Kahaki Jere, tralac intern, discusses the proposed Tripartite Free Trade Area (TFTA) Dispute Settlement Mechanism and the need for clarification of technical issues

As negotiations on the Tripartite Free Trade Area (TFTA) proceed with the aim of reaching a conclusion in 2014, a proper analysis of the proposed TFTA dispute settlement mechanism becomes very necessary. This is vital if a rules-based arrangement is to be adopted. This requires that a proper dispute settlement system is provided for and that the procedural aspects are thoroughly canvassed. There are several technical issues still to be resolved.

The draft TFTA Agreement and the Annex on Dispute Settlement provides for a Dispute Settlement Mechanism (DSM) which differs from the DSMs found in the RECs which have regional courts. In general terms it follows the approach of the WTO Dispute settlement Understanding (DSU) which starts with a call for amicable resolution of disputes between member States and then employs rules in order to ensure certainty and predictability in dispute settlement through binding rulings by Panels and eventually the Appellate Body.

Article 38 of the draft TFTA Agreement provides as follows –

1. Tripartite Member States shall endeavour to agree on the interpretation and application of this Agreement, and shall make every effort, through co-operation and consultation, to arrive at a mutually satisfactory solution.

2. The settlement of any dispute among Tripartite Member States shall, whenever possible, imply removal of a measure not conforming with the provisions of this Agreement or causing nullification or impairment of a benefit under such provision.

3. As a last resort, disputes regarding the interpretation and application of this Agreement shall be settled in accordance with the Annex 13 on the Tripartite Dispute Settlement Mechanism.

4. In the event of inconsistency or a conflict between this Agreement and the treaties and instruments of COMESA, EAC and SADC, this Agreement shall prevail to the extent of the inconsistency or conflict.

Article 4 of TFTA Annex 13 on Dispute Settlement establishes a dispute settlement mechanism and provides as follows –

1. Where a dispute arises between or among the Tripartite Member States, recourse shall in the first instance be had to consultations with a view to finding an amicable resolution to the dispute including, but not limited to, the use of good offices, conciliation and mediation.

2. Where an amicable resolution is not achieved, any party to the dispute shall after notifying the other parties, refer the matter to the Tripartite Council, through the Chief Executive Officers of the RECs, requesting for the establishment of a dispute settlement Panel, (hereinafter referred to as the “Panel”) for purposes of settling the dispute.

3. A Panel shall set in motion the process of formal resolution of the dispute and the parties to the dispute shall in good faith observe in timely fashion any directions, rulings and stipulations that may be given to them by the Panel in relation to procedural matters and shall make their submissions, arguments and rebuttals in a format prescribed by the Panel.

A number of technical issues still have to be addressed before the TFTA will have a proper dispute settlement system. First, the procedure for establishing the dispute settlement Panels should be automatic; it should not be possible for parties who are alleged violators of TFTA obligations to prevent the appointment of panels by vetoing requests by applicants. This is the inevitable consequence when the consensus principle is followed for decisions in such matters. Under the WTO Dispute Settlement Understanding (DSU), reversed consensus is ultimately used regarding decisions involving the establishment of Panels and the adoption of Panel reports. Ultimately a Member State which is the subject of a complaint cannot prevent the establishment of a Panel.

In the TFTA, the Tripartite Council shall take decisions to establish a dispute settlement Panel on request by a complaining Member State after that State has notified the State to which the complaint relates. The effect of this notification is not clearly spelt out. Will the Member State which is the subject of a complaint have powers to block the establishment of a Panel? The answer to this question depends on the mode of decision making being employed. It should be noted that the TFTA Council comprises Ministers of the TFTA Member States and this entails that both the complaining member State and the State to which a complaint relates will take part in making the decision to establish a Panel. The mode of making decisions becomes critical because if consensus of all the Council members is required for the establishment of a Panel, disputes may in fact never be settled through adjudication.

These ambiguities in the procedure have to be clarified expeditiously. The unfortunate fate of the SADC Tribunal is a reminder of what can happen to dispute settlement systems if the design is flawed; and in particular if the consensus principle applies to crucial decisions. The implementation of rulings by the SADC Tribunal for example requires a decision by the Summit, which takes decisions on the basis of consensus. Zimbabwe, the state found by the SADC Tribunal to be in breach of its SADC obligations, became a judge in its own case and actively participated in the ensuing deliberations. The refusal to implement the Tribunal’s rulings should not surprise us. Not only did Zimbabwe get off scot free, it also started the campaign which resulted in the suspension of the SADC Tribunal. Such design flaws should not be repeated in the TFTA.

Tell us what you think.

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Sources:

Draft Tripartite Free Trade Area Agreement. Available online at: http://www.tralac.org/wp-content/blogs.dir/12/files/2011/uploads/Draft_Tripartite_FTA_Agreement_Revised_Dec_2010.pdf

Annex 1 on Negotiating Principles. Available online at: http://www.tralac.org//files/2011/06/Annex-1-T-FTA-Negotiating-Principles-etc.pdf

WTO Dispute Settlement Understanding. Available online at: http://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm

MacRae, D. 2004. What is the future of the WTO Dispute Settlement? Journal of international Economic Law, 7(1), 3-21 at 7. Oxford University Press.