Need to Initiate GPA Arbitration Process

The GPA Parties should initiate expeditiously the arbitration process in the revised GPA to facilitate resolving disputes over whether a Party may withdraw an entity from the GPA.

The recently implemented revision of the WTO Government Procurement Agreement (GPA) includes an improvement in the process that allows a Party to withdraw an entity that have been privatized or is no longer under government control from its GPA commitments — provided no other Party objects.  When another Party objects, the entity’s withdrawal is blocked until the objection is resolved.  Prior to the revised GPA, there was no effective way to resolve such objections.  As a consequence, several such disputes have remained unresolved for a number of years.  To facilitate the resolution of such disputes, the revised GPA provides for an arbitration process.  However, this new approach will go into effect only after the WTO Committee on Government Procurement adopts the necessary arbitration procedures.  It should do so expeditiously.

The need for a means of resolving objections over proposals to withdraw entities is illustrated by Japan’s unsuccessful attempts over more than a decade to remove several entities from its coverage commitments.  In 2001, Japan proposed the withdrawal of three railway companies — East Japan Railway Company, Central Japan Railway Company and West Japan Railway Company — from its GPA coverage on the basis that the Japanese government no longer had control or influence over them.  The European Union (EU) and the United States objected to Japan’s proposals.  In 2006, the U.S. withdrew its objection based upon information and assurances provided by the Government of Japan that it no longer controlled or influenced the three railway companies.  But, the EU maintained its objection.  As a consequence, in an annex to the revised GPA, Japan noted that it is covering the three companies only until the EU withdraws its objection to their removal.

In a second case that began in 2003, Japan proposed to withdraw the National Aerospace Laboratory of Japan (NAL) from its GPA coverage.  Both the EU and the U.S. objected and maintained their objections through the revision of the GPA.  Accordingly, as it had with its railway companies, Japan noted in an annex to the revised GPA that it would remove NAL from its coverage when the EU and the United States withdraw their objections.  These long-standing objections have continued because the GPA, prior to its revision, did not provide any effective recourse for resolving them.

The revised GPA aims to remedy this deficiency by providing an arbitration process.  It directs parties to make every attempt through consultations to resolve objections to the removal of an entity from coverage.  When such consultations do not resolve an objection, the revised GPA allows the parties to take the dispute to arbitration.  Once a dispute has been taken to arbitration, the party proposing the modification of its coverage is expected to comply with the results of the arbitration process.  If the party does not comply with the arbitration results, and withdraws the entity from coverage, any party that has objected may withdraw substantially equivalent coverage.

The arbitration process may not be used until the Committee has adopted arbitration procedures.  It should do so as soon as possible.

Jean Heilman Grier

April 14, 2014

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