1  In dispute settlement under the rules of the World Trade Organization (WTO), ‘sequencing’ refers to a procedural issue arising at the so-called compliance stage of WTO adjudication. A WTO Member found in breach of its WTO obligations in a report of the Dispute Settlement Body (‘DSB’) is usually awarded a reasonable period of time (‘RPT’) to comply with the findings and recommendations of the DSB (Determination of Reasonable Period of Time: Dispute Settlement System of the World Trade Organization (WTO)). The sequencing problem is a potential conflict occurring, at the end of the RPT, between the procedures established in Article 21.5 and 22.6 Dispute Settlement Understanding (‘DSU’). The time frame for these two procedures is incoherent, requiring parties to a dispute either to engage in parallel proceedings, which may be wasteful and lead to contradictory results, or to enter into so-called sequencing agreements to arrange these procedures sequentially.

2  Following the adoption by the DSB of a panel or Appellate Body report which finds that a WTO Member is in violation of its WTO obligations, the Member not able to implement the recommendation immediately can negotiate or be awarded an RPT to comply with the report and bring its measures into compliance with WTO rules. At the end of the RPT, two parallel issues may arise at once, leading to two parallel proceedings, one for determining whether compliance has occurred (governed by Art 21.5 DSU; Compliance Proceedings Pursuant to Article 21.5 DSU: Dispute Settlement System of the World Trade Organization (WTO)), the other for determining the amount and type of retaliation that the complainant will be authorized to adopt in response to this noncompliance (governed by Art 22.6 DSU; Arbitration on the Level of Retaliation: Dispute Settlement System of the World Trade Organization (WTO)).

3  The DSU does not offer a solution for how these two procedures are to be sequenced. Pursuant to Article 22.2 DSU, in case non-compliance persists at the end of the RPT and negotiations over compensation do not result in agreement within 20 days, the complaining party may request authorization from the DSB to retaliate against the wrongdoing Member, by suspending concessions or other obligations under the WTO Agreements towards the wrongdoing Member. However, Article 22.6 requires the DSB to grant this authorization ‘within 30 days of the expiry of the reasonable period of time’.

4  The sole exception provided to the 30-day deadline occurs if the Member found in breach objects to the level or type of retaliation proposed by the complainant. In this case, Article 22.6 DSU provides, the dispute is referred to arbitration. The arbitrator (composed of the original panelists to the extent possible) must complete the Article 22.6 arbitration within 60 days of the expiry of the RPT. Once this arbitration is completed, the complaining party may again request the DSB for an authorization to retaliate, this time consistently with the decision of the arbitrator. Article 22.7 DSU then provides that the DSB shall grant this party the authorization to retaliate.

5  The sequencing problem arises because there may be disagreement between the complainant and the Member found in breach with respect to whether the premise for the authorization to retaliate—non-compliance with the original recommendations of the DSB at the end of the RPT—has occurred. In this case, Article 21.5 DSU provides that ‘such dispute shall be decided through recourse to [DSU] dispute settlement procedures’, with the compliance panel being required, in principle, to ‘circulate its report within 90 days after the date of referral of the matter to it’. There is no provision for the suspension of the time period for retaliation to be awarded while compliance procedures are ongoing, and no right (or duty) for a Member to wait until the end of compliance procedures to request an authorization to retaliate or apply the retaliation measures.

6  The timing of the two procedures is therefore incongruent. Even if a compliance panel is able to issue its report within the 90-day deadline from its establishment (something that only happened in early Art 21.5 DSU reports) and the report is not appealed, this report will likely be adopted long after 30 days have passed from the expiry of the RPT (the deadline for the DSB to authorize retaliation) and more than 60 days after the expiry of the RPT (the deadline for the Art 22.6 DSU arbitrator to complete its work). If the complainant waits for the compliance procedure to be over to request authorization to retaliate, it is likely to find that the time window within which the DSB is allowed to issue an authorization to retaliate pursuant to Article 22.6 has passed. If the complainant does not wait and seeks an authorization to retaliate immediately, the whole procedure to determine the level and type of authorized retaliation will take place before the DSB is able to issue a report on the compliance dispute. Since noncompliance is a prerequisite for the right to retaliation to exist (Canada/US – Continued Suspension, Appellate Body Reports, 2008, para 304), questions also arise whether this right can be exercised when a compliance dispute is pending before a panel or the Appellate Body or whether the arbitrator responsible for the retaliation procedure may (or even must) also make a determination on the WTO-consistency of the measures taken to comply.

7  The sequencing issue emerged for the first time in 1999, after the expiry of the RPT in EC – Bananas III. At the DSB Meeting that followed the expiry of this RPT, the European Communities (‘EC’) suggested that it had taken measures to comply with the original ruling and that any challenge to the conformity of its measures with the original report should be brought under Article 21.5 DSU (Minutes of Meeting of 12 January 1999, 5). Whereas Ecuador requested a panel under Article 21.5, the United States (‘US’) did not request a compliance panel but sought to retaliate immediately, pointing to the time frame established in Article 22.6. A number of WTO Members objected to the DSB’s consideration of the request, agreeing with St Lucia’s proposition that the DSB had ‘no jurisdiction … to consider a request for suspension of concessions based on noncompliance’ if there was a dispute regarding the existence of this non-compliance. The US argued that it had followed the requirements of Article 22 DSU, which did not require a Member ‘to delay recourse to Article 22 until a panel had ruled on the consistency of the responding party's new measure in accordance with Article 21.5’. After a four-daylong DSB Meeting in which Members threatened to block the adoption of the agenda, then objected to the referral of the matter to arbitration, the DSB adopted a proposal by the Chairman and referred the matter to arbitration (Minutes of Meeting of 25, 28, 29 January and 1 February 1999, 3–4, 30–34).

8  WTO Members have been trying to address the issue of sequencing multilaterally ever since. In 1999, during the discussions on sequencing in EC – Bananas III, a number of Members put forward a proposal for the DSB to ‘place on hold’ the request for arbitration pending adoption of a report on compliance (DSB, Communication from Japan of 25 January 1999). In a 2002 document relating to the process of negotiations over reforming the DSU, the EC stated that Members ‘broadly agree[d] that completing the procedure established under Article 21.5 DSU is a pre-requisite for invoking the provisions of Article 22 DSU, in case of disagreement among the parties about implementation’ (DSB Special Session, Report by the Chairman of 19 June 2019, para 2.74). However, in the June 2019 report on DSU negotiations, the Chair of the DSB noted that one Member highlighted that there was ‘no convergence’ with respect to replacing the current system with one of mandatory sequencing, while another Member noted that ‘there was convergence, except for one Member, towards relying on compliance panels as the proper forum for compliance disputes’ (DSB Special Session, Communication from the European Communities of 13 March 2002, 4). Despite calls for Members to agree on a solution to the problem, therefore, no multilaterally negotiated solution has been reached over the past 20 years (Review of the Dispute Settlement Understanding: World Trade Organization (WTO)).

9  One conceivable alternative to address the sequencing problem would be for adjudicators themselves to break the stalemate through interpretation, interpreting the DSU so as to end the incongruence. Some adjudicators have sought to do precisely that. Since the Article 22.6 arbitrator is usually composed of the same individuals as the panel, they have sometimes sought to coordinate the two procedures. In EC – Bananas III, the Article 22.6 arbitrator found that, in the absence of agreement between the parties, it was incumbent upon it to ‘reach [ … ] a view’ on whether the measures taken in that dispute were, ‘in light of [the] findings in the original dispute, fully WTO-consistent’ (EC – Bananas III (US) (Article 22.6 – EC), Decision by the Arbitrator, 1999, para 4.8). This reasoning was followed by the panel in US – Certain EC Products, which found that the connection between the level of retaliation and the level of nullification of impairment gave ‘the [Article 22.6] arbitration panel the mandate and the authority to assess the WTO compatibility of the implementing measure’ (US – Certain EC Products, Panel Report, 2001, para 6.121).

10  On appeal, however, the Appellate Body declared the findings of the panel US – Certain EC Products to be of ‘no legal effect’. Noting the ‘systemic’ character of the debate, the lack of clarity of the DSU, and the absence of agreement among WTO Members on the issue, the Appellate Body concluded that it was ‘not the task of either panels or the Appellate Body to amend the DSU’ to ‘[d]etermin[e] what the rules and procedures of the DSU ought to be’ (US – Certain EC Products, Appellate Body Report, 2001, paras 91–92). At the DSB meeting at which this report was adopted, the US welcomed this finding, while highlighting its view that the DSU does not require sequencing—and that therefore Members should be able to obtain an authorization to retaliate without first going through Article 21.5 proceedings (Minutes of Meeting of 10 January 2001, 6).

11  In Canada/US – Continued Suspension, the Appellate Body nonetheless offered comments that could be read as suggesting that seeking a decision on compliance under Article 21.5 DSU would be an obligation of a complaining Member after the expiry of the RPT. After noting that ‘Article 21.5 is cast in obligatory language’ (Canada/US – Continued Suspension, Appellate Body Reports, 2008, para 371), the Appellate Body stated that retaliation is only available if the Member found in breach

12  The latter comments were made in the context of a discussion concerning the proper procedure for an assessment of compliance after retaliation was authorized. The Appellate Body explicitly stopped short of pronouncing on whether the Article 22.6 DSU arbitrator ‘could or should’ have addressed the consistency with WTO rules of the implementation measure (Canada/US – Continued Suspension, Appellate Body Reports, 2008, footnote 775). Given that the decisions of Article 22.6 arbitrators are (at least in WTO practice) not subject to appeal, a debate on the legal effects of any such pronouncement would touch on systemic issues regarding the role of the Appellate Body (or, currently, the alternative arrangements pursued to ensure review of panel reports in the absence of an Appellate Body).

13  The Appellate Body’s explicit abstention from pronouncing on the issue of sequencing on two occasions leaves it open to arbitrators to make the findings they deem necessary to reach a conclusion on the permissible level of retaliation. Given the obligation of Article 22.6 DSU arbitrators to issue their awards within 60 days from the expiry of the RPT, they may be unable to adopt, proprio motu, a solution such as suspending the arbitration until there is a decision on compliance. Arbitrators may find that the ‘logical way forward’ is the one adopted in EC – Bananas, in which the Arbitrators ‘reach a view’ on compliance in order to determine the permissible level of retaliation (EC – Bananas III (US) (Article 22.6 – EC), Decision by the Arbitrator, 1999, para 4.8). Since this solution often implies the possibility of an authorization to retaliate being granted while a ruling on compliance is pending, it only solves the sequencing problem in a technical way. Any different solution depends on cooperation between the parties.

14  In the absence of an adjudicatory solution to the sequencing problem, parties themselves must determine how to address the temporal incongruence between the procedures provided for in Articles 21.5 and 22.6 DSU. A range of possible scenarios may emerge: uncooperative, semi-cooperative, or cooperative. The fully cooperative scenario—the signing of a sequencing agreement—is discussed in section D below. In the uncooperative scenario, the complainant ignores the measure allegedly taken to comply and requests an authorization to retaliate, forcing the Member originally found in breach to request an arbitration. The complainant may then insist that the arbitrator complete its arbitration within 60 days of the expiry of the RPT as required by Article 22.6. In this case, the Member originally found in breach is likely to respond by requesting a compliance panel. The two procedures will run in parallel. Since the arbitration will, at least in principle, end before the compliance panel issues its report (which is still subject to appeal), it is likely that the DSB will be required to authorize retaliation (by negative consensus) before it is able to adopt a report on compliance.

15  As discussed above, the first time in which retaliation was requested, in EC – Bananas III, the outcome was an uncooperative solution, with the Article 21.5 DSU panel proceedings and the Article 22.6 arbitration running simultaneously. The potential confusion arising from the two proceedings being carried out at the same time was minimized by the fact that the arbitrator, composed of the same individuals as the compliance panel, issued its award on the permitted level and type of retaliation (EC – Bananas III (US) (Article 22.6 – EC), Decision by the Arbitrator, 1999, para 9.1) three days before the panel issued its report, which concluded that compliance had not been achieved (EC – Bananas III (Article 21.5 – Ecuador), Panel Report, 199, para 7.1).

16  A second instance of the uncooperative scenario emerged following the DSB report in US – Clove Cigarettes, which concluded that US tobacco reduction measures discriminated against Indonesian clove cigarettes as compared to US-produced menthol cigarettes (US – Clove Cigarettes, Appellate Body Report, 2012). At the end of the RPT, Indonesia disagreed with the US’s statement that it had taken measures to comply with the original report and sought an authorization to retaliate without undergoing compliance procedures. The European Union (‘EU’) then requested consultations with Indonesia on the matter. According to the EU, Indonesia’s decision to request an authorization to retaliate rather than initiate compliance proceedings, when the US alleged that it had taken measures to comply with the original recommendations, was WTO-inconsistent because Article 21.5 DSU establishes an obligation (‘shall’) for parties to disputes to undergo compliance procedures, not only in case of disputes regarding consistency with the WTO agreements of measures taken to comply with reports of the DSB but also in case of disputes regarding the existence of measures taken to comply (Indonesia – Recourse to Article 22.2 of the DSU in the US – Clove Cigarettes Dispute, Request for Consultations by the European Union). The dispute was settled following a mutually agreed solution in the original US – Clove Cigarettes dispute.

17  A third instance of the uncooperative scenario emerged in Russia – Pigs. In this dispute, Russia disagreed with the assertion by the complainant (the EU) that Russia had failed to comply with the original recommendations of the DSB and refused to enter into a sequencing agreement with the EU. In its request for an authorization to retaliate, the EU noted that it had proposed to Russia a sequencing agreement, stating that Russia’s rejection of the proposal left the EU with no choice but to seek retaliation without previously undergoing compliance procedures (Russia – Pigs, Recourse to Article 22.2 of the DSU by the European Union). At the DSB meeting in which the Members discussed the matter, the US rejected the view that going through an Article 21.5 DSU panel was a requirement for a Member to request authorization to retaliate under Article 22 (Minutes of Meeting of 3 January 2018, para 1.6).

18  A fourth instance of the uncooperative outcome took place, at virtually the same time, in India – Solar Cells. In this dispute, the US requested an authorization to retaliate after the expiry of the RPT, stating that, in the view of the US, India had not complied with the original rulings of the DSB (India – Solar Cells, Recourse to Article 22.2 of the DSU by the United States). India objected to the request, arguing that the US had failed to follow ‘the proper procedure’ to assess non-compliance and that the US request under Article 22.2 did not provide any indication as to what level of retaliation was sought (India – Solar Cells, Recourse to Article 22.6 of the DSU by India). Although the US ultimately accepted the referral of the matter to arbitration under Article 22.6, it pointed out that India’s initial objection did not target the level of retaliation specifically (Minutes of Meeting of 12 January 2018, para 2.28). India then requested a panel under Article 21.5 DSU to resolve the disagreement over its compliance with the original rulings, noting that it was required to do so in the particular ‘circumstances of th[e] dispute’ (India – Solar Cells, Recourse to Article 21.5 of the DSU by India). At the DSB meeting that established this panel, the US argued that its decision to pursue retaliation rather than initiate compliance proceedings was motivated by its view that India could not claim compliance when it continued to apply the measures found to be WTO-inconsistent (Minutes of Meeting of 28 February 2018, para 4.3).

19  Another possibility is the adoption of a semi-cooperative stance by the parties. In Brazil – Aircraft, Canada requested authorization to retaliate while Article 21.5 DSU appeal procedures were ongoing, arguing that the two procedures could run in parallel and that it would be within its rights to pursue retaliation as long as it did not retaliate while the compliance dispute was pending (Minutes of Meeting of 22 May 2000, para 6). In India – Agricultural Products, the US requested an authorization to retaliate and, prior to the constitution of the arbitrator, India requested a compliance panel (India – Agricultural Products, Request for the Establishment of a Panel). Despite not entering into a sequencing agreement, the parties have been negotiating in parallel to the panel and arbitration proceedings, requesting their simultaneous suspension no fewer than nine times between June 2017 and November 2019 (India – Agricultural Products, Communication from the Arbitrator of 6 November 2019).

20  In conclusion, although the uncooperative outcome in EC – Bananas III may be explained by overly cautious behaviour by the complainant the first time these provisions were resorted to, the more recent uncooperative outcomes show that the uncooperative scenario is not only a theoretical possibility but is perceived by WTO Members as a concrete alternative in case they fail to reach an agreement. Additionally, the semi-cooperative scenarios in Brazil – Aircraft and India – Agricultural Products demonstrate that complainants that are not satisfied with respondents’ claims of having taken action for compliance are able to combine negotiations and compliance proceedings with a proactive stance with respect to arbitration. This means that the cooperative scenario for the sequencing problem—the adoption of a sequencing agreement—corresponds to some established practice in the field, but also that this practice is unaccompanied by a widespread perception of an obligation to act cooperatively.

21  The cooperative scenario for the sequencing problem is the adoption of a sequencing agreement, by which the parties to the dispute establish the sequence of the procedures to be followed at the end of the RPT, usually ensuring that compliance adjudication takes place before the issue of the level of retaliation is discussed. The first sequencing agreement took place in Australia – Salmon, not in the form of an agreement in writing but in the form of matching declarations by the parties before the DSB. Noting the sequencing problem in the DSU, Canada (the complainant) requested an authorization to retaliate under Article 22.2 DSU and proposed before the DSB to ‘ask the [Article 22.6] arbitrators to hold the arbitration proceedings in abeyance until after the circulation of the panel report under Article 21.5’. If this report found that there had been non-compliance, ‘Australia and Canada would request the immediate resumption of the Article 22.6 arbitration, regardless of whether either party sought to appeal the Article 21.5 panel report’ (Minutes of Meeting of 27 and 28 July 1999, 5). Australia agreed, and the compliance panel (adopted without appeal) recorded the agreement of the parties (Australia – Salmon (Article 21.5 – Canada), Panel Report, 2000, para 1.3).

22  In the Brazil – Aircraft and Canada – Aircraft disputes, the parties (both disputes were between Brazil and Canada) complemented the format of matching declarations to address the sequencing issue with formal agreements, communicated to the DSB as an annex to the complainant’s recourse to Article 21.5 DSU (Brazil – Aircraft, Recourse by Canada to Article 21.5 of the DSU; Canada – Aircraft, Recourse by Brazil to Article 21.5 of the DSU). Members subsequently started adopting the practice of entering into formal, stand-alone sequencing agreements. Sequencing agreements in writing are usually notified to the DSB as ‘Understanding Between [Respondent] and [Complainant] Regarding Procedures under Articles 21 and 22 of the DSU’, entered into and notified to the DSB at around the end of the RPT. In disputes that feature more than one complainant, the Member found in breach concludes a separate sequencing agreement with each complainant.

23  The fundamental structure of sequencing agreements is generally the same. The parties provide that, if there is disagreement regarding compliance, the proceedings under Article 21.5 DSU must take place and be completed before there is substantive debate concerning permissible retaliation. In case the procedure results in a ruling of non-compliance, sequencing agreements seek to (i) preserve the entitlement of the complainant to obtain an authorization to retaliate under the terms provided for in the DSU, and (ii) prevent the Member found in breach from objecting to the use of the negative consensus procedure for DSB approval of the authorization to retaliate due to the expiry of the deadlines in Article 22.6 DSU.

24  Sequencing agreements secure, to the Member found in breach, the right to undergo compliance proceedings before retaliation is requested and to request, under Article 22.6, an arbitration on permissible retaliation; to the complainant, the right to request an authorization to retaliate under Article 22.2 DSU without worrying that the Member found in breach will raise the issue of timing to frustrate its right to obtain the authorization. Many sequencing agreements place the request for the authorization to retaliate after the adoption of the compliance report by the DSB (Indonesia – Iron or Steel Products, Understanding between Indonesia and Vietnam regarding procedures under Articles 21 and 22 of the DSU; China – Cellulose Pulp, Understanding Between China and Canada Regarding Procedures under Articles 21 and 22 of the DSU; Chile – Price Band System, Understanding Between Argentina and Chile Regarding Procedures Under Articles 21 and 22 of the DSU; EC – Chicken Cuts, Understanding between Thailand and the European Communities Regarding Procedures under Articles 21 and 22 of the DSU).

25  Other agreements, for example the one between the US and Canada in Canada – Dairy, place the request for an authorization to retaliate at the beginning of the process. The request for an authorization to retaliate is to be followed by an objection to the request under Article 22.6 DSU and the referral of the matter to arbitration. These sequencing agreements provide that the parties will jointly request the suspension of the arbitration until the completion of the compliance proceedings (Canada – Dairy, Understanding between Canada and the United States Regarding Procedures under Articles 21 and 22 of the DSU, para 9). Some agreements, like the one between the US and Mexico in US – Anti-Dumping Measures on Oil Country Tubular Goods, provide for both hypotheses, allowing the complainant to choose whether to have the matter of permissible retaliation referred to arbitration (and then have the arbitration proceedings suspended) or whether to wait until compliance procedures are over before requesting retaliation (US – Anti-Dumping Measures on Oil Country Tubular Goods, Understanding between Mexico and the United States Regarding Procedures under Articles 21 and 22 of the DSU, paras 3, 6, 8).

26  At the root of the divergence between models of sequencing agreements is the interpretative question that underlies the sequencing problem itself. Given the temporal incongruence in practice between Arts 21.5 and 22.6 DSU, many Members (most vocally, the EU) favour eliminating this incongruence, whether by amendment or through an interpretation that would make the deadline in Article 22.6 more flexible. The US, however, has vocally resisted both amending the DSU by agreement and attempts to eliminate the incongruence through interpretation. Its reasons for doing so include both its preference for literal over teleological interpretation of the WTO Agreements and its objective of making the retaliation procedure more expedite. Usually, therefore, sequencing agreements involving the US will preserve the right of the parties to request authorization to retaliate within the deadline established by Article 22.6, even if strictly speaking this deadline does not apply to the requesting Member but to the DSB.

27  As of November 2019, 72 agreements have been notified to the DSB specifically as ‘Understanding between [Respondent] and [Complainant] regarding procedures under Articles 21 and 22 of the DSU’. Before this terminology became uniform, some agreements were notified using other titles, and some of the early agreements were entered into by exchange of declarations before the DSB, as in Australia – Salmon, or with the parties’ declarations being complemented by formal agreements, as in Brazil – Aircraft and Canada – Aircraft.

28  Sequencing agreements often contain provisions additional to those specifically designed to address the sequencing problem. For example, it is unclear from the DSU whether a request for a compliance panel must be preceded by consultations, and the Appellate Body’s comments on the matter were inconclusive (Mexico – Corn Syrup (Article 21.5 – US), Appellate Body Report, 2001, para 65). Thus, many sequencing agreements provide that, following the expiry of the RPT, the parties will precede any resort to Article 21.5 DSU with a period of consultations (China – Cellulose Pulp, Understanding Between China and Canada Regarding Procedures under Articles 21 and 22 of the DSU).

29  A significant number of sequencing agreements contain provisions concerning the possibility of appeal from the compliance report. In the early days of WTO dispute settlement, it was unclear whether the provision in Article 21.5 DSU that compliance disputes are to be settled ‘through recourse to these dispute settlement procedures’ included a right to appeal from the report of a compliance panel. In their sequencing agreement in Australia – Automotive Leather II, the US and Australia agreed by exchange of letters not to appeal from the compliance panel report (Australia – Automotive Leather II, Recourse by the United States to Article 21.5 of the DSU), a commitment they respected even after the compliance report adopted the unprecedented view that compliance would require the repayment of WTO-inconsistent subsidies (Australia – Automotive Leather II (Article 21.5 – US), Panel Report, 2000, paras 6.50–6.51 and Annex 4, footnote 1). Australia, however, noted at the DSB Meeting at which the report was adopted that it had been ‘forced to relinquish its appeal rights under the threat of retaliation’ (Minutes of Meeting of 11 February 2000, 5). In Brazil – Aircraft, the first dispute together with Canada – Aircraft in which an appeal from a compliance panel report was filed, the sequencing agreement did not provide for a right to appeal. Against Brazil’s view that parties had to wait for the completion of the appeal to initiate retaliation proceedings, Canada filed its request for an authorization to retaliate concomitantly with Brazil’s appeal from the compliance panel report. By suggestion of the Chair of the DSB, the parties agreed that ‘no countermeasures would be sought pending the Appellate Body report and until after the Arbitration report’ (Minutes of Meeting of 22 May 2000, para 31).

30  More recently, anticipating the inability of the Appellate Body to hear an appeal due to fewer than three Appellate Body members being in office, sequencing agreements have started providing for this contingency. The parties in Indonesia – Iron or Steel Products committed not to appeal the compliance panel report (Indonesia – Iron or Steel Products, Understanding between Indonesia and Vietnam regarding procedures under Articles 21 and 22, para 7; Indonesia – Iron or Steel Products, Understanding between Indonesia and Chinese Taipei regarding procedures under Articles 21 and 22, para 7). In Brazil – Taxation, sequencing agreements with different complainants have gone different ways in this respect. Whereas the agreement between Brazil and Japan merely includes a generic provision on cooperation between the parties to find a solution to procedural issues that arise, the agreement between Brazil and the EU anticipates a ‘separate procedural agreement that preserves the availability of appeal review in this case on the basis of Article 25 DSU’ (Brazil –Taxation, Understanding between Brazil and the European Union Regarding Procedures under Articles 21 And 22 of the DSU, para 6). This agreement, the Multi-Party Interim Appeal Arbitration Arrangement Pursuant to Article 25 of the DSU, has now been signed (Statement on a Mechanism for Developing, Documenting and Sharing Practices and Procedures in the Conduct of WTO Disputes). And, in US – OCTG (Korea), the parties, while reserving their position on ‘any systemic matter’, provided for a possible amendment to the sequencing agreement if the parties agreed to arbitration procedures under Article 25 DSU ‘to provide for review of the report of the Article 21.5 panel’ (United States – Anti-Dumping Measures on Certain Oil Country Tubular Goods from Korea, Understanding Between the Republic of Korea and the United States Regarding Procedures under Articles 21 and 22 of the DSU, para 5). On the other hand, in US – Carbon Steel (India), the sequencing agreement did not provide for what would take place in case an appeal prevented a compliance report from being adopted (US – Carbon Steel (India), Understanding Between India and the United States Regarding Procedures under Articles 21 and 22 of the DSU, paras 7, 9). Once the appeal materialized, the parties agreed that it would only proceed once the Appellate Body were able to hear it, but made no comment on whether retaliation could be requested (US – Carbon Steel (India), Joint Communication from India and the United States).

31  The legal value of sequencing agreements remains an open question in WTO law. WTO Members ordinarily comply with agreements they enter into within the context of WTO disputes. If one of the parties decides not to comply with the agreement, most likely by pursuing retaliation proceedings where it had agreed not to do so, the issue may reach either the DSB or an adjudicator, in this case the Article 22.6 DSU arbitrator. If it reaches the DSB within a framework in which it would need to make a decision by positive consensus, history suggests that Members will not be able to reach a consensus. The question may also arise within the context of a dispute, such as when a complainant seeking an authorization to retaliate is faced with the claim by the party found in breach that the complainant has not complied with the sequencing agreement. As it has done in the past with respect to issues of jurisdiction, the DSB is likely to refer the whole matter to adjudication under the relevant provision (in the case contemplated, Art 22.6 arbitration), which would include the dispute as to the legal value of the sequencing agreement and any legal effects of its violation.

32  An adjudicator thus seized of a dispute regarding a sequencing agreement may be faced with a number of different issues. The parties may disagree on the interpretation of the sequencing agreement itself; on whether the sequencing agreement is able to modify the rights and obligations of the parties established under the DSU; or on the consequences of a violation of the sequencing agreement. Two or more of these issues may arise simultaneously. For example, a Member found to be in non-compliance may violate the sequencing agreement and object at the DSB to the request for an authorization to retaliate on grounds of improper timing of the request. A respondent that has agreed not to appeal from the report of the compliance panel if the Appellate Body is non-operational, as Indonesia and Vietnam did in Indonesia – Iron and Steel Products, may appeal nonetheless. The complainant may find that the text of the sequencing agreement does not appear to allow it to request retaliation in this case (Indonesia – Iron or Steel Products, Understanding between Indonesia and Vietnam regarding procedures under Articles 21 and 22, para 9), and request a ruling from the Article 22.6 DSU arbitrator. Either party, or a third party, could bring a dispute regarding the sequencing agreement through the regular panel procedure, or the parties could agree to arbitrate the issue under Article 25 DSU.

33  Similar issues have arisen in the past. The Article 22.6 DSU arbitrator in Brazil – Aircraft was requested to interpret the sequencing agreement in that dispute, to determine whether the term ‘report under Article 21.5 of the DSU’ in the sequencing agreement meant a report of the panel or whether, in case of appeal, it meant the report of the Appellate Body. The arbitrator preferred not to pronounce on its jurisdiction to interpret the agreement, which was put into question both because Canada argued that the arbitrators did not have the authority to interpret a bilateral agreement and because Brazil claimed to have terminated the agreement following a material breach by Canada. The arbitrator nonetheless (i) attributed legal effect to the sequencing agreement, finding that Brazil’s purported termination of the agreement could not affect Canada’s right to request retaliation which was ‘created through the execution’ of the agreement; and (ii) found that there had been an amendment to the agreement, due to the parties’ consent to a motion by the Chair of the DSB that ‘no countermeasures would be sought pending the Appellate Body report’ (Brazil – Aircraft (Article 22.6 – Brazil), Decision by the Arbitrator, 2000, paras 3.6–3.10).

34  In assessing what legal effects to attribute to the sequencing agreement, an adjudicator may consider the legal status of sequencing agreements and their relationship to the DSU. In Peru – Agricultural Products, the Appellate Body concluded that Members may relinquish their procedural rights under the DSU through ‘actions taken in relation to, or within the context of, the rules and procedures of the DSU’ (Peru – Agricultural Products, Appellate Body Report, 2015, para 5.25), which would appear to include sequencing agreements. In EC – Bananas III (21.5 II), the Appellate Body found that parties to a dispute had significant freedom to negotiate their procedural rights, stating that as part of a mutually agreed solution WTO Members may ‘forego the right to initiate compliance proceedings’, as long as the agreement contains ‘a clear indication … of a relinquishment of [this] right’ (EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III (Article 21.5 – US), Appellate Body Reports, 2008, para 212). These statements suggest that a sequencing agreement, as an instrument signed within the context of a WTO dispute, is a valid exercise by the parties of their right to arrange dispute settlement procedures so as to ensure a ‘positive solution to the dispute’, which is the aim of the WTO dispute settlement system (Art 3.7 DSU), subject to their duty to ‘engage in [dispute settlement] procedures in good faith’ (Art 3.10 DSU).

35  An Article 22.6 DSU arbitrator would be justified in giving effect to a sequencing agreement in line with these elements, to ensure that neither the incongruent structure of the DSU nor the parties’ agreement with respect to sequencing prevents Members from pursuing in good faith (Good Faith (Bona fide)) their rights through WTO dispute settlement. They may consider, for example, that a Member’s refusal to cooperate in the conclusion of Article 21.5 proceedings prevents it from invoking the sequencing agreement against the complainant, permitting the latter to lawfully request the resumption of suspended retaliation proceedings. In many cases, however, the arbitrator may not need to get into complex considerations regarding the legal effects of the sequencing agreement. The arbitrator may instead choose not to pronounce on the issue of sequencing and follow its narrow mandate, which is to determine whether the level and type of retaliation proposed by a complainant are in line with the principles set out in Article 22 DSU. Its award will then ground the granting by the DSB of an authorization to retaliate under Article 22.7. In the example above, the outcome of the two approaches would be the same; in choosing the latter one the arbitrator would be leaving for Members the task of finding a solution to the sequencing issue.

36  A more challenging situation will occur if, before the DSB, a respondent objects to the DSB granting an authorization to retaliate by negative consensus on the basis of an award that is silent on the dispute regarding the sequencing agreement. This respondent may argue either that the sequencing agreement does not have value against the text of the DSU or the opposite: that it prevails over the DSU and that failure to comply with the sequencing agreement precludes the complainant from requesting an authorization to retaliate. These arguments are difficult to settle at the DSB itself. The DSB only has two modes of decision-making: positive consensus, which allows any Member to object to a decision, and negative consensus, which allows any Member to ensure that the decision will be made (Art 2.4 DSU and footnote 1). There is no guidance as regards whether a defect in a request or in the procedure that precedes it prevents the operation of the negative consensus procedure. If the decision on whether an issue is to be decided by negative consensus or by positive consensus must be made by positive consensus, this allows any Member to prevent the operation of the negative consensus, even under the flimsiest of arguments.

37  In practice, although there may be stalemate (as in EC – Bananas III) Members usually find a solution that gives effect to the terms of the DSU. In a political organ such as the DSB, the consensus and negative consensus rules operate not so much as procedural rules than as guides for political decision-making, providing a basis for Members to discuss and reach a consensus on how to proceed (including by deciding, by positive consensus, that the appropriate procedure to make a decision is negative consensus). In other words, if the Article 22.6 arbitrator decides not to engage with the issue of the legality of the sequencing agreement or its legal effects, it is likely that the DSB will authorize retaliation by negative consensus, in the mode and level determined by the arbitrator, on the basis of the arbitrator’s choice to follow its narrow mandate.

38  These considerations demonstrate how fragile the ‘quasi-automatic’ WTO dispute settlement procedure is. They also reveal a key point not only about the sequencing issue but about the workings of WTO dispute settlement more broadly. Ultimately, every step of the WTO dispute settlement procedure—no matter how legally tight it may seem—is subject to political consensus within the organization. The commitment of Members to engage in dispute settlement in good faith is not so much an enforceable obligation as a declaration of an intention: the intention to take part in good faith in a decision-making process. The success of this process, and its ability to deliver legitimate outcomes, depends on Members’ willingness to accept the legitimacy of the process and to engage with it rather than undermining it. If this engagement is present, parties will find the means to interpret an incongruently drafted text in a way that allows them to settle their disputes and clarify their agreed rights and obligations. If this engagement is absent, the existence of supposedly watertight legal provisions provides little relief.

39  The sequencing issue—a procedural problem that arguably would not have existed if more time had been spent revising the DSU in 1992–94—provides a fascinating window into the operation of the WTO legal regime. Once a text has been agreed upon, no matter how obviously incongruent, modifying it may prove virtually impossible. Different Members will advance different solutions to the incongruence, depending on their views and interests (in this case, whether they favour a logical sequence of steps of adjudication or speedier enforcement). In the absence of a multilateral solution, Members must engage in bilateral negotiations to settle the matter, as any decision by the adjudicators to ‘solve’ the incongruence might be perceived as illegitimate. While the absence of a multilateral solution may strain bilateral relations if a Member decides to take advantage of systemic failures to advance its own interests, solutions can often be found at the DSB which, while not satisfactory to all, correspond to the text of the agreements—incongruous as it might seem.

40  The result is a dispute settlement system that operates well when parties can agree with respect to the fundamental aspects of the operation of the system but remains at risk of breaking down in the absence of such agreement. In these cases, the difficulty in resolving a seemingly simple procedural issue may betray deeper disagreements with respect to the contours and expected operation of the WTO regime. It is these disagreements, rather than the procedural incongruence itself, which may prove the most problematic for international dispute settlement.

41  I thank Eunjung Oh for the research assistance provided for this entry.

Geraldo Vidigal