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What's the article about?
- It talks about the need for appellate review in international trade and investment law.
Relevance:
- GS2: Important International Institutions, agencies and fora – their Structure, Mandate.
Context:
- The recently concluded G-20 Declaration reiterated the need to pursue reform of the World Trade Organization (WTO) to improve all its functions and conduct proactive discussions.
- The WTO’s dispute settlement system has been dysfunctional since 2019, and the United States has blocked the appointment of appellate body members.
- This article discusses the need for appellate review in international trade and investment law.
Analysis:
- The Importance of Appellate Review in International Trade Law:
- The WTO’s dispute settlement system, with the scope for appellate review and mechanisms to enforce rulings, has issued over 493 rulings since its establishment in 1995.
- The appellate body has been crucial in ensuring coherence and predictability in rulings, ensuring confidence in the WTO dispute settlement process.
- However, the future of the WTO’s appellate process is uncertain, given Washington’s continued opposition to an appellate review process.
- The U.S. seems inclined towards the dejudicialisation of international trade law. An appellate review process at the international level serves as an essential check on the interpretation and application of law and ensures consistency.
- The Need for Appellate Review in International Investment Law:
- International investment law through investor-state-dispute settlement (ISDS) is another area of international law witnessing the formative stages for an appellate process.
- The ISDS today is the principal means to settle international investment law disputes.
- However, the absence of an appellate review mechanism has meant that inconsistent and incoherent decisions and legal reasoning dot the landscape of international investment law.
- An appellate review mechanism will allow for rectifying errors of law and harmonising diverging interpretations.
- It will have the power to uphold, modify, or reverse the decision of a first-tier tribunal and thus bring coherence and consistency, which, in turn, will infuse predictability and certainty into the ISDS system.
- Benefits of Appellate Review:
- An appellate mechanism will be better than existing mechanisms such as the annulment proceedings, which only apply to arbitrations administered by the International Centre for Settlement of Investment Disputes.
- Further, such annulment proceedings can only address limited issues, such as the improper constitution of an arbitration tribunal or corruption but cannot correct errors in legal interpretation.
- The appellate mechanism will also be superior to getting an ISDS award set aside on limited procedural grounds in a court at the seat of arbitration.
- An appellate review mechanism will bring coherence and consistency, which, in turn, will infuse predictability and certainty into the ISDS system.
- India's Stand:
- Although India has not made a formal statement on this issue, India presumably supports the idea of an appellate review in the ISDS because Article 29 of the Indian model BIT talks of it.
- Given India’s concerns about inconsistency and incoherence in the ISDS system, supporting the creation of an appellate review mechanism will be in India’s interest.
- In any case, India will have to take a stand on this issue as part of the ongoing investment treaty negotiations with the European Union, which is championing the creation of an appellate review mechanism for investment disputes.
- Since India’s quest has always been to establish a rule-based global order, it should support an appellate review which will usher in greater confidence for states and investors in international investment law.
Way Forward:
- India should also push for the restoration of the WTO appellate body towards achieving the goal of a fully and well-functioning dispute settlement system at the WTO.
