Dispute Settlement under the Regional Comprehensive Economic Partnership:
Part 1: An Overview of Chapter 19

by Yvette Foo

The Regional Comprehensive Economic Partnership Agreement (RCEP) is a mega-free trade agreement (FTA) between fifteen countries that has recently entered into force. What makes the agreement remarkable is its sheer size and coverage, and concomitant impact as a multilateral trading system amidst a time of economic fracture and political turbulence.[1]

While many of RCEP’s chapters are weighty and deserving of discussion, this blog post series focuses on Chapter 19, which covers dispute settlement. Part 1 provides an overview of RCEP’s history before looking at key procedural provisions in Chapter 19. In particular, Chapter 19 will be compared to existing dispute settlement mechanisms to highlight important changes and/or adoptions. In doing so, Part 1 gives a concise summary of the dispute settlement process under Chapter 19, and demonstrates how it was specifically designed to overcome current difficulties in dispute settlement fora, and strike a balance between full legalisation and pragmatism.

Brief History of RCEP

After 31 rounds of negotiations taking place over eight years, the RCEP was finally signed on 15 November 2020. [2] The agreement entered into force around one year later on 1 January 2022. [3] Thus far, thirteen out of fifteen member states have submitted instruments of ratification/acceptance, these being Brunei Darussalam, Cambodia, Laos, Malaysia, Myanmar, [4] Singapore, Thailand, Viet Nam, Australia, China, Japan, Korea, and New Zealand. [5] RCEP combines ASEAN’s existing FTAs with the five relevant Dialogue Partners, all of which have considerable differences between them to suit different domestic interests, [6] in order to form a “single rule-book” for all member states to adopt. [7]

The overarching objective for RCEP is “to establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development” [8] —a herculean task considering how the RCEP covers roughly one third of the world’s economy and population. [9] It is even more so given RCEP’s wide coverage of many sectors of the economy: [10] trade in goods (including trade and non-trade barriers), services (including temporary movement of natural persons), investment, and newer sectors for economic integration such as intellectual property, e-commerce, and government procurement practices. [11]

Where trade disputes arise, parties may look at Chapter 19 of RCEP for guidance, for which the 2012 Guiding Principles and Objectives for Negotiating the RCEP (the 2012 Guiding Principles) explains that its dispute settlement mechanism will “provide an effective, efficient and transparent process for consultations and dispute resolution.” [12]

Noteworthy Aspects of RCEP’s Chapter 19

Chapter 19 takes some inspiration from existing instruments

Some of RCEP’s dispute settlement provisions mirror the World Trade Organisation’s (WTO) Dispute Settlement Understanding (DSU). Since the 2011 ASEAN Framework for RCEP, it was already set out between parties that RCEP would be “consistent” with the WTO. [13] The 2012 Guiding Principles echoes this statement. [14] Chapter 19 itself explicitly confirms this in Article 19.4(2):

“[w]ith respect to any provision of the WTO Agreement that has been incorporated into this Agreement, the panel shall also consider relevant interpretations in reports of WTO panels and the WTO Appellate Body, adopted by the WTO Dispute Settlement Body” (emphasis added).

Indeed, the overall structure and wording of the dispute settlement process under Chapter 19 closely follows that of the DSU.

Chapter 19 also mirrors major ASEAN instruments, which is not surprising given that RCEP is an ASEAN-led initiative, [15] and the above point that it is an extension/synthesis of existing ASEAN+1 FTAs. However, RCEP does not have an organ to manage the administrative aspects of Chapter 19, and in this sense, is more alike ASEAN+1 FTAs than the WTO. [16] RCEP is also described as having a “low level of legalisation”, albeit not to the level of ASEAN+1 FTAs. [17]

Some parts of Chapter 19 deviate from both the WTO DSU, and ASEAN+1 FTAs dispute settlement mechanisms—namely the 2004 ASEAN Protocol on Enhanced Dispute Settlement Mechanism (2004 EDSM). [18] RCEP does not have a dispute settlement body like the WTO, nor does it refer to the member states’ senior economic officials as having capacity to oversee/manage disputes. [19] In fact, it is not very clear which body is responsible for the administrative leg of carrying out Chapter 19.

RCEP’s scope; non-violation complaints are not covered

The scope of Chapter 19 is provided for under Article 19.3: Chapter 19 covers: (i) disputes concerning the interpretation or application of RCEP, and (ii) when a party is believed to not be acting in conformity with (performing) its obligations. [20]

Article 19.3 is also proscriptive. Footnote 1 of Chapter 19 provides that “[n]on-violation complaints shall not be permitted under [RCEP]”. A non-violation complaint is where a party claims for nullification or impairment under an agreement against an opposing party, regardless of whether the opposing party is not in conformity with the agreement or failed to carry out its obligations. History shows that WTO members have “seldom made ‘non-violation’ complaints”. [21] Its exclusion under RCEP is practical and ties back to the original intention of securing an effective and efficient dispute settlement process: by focusing on actual non-conformity, RCEP avoids the ambiguity and litigious nature of non-violation complaints. [22]

While the 2004 EDSM does not refer to non-violation complaints, some ASEAN+1 exclude non-violation complaints from its dispute settlement frameworks. This is the case for the ASEAN-Australia-New Zealand Free Trade Area Agreement, [23] and the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China (which forms part of the ASEAN-China Free Trade Area). [24] It is possible that RCEP borrowed from these FTAs with the intent to streamline disputes.

Dispute settlement time frames

By and large, Chapter 19’s time frames are somewhere between the 2004 EDSM, which has shorter time periods, and the WTO DSU, which has longer time periods. One example is to look at the period of time between the panel’s establishment to the issuance of its final report. RCEP states that this period should not exceed seven months. [25] Under the WTO, it cannot exceed nine months. [26] Under the 2004 EDSM, it cannot exceed 70 days, or roughly 2.3 months. [27] RCEP’s timeline here finds a balance between these two ends.

Another example to look at the amount of time given to a panel to issue its interim report after being established. The interim report under RCEP must be issued within roughly five months of a panel being established. [28] The WTO DSU’s time frame is six months. [29] Relatedly, RCEP sets a time frame of 30 days between the interim and final report, while the WTO allows for 60 days.[30] It should be noted that ASEAN’s dispute settlement mechanism, namely the 2004 EDSM, does not involve interim reports. In this way, Chapter 19 has elements of ASEAN’s “expedited dispute settlement process”, albeit not as extremely as the 2004 EDSM. [31]

Furthermore, and unlike both the WTO DSU and ASEAN instruments, RCEP has done away with appellate level proceedings. This was likely done to push for finality in proceedings and avoid the possibility of paralysis [32] ­­—namely the appellate body “crisis” at the WTO. [33]

That being said, certain stages of the dispute under RCEP have longer time frames. Where parties reconvene a panel for disputes concerning any measure taken to comply with the panel’s final report, the time between the panel being reconvened and its final report on compliance is 150 days. [34] Under the WTO, the time frame is 90 days. [35] Under the 2004 EDSM, the time frame is 90 days. [36]

Reconvening of panels after suspension of concessions/obligations

Article 19.17(13) presents parties with the opportunity to reconvene a panel when:

  • a Complaining Party has exercised its right to suspend concessions/obligations;
  • a Responding Party has made a notification that it has performed its obligations to implement the panel’s final report, and;
  • the parties disagree on the existence of consistency of any measure taken to comply.

In essence, RCEP allows for parties to reconvene a panel if they wish to lift a suspension of concessions/obligations, using the same panel proceedings provisions.

This is an upgrade from the rather amorphous treatment of similar situations under both the WTO DSU and 2004 EDSM, which only state that suspensions are temporary and should only be applied until the inconsistent behaviour ceases/obligations are performed. [37] In creating this new ‘stage’ of proceedings, RCEP seeks to ensure that parties are motivated to comply with the agreement. After all, a Responding Party is allowed to reconvene a panel once they have complied to officially require a Complaining Party to cease its suspension of concessions/obligations. Article 19.17(13) is an outcome-driven and impact-conscious addition to the typical dispute settlement process.

Concluding Thoughts: A Well-Balanced Dispute Settlement Mechanism?

Chapter 19 is the outcome of undoubtedly intense negotiations between the member states and their competing interests. It is an inspired document, borrowing from existing dispute settlement mechanisms’ tried and tested provisions/structures. However, it is also mindful of prominent issues in existing fora, and deviates accordingly. This is especially so with regard to RCEP’s exclusion of non-violation complaints, removal of the appellate body, and allowing a panel to reconvene after suspension of concessions/obligations.

If ASEAN represents a fully ‘internal’ system in that its instruments only affect the region, and the WTO represents a fully multilateral system for international trade, RCEP exists somewhere between the two. Chapter 19’s provisions strike a balance between having a fully legalised international dispute settlement framework and regulatory sovereignty to provide a system that is pragmatic for all fifteen member states. [38] Chapter 19 is by no means an all-encompassing, fool-proof system. However, as an ‘expanded’ internal system, Chapter 19 will be able to “de-politicise trade disputes and foster the culture of respect for the international rule of law” amidst a period of rising geopolitical tensions. [39] At the same time, its expedient time frames and narrow scope for disputes, and emphases on finality and compliance, ensure that RCEP remains committed in encouraging economic integration and cooperation.

It remains to be seen whether Chapter 19, in its current state, will be utilised at all between the parties for any trade disputes. On one hand, parties can choose a different forum to settle disputes, [40] and this may be the case when considering how some members would hesitate to use an untested mechanism. [41]

On the other hand, there are strong motivations for parties to rely on this new procedure under RCEP. Firstly, Chapter 19 appears to be shaped by existing dissatisfaction with the current dispute settlement systems available; an example that was discussed above was with the WTO’s frozen appellate body. The parties have personally designed an ideal and informed mechanism to use. Secondly, the sheer size of the economies involved may influence parties to resolve disputes quickly and collectively [42] in order to strengthen confidence in the region’s economic recovery. [43]

The goal of RCEP is to increase trade and strengthen economic cooperation in the region. While plenty of questions and concerns remain, Chapter 19 is a first step to ensure that any disputes arising out of the agreement can be managed in an effective and expedient manner.

[1] See generally ‘The strategic significance of RCEP in East Asia’ East Asia Forum (28 March 2022), <https://www.eastasiaforum.org/2022/03/28/the-strategic-significance-of-rcep-in-east-asia/>, accessed 25 April 2022.
[2] Ministry of Trade and Industry Singapore, ‘What You Need to Know about the RCEP’ (26 April 2021) at p 5, <https://www.mti.gov.sg/-/media/MTI/Microsites/RCEP/What-You-Need-to-Know-About-the-RCEP-Apr-2021.pdf>, accessed on 12 April 2022.
[3] ASEAN Secretariat News, ‘Regional Comprehensive Economic Partnership (RCEP) agreement to enter into force on 1 January 2022’ (3 November 2021), <https://asean.org/regional-comprehensive-economic-partnership-rcep-to-enter-into-force-on-1-january-2022/>, accessed on 12 April 2022.
[4] This author notes that Myanmar’s ratification of RCEP is controversial as it has been rejected by some members, such as the Philippines; see Joyce Ann L. Rocamora, ‘PH to reject military junta-led Myanmar in RCEP sans consensus’ Philippine News Agency (19 February 2022), <https://www.pna.gov.ph/articles/1168113#:~:text=MANILA%20%E2%80%93%20The%20Philippine%20government%20will,Southeast%20Asian%20Nations%20(Asean).> accessed on 20 April 2022.
[5] See generally, Centre for International Law Document Database, ‘2020 Regional Comprehensive Economic Partnership Agreement’, <https://cil.nus.edu.sg/databasecil/2020-regional-comprehensive-economic-partnership-agreement/> accessed 20 April 2022. The member states that have not ratified the RCEP yet are Indonesia and the Philippines.
[6] On the differences between the ASEAN+1 FTAs, a comprehensive analysis is set out in Sanchita Basu Das, Rahul Sen & Sadhana Srivastava, ‘Can ASEAN+1 FTAs Be a Pathway towards Negotiating and Designing the Regional Comprehensive Economic Partnership Agreement?’ (2016) 50:2 Journal of World Trade 253, at 261-274
[7] Ivy Tan, Wu Di, ‘Understanding the Regional Comprehensive Economic Partnership Agreement (RCEP)’ Baker McKenzie (December 2020), <https://www.bakermckenzie.com/-/media/files/insight/publications/2020/12/bakermckenzie_understandingrcep_dec2020.pdf?la=en> accessed on 12 April 2022.
[8] ASEAN Secretariat, ‘Summary of the Regional Comprehensive Partnership Agreement’, <https://asean.org/wp-content/uploads/2020/11/Summary-of-the-RCEP-Agreement.pdf>, accessed on 12 April 2022, at p 1.
[9] Ministry of Trade and Industry Singapore, supra note 2, at p 1.
[10] Ibid.
[11] See Eva Novi Karina, ‘Regulatory Framework on IPR in Indonesia: Overview and Preliminary Assessment on the RCEP-IP Chapter’, (2019) 7:1 Global & Policy 40 at p 41 on the author’s discussion of how WTO negotiations, including intellectual property, e-commerce, etc., were considered in RCEP as well.
[12] 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 13 April 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 14 April 2022.
[14] 2012 Guiding Principles, supra note 12.
[15] See generally, Lee Jaehyon, ‘Diplomatic and Security Implications of the Regional Comprehensive Economic Partnership (RCEP)’ Asian Institute of Policy Studies (15 March 2021), < http://en.asaninst.org/contents/diplomatic-and-security-implications-of-the-regional-comprehensive-economic-partnership-rcep/> accessed on 20 April 2022.
[16] Massimo Lando, ‘Enhancing Conflict Resolution ‘ASEAN Way’: The Dispute Settlement System of the Regional Comprehensive Economic Partnership’, (2022) 13:1 Journal of Dispute Settlement 98, at p 101.
[17] Ibid.
[18] 2004 ASEAN Protocol on Enhanced Dispute Settlement Mechanism, adopted in Vientiane Laos at the 10th ASEAN Summit on 29 November 2004, <http://agreement.asean.org/media/download/20141217102933.pdf> accessed 18 April 2022.
[19] Lando, supra note 16, at 119.
[20] Article 19.3(1) RCEP.
[21] Lando, supra note 16, at p 114.
[22] See generally, Sungjoon Cho, ‘GATT Non-Violation Issues in the WTO Framework: Are They the Achilles’ Heel of the Dispute Settlement Process?’ 39:2 Harvard International Law Journal 311 <https://jeanmonnetprogram.org/archive/papers/98/98-9-.html> accessed 14 April 2022.
[23] 2009 Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area, adopted in Cha-am, Thailand on 27 February 2009, <https://aanzfta.asean.org/chapter-17-consultations-and-dispute-settlement/> accessed 20 April 2022, Chapter 17: Dispute Settlement, at nn 2.
[24] 2004 Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Co-Operation Between the Association of Southeast Asian Nations and the People’s Republic of China, adopted in Vientiane, Laos on 29 November 2004, <https://asean.org/agreement-on-dispute-settlement-mechanism-of-the-framework-agreement-on-comprehensive-economic-co-operation-between-the-association-of-southeast-asian-nations-and-the-peoples-republic-of-chin/> accessed 20 April 2022.
[25] Article 19.13(4) RCEP.
[26] Article 12.9 WTO DSU; it should be noted that the expected time frame is six months, which can be extended to nine months.
[27] Article 8.2 2004 EDSM.
[28] Article 19.13(14) RCEP. The Interim Report must be issued within 150 days of the Panel’s establishment.
[29] Article 12.8 WTO DSU.
[30] Article 19.13(17) RCEP; Article 16.4 WTO DSU.
[31] Edmund Sim, ‘ASEAN Further Enhances its Dispute Settlement Mechanism’ (2020) 7:1 Indonesian Journal of International & Comparative Law 279, at 285.
[32] Desmond Ang, ‘RCEP and Legal/Contractual Practice for Dispute Resolution’ Sidley Austin LLP (8 July 2021), <https://www.asean.or.jp/ja/wp-content/uploads/sites/2/20210708_Mr.-Desmond-Ang_RCEP.pdf> accessed 13 April 2022, at slide 10.
[33] See generally Manzoor Ahmad, Mihailo Gajic, Mat Cuthbert, Guillermo Peña, Bridget S Masango, Matthias Bauer, ‘Reforming the Unreformable: Impulses for the Future of the WTO’ (December 2021) Friedrich Naumann Foundation for Freedom.
[34] Article 19.16(6) RCEP.
[35] Article 21.5 WTO DSU.
[36] Article 15.5 2004 EDSM, it should be noted that the expected time frame is six months, which can be extended to nine months.
[37] Article 22.8 WTO DSU; Article 16(9) 2004 EDSM.
[38] Pasha L. Hsieh, “Signing the RCEP As a Milestone” in New Asian Regionalism in International Economic Law (Cambridge University Publishing, 2021) at 81–3. Hsieh makes the following comment on RCEP’s overall design, which is applicable to Chapter 19: “RCEP pursues pragmatism instead of perfectionism … [the exclusion of some rules] the need to balance comprehensiveness with regulatory sovereignty”.
[39] Henry S. Gao, “Dispute settlement provisions in ASEAN’s external economic agreements with China, Japan and Korea” in Pasha L. Hsieh & Bryan Mercurio eds, ASEAN Law in the New Regional Economic Order: Global Trends and Shifting Paradigms (2019, Cambridge University Press) 64, at 82. See also Dentons, “The Regional Comprehensive Economic Partnership – A North American perspective” (30 November 2020), <https://www.dentons.com/en/insights/articles/2020/november/30/the-regional-comprehensive-economic-partnership-a-north-american-perspective> accessed 25 April 2022, which argues that “while the RCEP demonstrates that large-scale trade agreements are still viable, the fact it covers 30% of the global economy may spur the other 70% to move more quickly in resolving trade disputes or forming agreements of their own through more nimble bilateral or trilateral FTAs”.
[40] See Article 19.5 RCEP.
[41] This was raised to be the case for ASEAN member states in relation to the 2004 EDSM, in Walter Woon, The ASEAN Charter: A Commentary (NUS Press 2015), at p 179–80.
[42] Lukas Maximilian Mueller, ‘The Regional Comprehensive Economic Partnership paves a way forward’ Asia & The Pacific Policy Society – Policy Forum (14 December 2020), <https://www.policyforum.net/the-regional-comprehensive-economic-partnership-paves-a-way-forward/> accessed 25 April 2022.
[43] Ministry of Trade and Industry Singapore, supra note 2, at p 2.