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DISPUTE SETTLEMENT PROCEDURE

One of the unique features of the WTO is its provision

relating to dispute settlement mechanism . In fact the power to settle trade disputes is what is the difference between the WTO and GATT . When a member files a complaint against another , the dispute settlement body of the WTO steps in immediately . Decisions have to be taken in less than 1 year 9 months if the case is urgent , 15 months if the case is appealed . The dispute settlement system of WTO is faster and automatic and the decisions cannot be ignored or blocked by members .

Offending countries must realign their trade policies according to the WTO guidelines or suffer financial penalties and even trade sanctions . Because of its ability to penalize offending member nations ,the WTO dispute settlement is the backbone of the global trading system The costs of dispute settlement proceedings are disproportionately heavy for developing countries. In general , developing countries do not enjoy a neutral playing field. Although the dispute settlement procedure is not biased against any party in a dispute , developing countries are less well equipped to participate in the process. Necessary training , they are less experienced and as noted above , they face resource constraint.

Dispute Settlement in the WTO: Overview

Overall aim: to secure compliance with the Agreements Quasi-judicial Nature Secured access Detailed procedures Automaticity in the proceedings Deadlines Possible appeal

The WTO as a dispute settlement forum and a monitoring body

Settlement of disputes under the DSU

1. Consultations, good offices, conciliation and mediation 2. Panel proceedings 3. Appellate Body 4. Consideration and adoption of Panel/AB reports by the DSB If the report concludes that a measure is inconsistent with a covered agreement the Panel (/AB) must recommend that the Member concerned bring the measure into conformity with that agreement. Adoption of Panel (/AB) reports by the DSB is automatic. 5. Implementation of reports by members
- Compliance - Negotiation of compensation (voluntary, mutually acceptable) - Authorisation of retaliatory action (suspension of concessions/obligations)

Trade Policy Review Mechanism- Periodic review of trade policies

World Trade Organization (WTO)

Structure Ministerial Conference: Highest authority. Meet every two years General Council: Ambassadors or heads of delegation in Geneva. Meets as Trade Policy Review Body Dispute Settlement Body Goods Council, Service Council and Intellectual Property Council, and so on Numerous specialized committees and working groups Secretariat: Day-to-day operations by DirectorGeneral, Four Deputy D.G.s, and 500 staff
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World Trade Organization (WTO)

Resolution of Trade Disputes Trade disputes are settled according to the Understanding on Rules and Procedures Governing the Settlement of Disputes Member should not take unilateral action against perceived violations of trade rules, but seek resolution thru Multilateral dispute settlement system, and abide by its rulings and findings A petition is filed with WTO Dispute Settlement Body (DSB) is convened

World Trade Organization (WTO)

Resolution of Trade Disputes 1st stage: Bilateral consultations within 30 days of request by another member. Can be brought to WTO Director-General. If failed after 60 days from request for consultation 2nd stage: Complainant requests DSB to establish a panel to examine the case 3rd stage: Panel's final reports are given to parties within 6 months or 3 months in urgency such as perishable goods. Panel reports are adopted by DSB within 60 days of issuance, unless one party notifies its decision to appeal or parties agree not to adopt report 4th stage: Either party appeals to a standing Appellate Body
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World Trade Organization (WTO)

Resolution of Trade Disputes 5th stage: Appellate Body decision: Generally within 60 days, but in no case longer than 90 days. Reports of Appellate Body are accepted by DSB in 30 days of issuance. 6th stage: At a DSB meeting, party concerned presents intentions on how to implement the adopted recommendations and rulings of DSB 7th stage: If party concerned fails to comply, obligated to enter into negotiation with complainant to determine mutually acceptable compensation
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World Trade Organization (WTO)

Resolution of Trade Disputes 8th stage: If no satisfactory compensation is agreed, complainant requests authorization from DSB to suspend concessions or obligations to the other party 9th stage: DSB should grant this authorization, unless DSB decides by consensus to reject the request. 10th stage: DSB continues to monitor implementation of adopted recommendations

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Stages of Dispute Settlement

I Consultation Stage: Upto 60 Days. To see if dispute can be avoided II Appt of Panel: Upto 45 days + 6 mths for Panel to conclude III Appeals from Panel to Appellate Body. To be decided within 60 days; max 90 days IV DSB to accept AB report within 30 days. Rejection possible only by consensus

After DSB Adoption

Losing Party to bring its policy in line with the

decision. Prompt compliance reqd. Party to tell DSB its intention of compliance within 30 days. If immediate compliance impractical, DSB will give Member reasonable time period to do so. If dispute whether measures adopted comply with DSB ruling, a Compliance Panel will hear the matter & rule within 90 days.

After DSB Adoption (Contd)

Failure to act Adequate Compensation to

Complaining party/parties Amount of Compensation through negotiations If no satisfactory agreement, complaining side may seek DSBs permission for ltd trade sanctions Trade sanctions: Suspension of concessions or obligations. In principle, in the same sector as the dispute. If this is not effective or practical, action under another agreement.

WTO :DISPUTE SETTLEMENT

Enforcement of trade rules Cases brought up by members Basis of any case is a violation of

commitments by a member vis a vis other member in the WTO.

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RULES AND REGULATION

How long to settle a dispute? 60 days consultation, medication, etc 45 days panel setup and panelists appointed 6 months final panel report to parties 3 weeks final panel report to WTO 60 days dispute settlement body adopts report (no appeal) Total = 1 year without appeal/ 60-90 days appeal report 30 days dispute settlement body adopts appeals report Total = 1 year 3 months with appeal.

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WTO: Dispute settlement

Priority: Settle disputes through

consultations Dispute Settlement Body. Panel process Appellate body Rules are binding and automatically adopted

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How the Dispute Settlement System works

The Dispute Settlement Body, All Members
Establishes No appeal? DSB adopts the report DSB adopts the reports

Panel

Report

Appellate Body

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Dispute Settlement under the GATT 1947

Articles XXII and XXIII of GATT 1947 Very limited rules Central concept was nullification and impairment of benefits flowing from the agreement
Diplomatic character of dispute settlement:

No judicial arm, rather all matters were within powers of GATT Contracting Parties
Evolved practice under GATT 1947
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Dispute Settlement in the WTO: Aim

Dispute Settlement Understanding: Mechanism aimed at securing compliance with the Covered Agreements (CA)
Preserves the rights and obligations of Members under the CA (Art 3.2 DSU)

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New innovations of the DSU

More detailed procedures for the various

stages of dispute
Appellate review of panel reports and

surveillance of implementation by the DSB

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Dispute Settlement in the WTO: Objectives

To secure a positive solution to the dispute. (Art. 3.7 DSU)
Preferred outcome:

To reach a mutually agreed solution If not, Panel Proceeding . [.and AB review.] And then, Implementation, or . Retaliatory trade sanctions may be imposed

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Dispute Settlement in the WTO: Scope

An integrated system:
Applies to all the

WTO multilateral agreements (Appendix 1) A single set of rules for all disputes (Art 23) Only a few special or additional rules in some CA (Appendix 2)

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Dispute Settlement in the WTO: Main Features

compulsory jurisdiction detailed procedures and deadlines complainant-driven quasi-judicial automaticity

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Dispute Settlement in the WTO: Main characters

Parties to the dispute: WTO Members only Dispute Settlement Body (all the Members)

Panel ( 3 or 5 panelists)
Appellate Body (7 persons) WTO & AB Secretariats

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Consultations Panel
Appeal Adoption Implementation
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Dispute Settlement in the WTO: Consultations

Who? One or more Members (complainants) against another Member (respondent) Possibility for third party Members to join

Confidential process
Minimum time limits for complainant

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Dispute Settlement in the WTO: Panels

Establishment of a

panel: Automatic
6 months or 9 months to

Composition well-qualified government and/or nongovernmental individuals

issuance of final report

Process confidential, report

public

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Dispute Settlement in the WTO: The matter in dispute

The specific

measures at issue
The legal basis

(claims)

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Dispute Settlement in the WTO:

The Mandate
Panel Request

Measures

Matter

Claims

Mandate

Jurisdiction

Inform the parties for their defence

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Dispute Settlement in the WTO:

Panel Procedures: deadlines
Composition of a panel

Establishment of a panel

max. 6 months

Final Report circulated

max. 9 months

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Dispute Settlement in the WTO:

Adoption of Panel Reports
Art. 16 DSU

Panel reports not

considered for adoption until 20 days after circulation

Adoption within 60

days of circulation, unless negative consensus.

Except if appealed

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Dispute Settlement in the WTO:

Appellate Review
WTO dispute settlement system innovation
Rules applicable to Appellate Review
Dispute Settlement Understanding (Article 17; Article 16.4; Articles 1, 3, 18 and 19)
Working Procedures for Appellate Review Rules of Conduct
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Dispute Settlement in the WTO:

Appellate Body Members
A standing body of 7 Members

Appointment by DSB
4-year term, renewable once

Requirements authority and expertise in international trade law unaffiliated with any government
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Dispute Settlement in the WTO:

Appellate Body Members
broadly representative of membership Art. 17.3 DSU

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Dispute Settlement in the WTO: Appellate Body

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Dispute Settlement in the WTO:

Article 17 DSU
WHAT? appeals limited to issues of law and legal

interpretations developed by the panel, including cross-appeals

WHO? appeal only open to parties to the dispute

WHEN? Appeal must be commenced no later than

60 days after the Panel Report is circulated to Members; takes 60-90 days
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Dispute Settlement in the WTO: Appellate Procedure

Notice of Appeal
Written Submissions
60/90 days

Oral Hearing

Exchange of Views
Circulation of the Report
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Dispute Settlement in the WTO: Adoption by the DSB

Adoption by the DSB of the Panel Report, as

upheld, modified or reversed, by the Appellate Body Report

Within 30 days circulation (60 days if no

appeal)
Negative consensus
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Dispute Settlement in the WTO: Implementation

What if it cannot be implemented

immediately?
Determination of reasonable period of time for implementation (Guideline: 15 months)

Is it properly implemented?

If there is disagreement, refer to compliance

panel (original panel preferred) under Article 21.5

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Dispute Settlement in the WTO: Surveillance and Implementation

Surveillance by the DSB: Status reports on

implementation
If Member fails to bring measure into conformity

within reasonable period of time, possibility of temporary measures : compensation or suspension of concessions (retaliation)

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Dispute Settlement in the WTO: Facts and Figures

Requests for consultations:

363

Mutually agreed solutions:

Panels established: Panels composed: Panel reports:

83
148 129 110

Appellate Body reports:

Compliance panels: Appeals from compliance panels: Arbitrations on "retaliation" : Authorizations to "retaliate" :

68
23 14 16 7

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Dispute Settlement in the WTO Selected Disputes in Progress

Continued EC Hormones

Dispute
New Bananas dispute

Zeroing disputes
EC/US cases on aircraft subsidies
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Dispute Settlement in the WTO Trends?

Increasing composition of panels by DG

Increasing number of compliance cases

Decreasing rate of appeal

Increasing use of dispute settlement system

by developing countries Private lawyers / pro bono / ACWL

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Dispute Settlement in the WTO: The Doha Mandate

Doha Declaration, paragraph 30: improvements and clarifications Original May 2003 deadline, extended to May 2004, then July 2004 Package. Negotiations suspended second half 2006, then resumed. Continued negotiations outside the single

undertaking, but on what basis and what timeframe?

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Dispute Settlement in the WTO: Selected Issues in the Negotiations

Streamlining procedures at consultation

and panel stages

Transparency Remand? Enhance Special & Differential treatment? Implementation
Sequencing Remedies (compensation, retaliation)

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Dispute Settlement in the WTO Final Thoughts

What changes needed and how extensive? Relationship dispute settlement/decision-

making?
Relationship dispute settlement/rule-making

(negotiations)?
Bottom line: system is being used and is

working -- security and predictability

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