Global dispute settlement, India and appellate review

Why in the News?

The New Delhi Leaders Declaration at G20 reiterated the need to pursue reform of the WTO “to ensure a fully and well-functioning dispute settlement system accessible to all members by 2024”.

Issues with World Trade Organization (WTO):

1. The dispute settlement system, a two-tier panel cum appellate body structure, has been dysfunctional since 2019 as the United States has blocked the appointment of appellate body members.
   1. The dispute settlement system has issued over 493 rulings since its establishment in 1995 (the International Court of Justice has dealt with only around 190 cases since 1947).
   2. The appellate body of WTO has been crucial in ensuring coherence and predictability in rulings and confidence in the WTO dispute settlement process.
2. U. S’s continued opposition to an appellate review process seems to be inclined towards the de-judicialization of international trade law.
   1. This can allow countries to take back control from international courts and tribunals.
   2. The appellate review process at the international level serves as an essential check on the interpretation and application of law and ensures consistency.

Benefits of an appellate review:

1. Inconsistent and incoherent decisions and legal reasoning.
   1. For instance, the Investor-state-dispute settlement (ISDS), an international investment law of Bilateral Investment Treaties (BITs) operates through ad hoc or one-off arbitration tribunals without any appellate review.
   2. The ISDS tribunals operating under different arbitral institutions have offered diverging interpretations of the same treaty provision and even reached opposite conclusions despite interpreting and applying the same treaty to the same facts.
   3. This has caused instability and improbability for states and foreign investors.
2. An appellate review shall allow for rectifying errors of law and harmonising diverging interpretations.
3. It shall have the power to uphold, modify, or reverse the decision of a first-tier tribunal and thus bringing coherence and consistency, and hence predictability and certainty into the ISDS system. 

 Critical issues in creating an appellate review:

1. The form in which the appellate mechanism shall take place
   1. Ad hoc appellate mechanism, where a body will be constituted by the disputing parties on a case-by-case basis, or
   2. a standing appellate mechanism
2. Deciding on the standard to review the decisions of the first-tier tribunal.
3. Finalising the time frame and the effect of the decision rendered by the appellate review.

India’s stand:

1. India, presumably, supports the idea of an appellate review in the ISDS because Article 29 of the Indian model BIT advocates it. 
2. Supporting the creation of an appellate review mechanism will be in India’s interest as it will address the concerns about inconsistency and incoherence in the ISDS system.
3. Since India’s quest is to establish a rule-based global order, support to an appellate review shall usher in greater confidence for states and investors in international investment law.