Over the past decade, the WTO dispute settlement system has continued to be used extensively, contrasting with the very few disputes taken to inter-state adjudication under FTAs. This paper discusses the causes of this discrepancy, arguing that, besides specific procedural difficulties, it may be explained by a more structural difference between adjudication in a multilateral and in a bilateral setting. The WTO's global scope and the collective surveillance established by the DSU ensure that findings of breach harm a wrongdoer's reputation and mobilize community pressure for compliance.Because adjudication within an FTA cannot mobilize the same multilateral forces, it may not only be less effective than WTO adjudication -it may also be perceived as less effective than unilateral retaliation.
The World Trade Organization (WTO) is in crisis. Once the Appellate Body has fewer than three members in office, it will become non-operational, compromising the WTO’s compulsory and binding dispute settlement system. Attempts to overcome the opposition of the United States to Appellate Body appointments through majority rule appear legally fragile and politically unwarranted, while purely ad hoc bilateral solutions fall short of reproducing the security provided by compulsory and binding dispute settlement. This article explores and discusses bilateral and ‘plurilateral’ agreements that willing Members may sign to re-establish compulsory dispute resolution, arguing that the one that best fits the letter and spirit of the Dispute Settlement Understanding is an ex ante agreement to establish an ‘appeal Arbitrator’ in case of a non-operational Appellate Body. If appropriately designed, such an agreement not only allows willing Members to restore a high degree of security and predictability in their mutual trade relations but also increases the incentives for multilateral negotiations leading to a permanent resolution of the crisis.
This article assesses the contribution of Brazil’s new bilateral treaties on investment, labelled Cooperation and Investment Facilitation Agreements (CIFAs), to the international legal framework for transnational investment. With its CIFAs, nine of which were concluded since 2015, Brazil offers an innovative model of International Investment Agreement (IIA) which does not contain investor-state dispute settlement (ISDS). Instead, CIFAs establish a system that combines dispute prevention mechanisms, creating institutions to ensure continued communication and foster cooperation, and state-to-state arbitration (inspired by dispute settlement provisions common in trade agreements and codified in the World Trade Organization’s Dispute Settlement Understanding). Like recent initiatives put forward by India and the European Union, CIFAs aim not only to regulate bilateral relations but also to positively influence the current debates relating to the reform of the international investment regime. Whether they will become an alternative to the current ISDS-dominated framework will be determined by practice.
The United States-Mexico-Canada Agreement (USMCA) features a clause, dubbed ‘anti-China’, which sets out legal consequences in case one of the parties negotiates or enters into a free trade agreement (FTA) with a nonmarket economy (NME). A similarly worded objective appears among the negotiating objectives of the US for FTAs with the European Union, Japan, and the United Kingdom. This article examines the anti-NME clause, arguing that its concrete legal consequences are less relevant than its symbolic effects. The USMCA clause itself is difficult to replicate in bilateral agreements, since it depends on cooperation between the two nonsigning parties. Its operation is nonetheless similar to that of two unilateral remedies available under the law of treaties, permitting a reasonable assessment that the clause, if it follows its original design, will aim to permit termination of bilateral US FTAs in response to the other party entering into an NME FTA. While such a clause would offer little in terms of concrete effects if added to agreements that already permit unilateral withdrawal, its greatest value may not be in its legal effects but in its legitimating and signaling properties, which push USMCA parties to establish a common front in the ‘geoeconomic’ dispute between the United States and China.
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