbitration award does not contain “adopted recommendations or rulings” within the meaning of the DSU.
The United States therefore takes note of Türkiye’s statement today with respect to implementation of the arbitrator award, although we do not consider such statement of intentions as required under Article 21.3 of the DSU.
How should we take the U.S. statement? Does it mean that the U.S. is unlikely to use Article 25 arbitration appeals because they look too much like appellate review as practiced by the Appellate Body? Or does it mean the U.S. might consider using Article 25 arbitration appeals if they avoided certain practices of the Appellate Body? It's worth noting that the Article 25 arbitrators in this case did circulate the award within 90 days, so that addresses one of the U.S. concerns about the Appellate Body. What other process changes might the U.S. insist on in order to agree to use Article 25 arbitration as an appeals process for one of its disputes? I'm looking at the list of ongoing WTO disputes, and I'm not sure I see any disputes for which it is likely that another WTO Member will ask the U.S. to use Article 25, but you never know.
Just to be clear, while that last paragraph might have made it sound like I thought there was a decent chance the U.S. would use Article 25 arbitration some day, I don't really have high hopes for that. I just thought I'd put the idea out there and see if anyone picked it up. One reason (of many) for my skepticism is where U.S. politics is right now on the issue of the WTO and the Appellate Body. Take a look at this letter from Senators Cotton, Grassley and Rubio to Ambassador Tai. When I say "take a look," I don't mean read and consider the substance, because it will just irritate you. I could take it apart sentence by sentence, but I don't think it's worth the effort. The key point is a political one, which is that some Republicans are pushing Tai not to allow Appellate Body appointments to go through (not that we even saw many hints that she would do so). That means any U.S. compromise on these issues could get caught up in U.S. domestic politics, which is a mess right now. (Establishing whether a consensus exists for a particular Appellate Body nominee could be subject to court challenges, recounts, and calls for election integrity! That's a joke. I think).
It's one thing to hear this from Senators Cotton and Rubio, who are both fairly "nationalist" in some sense of that word, but Grassley has traditionally been a promoter of agriculture exports who supports trade agreements. If he loses interest in using trade agreements and enforcement of those agreements to promote exports, that's a real problem for the trading system in general and also for getting WTO dispute settlement fully operational again. To be fair, the letter does say this: "to the extent Members want to agree to truly binding dispute settlement, they have numerous options to do so – including, for example, an agreement not to appeal the results of a panel decision." That is certainly an option, but I think if someone is citing it in this way, they should advocate for it rather than just mentioning it as an aside. If agreements not to appeal panel reports are Grassley's solution, that's fine, but he should say this directly and clearly and flesh out the details. And what does he think about Article 25 arbitration appeals? The absence of any mention of this possibility is telling.
