Suraj Shah

As the ASEAN Economic Community (AEC) seeks to deepen regional economic integration, the Enhanced Dispute Settlement Mechanism must avoid politicisation to optimise successful integration and economic development in the region.

Dispute Settlement Mechanisms (DSM) are fundamental features of economic institutions to ensure optimal outcomes. Governments include DSMs in international institutions to address collaboration problems and enhance the credibility of commitments, through exposing free riding, ascertaining violations and penalizing non-compliance. Economic actors need dispute settlement to be effective, even if not necessarily used, so that they know economic bargains will be honored.

However, in ASEAN, the EDSM suffers from fatal flaws. Fundamentally, a functional DSM that disciplines members who renegade on agreements is incompatible with the ‘ASEAN Way’, particularly given the norms of non-criticism and non-interference. Thus, the institutional outcome of the EDSM is structurally weak in that its instruments reflect the preference for protecting national sovereignty, and is essentially voluntary.

To establish credibility, one can either centralise regulations and institutions, such as the European Union, with a credible threat of referral to the European Court of Justice, or create a legal certainty about the extent of liberalisation with precision from the outset, such as NAFTA, together with the public and private instruments to defends one’s economic rights.

The ASEAN DSM has been active since the 1992 AFTA. Moreover, since the launch of the AEC, ASEAN has sought to enhance the DSM. The Protocol to the ASEAN Charter on Dispute Settlement Mechanisms was signed in April 2010, providing greater definition to the original DSM, known as the Enhanced Dispute Settlement Mechanism (EDSM).

The ASEAN’s EDSM is modeled on the WTO Dispute Settlement Understanding (DSU), of which all ASEAN members already subscribe to. This includes panels of independents, an appellate body, strict timelines and options for sanctions. However, ASEAN’s EDSM model suffers from practical flaws. The timelines adopted are even more expedited than the WTO DSU, by adopting half the time, which the WTO itself has difficulty following.

Furthermore, the ASEAN Secretariat is tasked to support the EDSM process with administrative and logistical support, yet has inadequate funding and legal expertise allocated to the EDSM process. Additionally, state-induced dispute settlement does not specify the remedy for found violations.

Thus, the EDSM establishes a dispute resolution procedure that cannot practically be followed. This structural weakness means that the EDSM has never been invoked.

Indeed, members favour using the WTO DSU rather than EDSM to resolve disputes, to avoid violating the norms of the ‘ASEAN Way’. For example, in Thailand’s dispute with the Philippines on Customs and Fiscal Measures on Cigarettes in July 2016, the WTO DSU was used, as it was seen as strategically less confrontational and would save face among ASEAN members by allowing third parties outside of the region to participate. Additionally, the WTO DSU was seen to give a more favorable outcome, given that the ASEAN EDSM is untested.

Moreover, effective dispute settlement mechanisms must be independent, yet, EDSM suffers from politicisation. The EDSM recognizes a variety of dispute settlement methods, ranging from ‘dialogue, consultation, and negotiation’, reference of ‘unresolved’ disputes to the ASEAN Summit, to the highest political decision-making body. However, it is possible under the current language of the ASEAN Charter, for an ASEAN member to refuse cooperation with the EDSM in the panel process or compliance proceedings, and thereby create an ‘unresolved dispute’.

The EDSM stipulates that ‘unresolved disputes’ have to be adopted by ASEAN political organs such as the ASEAN Economic Ministers Meeting (AEM), where both parties are already represented. In this sense, dispute settlement becomes politicised rather than independent. Moreover, in light of ASEAN norms of the aversion of conflict, adjudication with political, rather than independent, approval means the EDSM will likely be avoided.

Furthermore, the EDSM only envisages participation by ASEAN member states and does not permit private entities or investors to participate in the adjudicatory process. This minimises the involvement of non-state actors by denying access, disallows domestic courts from seeking a preliminary ruling, and deprives adjudicators of the means to compel compliance.

Essentially, the norms of the ‘ASEAN Way’ result in the structural weakness of the ASEAN EDSM. The outcome is a state-controlled EDSM which is voluntary, as there is an opt-out from the institutions of dispute settlement which is functional for protecting national sovereignty. While this non-confrontational approach may be suitable for diplomacy, ASEAN EDSM decisions behind closed doors by bureaucrats or politicians are not suitable for market transactions where private decisions implying private money or private efforts are based on public obligations or rights.

In light of this, the ASEAN EDSM is unlikely to be functional for optimising ASEAN Economic Integration, nor economic development in the region more broadly. ASEAN must seek to depoliticize the Enhanced Disputes Settlement Mechanism and create an independent regulatory body, as it seeks to deepen regional economic integration through the ASEAN Economic Community.

Suraj Shah is a MSc from King’s College London and former visiting fellow of ASEAN Studies Center.

Dio Herdiawan Tobing, Universitas Gadjah Mada

In May, I went with my research team to Palangka Raya, Central Kalimantan, one of Indonesia’s hotspots of land and forest fires.

We wanted to know how local administrations view an agreement between ASEAN countries on haze pollution that Indonesia ratified two years ago.

We were surprised to hear that the acting head of Central Kalimantan Environmental Agency, Humala Pontas, admitted he didn’t know much about the agreement. He asked:

What is contained in the agreement? Which part of haze does it regulate? Are there any provisions that contain economic or other means?

Here, as well as in other areas in Kalimantan, Sumatra and Papua, slash-and-burn methods are still commonly used to clear land for expansion of oil palm plantations. Palm oil is Indonesia’s top export.

Slash-and-burn is the cheapest and fastest way to prepare land for planting. But it produces haze that harms the health of humans and wildlife. Emissions from forest conversion in Indonesia contribute to global warming.

The smoke from burning doesn’t only affect the area where land is being cleared. It travels with the wind to neighbouring countries.

Response to haze crisis

In 2002, ASEAN members agreed on the ASEAN Agreement on Transboundary Haze Pollution (AATHP). This was a response to a haze crisis after huge forest fires in Indonesia between 1997 and 1998 created a thick smog across neighbouring countries.

At the time, fires burned some 45,000 square kilometres of forests in Kalimantan and Sumatra. The wind swept the acrid smoke across the region, polluting Brunei, Malaysia, Singapore and even Thailand.

The haze crisis happened in the midst of the devastating Asian Financial Crisis. The timing meant countries in the region struggled to cope with this disaster.

In 1998, Singapore’s minister for environment and health, Yeo Cheow Thong, stated:

A repeat of this disaster will surely aggravate the already bad regional economic situation.

Forest and land fires in Indonesia were leading factors why ASEAN countries formed the haze agreement. During the ministerial meeting in Bandar Seri Begawan, Brunei, in April 1998, ASEAN members blamed Indonesia for its land-clearing activities.

Hence, the 1997-1998 fires prompted ASEAN countries to try to overcome the economic and health impact of haze crisis together.

Slow implementation

It took 11 years after the treaty came into force for Indonesia to ratify the agreement in 2014. But two years in, Indonesia has yet to enact regulations at the national and local level.

Article 11 of the haze agreement obliged state parties, among others, to:

ensure that appropriate legislative, administrative and financial measures are taken to mobilise equipment, materials, human and financial resources required to respond to and mitigate the impact of land and/or forest fires and haze pollution arising from such fires.

During a closed interview with an expert staff of the Legislation Committee at Indonesia’s House of Representative (DPR), she, who requested to remain anonymous, admitted that the House still views additional regulations at the national and local level as unnecessary.

Lawmakers believed that national laws, such as the 2014 Law on Plantations and the 2009 Law on Environmental Protection and Management, were adequate, she said.

These laws do share the spirit of ASEAN’s zero-burning policy. The ASEAN haze treaty has a provision urging parties to prevent land-clearing using fire. The Indonesian laws mentioned above also prohibit land-clearing by burning.

But none of Indonesia’s national laws make special reference to haze or pollution resulting from slash-and-burn activities.

In fact, Indonesia does not categorise the spread of haze from forest burning as a disaster. For Indonesia, haze is merely a result of forest burning, especially when it’s man-made. Not categorising haze as a disaster prevents the country’s national and local disaster agencies from responding accordingly.

To implement the haze treaty, Indonesia could, for instance, legislate to expand the authority of the country’s Disaster Management Agency (BNPB) and local disaster management agencies at the provincial level to carry out activities to prevent and mitigate any transboundary haze crisis.

Currently, their mandate is limited to emergency preparedness. The local disaster relief fund can be used only when the haze status reaches “emergency standby” status. As a result, national and local disaster agencies cannot prevent and mitigate haze. They can only start work once there are already fires and haze.

Disjointed action

Within the Indonesian government, problems of commitment and co-ordination among agencies at the central and local level persist.

The Ministry of Environment and Forestry – the government body responsible for tackling threats to the environment – does not seem interested in enforcing the ASEAN haze agreement. It’s more focused on “project-based” action, such as distributing firefighting pump machines to the community.

It was the Ministry of Foreign Affairs, in charge of international agreements, that actively supported Indonesia’s ratification of the haze treaty.

As a consequence of the discord between the two ministries, two years into Indonesia’s ratification of the agreement, local administrations are still not aware of it.

What’s at stake?

If Indonesia maintains its non-compliant behavior, the regional community will continue to blame Indonesia for Southeast Asia’s haze problems. Previously, Indonesia’s non-ratification delayed the establishment of the ASEAN Co-ordination Centre for Haze

ASEAN has set a goal of a haze-free region by 2020. It may not achieve that goal if Indonesia does not not catch up. In a more general and long-term effect, Indonesia will lose its “natural leadership” position in ASEAN, as one of ASEAN’s founders and the largest economy in Southeast Asia.

It’s important to have a united approach between different government agencies for Indonesia to comply with the agreement.

Local administrations throughout Indonesia should be informed about the policy. Only this way can we ensure that policies are synchronised and implemented effectively at national and local level.

Dio Herdiawan Tobing, Research Associate at the ASEAN Studies Center, Universitas Gadjah Mada

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