Dispute Settlement under the Regional Comprehensive Economic Partnership:
Part 2: Is Article 19.18’s Special and Differential Treatment Necessary?
by Yvette Foo
Following Part 1 which examined key procedural provisions of Chapter 19, Part 2 now discusses Article 19.18 of RCEP, which purports to provide special and differential treatment (SDT) to Least Developed Country Parties (LCDP(s)) at all stages of a dispute under Chapter 19. Article 19.18 states the following:
Article 19.18: Special and Differential Treatment Involving Least Developed Country Parties
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- At all stages of the determination of the causes of a dispute and of dispute settlement procedures involving a Least Developed Country Party, particular consideration shall be given to the special situation of Least Developed Country Parties. In this regard, Parties shall exercise due restraint in raising matters under these procedures involving a Least Developed Country Party. If nullification or impairment is found to result from a measure taken by a Least Developed Country Party, a Complaining Party shall exercise due restraint regarding matters covered under Article 19.17 (Compensation and Suspension of Concessions or Other Obligations) or other obligations pursuant to these procedures.
- Where any Party to the dispute is a Least Developed Country Party, the panel’s report shall explicitly indicate the form in which account has been taken of relevant provisions on special and differential treatment for a Least Developed Country Party that form part of this Agreement which have been raised by that Party in the course of the dispute settlement procedures
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SDT provisions were first contemplated in the WTO’s Doha Round negotiations to ensure that developing “secure a share in the growth of world trade commensurate with the needs of their economic development”.[1] These provisions allow for delayed implementation or provide special assistance to developed countries to account for their economies and capacities. By including Article 19.18 under Chapter 19, RCEP’s 15 economically diverse members have pledged to help developing countries by affording them special rights during a dispute.
This blog post starts with a brief analysis of SDT provisions by comparing Article 19.18 to existing SDT provisions in other instruments. The analysis then turns to the wording of Article 19.18 to point out key issues with how the provisions was drafted. It is argued that SDT is nevertheless an important inclusion in RCEP. Lastly, this blog post will conclude by suggesting some improvements for Article 19.18.
For the avoidance of doubt, Part 2 does not discuss RCEP’s other SDT provisions, such as those under Annex 11B or Chapter 8’s exceptions for Cambodia, Laos, Myanmar, and Vietnam (the CLMV). It only looks at SDT for dispute settlement under Chapter 19.
Existing SDT Provisions – ‘Inspiration’ for Article 19.18
SDT provisions in ASEAN instruments
A starting point for Article 19.18 is to look within ASEAN instruments. Broadly speaking, special concessions for less economically developed countries are common in ASEAN instruments—typically for the CLMV. Deeper ASEAN integration would not be possible without some way to account for the region’s “diversity in size, resource endowment, level of economic development, technological capability and openness of trade and investment regimes”.[2]
The notion of providing SDT maps quite closely to the overarching mission of the Initiative for ASEAN Integration (IAI), which seeks to progressively integrate the member states’ economies by accounting for their differing levels of development.[3] Acknowledging that newer ASEAN member states, i.e. the CLMV, have capacity constraints preventing them from implementing ASEAN commitments as widely or quickly as the other countries, special measures are used help to facilitate greater participation and narrow development gaps to fully integrate the region.[4]
More specifically however, the 2012 Guiding Principles and Objectives for Negotiating RCEP also states that RCEP will include SDT provisions that are consistent with existing ASEAN+1 free trade agreements (FTAs).[5] SDT provisions indeed can be found in the ASEAN-Australia-New-Zealand FTA,[6] the ASEAN-China FTA,[7] the ASEAN-Japan FTA,[8] and the ASEAN-Korea FTA.[9] These FTAs require the dialogue partner to provide SDT to the CLMV. In particular, very similar wording to Article 19.18 is found under Section E, Article 18 of the ASEAN-Australia-New-Zealand FTA, although it applies arbitral proceedings.
Other major ASEAN economic agreements also contain SDT provisions for the CLMV or “newer ASEAN member states”. These include the ASEAN Trade in Services Agreement (ATISA),[10] and the ASEAN Comprehensive Investment Agreement,[11] respectively.
It is important to note that the SDT provisions in these FTAs and agreements do not relate specifically to dispute settlement. Most only impose a generic duty to be considerate to the CLMV, such as requiring member states to increase the CLMV’s domestic capacities for economic integration or have gradual phasing/tariff-elimination schedules. Save for Section E of the ASEAN-Australia-New-Zealand FTA, there are no provisions specifically laying out how SDT applies to disputes. It should also be noted that ASEAN’s main dispute settlement mechanism, the 2004 EDSM, also does not contain SDT provisions.
In summary, Article 19.18 follows from an existing ASEAN practice to provide special treatment to less economically developed countries in the region, although there is little background for how it should apply to disputes.
SDT provisions in the WTO DSU
The main provision for SDT under the WTO DSU is Article 24. Although Article 19.18 of RCEP and Article 24.1 of the WTO DSU are quite similar, one major difference is that Article 24.2 allows LDCPs to seek the assistance from the Director-General or the Chairman of the Dispute Settlement Body (DSB) to resolve disputes amicably before a panel is constituted by offering their good offices, conciliation, and mediation.
SDT is also provided for under other WTO DSU provisions. These other provisions include, inter alia, Article 8.10, which requires the dispute panel to have at least one panellist from the LDCP if so requested; Article 12.10, which states that parties can agree to extend the consultation period if an LDCP is involved; and Article 21.8, which, in the framework of supervising implementation, requires the DSB to consider the LDCP’s economic status when considering any further measures to impose on top of surveillance and status reports.[12]
The WTO DSU has designed clear steps for how SDT can be provided in a dispute with an LDCP. This is especially the case with Articles 8.10, 12.10, and 21.8, which are concrete obligations on top of Article 24’s overarching requirement to be considerate. In comparison, Article 19.18 is less legalistic—a point which will be expanded on below.
Protection for LDCPs under Article 19.18 is ambiguous
It is evident from the discussion above that SDT provisions are not novel. However, certain aspects of Article 19.18 are left open-ended or undefined, which leads to difficulty in understanding how the Article should be effected by parties.
Who is an LDCP?
Article 19.18 applies to “LDCPs”, but the term is not defined in RCEP. One possibility is that “LDCPs” refers to the CLMV. Recalling the point above that Article 19.18 is based on existing ASEAN+1 FTAs provisions which provide SDT to the CLMV, it would be reasonable to suggest that the intention was to restrict protection to these ASEAN countries only. Furthermore, the 2011 ASEAN Framework for RCEP explicitly states that RCEP shall provide for SDT to ASEAN member states, “especially the CLMV”.[13] However, if this is the case, why did RCEP simply not refer to the CLMV in Article 19.18?
Another guideline then is to refer to is the Economic and Social Council. Its subsidiary body, the United Nations’ Committee for Development Policy, developed criteria to identify least developed countries (the ECOSOC’s criteria).[14] The criteria are divided into three main categories: income, human assets, and economic and environmental vulnerability.[15] These guidelines are referred to under the ATISA specifically in the context of SDT, which lends credence to them also applying to RCEP. However, ECOSOC’s criteria exclude Vietnam from being considered an LDCP.[16] This stands at odds with ASEAN agreements typically providing concessions to Vietnam as well.
How do parties exercise “due restraint”?
Article 19.18 uses the term “due restraint” in two instances. First, parties must exercise due restraint in raising a dispute under Chapter 19 when an LDCP is involved. Secondly, a Complaining Party must exercise due restraint for matters under Article 19.17, which covers compensation and suspension of concessions/obligations when an LDCP is involved. However, “due restraint” is not defined in RCEP. It also does not help that the term is not readily defined elsewhere: ASEAN instruments do not define the term; the WTO DSU also does not define it, and there is no case law to rely on.[17]
Some guidance can be gleaned from the Proposal by the Least-Developed Countries (LDC) Group in the WTO DSU negotiations. For Article 24, the LDC Group stated the following:[18]
At the outset of a case for instance, panels should have the authority to determine whether a party bringing a complaint against an LDC has a prima facie case and whether the complainant exercised due restraint. Restraint in this sense could include a determination whether it would have been better in the circumstances to invoke the assistance of the “good offices of the Director-General”, whether due diligence was exercised with the objective of actually settling the dispute and what the outcome was.
The proposal seems to be covered under Article 24.2 of the WTO DSU. What complicates matters is that RCEP does not have Article 24.2’s central body or figure like the Director or Chairman, making the Proposal difficult to adapt.
Consequences of failing to observe Article 19.18?
Article 19.18 also does not make it clear what the relevant consequences are if parties do not exercise due restraint. The only ‘check’ imposed is the requirement for the LDCP to explain how due restraint was exercised, and for the panel report to reflect this.[19] Would failing to provide SDT to an LDCP mean that a request to establish a panel fails at the outset, or something less extreme, such as diminished compensation for or from an LDCP? Again, this vagueness is not cured by elaboration from other instruments/case law from ASEAN or the WTO.
In effect, Article 19.18’s vagueness “[inhibits] the impulses of Complaining Parties”, rather than provides tangible support in disputes.[20] A similar state is happening at the WTO: as of June 2020, no WTO member has disputed with an LDCP, and that the only case where an LDCP has invoked dispute settlement proceedings against a member was settled through a mutually agreed solution.[21] RCEP can expect a similar outcome with Article 19.18’s lack of clarity.
Why Article 19.18 was Included in RCEP
Article 19.18 is, in terms of its legal obligations, confusing. Some may wonder why Article 19.18 was drafted into Chapter 19 in its current state. From a diplomacy angle, it that it is possible that Article 19.18 was included as a prospective provision designed to encourage more so-called LDCPs to ratify RCEP.[22] Under Article 20.9 of RCEP, other countries are welcome to apply to join the trade bloc. For countries like Timor-Leste, who is hoping to join ASEAN,[23] or other LDCPs in the Asia-Pacific region, they stand to reap significant economic benefits if they join.[24]
It is a fact that RCEP involves economic giants. Therefore, it needs to assuage smaller countries gaining access to these new markets, that their interests will be properly accounted for should a trade dispute happen. After all, RCEP’s goal is to “[enable] more parties to get on board and share fruits, instead of setting the bar too high and narrowing down the circle of friends.”[25] With Article 19.18, LDCPs have a provision they can rely on for a minimum level of protection, however vague it may be, when up against countries with more powerful economies.
Possible amendments for Article 19.18
RCEP is an evolving instrument.[26] To better match RCEP’s goal of encouraging greater economic integration of the countries involved, steps should be taken to make Article 19.18’s protection more meaningful. It is suggested that Article 19.18 can be expanded on in the future to further legalise SDT, and therefore, protection for LDCPs.
First, Article 19.18 should clarify who is considered an “LDCP” under RCEP. If the goal of Article 19.18 is to attract other LDCPs to join, the Article is correct to not limit protection to the CLMV. However, objective criteria should still be used to identify whether a country is considered an LDCP. Since ATISA—a recent instrument that entered into force in April 2021—already relies on the ECOSOC’s criteria, RCEP could follow suit.
Second, examples of “due restraint”, should be provided to provide clarity to RCEP. Examples for the former could include those listed above under the WTO DSU beyond Article 24. Doing so would properly situate how parties are expected to conduct disputes under RCEP, and fully involve LDCPs in disputes instead of pre-emptively shutting down the possibility.
Third, the possible consequences of not exercising it in a dispute with an LDCP should be laid out clearly in Article 19.18. A gradation of possibilities should be provided to escalate the consequences of not exercising due restraint to account for different degrees of non-compliance.
Lastly, Chapter 19 should allow for costs of disputes to be shared where LDCPs are involved.[27] Doing so would allow for more participatory dispute settlement by ensuring that LDCPs are not gatekept from cases because they cannot pay for costs of the dispute.
Article 19.18, while not novel, has upgraded SDT from ASEAN+1 FTAs and the IAI in the sense that it now plays a role in dispute settlement. The legal ramifications of Article 19.18 are uncertain for now, as its role is largely motivational and seeks to encourage smaller, less developed nations to join RCEP. However, it is expected that Article 19.18 will harden into concrete obligations to create meaningful protection for LDCPs, especially if RCEP is proactive in its mission to deepen regional economic integration.
[1] WTO, ‘The Doha Round’, <https://www.wto.org/english/tratop_e/dda_e/dda_e.htm#declaration> accessed 5 June 2022.
[2] Siow Yue Chia and Michael G. Plummer, ‘ASEAN’s FTA-led economic integration’ in Siow Yue Chua and Michael G. Plummer, eds., ASEAN Economic Cooperation and Integration, Progress, Challenges and Future Directions (Cambridge University Press, 2015) pp. 39-73 at 40.
[3] See for example Initiative for ASEAN Integration (IAI) Work Plan IV (2021-2025), adopted in Ha Noi, Vietnam on 12 November 2020, <https://asean.org/wp-content/uploads/2021/08/Initiative-for-ASEAN-Integration-IA-Work-Plan-IV-2021-2025.pdf> accessed on 23 May 2022.
[4] Ibid, at p 11.
[5] 2012 Guiding 2012 Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership Agreement, adopted in Phnom Penh, Cambodia, at the 21st ASEAN Summit on 20 November 2012, <https://asean.org/wp-content/uploads/2012/05/RCEP-Guiding-Principles-public-copy.pdf> accessed on 26 April 2022, at p 1.
[6] 2009 Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area, adopted in Cha-am, Thailand on 27 February 2009, <https://aanzfta.asean.org/uploads/2016/09/AANZFTA-legal-text-PRINTED-Signed.pdf> accessed 17 May 2022. See especially Chapter 17 (Consultations and Dispute Settlement), Article 3.
[7] ASEAN-China trade instruments have general SDT provisions, see the 2002 Framework Agreement on Comprehensive Economic Co-operation between ASEAN and the People’s Republic of China (the ASEAN-China FTA), adopted in Phnom Penh, Cambodia, on 4 November 2002, Article 2(d). Curiously, however, the 2004 Agreement on Dispute Settlement Mechanism of the ASEAN-China FTA, adopted in Vientiane, Laos on 29 November 2004, does not mention SDT.
[8] 2008 Agreement on Comprehensive Economic Partnership among Member States of ASEAN and Japan, adopted 1 January 2008 at the respective capitals of ASEAN Member Countries and Japan, Article 2(c).
[9] 2005 Framework Agreement on Comprehensive Economic Cooperation Among the Governments of the Member Countries of ASEAN and the Republic of Korea (the ASEAN-Korea FTA), adopted in Kuala Lumpur, Malaysia on 13 December 2005, Article 1.3. Curiously, however, the 2004 Agreement on Dispute Settlement Mechanism of the ASEAN-Korea FTA, adopted in Kuala Lumpur, Malaysia on 13 December 2005, does not mention SDT.
[10] 2020 ASEAN Trade in Services Agreement, adopted in Manila, the Philippines on 7 October 2020, <https://agreement.asean.org/media/download/20201111041414.pdf> accessed 23 May 2022, at Article 27.
[11] 2009 ASEAN Comprehensive Investment Agreement, adopted in Cha-am, Thailand on 26 February 2009, <http://investasean.asean.org/files/upload/Doc%2005%20-%20ACIA.pdf> accessed 23 May 2022, at Article 23.
[12] Other provisions include Articles 4.10, 21.2, 21.7 of the WTO DSU. See generally WTO, “Developing countries in WTO dispute settlement”, <https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c11s2p1_e.htm> accessed 23 May 2022.
[13] 2011 ASEAN Framework for Regional Comprehensive Economic Partnership, adopted in Bali, Indonesia on 17 November 2011, <https://cil.nus.edu.sg/wp-content/uploads/2019/02/2011-ASEAN-Framework-for-Regional-Comprehensive-Economic-Partnership.pdf> accessed 13 May 2022.
[14] See generally United Nations, Department of Economic and Social Affairs, ‘Least Developed Countries (LDCs)’, <https://www.un.org/development/desa/dpad/least-developed-country-category.html>, accessed 25 April 2022.
[15] For a breakdown of each criterion, see United Nations, Department of Economic and Social Affairs, ‘LDC Identification Criteria & Indicators’ <https://www.un.org/development/desa/dpad/least-developed-country-category/ldc-criteria.html>, accessed 11 May 2022.
[16] Article 27, nn 12: “The asterisk (*) denotes Least Developed Countries as determined by criteria issued by ECOSOC’s Committee for Development Policy.”
[17] See generally on the vagueness of “due restraint” in the WTO context, Farhaan Uddin Ahmed, ‘Special and Differential Treatment of LDC Parties in RCEP’s Dispute Settlement Mechanism: Mere Words or Effective Safeguards?’, AfronomicsLaw (17 February 2021), <https://www.afronomicslaw.org/category/analysis/special-and-differential-treatment-ldc-parties-rceps-dispute-settlement-mechanism> accessed 20 May 2022.
[18] WTO, ‘Negotiations on the Dispute Settlement Understanding — Proposal by the LDC Group’ [TN/DS/W/17] (9 October 2002), <https://jmcti.org/2000round/com/doha/tn/tn_ds_w_017.pdf> accessed 24 May 2022.
[19] Article 19.18(2) RCEP.
[20] Diane Desierto, ‘The Regional Comprehensive Economic Partnership (RCEP)’s Chapter 19 Dispute Settlement Procedures’, EJIL: Talk! (16 November 2020), <https://www.ejiltalk.org/the-regional-comprehensive-economic-partnership-rceps-chapter-19-dispute-settlement/> accessed 20 May 2022.
[21] Supra note 17.
[22] Mustafizur Rahman, ‘Regional Comprehensive Economic Partnership: why should it involve the excluded LDCs?’, OECD Development Matters (29 January 2021), <https://oecd-development-matters.org/2021/01/29/regional-comprehensive-economic-partnership-why-should-it-involve-the-excluded-ldcs/> accessed 12 May 2022.
[23] Adrian David, ‘“Becoming Asean a national and strategic priority”’ New Straits Times (16 March 2022), <https://www.nst.com.my/news/nation/2022/03/780504/becoming-asean-national-and-strategic-priority> accessed 19 May 2022.
[24] Rahman, supra note 22.
[25] Jiang Qin, ‘RCEP: Ship bound for shared future sets sail’, The Jakarta Post (31 December 2021), <https://www.thejakartapost.com/opinion/2021/12/30/rcep-ship-bound-for-shared-future-sets-sail.html> accessed 12 May 2022.
[26] See Fukunari Kimura, ‘A framework for ongoing commitments to RCEP success’ East Asia Forum (5 April 2022), <https://www.eastasiaforum.org/2022/04/05/a-framework-for-ongoing-commitments-to-rcep-success/> accessed 17 May 2022.
[27] Henry S. Gao, ‘Dispute settlement provisions in ASEAN’s external economic agreements with China, Japan and Korea’ in Pasha L. Hsieh and Bryan Mercurio, eds, ASEAN Law in the New Regional Economic Order, Global Trends and Shifting Paradigms (Cambridge University Press, 2019) pp. 64-82 at 81: “This might prevent smaller and poorer ASEAN countries from participating in dispute settlement proceedings as they do not have resources comparable to the non-ASEAN partners.”