🛂 Beyond Panels and Tariffs: Can ADR Restore the WTO’s Capacity to Resolve Trade Conflicts?

by Pierfrancesco C. Fasano

The less visible side of WTO dispute settlement

The World Trade Organization is generally associated with litigation: consultations, panels, appellate review, compliance proceedings and, ultimately, the possible suspension of trade concessions. Yet the WTO legal order also contains a significant, albeit underused, architecture for alternative dispute resolution.

The distinction between adjudication and ADR is particularly important in the present geopolitical climate. The renewed use of tariffs as instruments of industrial policy, economic security and political leverage has generated disputes that are legally complex but, above all, politically sensitive. A panel may determine whether a measure is consistent with WTO law; it cannot necessarily reconstruct the political relationship that produced the measure.

The WTO system therefore offers Members a broader dispute-resolution continuum: bilateral consultations and mutually agreed solutions; good offices, conciliation and mediation under Article 5 of the Dispute Settlement Understanding (DSU); and arbitration under Article 25. Other forms of arbitration operate at the implementation and retaliation stages under Articles 21.3(c) and 22.6.

ADR is consequently not external to the WTO system. It has been embedded in its legal framework since 1995. Its weakness lies not in its formal availability, but in the limited political willingness to use it.

Consultations: the WTO’s most frequently used negotiation room

Every WTO dispute formally begins with a request for consultations. Consultations are not merely a procedural waiting period before litigation. Their purpose is to enable Members to exchange information, clarify the measures under challenge and seek a solution without requesting a panel.

This is the WTO’s most frequently used consensual process. By the end of 2024, Members had submitted 631 requests for consultations, but panels had been established in only 376 disputes, approximately 60 per cent of the total. The remaining 40 per cent cannot automatically be classified as settled: some disputes may have become inactive for political, economic or procedural reasons. Nevertheless, the figures confirm that a substantial proportion did not proceed to adjudication. Even after a panel has been established, negotiations may continue and the dispute may still be resolved by agreement. WTO dispute settlement statistics⁠

Consultations are conducted directly by the Members and do not normally involve a neutral third party. They are therefore better described as institutionalised negotiation than mediation. Their strength is flexibility; their weakness is that the same asymmetry of political and economic power that generated the dispute may also shape the negotiations.

When successful, consultations may result in a mutually agreed solution. Under Articles 3.6 and 3.7 DSU, a solution reached after a formal request for consultations must be notified to the Dispute Settlement Body (DSB) and must remain consistent with the covered agreements. This requirement protects the interests of the wider WTO membership: bilateral diplomacy may settle a dispute, but it should not create a discriminatory arrangement at the expense of third Members.

Good offices: reopening a diplomatic channel

Article 5 DSU provides for good offices, conciliation and mediation, all of which are voluntary and require the agreement of the disputing Members. They may begin and end at any time, may continue in parallel with panel proceedings and are confidential and without prejudice to the parties’ positions in subsequent proceedings. The Director-General may also offer these services ex officio. Article 5 DSU⁠

Although the DSU does not define the three procedures separately, good offices generally involve a neutral office-holder facilitating communication, transmitting messages, convening meetings and helping the parties resume direct dialogue. The neutral does not ordinarily evaluate the merits or formulate detailed settlement proposals.

Good offices may be particularly useful where direct political communication has broken down or where accepting a bilateral concession would be domestically difficult. The involvement of the Director-General can provide institutional cover without transforming the process into adjudication.

Publicly documented practice remains extremely limited. One notable example concerns the Director-General’s good offices in the banana disputes brought by Colombia and Panama against the European Communities, DS361 and DS364, under the special procedures available pursuant to Article 3.12 DSU. WTO overview of ADR procedures⁠

The limited public record must, however, be interpreted cautiously. Since Article 5 proceedings are confidential, informal diplomatic interventions may not appear in WTO statistics. What can safely be said is that formal and publicly identifiable recourse has been exceptional.

Conciliation and mediation: provided for, but almost absent

Conciliation normally permits the neutral to take a more active role than in good offices, including identifying common ground, assessing possible compromises and putting forward non-binding settlement terms. Mediation is likewise facilitative, but may involve a more structured process in which the neutral assists the parties in moving from stated legal positions to their underlying commercial, regulatory and political interests.

Neither conciliator nor mediator imposes a decision. Any settlement remains the product of Member consent. If no agreement is reached, either party may return to the ordinary DSU process, while the confidentiality and without-prejudice protections preserve its legal position.

These mechanisms are nevertheless among the least used elements of the WTO system. No body of publicly reported mediation or conciliation practice comparable to WTO panel jurisprudence has developed during the Organisation’s first three decades. They exist in law but have scarcely acquired an institutional life of their own.

Several explanations may be offered. Governments may fear that proposing mediation will be interpreted as uncertainty about the legal strength of their case. Trade disputes frequently involve domestic industries, parliamentary scrutiny and wider geopolitical strategies, leaving negotiators with limited authority to compromise. Members may also prefer familiar consultations or adjudication to procedures whose institutional protocols, neutral-selection rules and expected outcomes remain comparatively undefined.

This is a paradox. Mediation is especially suitable for disputes involving several interconnected measures, phased implementation, scientific uncertainty, supply-chain adjustment or the need to preserve a long-term trading relationship. These are precisely the disputes that a strictly binary finding of consistency or inconsistency may resolve only partially.

Arbitration: the adaptable but binding alternative

Article 25 DSU permits “expeditious arbitration” for issues clearly defined by the parties. Unlike mediation, arbitration produces a binding award. It remains consensual at the entry stage: the parties must agree to use it, define the issues and notify their agreement to all WTO Members. Once the award has been rendered, however, the parties must abide by it.

Article 25 gives Members considerable procedural autonomy. They may determine the composition of the tribunal, the timetable, the scope of review and other working arrangements. Arbitration may replace panel adjudication, resolve a particular issue within a wider dispute or operate as an appellate mechanism.

For many years, Article 25 was barely used as a genuine alternative to panels. Its role changed after the Appellate Body ceased to be operational in December 2019 because vacant positions were not filled. The Multi-Party Interim Appeal Arbitration Arrangement (MPIA), established in 2020, uses Article 25 to provide appellate review in disputes between participating Members.

The MPIA does not create a new permanent WTO court. It is a plurilateral political arrangement implemented through an arbitration agreement in each relevant dispute. Its arbitrators may uphold, modify or reverse a panel’s legal findings, and their award is binding on the parties. It thereby prevents an appeal “into the void”, through which a panel report would otherwise remain unadopted.

By the end of 2024, parties in 13 disputes had agreed on Article 25 appeal-arbitration procedures and awards had been issued in two proceedings. In July 2025, the award in European Union — Enforcement of Intellectual Property Rights became the second appeal arbitration conducted specifically under the MPIA. WTO, EU–China intellectual property award⁠

The MPIA proves that arbitration can work within the WTO framework. Yet it remains a partial solution. Participation is voluntary, it does not bind non-participants, and its political legitimacy cannot be assumed to equal that of a universally agreed appellate mechanism.

Arbitration after judgment: implementation and retaliation

Not every WTO arbitration is an alternative to adjudication. Two further forms operate after the merits of a dispute have been determined.

Under Article 21.3(c) DSU, arbitration may establish the “reasonable period of time” within which the responding Member must implement WTO recommendations. By the end of 2024, such periods had been determined by arbitrators in 53 disputes.

Under Article 22.6, arbitration determines whether the level of proposed retaliation is equivalent to the nullification or impairment suffered by the complainant. By the end of 2024, retaliation arbitration had been initiated in 41 disputes, 21 of which had resulted in at least one arbitral decision. Every request for authorisation to retaliate that was contested had been referred to arbitration.

These procedures perform an essential stabilising function. They replace unilateral determinations with a rules-based assessment. Nevertheless, they manage the consequences of an unresolved dispute rather than restore cooperation between the Members. Retaliation remains a temporary remedy, not the preferred outcome.

Reforming dispute settlement: ADR moves towards the centre

At the Twelfth Ministerial Conference in 2022, Members committed themselves to establishing a fully and well-functioning dispute settlement system accessible to all by 2024. That deadline was not met. A consolidated draft reform text circulated in February 2024 contained an unusually prominent set of provisions on good offices, conciliation, mediation and arbitration. Although not agreed, it sought to make ADR more usable through clearer procedures, greater institutional support and the possibility of engaging confidentially at an earlier stage. WTO dispute settlement reform⁠

The Thirteenth Ministerial Conference instructed Members to accelerate work, including on appeal or review and accessibility. However, the Fourteenth Ministerial Conference, held in Yaoundé in March 2026, did not achieve a substantive settlement of the dispute-settlement impasse. Members agreed to return the draft WTO reform declaration and work plan to Geneva, while consultations on dispute settlement reform were to continue under the auspices of the DSB. WTO post-MC14 briefing note⁠

The reform debate is therefore no longer confined to rebuilding the Appellate Body. It concerns the design of a system in which different disputes can be directed towards different processes: adjudication where authoritative interpretation is required; arbitration where a binding but adaptable determination is preferable; and mediation, conciliation or good offices where implementation, political accommodation and continuing economic relations are central.

For ADR to become credible, Members will need practical rules on initiation, neutral appointment, conflicts of interest, confidentiality, the participation of developing and least-developed countries, technical assistance, the relationship with pending panel proceedings and the notification of settlements. Reform must also avoid creating a two-tier system in which well-resourced Members enjoy sophisticated procedural choices while smaller economies remain unable to use them effectively.

The tariff-war test

The contemporary tariff conflict places the WTO’s dispute-settlement architecture under exceptional pressure. Tariffs are increasingly presented not merely as commercial measures but as responses to security risks, strategic dependencies, industrial subsidies, environmental objectives or geopolitical conduct.

A tariff is not automatically contrary to WTO law. Its consistency depends, among other matters, on bound tariff commitments, most-favoured-nation treatment, applicable trade-remedy rules and any exception invoked by the Member concerned. Yet when successive tariff measures provoke countermeasures and retaliatory negotiations, the dispute may expand beyond the legal questions that a panel has been asked to decide.

This is where ADR may offer institutional value. A mediated process could address tariff withdrawal schedules, sector-specific arrangements, monitoring, transparency, compensation, safeguards and future consultation mechanisms in a single negotiated package. Good offices could preserve communication where formal negotiations have become politically untenable. Arbitration could isolate a clearly defined legal or economic issue and prevent escalation while broader talks continue.

ADR cannot legitimise unilateral coercion or substitute political bargaining for compliance with WTO obligations. Nor should confidentiality conceal settlements that adversely affect other Members. Properly designed, however, it can bring confrontational trade diplomacy back within a multilateral, rules-based setting.

Conclusions: from an unused option to a strategic function

ADR already exists at the WTO, but its methods have developed unevenly. Consultations are used in every formally initiated dispute and frequently prevent escalation. Mutually agreed solutions are expressly preferred by the DSU. Implementation and retaliation arbitration are established components of the system. Article 25 appeal arbitration has demonstrated its practical viability through the MPIA.

By contrast, good offices, conciliation and mediation remain largely dormant. Their limited use reflects political hesitation, insufficient procedural infrastructure and a legal culture that has long treated adjudication as the principal measure of institutional effectiveness.

In the present tariff environment, that approach is no longer sufficient. A functioning WTO requires authoritative adjudication, but it also requires the capacity to manage disputes before they harden into prolonged economic confrontation. ADR should therefore be understood neither as a weaker form of justice nor as an emergency substitute for appellate reform. It is a distinct means of protecting negotiated interests, facilitating compliance and preserving trading relationships.

The decisive question is no longer whether ADR belongs in the WTO. The DSU settled that issue in 1995. The question is whether Members are prepared to turn an existing legal possibility into an effective instrument of multilateral economic diplomacy.