Introduction

Multilateralism is the founding principle of the World Trade Organization (‘WTO’). Except for certain agreements like the Agreement on Government Procurement, and certain understandings such as the Information Technology Agreement – I and II, multilateralism has been the basis for rule making at the WTO. However, inspite of the strong foundations in multilateralism, the WTO’s record in achieving consensus on certain critical issues in the recent past has seen limited success on certain issues.

While the WTO has been able to achieve outcomes such as the Fisheries Subsidies Agreement, the Ministerial Decisions forming part of the Geneva Package, etc. in the recent past, these outcomes pale in comparison to the level of ambition outlined by the WTO’s Members for securing agreements on key topics. The Doha Development Agenda is one such example where Members eventually abandoned negotiations under the agenda as such.

Interestingly, while the WTO is seeing limited success in negotiating outcomes on a multilateral basis, a trend is slowly emerging at the WTO where certain Members are forming plurilateral clubs and negotiating disciplines on issues of vital importance. The latest example in this regard is the formation of the Agreement on Electronic Commerce on 26 July 2024 by certain WTO Members who are part of the Joint Statement Initiative on Electronic Commerce.

Besides the agreement on electronic commerce, there are two other plurilateral initiatives where certain WTO Members have concluded agreements on two other topics – the Investment Facilitation for Development Agreement and the Reference Paper on Services Domestic Regulation. These are discussed later in this article.

When examined holistically, the initiative of certain WTO Members forming plurilateral clubs to negotiate and conclude agreements seems to have somewhat been driven by the absence of any clear direction towards rule-making by the broader WTO Membership on these issues. However, since multilateralism is the founding principle of the WTO, and these agreements have been negotiated without the sanction of the overall WTO Membership, a question arises as to whether the plurilateral rules formed by these select clubs within the umbrella of the WTO are appropriate.

This article is intended to discuss the legal basis for these plurilateral agreements and assess their compatibility with the broader principles of multilateral rule-making at the WTO.

Details of Plurilateral Agreements at the WTO

On 26 July 2024, over 80 Members of the WTO forming part of the Joint Statement Initiative on Electronic Commerce announced that they have developed a text on the Agreement on Electronic Commerce.[1] Concluded after negotiations that lasted over five years, this agreement establishes disciplines on various topics related to e-commerce such as facilitation, removal of barriers, telecommunications, etc.

Not long before the conclusion of the Agreement on Electronic Commerce, on December 2021, 67 WTO Members declared, that they had concluded negotiations on a Reference Paper on Services Domestic Regulation.[2] This Reference Paper was concluded under the aegis of the Joint Initiative on Services Domestic Regulation, which was formed in December 2017.

A few months before the formation of the Joint Initiative on Services Domestic Regulation, certain developing country Members of the WTO formed the Investment Facilitation for Development (IFD) Initiative. This group negotiated and concluded an Investment Facilitation for Development (IFD) Agreement in November 2023.[3]

A common thread that runs through these plurilateral agreements is that though they are being negotiated under the WTO’s roof, they are being negotiated outside the multilateral framework. Further, neither of these agreements nor the initiatives by which negotiations on these agreements began, have been sanctioned either by the Ministerial Conference or the General Council.

Plurilateral agreements at the WTO – A legal analysis

The WTO is not new to plurilateral agreements. In fact, Annex 4 to the Marrakesh Agreement Establishing the WTO (‘Marrakesh Agreement’) covers a list of plurilateral agreements that are applicable only between WTO Members that are signatory to those agreements. From this list, the Agreement on Government Procurement is the best example of a plurilateral agreement within the WTO which enshrines disciplines and records commitments by Members in a rather important area concerning international trade in goods and services.

However, what distinguishes the plurilateral agreements under Annex 4 from those being negotiated under the joint initiatives is the absence or presence of approval by all the WTO Members under the Marrakesh Agreement.

Article IX of the Marrakesh Agreement concerns decision making. As per para 1 of Article IX, the WTO can only make decisions by consensus. Para 1 goes on to state that, except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting. In case of joint initiatives, there seems to be no record of the broader WTO Membership having blessed these initiatives.

Reference is also invited to Article III of the Marrakesh Agreement, which concerns the WTO’s functions. Para 2 of Article III concerns the WTO’s negotiating functions of the WTO. The first sentence of para 2 provides that the WTO shall be the forum for negotiations on existing agreements under the Marrakesh Agreement.

The second sentence of para 2 concerns negotiations on new issues. It provides that that the WTO may provide a forum for further negotiations among its Members concerning their multilateral trade relations, and a framework for the implementation of the results of such negotiations. However, the second sentence categorically adds that such forum and framework are to be decided by the Ministerial Conference.

In the present case, there is not an iota of doubt that the plurilateral joint initiatives have not been blessed by the Ministerial Conference. Therefore, this makes the entire exercise of forming plurilateral clubs and negotiate agreements under these clubs as suspect, when it is being done without the approval of the Ministerial Conference.

Conclusion

One of the key purposes of the WTO is to negotiate agreements on international trade. Unfortunately, the negotiating arm of the WTO has seen limited success for more than a decade now. However, does this situation permit certain WTO Members to negotiate plurilateral agreements without the sanction of the broader WTO Membership? If examined from a legal perspective, it would appear that such initiatives are not in harmony with the WTO’s constitution.

The WTO has always been a rules-based Member driven organization. Unlike certain other international organizations, consensus of all WTO Members has been the driving spirit for rule-making at the WTO. If plurilateral agreements are to be negotiated at the WTO, they must strictly be in accordance with the relevant provisions of the Marrakesh Agreement.

It is pertinent to note that certain WTO Members like India and South Africa have already raised serious objections to such plurilateral rule-making initiatives.[4] However, the broader WTO Membership is yet to react and decide on a course of action concerning these plurilateral initiatives.

The Membership must collectively examine whether plurilateral clubs undermine the multilateral nature of the WTO. If left unchecked, they could pose a grave threat to the WTO and the larger interests of its Membership, the overwhelming majority of which are developing country Members.

[The author is an Associate Partner in WTO and International Trade Division at Lakshmikumaran & Sridharan Attorneys, New Delhi]

1. [1] See Joint Statement Initiative on Electronic Commerce, INF/ECOM/87 dated 26 July 2024, World Trade Organization (available here).
2. [2] See Declaration on The Conclusion of Negotiations on Services Domestic Regulation, WT/L/1129 dated 2 December 2021 (available here).
3. [3] Investment facilitation for development, World Trade Organization (available here).
4. [4] See The Legal Status of 'Joint Statement Initiatives' and their Negotiated Outcomes – Revision, WT/GC/W/819/Rev.1 dated 30 April 2021, General Council, World Trade Organization. (available here).