Dispute Settlement without recourse to Panels and the Appellate Body

8.2 Arbitration pursuant to Article 25 of the DSU

As an alternative to adjudication by panels and the Appellate Body, the parties to a dispute can resort to arbitration (Article 25.1 of the DSU). The parties must agree on the arbitration as well as the procedures to be followed (Article 25.2 of the DSU). The parties to the dispute are thus free to depart from the standard procedures of the DSU and to agree on the rules and procedures they deem appropriate for the arbitration, including the selection of the arbitrators. The parties must also clearly define the issues in dispute.

Before the beginning of the arbitration, the parties must notify their agreement to resort to arbitration to all (WTO) Members. Other Members may become party to an arbitration only with the agreement of the parties engaged in the arbitration. The parties to the arbitration must agree to abide by the arbitration award, which, once issued, must be notified to the DSB and the relevant Councils and Committees overseeing the agreement(s) in question (Articles 25.2 and 25.3 of the DSU). The provisions of Articles 21 and 22 of the DSU on remedies and on the surveillance of implementation of a decision apply to the arbitration award (Article 25.4 of the DSU).

To date, in only two disputes, have the parties resorted to arbitration under Article 25 of the DSU. In one dispute, the procedure was not used as an alternative to the panel and Appellate Body procedure, but at the stage of implementation, when the panel report had already been adopted. The parties asked the arbitrators to determine the level of nullification or impairment of benefits caused by the violation established in the panel report. Under the standard procedures of the DSU, parties can obtain a binding determination of the level of nullification or impairment by recourse to arbitration under Article 22.6 of the DSU. A prerequisite for such arbitration is that the complainant has requested the DSB’s authorization for the suspension of obligations and that the respondent disagrees with the proposed level of retaliation.  In the second dispute, the procedure was used to decide an “appeal” from a panel report that had been issued to parties, but not circulated to WTO members. In the case where the parties resorted to arbitration under Article 25 of the DSU, they agreed that the award of the arbitrators would be final. Recourse to Articles 21 and 22 of the DSU is available to implement and enforce the conclusions of these arbitration awards.