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Dispute settlement

The European Union uses various tools to enforce the commitments it negotiates to benefit companies, workers and citizens under international trade agreements.

One of these tools is dispute settlement under the World Trade Organization (WTO) or under EU bilateral trade agreements.

WTO dispute settlement

WTO dispute settlement provides for two-tier resolution of trade disputes between WTO members, comprising a panel stage and an Appellate Body stage.

Appellate Body

Since 11 December 2019, due to the blockage of new appointments to the WTO's Appellate Body, it is no longer able to deliver binding resolutions of trade disputes and guarantee the right to appellate review.

The EU has been engaged in efforts to resolve this situation. In particular, the EU has been supportive of the informal process under the auspices of the WTO General Council led by New Zealand Ambassador David Walker, who chairs the WTO Dispute Settlement Body (see also the EU Proposal to the WTO to amend the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), the EU Statement of 15 and 16 October 2019, and the EU Statement of 9 December 2019).

Pending such a resolution of the situation, the EU has prepared contingency measures to apply as long as the appointments remain blocked – known as 'Interim Appeal Arbitration Arrangements'. The interim arrangements would maintain two-tier dispute settlement through arbitration proceedings provided under Article 25 of the DSU, preventing disputes from becoming blocked. In 2019, the EU has concluded such bilateral arrangements with Canada and Norway.

Following the effective paralysis of the Appellate Body in December 2019, the EU and other Members have set up a 'Multi-party interim appeal arbitration arrangement' (MPIA).

The MPIA was notified to the WTO and became effective on 30 April 2020.

Multi-party interim appeal arbitration arrangement

On 30 July 2020, the participating Members established a pool of appeal arbitrators who will hear appeals of WTO panel reports under the MPIA.

The MPIA ensures that the participating WTO members will continue to benefit from a functioning two-step dispute settlement system in the WTO including the availability of an independent and impartial appeal stage. It is open to any WTO Member to join.

The EU's third line of defence in response to the WTO issue is the Enforcement Regulation. It permits the European Commission to act on the EU's behalf in certain situations to respond to trade actions by partner countries.

The Regulation also permits the EU to act where a third country blocks effective dispute settlement under either the WTO or in a bilateral dispute settlement.

More information on WTO dispute settlement cases.

Bilateral dispute settlement

The EU’s bilateral trade and investment agreements provide for state-to-state dispute settlement to ensure that the rights and obligations provided for in EU FTAs are respected.

The EU brings bilateral disputes where necessary to enforce EU rights.

More information on Dispute settlement cases under bilateral trade agreements.

Investment dispute settlement

Since 2009, the EU has been negotiating investment treaties that protect EU investors when they operate in third countries.

These enable investors to resolve their investment disputes with States (e.g. on expropriation) before independent courts and tribunals.

The EU is party to the Energy Charter Treaty that provides for investment dispute settlement. The EU is also negotiating to establish a Multilateral Investment Court.

More information on Investment disputes.

Candidates for dispute settlement activities

The Commission is launching a call for applications to the pool of arbitrators for dispute settlement under EU trade and investment agreements.

Arbitrators will be vetted by a panel of four independent experts, one of which is nominated by the Commission. The Commission has also published a call for applications regarding the Commission nominee to the selection panel.

Dispute settlement in a nutshell

  • It is an objective and effective means of settling disagreements between States or between investors and States on government measures/practices;
  • It prevents unilateral actions and the escalation of diplomatic tensions, and contributes overall to peaceful international relations, and;
  • It clarifies the obligations of States under international law and develops a common understanding through case law.