Parallel Rules: Overlap of Jurisdiction of Regional Trade Agreements (RTAs) with World Trade Organisation (WTO)

Author: Meaza Haddis Gebeyehu
Lecturer, Hawassa University, School of Law

It is very interesting how RTAs have increased in number and scope in recent years as manifestation of the new tendency towards regionalism at the expense of WTO’s multilateral arrangement. As of 15 October 2021, the WTO received 568 notifications of RTAs from its members and currently 350 RTAs are in force.[1] RTAs and their reciprocal preferential trade rules are in principle against WTO’s non-discrimination principles but they constitute one of the authorised exemptions under WTO. 

The fact that the Doha Development Round as a major multilateral trade negotiation under WTO has deadlocked for more than a decade gave RTAs the opportunity to be taken as important alternatives.[2] RTAs have proliferated not only in number but in the regions they cover and in the sectors of trade they apply to as well.[3] The rapid growth in the number of RTAs in recent years created two phenomena: (i) it undermines WTO’s non-discrimination principle as RTAs establish preferential rules among member states and hence generate the ‘spaghetti bowl’; and (ii) RTAs often institutionalise their dispute settlement mechanisms to address disputes arising with regard to the applications of these agreements. The possibility of potential conflicts of jurisdiction between the respective dispute settlement mechanisms might arise as RTAs include separate dispute settlement rules to deal with obligations of parties under these RTAs that are parallel or even similar to their obligations under the WTO covered agreements.[4]

Dispute settlement is one of the major functions of WTO as per Article III (3) of the WTO agreement. Moreover, Article 3.2 of the Dispute Settlement Understanding (DSU) provides that WTO’s dispute settlement is an essential element to provide security and predictability to the multilateral trading system. The WTO dispute settlement has two major purposes: preserving the rights and obligations of members under the various WTO agreements, and clarifying the existing provisions of those agreements. This well developed and a rule-based system assumes compulsory, exclusive and contentious jurisdiction as provided under the various provisions of the DSU.

Not only do RTAs concern the same issues as various WTO agreements in terms of substance, but they also contain some form of dispute settlement mechanisms parallel to WTO’s dispute settlement system. The dispute settlement arrangements or rules of majority of RTAs can generally be described as one of the following: a) choice of forum agreements; b) exclusive jurisdiction agreements; or c) preference agreements.[5]   The rules of most RTAs operating today belong to the first category, choice of forum agreements allowing the complaining party to choose between that RTA’s dispute settlement system or WTO’s system when deciding to bring a claim. The general understanding related to this arrangement from most RTAs is that, the initiation of a dispute settlement process in one forum will automatically exclude the other forum from entertaining the case.  While WTO as a multilateral system has exclusive and compulsory jurisdiction over cases concerning covered agreements, RTAs have adopted parallel dispute resolution rules distinct from WTO’s system creating a paradox and contradiction between the two systems.

The issue is that since Article 23 of the DSU provide compulsory and exclusive jurisdiction to resolve disputes involving the WTO covered agreements, one may ask whether RTAs with substantive provisions that are similar to the WTO but which have the effect of requiring resolution of a dispute by the RTA’s dispute settlement process-either by compulsion or by being the first chosen exclusive forum-deprive parties of the right of access to the WTO’s dispute settlement process. On the other hand, just because parties to RTAs have agreed to the terms of the agreements, are they going to be deprived of their rights to access WTO’s dispute settlement system which is sophisticated and more effective than RTAs’ mechanisms just because initiating a WTO proceeding might be considered as violation of their RTA obligation? If so, it would mean parties to an RTA would have to give up WTO’s dispute settlement system which is legally rigorous, detailed and more attractive, and must rather adhere to a not so developed dispute resolution mechanism of the RTA to which they are parties so as to avoid violation of their RTA obligations.

The occurrence of overlaps of jurisdiction opens room for ‘forum shopping’ by which disputing parties can choose between two jurisdictions to initiate their complaints at both fora either at the same time or one after the other. This in turn will cause dispute settlement bodies to reach different or opposing decisions which cannot even be executed together. These bodies may also claim to have the final jurisdiction as they do not recognise each other’s adjudicatory power. Negotiation of terms of mutual recognition of the jurisdictions of both systems concurrently can hence be considered the most effective solution to reduce cases of overlaps of jurisdiction since both systems have the potential to work together towards a more developed international trade law legal regime where effective legal integration instead of fragmentation is achieved.

[1] https://www.wto.org/english/tratop_e/region_e/region_e.htm; Both GATT 1994 and WTO jurisprudence have made it clear that members are allowed to enter into regional trade agreements as long as they fulfill the pre-conditions as set out under Article XXIV of GATT 1994 or Article V of GATS.

[2] Simon Lester and Bryan Mercurio (eds),  Bilateral and Regional Trade Agreements: Commentary and Analysis, Cambridge University Press (2009), 1.

[3] Ibid.

[4] Angelica Bonfanti and Cesare Pitea, “Is the settlement of trade disputes under Regional Trade Agreements undermining the WTO dispute settlement mechanism and the integrity of the world trading system?”, QIL, Zoom-in 23 (2015).

[5] Jennifer A. Hillman, “Conflicts Between Dispute Settlement Mechanisms in Regional Trade Agreements and the WTO — What Should WTO Do?”, 42 Cornell International Law Journal, pp. 193-208 (2009);  195.

About the Author:

Meaza Haddis Gebeyehu is currently a Lecturer at Hawassa University, School of Law, where she teaches International Trade Law, Public International Law and Law of Contracts. She holds the degrees LL.B. from Hawassa University with Very Great Distinction and Magister Hukum (M.H.) in Legal Science (Cum Laude) from Universitas Indonesia.