The EU Commission announced that the European Union, together with 16 other countries, including China, agreed to establish a body to bypass the United States’ blockage of the appeals body of the World Trade Organisation. The countries, which are WTO members, reached an agreement on the sidelines of the World Economic Forum in Davos, Switzerland. The US is not among them.

“We will work towards putting in place contingency measures that would allow for appeals of WTO panel reports in disputes among ourselves, in the form of a multi-party interim appeal arrangement”, the ministers said in a statement.

The US froze the body by blocking appointments for over two years. The EU has since been attempting to set up an appellate body to arbitrate trade disputes, but the number of countries to join in was uncertain. With the WTO’s paralysis, countries could abuse sanctions to limit imports. In order to reform the WTO, consensus from its 164 member countries is required.

The WTO blockage began when the terms of two of the last three judges on the WTO’s appellate body ended on 10 December. Their departure left countries’ trade disputes open as the organisation became unable to issue rulings. Its lower court is still be able to hear cases, but if a country appeals to the higher court, the lower court’s decisions will be irrelevant.

The EU Commission said that the contingency step would preserve the WTO’s two-step dispute system. “This statement testifies to the high importance that the EU and the participating WTO members attach to retaining a two-step dispute settlement process in WTO trade matters. The multiparty appeal arbitration arrangement will guarantee that the participating WTO members continue to have access to a binding, impartial and high-quality dispute settlement system among them”, EU trade Commissioner Phil Hogan said.

The deal was signed by the EU, Australia, Brazil, Canada, Chile, China, Colombia, Costa Rica, Guatemala, Republic of Korea, Mexico, New Zealand, Norway, Panama, Singapore, Switzerland and Uruguay. China’s participation is important as it is one of the countries with more open disputes. However, in a previous discussion, some countries warned that the exclusion of the US in the deal would bring the EU closer to China and Russia.

The countries reminded, however, that the arrangement is a contingency measure and it will only apply until the WTO appellate body becomes operational again.