DR.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW

SEMINAR PAPER
INTERNATIONAL DISPUTE RESOLUTION BODIES

WORLD TRADE ORGANISATION DISPUTE

SETTLEMENT MECHANISM

SUBMITTED TO: SUBMITTED

BY:

Mr. Prasenjit Kundu Abhishek Kumar Singh

Asst. Professor Roll No- 130101004

Settlement of dispute under GATT

A dispute arises when one country adopts a trade policy measure or takes some action that one
or more fellow-WTO members considers to be breaking the WTO agreements, or to be a failure
to live up to obligations. A procedure for settling disputes existed under the old GATT but it
had no fixed timetables, rulings were easier to block, and many cases dragged on for a long
time inconclusively.

The Uruguay Round Agreement

The Uruguay Round agreement introduced a more structured process with more clearly defined
stages in the procedure. The agreement emphasises that prompt settlement is essential if the
WTO is to function effectively. Strict timelines were created for each stages of the dispute
resolution process to speed up the resolution of disputes. If a case runs its full course to a first
ruling, it should not normally take more than about one year or 15 months if the case is
appealed. The agreed time limits are flexible, and if the case is considered urgent (e.g. if
perishable goods are involved), it is accelerated as much as possible. The Uruguay Round
agreement also made it impossible for the country losing a case to block the adoption of the
ruling. Previously under GATT adoption of a panel report required unanimous support , now a
country need unanimous support to block a panel report. Now, rulings are automatically
adopted unless there is a consensus to reject a ruling, any country wanting to block a ruling has
to persuade all other WTO members (including its adversary in the case) to share its view. The
reforms brought other changes too. Unilateral retaliation is now explicitly prohibited, and a
permanent Appellate Body was created to allow bad· rulings to be appealed. The Reforms also
brought greater legal transparency.

Functions and Objectives Of DSU

Providing security and predictability to the multilateral trading system. Preserving the rights
and obligations of WTO Members Clarification of rights and obligations through interpretation
‘Mutually Agreed Solutions’ as ‘Preferred Solution’. Prompt settlement of disputes Prohibition
against unilateral determinations Exclusive jurisdiction Compulsory nature

Scope of the dispute settlement system

The Covered Agreement:

The (WTO) dispute settlement system applies to all disputes brought under the WTO
Agreements listed in Appendix 1 of the DSU. In the DSU, these agreements are referred to as
the ³covered agreements´ The covered agreements also include the so-called Plurilateral Trade
Agreements contained in Annex 4 to the WTO Agreement (Appendix 1 of the DSU), which
are called plurilateral´ as opposed to ³multilateral´ because not all WTO Members have signed
them.

A single set of rules and procedures:

Provides a coherent and integrated dispute settlement system applicable to the ‘Covered
Agreements’, End of ‘GATT à la carte’. Subject to certain exceptions, the DSU is applicable
in a uniform manner to disputes under all the WTO Agreements.

BODIES INVOLVED IN DISPUTE SETTLEMENT

Dispute Settlement Body (DSB)

The DSB is similar to the WTO General Council which comprises of the entire membership of
WTO. The DSB has the power to establish panels, adopt panels and Appellate Body reports
etc. the DSB is responsible for the referral of a dispute to adjudication (establishing a panel);
for making the adjudicative decision binding (adopting the reports); generally, for supervising
the implementation of the ruling; and for authorising ‘retaliation’ when a Member does not
comply with the ruling.

Other independent bodies in dispute settlement:

The Director General and the WTO Secretariat.

Panel

Appellate Body

Arbitrator

Experts

The Director General

In a dispute settlement procedure the Director-General mediates and tries to resolve the dispute,
before a request for a panel is made. The Director-General convenes the meetings of the DSB
and appoints panel members upon the request of either party. The Director-General also
appoints the arbitrator (s) for the determination of the reasonable period of time for
implementation, if the parties cannot agree on the period of time and on the arbitrator .

The WTO Secretariat

The staff of the WTO Secretariat, which reports to the Director-General, assists Members in
respect of dispute settlement at their request conducts special training courses. Provides
additional legal advice and assistance to developing country. The Secretariat also assists parties
in composing panels by proposing nominations for potential panellists to hear the dispute.
Assists panels once they are composed Provides administrative support for the DSB.

Panel

Panels are the quasi-judicial bodies, in a way tribunals, in charge of adjudicating disputes
between Members in the first instance. Panel members are required to be ³well-qualified
governmental or non-governmental individuals´ Or who have been previously panel members,
or have served as governmental representatives to the GATT or WTO, as senior trade policy
officials or with the secretariat, 3 or 5 members of a panel has to be independent, drawn from
diverse background with wide experience. Members cannot be from countries involved in
disputes before the panel. Developing countries can also request that the panel include at least
one member from the developing country.

Appellate Body

v’A permanent body of seven members entrusted with the task of reviewing the legal aspects
of the reports issued by panels. The Appellate Body is thus the second and final stage in the
adjudicatory part of the dispute settlement system. The DSB appoints the members by
consensus , for a four year term and can reappoint a person once .. Appellate Body members
must be persons of recognised authority, with demonstrated expertise in law, international trade
and the subject matter of the covered agreements generally, and they must not be affiliated with
any government .

Arbitrator

In addition to panels and the Appellate Body, arbitrators, either as individuals or as groups, can
be called to adjudicate certain questions at several stages of the dispute settlement process.
Arbitration results are not appeal able but can be enforced through the DSU. Two forms of
arbitration: The first such situation, which an arbitrator may be called to decide on, is the
establishment of the ³reasonable period of time´ granted to the respondent for implementation
The second is where a party subject to retaliation may also request arbitration if it objects to
the level or the nature of the suspension of obligations proposed

Experts

Where a panel considers it necessary to consult experts in order to discharge its duty to make
an objective assessment of the facts, it may consult either individual experts or appoint an
expert review group to prepare an advisory report y Expert review groups perform their duties
under the panel’s authority and report to the panel. y Expert review groups only have an
advisory role. Where panels have so far resorted to experts, they did not establish expert review
groups, but consulted experts on an individual basis.

LEGAL BASIS FOR DISPUTE

The basis or cause of action for a WTO dispute must be found in the ³covered agreements´
listed in Appendix 1 to the DSU, namely, in the provisions on ³consultation and dispute
settlement´ contained in those WTO Agreements. e.g. ± Articles XXII and XXIII of GATT
1994. Article 19 of the Agreement on Agriculture.

When to complain?

If any contracting party should consider that any benefit accruing to it directly or indirectly
under this Agreement is being nullified or impaired or that the attainment of any objective of
the Agreement is being impeded as the result of the failure of another contracting party to carry
out its obligations under this Agreement, or the application by another contracting party of any
measure, whether or not it conflicts with the provisions of this Agreement, or the existence of
any other situation, the contracting party may, with a view to the satisfactory adjustment of the
matter, make written representations or proposals to the other contracting party or parties which
it considers to be concerned. Any contracting party thus approached shall give sympathetic
consideration to the representations or proposals made to it.´

Types of Complaints:

Violation Complaint

Nullification or impairment due to the failure of another contracting party to carry out its
obligations under WTO Agreement
Non-violation Complaint

Nullification or impairment due to the application by another contracting party of any measure,
whether or not it conflicts with the provisions of WTO Agreement

Situation Complaint

Nullification or impairment due to the existence of any other situation.

WTO DISPUTE SETTLEMENT PROCESS

Two ways to settle a dispute

The parties find a mutually agreed solution, particularly during the phase of bilateral
consultations; and y Through adjudication, including the subsequent implementation of the
panel and Appellate Body reports, which are binding upon the parties once adopted by the
DSB.

There are three main stages to the WTO dispute settlement process: Consultations between the
parties by Adjudication by panels and, if applicable, by the Appellate Body The
implementation of the ruling, which includes the possibility of countermeasures in the event of
failure by the losing party to implement the ruling.

Consultations

1. Objective for consultations.

First stage of formal dispute settlement. It give the parties an opportunity to discuss the matter
and to find a satisfactory solution without resorting to litigation

2. Legal basis and requirements for a request for consultations.

Under GATT 1994, two legal bases are available for launching a dispute with a request for
consultations, that is, either Articles XXII:1 or XXIII:1 The main difference between these two
legal bases relates to the ability of other WTO Members to join as third parties.

3. Procedure for consultations.

(WTO) Secretariat is not involved . Respondent must reply to the request within ten days and
enter into consultations in no more than 30 days . Rules are different in cases of urgency e.g.
perishable goods.

4. Third parties in consultations.

Third party may have trade interest or tend to benefit from that. The request must be addressed
to the consulting Members and the DSB within ten days. If the respondent disagrees, there is
no recourse through which the interested Member can impose its presence at the consultations.

Establishment of a panel

A request for the establishment of a panel must be made in writing and is addressed to the
Chairman of the DSB. In addition to determining the panel’s terms of reference, the request for
establishment of the panel also has the function of informing the respondent and third parties
of the basis for the complaint. In the first DSB meeting in which such a request is made, the
responding Member can still block the panel’s establishment, as was the case in the dispute
settlement system under GATT 1947. At the second DSB meeting where the request is made,
however, the panel will be established, unless the DSB decides by consensus not to establish
the panel (i.e. the ‘negative’ consensus rule applies).

Stages in which a panel works

Before the first hearing:

Each side in the dispute presents its case in writing to the panel. First hearing: the case for the
complaining country and defence: the complaining country (or countries), the responding
country, and those that have announced they have an interest in the dispute, make their case at
the panel’s first hearing. Rebuttals: the countries involved submit written rebuttals and present
oral arguments at the panel’s second meeting.

Experts:

If one side raises scientific or other technical matters, the panel may consult experts or appoint
an expert review group to prepare an advisory report. First draft: the panel submits the
descriptive (factual and argument) sections of its report to the two sides, giving them two weeks
to comment. This report does not include findings and conclusions. Interim report: The panel
then submits an interim report, including its findings and conclusions, to the two sides, giving
them one week to ask for a review.

Review:

The period of review must not exceed two weeks. During that time, the panel may hold
additional meetings with the two sides. y Final report: A final report is submitted to the two
sides and three weeks later, it is circulated to all WTO members. If the panel decides that the
disputed trade measure does break a WTO agreement or an obligation, it recommends that the
measures be made to conform with WTO rules. The panel may suggest how this could be done.
y The report becomes a ruling: The report becomes the Dispute Settlement Body¶s ruling or
recommendation within 60 days unless a consensus rejects it. Both sides can appeal the report
(and in some cases both sides do).

Appellate review

1. Rules on the appellate review-Article 17 is the only article dealing specifically with the
structure, function and procedures of the Appellate Body. The ³gap-filling´ Rule 16(1) of the
Working Procedures permits an Appellate Body division under certain circumstances to adopt
additional procedures for a particular appeal in which the need to do so arises.

2. Deadline for filing an appeal-DSU implies that the panel report must be appealed before it
is adopted by the DSB 3. Right to appeal -DSU makes clear that only the parties to the dispute,
not the third parties, can appeal the panel report. 4. Third participants at the appellate stage-
Third parties cannot appeal a panel report. However, third parties that have been third parties
at the panel stage may also participate in the appeal as a so-called ³third participant´. 5.
Conclusion and Recommendations of Appellate Body are addressed to the DSB, which is then
to request the Member concerned to bring its measure into conformity with the relevant
provisions of WTO law.

Non-implementation

Either compensation or the suspension of WTO obligations.

COMPENSATION
Compensation does not mean monetary payment; rather, the respondent is supposed to offer a
benefit, for example a tariff reduction

Recommendations and rulings of the DSB

First, panels and the Appellate Body only apply WTO law as it is contained in the covered
agreements. They cannot add to or diminish the rights and obligations provided in the WTO
Agreements .

Second, member that does not bring its WTO- inconsistent measure into conformity with the
WTO Agreement risks consequences: it either has to provide compensation with the agreement
of the complainant, or it may face retaliatory countermeasures

Third, the DSU specifically states that there is no obligation to withdraw the WTO-consistent
measure in the event of a successful non-violation complaint .

Legal status of adopted/un adopted reports in other disputes- the reports of panels and the
Appellate Body are not binding precedents for other disputes.

Alternative ways of solving a dispute

1. Take place at the beginning of any dispute. But also at the stage of appellate review, the
appellant may withdraw the appeal at any time for bilateral negotiation. Dispute resolution
mechanisms such as good offices, conciliation or mediation- A prerequisite for such
arbitration is that the complainant has requested the DSB’s authorisation for the suspension
of obligations and that the respondent disagrees with the proposed level of retaliation.

2. Parties and third parties and principle of confidentiality: Members enter as parties
or third parties in the mechanism. The confidentiality of the process Members have the
right to disclose their submissions to the public Non-participants cannot make any
contribution to the ongoing dispute settlement proceeding

3. Legal representation: WTO agreement has given the countries the right to decide the
composition of the delegation Private legal counsel can appear as representatives of the
party but have to respect the confidentiality of the proceedings. Helpful for the developing
countries.

4. Amicus Curiae submissions : ³Friend of the court´ Unsolicited advices from neither the
parties nor the third parties. Generally come from Non Governmental Organisations .
According to the Appellate Body, the panels have the right to accept or reject information
 even if unsolicited. Contentious among WTO members Only few panels till date have used
their discretionary right to accept and consider unsolicited briefs

Developing countries in WTO dispute settlement

Theory and practice

Theory says that the very existence of a compulsory multilateral dispute settlement system is
itself a particular benefit for developing country and small Members. In practice, also dispute
settlement system has already offered many examples of developing country Members
prevailing in dispute settlement over large trading nations. At the same time these members
also face considerable burdens. Often do not have a sufficient number of specialised human
resources. It may also be difficult for a developing country Member to endure the economic
harm arising from another Member’s trade barrier for the entire period of the dispute settlement
proceedings.

In theory, since 1995 developing countries have been the complainant in one third of the cases
and the respondent in two fifth of the cases. (Shows a healthy number) y In practice however
majority of the cases are still involving developed countries. Developed countries form two
third of the trade volume. But then, the moderate trade volume affected by a possibly WTO-
incompatible trade barrier maintained by another Member might not always justify the
considerable investment of time and money necessary for a WTO dispute.

Special and differential treatment

Special and differential treatment in consultations.

Special and differential treatment at the panel stage.

Special and differential treatment in implementation.

Accelerated procedure at the request of a developing country Member.

Decision of 5 April 1966 - Least-developed country members involved in a dispute - In addition

to the above a few particular rules applicable for LDC’s are: Members must exercise due
restraint in bringing disputes against a least-developed country member and in asking for
compensation or seeking authorisation to suspend obligations against a least-developed country
member that has ³lost´ a dispute . The DSU also specifically foresees good offices, conciliation
and mediation.
Legal assistance Representation by private counsel and the Advisory Centre on WTO Law
receive effective assistance in dispute settlement from the recently established, Geneva-based
Advisory Centre on WTO Law. Assistance in the form of legal assistance and legal advice.

Evaluation of the WTO dispute settlement system

As a statistical snapshot, in the first ten years of operation of the DSU : 313 disputes were
initiated (i.e. formal Article 4 consultations were requested). 128 panels were established,
covering 158 of the 313 disputes formally initiated (i.e. roughly half). 104 panels were
composed, covering 133 disputes. 80 panel reports were adopted, covering 103 disputes. 53
Appellate Body Reports were adopted. One of the encouraging conclusions which can be
drawn from the above is that many disputes appear to be settled at the consultation stage.

Achievement of the objectives?

The large number of cases in which parties invoked the dispute settlement system in the first
ten years of the WTO suggests that Members have faith in the system. It appears that the WTO
dispute settlement system has fulfilled its main function: to contribute to the settlement of trade
disputes. Moreover, the reports of panels and the Appellate Body have served to provide
clarification of the rights and obligations contained in the covered agreements

Weaknesses

The long duration of the full dispute settlement procedure causes economic harm if the
challenged measure is indeed WTO inconsistent. y A successful complainant will receive no
compensation for the harm suffered during the time given to the respondent to implement the
ruling. y The ³winning party´ receives no reimbursement from the other side for its legal
expenses. y In a few cases, a suspension of concessions has been ineffective in bringing about
implementation.

Basic Advantage

Compared with other multilateral systems of dispute resolution in international law, the
compulsory nature and the enforcement mechanism of the WTO dispute settlement system
certainly stand out.

Current negotiations

The Doha Development Round and DSU Negotiations Proposals for reform on a significant
number of issues, including: the extension of third party rights; improved conditions for
Members seeking to be joined in consultations; the introduction of remand and interim review
in appellate review proceedings; the sequencing issue and other problems concerning the
suspension of concessions or other obligations; the enhancement of compensation as a
temporary remedy for breach of WTO law; the strengthening of notification requirements for
mutual agreed solutions; and the strengthening of special and differential treatment for
developing country Members.

Conclusion:

To date, the negotiations of the reform have not yet lead to any agreement on the amendment
of the DSU. Many of these proposals are to be welcomed as they will strengthen the WTO
dispute settlement system. With respect to other proposals not included in the Chairman’s Text,
it should be noted that their time has not come yet.

CASE STUDY

United States Anti-Dumping and Countervailing Measures on Steel Plate from India

Key Facts:
Complainant: India
Respondent: United States Of America
Third Parties: Chile; European Communities; Japan
Request for Consultations received: 4 October 2000
Panel Report circulated: 28 June 2002

Complaint by India.

Final affirmative determinations of sales of certain cut-to-length carbon quality steel plate
products from India at less than fair value by US Department of Commerce (DOC) on 13
December 1999 and affirmed on 10 February 2000; Interpretation and use of provisions relating
to facts available in the anti-dumping and countervailing duty investigations by DOC; and
Determination and interpretation by the US International Trade Commission (ITC) of
negligibility, cumulation and material injury caused by the said Indian steel imports.

Panel and Appellate Body proceedings

The DSB established a Panel at its meeting of 24 July 2001. Chile, the EC and Japan reserved
their third-rights. On 16 October 2001, India requested the Director General to determine the
composition of the Panel. On 26 October 2001, the Director-General composed the Panel. On
16 April 2002, the Chairman of the Panel informed the DSB that the Panel would not be able
to complete its work in six months in light of scheduling conflicts. The Panel expected to
complete its work in June 2002, depending on translation.

On 28 June 2002, the Panel circulated its report to Members. The Panel concluded that: y the
United States statutory provisions governing the use of facts available, sections 776(a) and
782(d) and (e) of the Tariff Act of 1930, as amended, are not inconsistent with Articles 6.8 and
paragraphs 3, 5, and 7 of Annex II of the AD Agreement. the United States did not act
inconsistently with Article 15 of the

With respect to India’s claims not addressed above, the Panel concluded that: it would not rule
on India’s abandoned claim; and in light of considerations of judicial economy, it was neither
necessary nor appropriate to make findings with respect to the remainder of India’s claims. The
Panel therefore recommended that the DSB request the United States to bring its measure into
conformity with its obligations under the AD Agreement. At its meeting on 29 July 2002, the
DSB adopted the Panel report.

Implementation of adopted reports

On 1 October 2002 the United States and India they have mutually agreed that the reasonable
period of time to implement the DSB recommendations and rulings in this dispute shall be five
months. On 14 February 2003, the parties informed the DSB that they had agreed on certain
procedures under Article 21 and 22 of the DSU. India agrees not to request the authorisation
to suspend concessions under Article 22 until the adoption of the compliance reports (Panel
and AB, if any) and the US agrees not to assert that India is precluded from doing so given that
the request would be made outside the 30-day period.