In 1994, the WTO members agreed on the Understanding
on Rules and Procedures Governing the Settlement of Disputes (DSU). Dispute
settlement is regarded by the WTO as the central pillar of the multilateral
trading system, and as a “unique contribution to the stability of the global
economy”. WTO members have agreed that, if they believe fellow-members are
violating trade rules, they will use the multilateral system of settling
disputes instead of taking action unilaterally.
Although
the dispute settlement system is intended to uphold the rights of aggrieved
Members and to clarify the scope of the rights and obligations, which gradually
achieves higher levels of security and predictability, the primary objective of
the system is not to make rulings or to develop jurisprudence. Rather, like
other judicial systems, the priority is to settle disputes, preferably through
a mutually agreed solution that is consistent with the WTO Agreement.
The WTO dispute settlement system has been in
operation since 1995 and has, during this time, been the most productive of all
international dispute settlement systems. During its first ten years, more
disputes had been brought to the WTO for settlement than to its predecessor
GATT, during its forty-seven years of existence from 1948 to 1995. The
operation of the WTO dispute settlement process involves the DSB panels, the
Appellate Body, the WTO Secretariat, arbitrators, independent experts and
several specialized institutions. The WTO’s dispute
settlement procedure underscores the rule of law, and it makes the trading
system more secure and predictable. It is clearly structured, with strict timetables
set for completing a case. First rulings are made by a Panel. Appeals based on
points of law are possible. All final rulings or decisions are made by the
WTO’s full membership.
DISPUTE SETTLEMENT:
When the WTO dispute
settlement system has only been used since the first of January 1995, it was
not a novel system. The system is based on almost fifty years of experience in
trade dispute resolution from the GATT 1947. Disputes of today as well as
disputes of past times can be solved in many different ways. Essentially there
are two methods to reach a peaceful resolution of international disputes:
a)
Through diplomatic negotiations between the
concerned parties, with varying interference and assistance by third parties;
or
b)
Through adjudication by an independent entity, also
called arbitration and judicial settlement.
A dispute arises when one member country adopts
a trade policy measure or
takes some action that
one or more fellow members considers to a breach of WTO agreements or to be a
failure to live up to obligations. By joining the WTO, member countries have
agreed that if they believe fellow members are in violation of trade rules,
they will use the multilateral system of settling disputes instead of
taking action unilaterally — this entails abiding by agreed procedures (Dispute
Settlement Understanding) and respecting judgments, primarily of
the Dispute Settlement Body (DSB), the WTO organ responsible for
adjudication of disputes[1]. A
former WTO Director-General characterized the WTO dispute settlement system as
"the most active international adjudicative mechanism in the world
today."
The General Council discharges its responsibilities
under the DSU through the DSB[2]. Like
the General Council, the DSB is composed of representatives of all WTO Members.
The DSB is responsible for administering the DSU, i.e. for overseeing the
entire dispute settlement process. It also has the authority to establish
panels, adopt panel and Appellate Body reports, maintain surveillance of
implementation of rulings and recommendations, and authorize the suspension of
obligations under the covered agreements[3]. The
DSB meets as often as necessary to adhere to the timeframes provided in the DSU[4].
PROCEDURE FOR DISPUTE SETTLEMENT IN WTO:
According
to Article III.3 WTO agreement, dispute settlement is one of the key functions
of the WTO. The rules for settlement are laid down in the Dispute Settlement
Understanding (DSU). The procedure for the dispute settlement consists various
stages or steps to reach the final implementation of judgment. In this project,
the various stages or steps of WTO Dispute Settlement are described below in
detail as:
1.
DISPUTE
INITIATION STAGE:
The
initiation stage of WTO dispute settlement is governed by national law.
Although it is not part of the DSU, the question of dispute initiation is
useful for the overall positioning and understanding of the procedure in a
larger trade policy context. One feature of WTO dispute settlement is that only
government has access to WTO dispute settlement in terms of dispute initiation.
Private economic actors such as exporters, importers and consumers do not have
the right to bring complaints. The initiation of a dispute under the DSU
therefore still requires a government decision.[5]
2.
CONSULTATION
STAGE:
Once
the government of the complainant country has decided to bring a trade dispute
to the WTO, the provisions of the Dispute Settlement Understanding (DSU; Annex
2 to the WTO Agreement) govern the proceedings. The first stage of any dispute
settlement procedure consists of mandatory consultations between the
complainant and the defendant. Complainant, who alleges that Defendant has
violated WTO provisions, thereby nullifying or impairing complainants’ benefits
under the agreements, has the right to ask defendant to enter into
consultations in order to find a mutually acceptable solution to the problem.[6]
Such consultation requests shall be made in writing. They shall contain the
reasons for the request, and identify the measures and the legal basis for the
complaint.[7]
Consultation requests shall be notified to the Dispute Settlement Body.
Defendant
is normally obliged to answer within 10 days after receipt of the consultation
requests, and it shall enter into such consultations within 30 days.[8]
The consultations are confidential. However, a third party which considers that
it has a ‘substantial trade interest’
in the consultations may notify the consulting Members and the DSB of its
interest. It shall be joined in the consultations if the other parties agree to
the claim of substantial interest. If the third party is not allowed to join
the consultations, it may request its own consultations.[9] Good
offices, conciliation and mediation are procedures that are undertaken
voluntarily if the parties to the dispute so agree.[10]
If
a mutually acceptable solution for the dispute has been found, it shall be notified
to the DSB.[11]
The DSU has a clear preference for mutually acceptable solutions over the
solution of disputes through panel procedures.[12]
It prescribes, however, that such mutually agreed solutions shall be consistent
with the multilateral trade agreements, and that they shall not nullify or
impair the benefits accruing to any member under these agreements.[13] If
Defendant refuses to enter into consultations, or if no mutually acceptable
solution can be found within 60 days, Complainant has the right to ask the DSB
to establish a panel.[14]
3.
PANEL
STAGE:
·
Establishment of Panels:
If
consultations fail to resolve the dispute within 60 days, complaining party may
ask the DSB to establish a panel. If a developing country member is involved,
60 day period could be extended. In practice consultations continue even beyond
60 days and even during panel process. Panels do encourage the members to find
a mutually agreed solution.[15]
Panel
requests must be formulated in writing. They must contain details on whether
consultations have been held, which measures are the subject of the complaint
and which rules of the multilateral trade regime are concerned.[16]
Following a request a panel is usually established at the second meeting of the
DSB where the panel request appears on the DSB’s agenda, unless the DSB decides
by consensus not to establish the panel.[17]
In other words, the time between the first and the second DSB meeting with the
request on the agenda may be used for further consultations. By the time of the
second meeting, agenda control shifts to the complainant as the latter would
have to consent not to establish a panel. The reverse consensus rule for the
establishment of panels is a new feature of dispute settlement in the WTO, as
has been pointed out in the preceding chapter.[18]
·
Composition of Panels:
Panels
typically consist of three panelists, unless the parties agree to a panel
composed of five panelists.[19]
Panelists are usually governmental or non-governmental trade experts, including
officials, diplomats or academics. They are appointed ad hoc, although the WTO maintains a roster from which panelists
can be chosen.[20]
Citizens of member countries whose governments are involved in a specific
dispute shall not serve on that panel.[21]
The secretariat shall propose nominations for the panel which shall be accepted
by the parties. Such nominations shall not be opposed by Members, except for
‘compelling reasons’. If the parties cannot agree on the panelists, the
Director General of the WTO is called upon to determine the composition of the
panel.[22]
When acting on a panel, panelists shall serve in their individual capacities
and independent from instructions of their governments. Further rules for
observance by panelists are contained in specific rules of conduct. In disputes
involving developing countries, at least one panelist from a developing country
shall be included if the developing country members so request.[23]
·
Terms of Reference of Panels:
Panels
shall have the following terms of reference unless the parties to the dispute
agree otherwise within 20 days from the establishment of the panel. The
Appellate Body in case of Brazil —
Desiccated Coconut[24]
explained the importance of the terms of reference. “A panel’s terms of
reference are important for two reasons. First, terms of reference fulfill an
important due process objective — they give the parties and third parties
sufficient information concerning the claims at issue in the dispute in order
to allow them an opportunity to respond to the complainant’s case. Second, they
establish the jurisdiction of the panel by defining the precise claims at issue
in the dispute.”
In
case of Australia — Apples,[25] the
Panel observed that according to established jurisprudence, it is the panel’s
terms of reference that “define the scope of a dispute”. The
Panel also emphasized that a panel’s mandate or terms of reference are
determined by the request for the establishment of the panel.
·
Functions of Panel:
The
panel’s task is to assist the DSB in making rulings and recommendations under
the covered agreements. In practice, this usually means the establishment of a
report on whether or not a trade measure constitutes a violation of
multilateral trade rules. To this purpose, a panel shall make an objective
assessment of the matter before it, including an objective assessment of the
facts of the case and the applicability of and conformity with the relevant
covered agreements.
·
Panel Procedures:
Panel
procedures include written submissions of the parties to the disputes and panel
hearings. Two so-called ‘substantive meetings’ normally take place before the
interim report is issued, and another meeting takes place after the interim
report is issued. If necessary, more meetings can be arranged. The panel enjoys
a right to information and technical advice from anyone it deems appropriate. Panels
may also request advisory reports from expert review groups. Parties’
submissions to the panel shall be treated as confidential but shall be made
available to the parties to the dispute. Disputing parties have a right to
disclose statements of their own to the public. Members may also ask disputing
parties to provide a non-confidential summary of the information contained in
written submissions which may be disclosed to the public. However, there is no
time frame for the fulfillment of this obligation.
Even
during the panel stage, both parties are encouraged to continue their search
for a mutually acceptable solution. To this end, panels should also consult
regularly with the parties to the dispute and give them adequate opportunity to
develop a mutually satisfactory solution. Moreover, the panel has the authority
to suspend its procedures for a maximum of months upon the complainant’s
request in order to allow for further bilateral negotiations. If the work of a
panel has been suspended for more than 12 months, its authority lapsed.
·
Panel Reports:
As
during consultations, third party enjoys specific rights during the panel
stage. Having notified their substantial interest in a matter to the DSB, they
shall be heard by panel and their submissions shall be reflected in the panel
report. They also receive the submissions of the disputing parties to the first
meeting of the panel and they may request their own panel under the DSU.
Specific rules apply for cases involving multiple complainants.
If
no mutually acceptable solution can be agreed upon during the panel stage, the
panel shall issue its final report within six or, under exceptional
circumstances, within nine months. The deliberations of the panel are confidential,
and the reports are drafted without the presence of the parties. Opinions
expressed by individual panelists in the report are anonymous. Before the final
report, the panel issues an interim report which is circulated to the parties
to the dispute. If this interim report is not commented by the parties, it
constitutes at the same time the final report to the DSB.
Where
the panel has found a trade measure to be in violation of WTO law, it
recommends that the party concerned bring its trade regime into conformity with
its WTO obligations. The panel may also suggest possible ways of
implementation. This, however, is rarely done. Panel findings and
recommendations may not add to the rights and obligations of members. Where no
party notifies its intention to appeal findings of the panel report, the DSB
adopts the panel report, unless it decides by consensus i.e. with the vote of
the prevailing party – not to adopt the report.
4.
APPELLATE
REVIEW STAGE:
Both
the complainant and the defendant have the right to appeal a panel report.
Third parties do not have the right to appeal a report but they may make
written submissions to and be heard by the Appellate Body in the course of an
appeal if they had previously notified the DSB of their substantial interest
during the panel stage.
The
responsibility for the appeal lies with a permanent organ, the Appellate Body.
It consists of seven persons, three of whom (i.e. a division) work on any case.
Appellate Body members shall have demonstrated expertise in law, international
trade and the subject matter of the multilateral trade agreements.[26]
They are appointed for a four-year term which is renewable once. They shall be
unaffiliated with any government. In contrast to the panel stage, there is
nothing in the DSU which would prevent an Appellate Body member from serving on
a case involving his home country. Further rules for observance by Appellate
Body members are contained in the rules of conduct.
An
appeal is limited to issues of law and legal interpretations in the panel
report.[27] This
stage of dispute settlement does not include another fact-finding process, nor
does the DSU currently grant the Appellate Body the authority to remand an
issue to the panel for further fact- finding. But if the findings involve
application of a legal rule to facts then it has been ruled to be finding of
law.[28]
Article
17.13 of DSU said that Appellate Body may uphold, modify or reverse the legal
findings and conclusions of the panel.[29]
In case of US - Wheat Gluten[30],
Appellate Body stated that though panel found several deficiencies in the USITC
report yet panel found that the report provided an adequate, reasoned and
reasonable explanation with respect to ‘profits and losses’, but Appellate Body
ruled that Panel did not make objective assessment of facts as required by
Art.11 of DSU and reverse their finding.
When
a case is reached to Appellate Body, he has two options; either to leave the
dispute unresolved or go on a complete legal analysis. In Australia - Salmon[31]
and in few other cases, the Appellate Body has completed the ‘legal analysis’
to avoid a situation where the dispute between the parties remains unresolved.
In
order to appeal a panel report, a country notifies its intention to appeal to
the DSB before adoption of the panel report and submits a notice of appeal. It
shall include, inter alia, a brief statement on the nature of the appeal
including the alleged errors in the issues of law covered in the panel report
and the legal interpretations adopted by the panel.[32]
Within 10 days after filing the notice of appeal, the appellant has to file its
appellant’s submission with more specific information.[33]
Within 25 days after the notice of appeal has been filed, the appellee may
present its submission.[34]
Thirty days after the filing of the notice of appeal, an oral hearing shall
take place.[35]
Parties’ submissions to the Appellate Body shall be treated as confidential but
shall be made available to the parties to the dispute. Disputing parties have a
right to disclose statements of their own to the public. Members may also ask a
disputing party to provide a non-confidential summary of the information
contained in its written submission which may be disclosed to the public.
However, there is no time-frame for the fulfillment of this obligation.[36]
Further rules for appellate review are included in the Working Procedures for
Appellate Review.
The
Appellate Body has 60 days (following the appellant’s notification of its
decision to appeal a panel report) to finish its report for the DSB.[37]
In its report, the Appellate Body can uphold, modify or reverse the panel’s
findings.[38]
As is the case with panel reports, the deliberations of the Appellate Body
shall be confidential and the reports shall be drafted without the presence of
the parties.[39]
Opinions expressed in the Appellate Body report shall be anonymous.[40]
Appellate Body decisions shall be taken by consensus wherever possible;
otherwise, decisions shall be made by majority votes.[41]
Collegiality plays a vital role in the work of the Appellate Body.[42]
Once
the report has been finished and circulated to the members, it shall be adopted
by the DSB and unconditionally accepted by the parties within 30 days from the
date of circulation unless the DSB decides by consensus (i.e. with the agreement
of the prevailing party) not to adopt it.[43]
Like panel reports, Appellate Body reports may not add to or diminish the
rights and obligations of members.[44]
Overall,
the total duration from the date of the establishment of the panel until the
date when the Appellate Body report is considered for adoption shall not exceed
nine months in cases where no appeal is made, or 12 months in cases with
appeal.[45]
5.
IMPLEMENTATION
STAGE:
Where
a panel and/or the Appellate Body have reached the conclusion that a trade measure
of a country is not compatible with its obligations under any of the
multilateral trade agreements, it recommends that the member state shall bring
its measure into conformity with the WTO agreement. Although the panel or
Appellate Body is free to make suggestions on how this conformity can be
reached[46],
they have used this authority only rarely as they obviously do not wish to
interfere in member governments’ policies.
The
member whose trade measure has been found to be in violation of WTO obligations
shall communicate to the DSB how it plans to implement the DSB recommendations.
As a general rule, the recommendations and rulings should be implemented
immediately, or within a ‘reasonable period of time’. If the parties to the
dispute cannot agree on a reasonable period of time, it will be determined by
binding arbitration within 90 days after the adoption of the recommendations
and rulings. It should not exceed 15 months, but it can be adjusted upwards or
downwards in exceptional circumstances.[47]
The DSU requires that the DSB keeps the implementation of adopted
recommendations under surveillance and that the implementation of rulings is placed
on the DSB agenda after 6 months following the determination of the reasonable
period of time, unless the DSB decides otherwise. The dispute remains on the
agenda until it is resolved. During this time, the defendant party is required
to submit written status reports to the DSB 10 days prior to each meeting with
information on the progress in the implementation of the recommendations and
rulings.[48]
6.
COMPENSATION AND SUSPENSION OF
CONCESSIONS:
Where
no implementation occurs, the DSU provides for compensation or for the
suspension of concessions or other obligations as of temporary relief in case
of non-compliance. However, neither compensation nor the suspension of
concessions or other obligations is preferred to full implementation.[49]
Upon request from the complainant, the defendant shall enter into negotiations
with a view to developing mutually acceptable compensation. Where no
satisfactory compensation has been agreed within 20 days after the date of
expiry of the reasonable period of time, the complainant may request authorization
from the DSB for the suspension of concessions or other obligations vis-à-vis
the defendant.[50]
According
to the rules on ‘cross-retaliation’ as laid down in Article 22.3 DSU, the
general principle is that such suspension should occur in the same sector as
that where the violation has occurred. If this is not deemed practicable or
effective by the complainant, the complainant may seek redress in other sectors
of the same agreement, or even under other agreements, provided that the circumstances
are serious enough.
In
case of EC - Banana III[51],
US sought DSB authorization to suspend concessions in trade in goods. EC
objected contending that authorization should have been requested to suspended
concessions in the service sector alone as the Appellate Body ruling related to
that. But Arbitrators rejected EC’s argument stated that US has the right to
seek suspension of concessions in either or both, goods and services, sectors
up to the overall level of nullification or impairment suffered.
The
level of the suspension of concessions or other obligations shall be equivalent
to the level of nullification or impairment suffered by the complainant. If the
defendant objects to the level of suspension proposed, or if it claims that the
rules on cross- retaliation have not been followed, the matter shall be
referred to binding arbitration. This arbitration shall be completed within 60
days after the reasonable period of time has lapsed. Where available, the
original panel shall act as arbitrator. Concessions may not be suspended while
the arbitration is in course.
Findings
of non-compliance with regard to implementation cannot be made unilaterally by
the complainant. They must be made using the multilateral rules and procedures,
as Article 23 DSU stresses. The objective of this provision is to avoid unilateral
determinations of non- compliance which lead to unilateral trade measures by
individual member countries and which would seriously undermine the credibility
of the multilateral trade regime and its ‘monopoly of power’ with regard to
determinations of compliance and non-compliance under the covered agreements.
7.
ARBITRATION
STAGE:
If
the member objects to the level of suspension proposed or claims that the
principles and procedures set forth in Art. 22.3 have not been followed where a
complaining party seeks authorization to suspend concessions or other
obligations under Art. 22.3 (b) or (c), the matter is referred to arbitration
by the original panel. Arbitrator does not examine the nature of the
concessions or other obligations proposed to be suspended by the member. They
fall outside the arbitrators’ jurisdiction. What they do have to determine is
whether the overall proposed level of suspension is equivalent to the level of
nullification and impairment.[52]
The decision of the arbitrator is final and binding on the parties.
US
- Gambling Case[53]: Antigua
and Barbuda, a small independent commonwealth country, with few natural
resources, relies on tourists and gambling revenues. But US passed law banning
internet gambling. Here panel and
appellate body ruled in favor of Antigua and Barbuda that the US measures was
inconsistent with its obligations under GATS. On 2007, Antigua sought to
suspend concessions or related obligations under TRIPs Agreement amounting to
an annual value of US$ 3.44 billion which it considers to “match the level of
nullification or impairment of benefits.” But arbitrator determined the annual
level of nullification or impairment of benefits accruing to Antigua to be US$
21 million and allowed it to seek authorization from DSB, to suspend the
obligations under TRIPs Agreement of the value of US$ 21 million annually.
CONCLUSION
This Project has set forth the steps regarding the
procedure of the Dispute Settlement Body in solving the dispute. Having reviewed the
dispute settlement procedure as it is laid down in the Dispute Settlement
Understanding, it becomes clear that the dispute settlement rules of today
combine both political and legal elements and that they constitute something of
a ‘middle ground’ between political/diplomatic negotiations and third party
adjudication also. The DSU thus combines both the rule-oriented and the
diplomatic, negotiation-oriented traditions of its evolution. The scope of
panel and Appellate Body recommendations has been clearly limited as they may
not add to or diminish the rights and obligations of Members.
Besides
the procedures laid down in Section 3.3, the DSU provides rules for alternative
means of dispute settlement. These are good offices, conciliation and mediation
(Article 5 DSU), or arbitration (Article 25 DSU). As they have neither been
frequently used in DSU practice nor been among the central topics of the DSU
review, we will abstain from offering a detailed account on these procedures.
