China Agrees To Use Arbitration Appeal Mechanism in WTO Dispute With Australia

In a WTO complaint by Australia against Chinese AD/CVD measures imposed on Australian barley (DS598), China and Australia have agreed to procedures for using an alternative mechanism for any appeal in the case. This agreement ensures that any panel report in the case will be enforceable through the standard WTO dispute settlement procedures.

As provided in the WTO's Dispute Settlement Understanding, a WTO complaint will be heard by a panel and can be appealed to the Appellate Body. Upon adoption of these reports by the WTO's Dispute Settlement Body, a successful complaining party can impose trade sanctions against the responding party in order to induce compliance with the rulings.

Under the Trump administration, however, the United States began blocking all appointments to the Appellate Body as the Appellate Body Members' terms expired, which left the Appellate Body without any "judges" as of December 2019. As a result, when a responding party lost a case decided after that, it could appeal the panel report "into the void," and leave it an unenforceable state of limbo.

To deal with this issue, the European Union led an effort to create an alternative mechanism for appeals, called the Multi-Party Interim Appeal Arbitration Arrangement. Along with the European Union, there are currently 24 other WTO Members who are parties to this arrangement, including both China and Australia.

There have been four previous WTO disputes in which the parties agreed to use the MPIA as an appeals mechanism, in order to prevent appeals into the void. Now for the first time, China has signed on to these procedures in a dispute. In China - AD/CVD Measures on Barley from Australia (DS598), the WTO has circulated the procedures agreed to by China and Australia here. The panel was established on May 28, 2021, and has not yet been composed, so it would be a while until a panel report is ready to be appealed. Nevertheless, agreeing to these procedures now is an important step in ensuring that this complaint can take its proper course and reach the enforcement stage if necessary.