Reflecting on ASEAN Members’ Disputes
at the World Trade Organisation
Part 4: The Impact of the WTO on ASEAN’s
Dispute Settlement Mechanisms
by Yvette Foo
Introduction
Over the past three instalments of this series, it was argued that the ASEAN Member States have become more committed to relying on dispute settlement to resolve trade-related conflicts. In DS1, Singapore and Malaysia used the possibility of a full-scale dispute to revisit conciliation and amicable resolution. In DS371, the Philippines continuously sought heavier measures to reach resolution after bilateral discussions with Thailand failed. Lastly, DS496, which involved Viet Nam and Indonesia, is the only case to date where an ASEAN trade dispute was resolved fully after a full exploration of each stage of the WTO dispute settlement process. From these three WTO cases, ASEAN has demonstrated its willingness to use third-party dispute settlement mechanisms to resolve regional economic disputes.
Departing now from analysing the cases, Part 4 looks more holistically at ASEAN’s engagement with the WTO. It first explores possible motivations for ASEAN to rely on the WTO DSU over internal dispute settlement mechanisms. It then analyses how the WTO has influenced ASEAN’s most recent dispute settlement instrument, the 2019 Protocol on Enhanced Dispute Settlement Mechanism (2019 Protocol).
Choosing the WTO as a Forum
It is important to note that dispute settlement has always been part of ASEAN’s mission in its establishment as a regional bloc. Part 1 of this series provided a short exposition of ASEAN’s own mechanisms. To recap, major instruments such as the 1992 Framework Agreement on Enhancing ASEAN Economic Cooperation (1992 Framework Agreement), the 1996 Protocol on Dispute Settlement Mechanism (1996 Protocol), and the ASEAN Charter, and the 2004 ASEAN Protocol on Enhanced Dispute Settlement Mechanism (2004 Protocol), have pointed to the importance of strengthening mechanisms for dispute settlement, especially when it came to economic cooperation.
This begs the question: why did ASEAN choose to settle its disputes through the WTO instead of using an internal mechanism? There were already internal mechanisms available to parties at the time the WTO disputes arose: DS1 could have used the 1996 Protocol which was adopted on 20 November 1996; both DS371 and DS496 could have used the 2004 Protocol, which was adopted at the tenth ASEAN Summit on 29 November 2004.
One answer might be that the ASEAN Member States lacked confidence in untested mechanisms: they preferred the WTO’s tried-and-tested system over an untested one.[1] Untested mechanisms meant that there was no precedent—and therefore no guarantee—that any panel decision would be implemented.[2] Even for DS1, which was the first dispute to be brought to the WTO DSB, there was comfort to be found from the precedents set by disputes resolved under the former GATT 1947 system.[3] By contrast, neither the 1996 Protocol nor the 2004 Protocol (which replaced the 1996 Protocol)[4] has ever been applied to a dispute to date.[5]
Another potential issue relating to the lack of confidence in ASEAN dispute mechanisms involves the quality of the ASEAN panel in comparison to the WTO’s.[6] Particularly for the 2004 Protocol, various stages of the dispute are likely to become politicised because ASEAN representatives will find themselves at the forefront of decision-making processes.[7] For instance, in the 2004 Protocol, there is no rule to prevent parties in a dispute from getting involved in the ASEAN Senior Economic Officials Meeting’s (SEOM) decision making process.[8]
The WTO Impasse – A Lost Forum for ASEAN?
At present, the WTO’s Appellate Body is still lacking the requisite number of members to function. However, the political context remains somewhat unchanged. Even after the Trump Administration—who some consider to have caused the impasse by repeatedly blocking appointments[9]—stepped down, the incumbent Biden Administration is continuing to block appointments because the United States “continues to have systemic concerns” with the WTO,[10] and is looking instead to reform the system.[11] This path of reform is shared by other global forces, including the European Union[12] and G7 countries.[13] While ASEAN has consistently expressed its willingness to respect and uphold the WTO system, this impasse may be a problem that the region lacks geopolitical influence over to fix.[14]
With the WTO’s Appellate Body frozen, ASEAN may have to look to a different forum for future trade disputes. The WTO impasse has already impacted DS371 and DS496: in the former case, parties were made to attempt consultations again, and in the latter, there was some controversy over whether the parties’ decision to not appeal findings.
Beyond these two cases however, reticence towards the WTO system after the impasse is also evidenced by the lack of cases being brought to the DSB. Currently, there is a brewing dispute between the Philippines and Viet Nam concerning the former’s imposition of import duties over the latter’s cement industry.[15] Despite this trading issue arising as early as March 2019,[16] and Viet Nam going as far as saying as that they would approach the WTO,[17] the two ASEAN Member States have only engaged in consultations on 21 November 2019.[18] Neither party has escalated the matter since 2019. Given that both the Philippines and Viet Nam have experience raising cases at the WTO, it is surprising that they are holding back for this dispute.
The impasse has and is continuing to make the WTO a problematic forum for ASEAN. Departing from the WTO (possibly at least until the impasse subsides) puts ASEAN in a position to find a new avenue for disputes or look inwards once more at its own mechanisms to resolve them.[19]
How the 2019 Protocol Follows the WTO System
Earlier ASEAN modalities were modeled off the WTO DSU with some differences. They became increasingly sophisticated over time to respond to various geopolitical and economic influences, and whenever the region reached higher levels of economic cooperation.[20]
The 1996 Protocol was adopted pursuant to the 1992 Framework Agreement to cover for economic agreements that did not have dispute settlement clauses.[21] However, while the 1996 Protocol followed the WTO in terms of procedures, it also deviated by giving discretion to ASEAN’s political organs.[22]
The 2004 Protocol was realised after ASEAN vowed to establish an ASEAN Economic Community, and improve “‘existing ASEAN Dispute Settlement Mechanisms in order to ensure expeditious and legally binding resolution of any economic disputes”.[23] More specifically, the 2004 Protocol drew from the Recommendations of the High-Level Task Force on ASEAN Economic Integration, which specifically called for a dispute settlement mechanism to be “be modeled after the WTO”.[24] Indeed, the 2004 Protocol was drafted more closely to follow the WTO system; one example was the decision to adopt the WTO’s ‘negative consensus’ tool, which allows certain stages in the dispute to proceed unless decided otherwise by the SEOM.[25]
In the same way, and fifteen years after the 2004 Protocol was adopted, the 2019 Protocol was drafted to take in criticism from legal experts and academics about the 2004 Protocol.[26] ASEAN recognised that there was room for policy reform to address the 2004 Protocol’s institutional deficiencies and gaps. As a result, the region’s most recently adopted instrument on dispute settlement closely follows the WTO DSU, and is a promising response to the current WTO impasse.
On 20 December 2019 in Manila, the Philippines, ASEAN adopted the 2019 Protocol as the successor to the 2004 Protocol.[27] Like its predecessors and the WTO DSU, the 2019 Protocol provides a stage-by-stage roadmap for how ASEAN Member States can resolve their disputes in an adjudicative manner. The 2019 Protocol comes with five appendices which “form an integral part” of the Protocol.[28] The 2019 Protocol applies mostly to economic agreements,[29] although the ASEAN Secretariat can, with approval from the SEOM, expand on this list of covered agreements.[30] Changes between the 2019 Protocol from its earlier instruments show how ASEAN is adjusting its dispute settlement processes to further emulate the WTO system.
Realistic Timelines
A flaw in the 2004 Protocol is its impractically short timelines: “the time allowed for consultation, deliberation, decision and reports is too short for the parties to undertake meaningful research and analysis”.[31] The 2004 Protocol’s Panel only has 60 days to issue its report,[32] and likewise for the Appellate Body’s report.[33] For adoption, the SEOM has 30 days to adopt the Panel’s Report,[34] and likewise for the Appellate Body’s Report.[35] There is a consensus among legal experts that these timelines were too short for a dispute settlement system, and calls for reform.[36]
The 2019 Protocol has been amended to have longer, more realistic durations.[37] The Panel has 6 months to issue a report (with an additional period of 3 months at most),[38] and the Appellate Body has 60 days to issue a report.[39] The Panel’s Report must be adopted by the SEOM in 60 days,[40] and the Appellate Body’s Report in 30 days.[41] As an added measure, the 2019 Protocol also allows parties to agree to modify these timelines, as long as third party rights are not affected.[42] These timelines are much closer to those set by the WTO.[43]
With these longer and extendable timelines, and firsthand experience settling trade disputes, ASEAN has settled for a balance between needing sufficient time to consider legal issues, and its original concern of preventing “disputes from festering and [] the aggrieved party from continuing to suffer damages”,[44] especially for less sensitive economic disputes.[45] Given how DS371 has not been resolved to date, this last factor is paramount.
Confidentiality
Unlike the 2004 Protocol, which makes certain stages of the dispute settlement process transparent, the 2019 Protocol accords greater confidentiality to proceedings. Confidentiality is assured for consultations,[46] Panel deliberations,[47] Appellate Body proceedings,[48] and communications made to either the Panel or Appellate Body.[49] This is similar to the WTO’s DSU which maintains confidentiality at every stage of the dispute settlement process.[50] It may be recalled that for DS1, very little information was actually published as to what convinced Singapore and Malaysia to agree to settle the dispute during their last bilateral negotiation.
Rules of Conduct
Earlier ASEAN instruments, such as the 1996 Protocol, lacked safeguards that would ensure impartiality of the adjudication process, something that other international dispute settlement procedures would have.[51] The 2004 Protocol was the first step to change this, as it provides extensive rules under Annex II and its accompanying sub-annexes to secure impartiality.[52] Annex II is similar to the WTO DSU’s Rules of Conduct.[53] The 2019 Protocol has adopted the 2004 Protocol’s Rules of Conduct wholesale[54] with a slight difference: there is now also an explicit reminder in Article 5 to observe the Rules of Conduct.[55] Evidently, ASEAN is working towards aligning itself with international dispute settlement procedures.
Additional Responsibilities for the ASEAN Organs
Perhaps as a response to concerns about an over-politicised dispute settlement process, ASEAN organs now have additional responsibilities in the dispute settlement process. The 2019 Protocol allows the ASEAN Secretariat to assist by providing “legal advice and assistance” to parties in a dispute.[56] The 2019 Protocol also expands on the ASEAN Secretary-General’s responsibilities. To expedite arbitral proceedings, the Secretary-General can choose an arbitrator if parties cannot come to an agreement.[57] While the SEOM still has authority over much of the dispute settlement process, incremental changes can distribute the responsibilities more evenly across the organs involved. It is important, however, to acknowledge that the 2019 Protocol has not fully addressed concerns from experts about capacity. While the aforementioned amendments are welcome, there is still a systemic issue at play because the lack of manpower, especially legal experts and officers, may mean that ASEAN organs are unable to execute their roles effectively.[58]
Ratification Status of the 2019 Protocol
Although the 2019 Protocol is posed to replace the 2004 Protocol, this will only be after the former enters into force. Under Article 27(2), the 2019 Protocol will enter into force after “on the date on which the tenth Member State has notified the Depositary of its completion of internal procedures necessary for the entry into force of this Protocol.” To date, seven out of ten ASEAN Member States, namely Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam, have submitted instruments of acceptance/notification/ratification.[59]
While ASEAN has taken steps to ensure that there is an internal mechanism to address disputes, the implementation of such a mechanism waits on the remaining three ASEAN Member States (i.e. Brunei Darussalam, Cambodia, and Indonesia) submitting their instruments to the ASEAN Secretariat. This last hurdle aside, the 2019 Protocol is likely to be a turning point for ASEAN dispute settlement. ASEAN Member States have preferred the WTO DSB over internal panels.[60] In amending the 2004 Protocol to take on positive aspects of the WTO’s DSU, the 2019 Protocol is a familiar and palatable system for ASEAN Member States, and therefore more likely to be utilised compared to existing mechanisms. ASEAN already has sufficient experience from conducting WTO cases, and motivation with the WTO impasse, to find a new way to resolve regional trade disputes. The 2019 Protocol, if ratified, will be a welcome avenue for ASEAN Member States to do so.
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At the end of this 4-part series investigating ASEAN’s cases at the WTO DSB, a short journey through ASEAN’s growing confidence and seriousness towards dispute settlement reveals that there is reason to look forward to seeing ASEAN’s continued efforts in this area. The three WTO cases showed that ASEAN is no stranger to adjudication, at least when it comes to external third-party dispute settlement mechanisms. The text of the 2019 Protocol documents ASEAN’s sincerity in strengthening its own mechanisms, particularly for its economic pillar. This, coupled with the strong stimulus in looking for a forum to substitute the WTO DSB, suggests that the 2019 Protocol is ASEAN’s solution to the WTO impasse. The next few years may see the start of the 2019 Protocol in practice, and the ASEAN Member States setting their own precedent for how to adjudicate regional trade disputes.
[1] Walter Woon, The ASEAN Charter: A Commentary (NUS Press 2015), at p 179-180.
[2] Edmund Sim, ‘ASEAN Further Enhances its Dispute Settlement Mechanism’ (2020) 7(1) Indon J Int’l & Comp L 279 (Sim) at p 282.
[3] See generally the GATT 1947 dispute settlement procedure, World Trade Organisation, ‘Historic development of the WTO dispute settlement system: 2.1 The system under GATT 1947 and its evolution over the years’ https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c2s1p1_e.htm accessed 2 September 2021.
[4] Article 21(2) of the 2004 Protocol. See a full list of cases under the GATT 1947, World Trade Organisation, ‘Dispute settlement reports within the framework of GATT 1947’, https://www.wto.org/english/tratop_e/dispu_e/gt47ds_e.htm accessed 2 September 2021.
[5] Robert Beckman, Leonardo Bernard, Hao Duy Phan, Tan Hsien-Li, Ranyta Yusman, ‘Dispute settlement mechanisms in ASEAN’ in Promoting Compliance, The Role of Dispute Settlement and Monitoring Mechanisms in ASEAN Instruments, (Cambridge University Press 2016), at p 65, 76.
[6] Ibid, at p 76.
[7] Kelly Gerard, ‘ASEAN as a “Rules-based Community”: Business as Usual‘ (2018) 42:2 Asian Studies Review 210, at p 221. See also supra note 5, at p 76: “…it is unlikely that 2004 Protocol panel members would be able to reach the level of sophistication and expertise of WTO panel members.”
[8] Ibid, at page 219. This is unlike the 1996 Protocol, which has Article 7: ”SEOM representatives from Member States which are parties to a dispute can be present during the process of deliberation but shall not participate in the ruling of SEOM.”
[9] Ana Swanson, ‘Trump cripples WTO as trade war rages’ The New York Times (8 December 2019) https://www.nytimes.com/2019/12/08/business/trump-trade-war-wto.html accessed 14 October 2021.
[10] Bryce Baschuk, ‘Biden picks up where Trump left off in hard-line stances at WTO’ Bloomberg (22 February 2021) https://www.bloomberg.com/news/articles/2021-02-22/biden-picks-up-where-trump-left-off-in-hard-line-stances-at-wto accessed 14 October 2021.
[11] Emma Farge, ‘U.S. committed to WTO and wants it to succeed, trade rep Tai says’ Reuters (14 October 2021) https://www.reuters.com/world/us/us-committed-wto-wants-it-succeed-trade-rep-tai-says-2021-10-14/ accessed 14 October 2021.
[12] ‘Let’s reform not ruin the WTO, EU trade chief urges U.S.’ Reuters (27 September 2021) https://www.reuters.com/business/lets-reform-not-ruin-wto-eu-trade-chief-urges-us-2021-09-27/ accessed 14 October 2021.
[13] ‘G7 trade track backs WTO reform, builds momentum to COP 26’ International Institute for Sustainable Development (1 June 2021) https://sdg.iisd.org/news/g7-trade-track-backs-wto-reform-builds-momentum-to-cop-26 accessed 14 October 2021.
[14] Cf. Jake Read, ‘Asia is in a critical position to kick-start global trade reform’ East Asia Forum (30 July 2021) https://www.eastasiaforum.org/2021/07/30/asia-is-in-a-critical-position-to-kick-start-global-trade-reform/ accessed 14 October 2021.
[15] Cliff Venzon, ‘Philippines hits Vietnam with new tariffs on cement imports’ Nikkei Asian Review (4 September 2019) https://asia.nikkei.com/Economy/Philippines-hits-Vietnam-with-new-tariffs-on-cement-imports accessed 9 September 2021.
[16] See ‘Vietnam says cement exports to PHL meet demand that cannot be filled by local producers’, BusinessWorld (19 March 2019) https://www.bworldonline.com/vietnam-says-cement-exports-to-phl-meet-demand-that-cannot-be-filled-by-local-producers/ accessed 9 September 2021.
[17] Elijah Felice Rosales, ‘Vietnam seeks WTO role in cement issue with PHL’ Business Mirror (4 November 2019) https://businessmirror.com.ph/2019/11/04/vietnam-seeks-wto-role-in-cement-issue-with-phl/ accessed 9 September 2021.
[18] World Trade Organisation, ‘Immediate Notification to the Council for Trade in Goods of the Results of the Consultations under Article 12.3 – Joint Communications of Viet Nam and the Philippines G/L/1347’ (28 November 2019).
[19] Allan F Tatham, ‘Paying Court to the Future: Has the Time for an ASEAN Trade Tribunal Arrived?’ (2019) 67(2) Estudios de Deusto: revista de la Universidad de Deusto 47 at p 53. See also supra note 2, at p 291.
[20] Supra note 5, at p 58, 63-64.
[21] Supra note 5, at p 64.
[22] Supra note 7 , at p 218.
[23] Declaration of ASEAN Concord II (Bali Concord II), adopted on 7 October 2003, https://asean.org/speechandstatement/declaration-of-asean-concord-ii-bali-concord-ii/, accessed 12 October 2021.
[24] Annex to the 2003 Declaration of ASEAN Concord II: Recommendations of the High-Level Task Force on ASEAN Economic Integration at Annex 1: Mechanism of the Dispute Settlement System, Enforcement Mechanism, https://image.mfa.go.th/mfa/0/OcXc7u4THG/migrate_directory/other-20130527-164513-046340.pdf accessed 12 October 2021.
[25] Supra note 5, at p 75. For example, a panel will be formed unless the SEOM decides by negative consensus to not do so.
[26] See for example Robert Beckman, Leonardo Bernard, Hao Duy Phan, Tan Hsien-Li, Ranyta Yusman, ‘Recommendations’ in Promoting Compliance, The Role of Dispute Settlement and Monitoring Mechanisms in ASEAN Instruments, (Cambridge University Press 2016), 160, at p 164-166. The authors provided a comprehensive list of possible policy reform for ASEAN instruments, including calling for “a group of experts [to] be established to review the timelines and make recommendations for amendments [to the 2004 Protocol].”
[27] See Article 27(3) of the 2019 Protocol: “This Protocol shall replace the 2004 Protocol on EDSM and shall be applied only with respect to new requests for consultations under this Protocol made on or after the date of entry into force of this Protocol. …”.
[28] Article 27(1) of the 2019 Protocol: “The Appendices to this Protocol shall form an integral part of this Protocol…”
[29] Appendix I of the 2019 Protocol
[30] Article 26(2)(a) of the 2019 Protocol.
[31] Supra note 5, at p 76.
[32] Article 8(2) of the 2004 Protocol.
[33] Article 12(5) of the 2004 Protocol.
[34] Article 9(1) of the 2004 Protocol.
[35] Article 12(12) of the 2004 Protocol.
[36] Supra note 26, at p 166.
[37] See generally supra note 2, at p 285-289 for a summary of the changes in timelines, which also provides a table breaking down the different timelines for the 2004 Protocol, 2019 Protocol, and WTO DSU.
[38] Article 10(2) of the 2019 Protocol.
[39] Article 14(5) of the 2019 Protocol.
[40] Article 11(2) of the 2019 Protocol.
[41] Article 14(13) of the 2019 Protocol.
[42] Article 21(2) of the 2019 Protocol.
[43] Supra note 2, at p 286-287. See also the World Trade Organisation, ‘Understanding on Rules and Procedures Governing the Settlement of Disputes’, https://www.wto.org/english/docs_e/legal_e/28-dsu_e.htm accessed 10 September 2021 (WTO DSU).
[44] This was a concern for the 2004 Protocol, see supra note 5, at p 72.
[45] Hao Duy Phan, ‘Towards a Rules-Based ASEAN: The Protocol to the ASEAN Charter on Dispute Settlement Mechanisms’, (2013) 5:14 Arbitration Law Review 254 at 267.
[46] Article 3(6) of the 2019 Protocol.
[47] Article 10(6) of the 2019 Protocol.
[48] Article 14(9) of the 2019 Protocol.
[49] Article 15(2) of the 2019 Protocol.
[50] See Articles 4(6), 5(2), 14, 17(10), 18(2) of the WTO DSU, supra note 28.
[51] Supra note 2, at p 283.
[52] Annex II: Rules of Conduct, of the 2004 Protocol.
[53] See World Trade Organisation, ‘Rules of conduct for the understanding on rules and procedures governing the settlement of disputes’, https://www.wto.org/english/tratop_e/dispu_e/rc_e.htm accessed 10 September 2021, which forms Annex II of the WTO DSU.
[54] See Appendix II: Rules of Conduct, of the 2019 Protocol.
[55] Article 5 of the 2019 Protocol: “All covered persons as defined in the Rules of Conduct at Appendix II shall comply with the said Rules of Conduct.”
[56] Article 22(4) of the 2019 Protocol.
[57] Article 17(3) nn 2 of the 2019 Protocol.
[58] Supra note 5, at p 79-80.
[59] See ‘ASEAN Protocol on Enhanced Dispute Settlement Mechanism – Instruments of Ratification’, ASEAN Legal Instruments: http://agreement.asean.org/agreement/detail/373.html accessed 15 September 2021.
[60] Supra note 5, at p 76.