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Source: This post is created based on the article ‘Global dispute settlement, India and appellate review’ published in The Hindu on 30th Sep, 2023.
Syllabus Topic: GS Paper 2, International Relations
News: The G-20 Declaration emphasized the need for reforms in the World Trade Organization (WTO). It was aimed to enhance its functions and ensure a comprehensive dispute settlement system available to all members by 2024.
Significance of WTO’s dispute settlement system
Firstly, the WTO’s Dispute Settlement System (DSS) operates as a two-tier panel and appellate body. It has been non-functional since 2019 because U.S. blocked the appointment of appellate body members.
Second, WTO’s DSS has been hailed as the crown jewel of the WTO.
Third, it has been more successful compared to the International Court of Justice (ICJ). ICJ has solved just around 190 cases since 1947 compared to 493 rulings by DSS since its establishment in 1995.
Fourth, it has the scope of appellate review and mechanisms to enforce rulings.
Fifth, it ensures uniformity in the application of law globally, through the appellate review process at the international level.
What is the significance of Investor-State-Dispute Settlement (ISDS)?
With the U.S. leaning towards dejudicialisation of international trade law, Investor-State-Dispute Settlement (ISDS) has become a principle means to solve the international disputes.
ISDS mechanism is a key component of Bilateral Investment Treaties (BITs), which has seen 1,257 cases initiated as of January 1, 2023.
It offers a more comprehensive solution than existing mechanisms like annulment proceedings.
What are the challenges faced by ISDS?
The ISDS mechanism, primarily used to settle international investment law disputes, lacks an appellate review. The ISDS mechanism, without an appellate review, has resulted in inconsistent and different decisions of the same provision, creating instability for states and investors.
What should be done?
Introducing an appellate review in ISDS can rectify legal errors, harmonize varying interpretations, and bring coherence to the system.
Article 29 of the Indian model BIT also indicates that India seems to favor an appellate review in ISDS.
The United Nations Commission on International Trade Law or UNCITRAL’s working group III, is focusing on ISDS reforms. It will be important to decide the form and mechanism that this appellate review system should follow.
