Why is it in the news?

• The recently concluded G-20 Declaration, among its many commitments, reiterated the need to pursue reform of the World Trade Organization (WTO) to improve all its functions and conduct proactive discussions “to ensure a fully and well-functioning dispute settlement system accessible to all members by 2024”.

More about the news

• The WTO’s dispute settlement system, including the appellate body, has been dysfunctional since 2019 due to the United States blocking the appointment of appellate body members.
• The appellate body of the WTO has played a crucial role in ensuring coherence, predictability, and confidence in the dispute settlement process, issuing over 493 rulings since its inception.
• The U.S. appears to favour de-judicialization of international trade law, which would limit the role of international courts and tribunals, raising uncertainty about the future of the WTO’s appellate process.
• In international investment law, investor-state dispute settlement (ISDS) is a common mechanism, with hundreds of ad hoc arbitration tribunals leading to inconsistent interpretations and conclusions.
• The introduction of an appellate review mechanism in ISDS could rectify legal errors, harmonize interpretations, and bring coherence and predictability to the system.
• Discussions on creating an appellate review mechanism for ISDS are ongoing at the United Nations Commission on International Trade Law (UNCITRAL).
• India has not made a formal statement but likely supports the idea of an appellate review in ISDS, as indicated in Article 29 of the Indian model Bilateral Investment Treaty (BIT).
• Supporting an appellate review mechanism aligns with India’s concerns about inconsistency and incoherence in ISDS, which could benefit both states and investors.
• India’s stance on this issue will be important in ongoing investment treaty negotiations with the European Union, which advocates for an appellate review mechanism for investment disputes.
• India’s pursuit of a rule-based global order should also extend to supporting the restoration of the WTO’s appellate body to achieve a well-functioning dispute settlement system.

About WTO’s Appellate Body

• The WTO’s Appellate Body was established in 1995 as a standing committee within the WTO.
• It serves as a judicial body to resolve trade-related disputes among member countries.
• Composed of seven members with four-year terms, appointed by the Dispute Settlement Body (DSB).
• The Chairperson oversees the body’s operations.

About UNCITRAL

• UNCITRAL is the core legal body of the United Nations system responsible for matters related to international trade law.
• It was established in 1966 with the recognition that international trade cooperation among states is essential for promoting friendly relations, peace, and security.
• UNCITRAL’s primary mission is the modernization and harmonization of rules governing international business transactions.
• UNCITRAL has 60 member states elected for six-year terms, distributed across regions: 14 from Asia, 14 from Africa, 10 from Latin America and the Caribbean, 8 from Eastern Europe, and 14 from Western European and other states.