Dispute settlement in the WTO
Encyclopedia
Dispute settlement is regarded by the World Trade Organization
(WTO) as the central pillar of the multilateral trading system
, and as the organization's "unique contribution to the stability of the global economy
". 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. A former WTO Director-General characterized the WTO dispute settlement system as "the most active international adjudicative mechanism in the world today."
The operation of the WTO dispute settlement process involves the parties and third parties to a case and may also involve the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts, and several specialized institutions. The General Council discharges its responsibilities under the DSU through the Dispute Settlement Body
(DSB). 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. The DSB meets as often as necessary to adhere to the timeframes provided for in the DSU.
by the Secretariat, sits to receive written and oral submissions of the parties, on the basis of which it is expected to make findings and conclusions for presentation to the DSB. The proceedings are confidential, and even when private parties are directly concerned, they are not permitted to attend or make submissions separate from those of the state in question. Disputes can also arise under Non-violation nullification of benefits claims.
The final version of the panel's report is distributed first to the parties; two weeks later it is circulated to all the members of the WTO. In sharp contrast with other systems, the report is required to be adopted at a meeting of the DSB within 60 days of its circulation, unless the DSB by consensus decides not to adopt the report or a party to the dispute gives notice of its intention to appeal. A party may appeal a panel report to the standing Appellate Body, but only on issues of law and legal interpretations developed by the panel. Each appeal is heard by three members of the permanent seven-member Appellate Body set up by the Dispute Settlement Body and broadly representing the range of WTO membership. Members of the Appellate Body have four-year terms. They must be individuals with recognized standing in the field of law and international trade, not affiliated with any government. The Appellate Body may uphold, modify or reverse the panel's legal findings and conclusions. Normally appeals should not last more than 60 days, with an absolute maximum of 90 days. The possibility for appeal makes the WTO dispute resolution system unique among the judicial processes of dispute settlement in general public international law.
Members may express their views on the report of the Appellate Body, but they cannot derail it. The DSU states unequivocally that an Appellate Body report shall be adopted by the DSB and unconditionally accepted by the parties, unless the DSB decides by consensus within thirty days of its circulation not to adopt the report. Unless otherwise agreed by the parties to the dispute, the period from establishment of the panel to consideration of the report by the DSB shall as a general rule not exceed nine months if there is no appeal, and twelve months if there is an appeal.
While such "retaliatory measures" are a strong mechanism when applied by economically powerful countries like the United States
or the European Union
, when applied by economically weak countries against stronger ones, they can often be ignored. This has been the case, for example, with the March 2005 Appellate Body ruling in case DS 267, which declared US cotton subsidies illegal. Whether or not the complainant has taken a measure of retaliation, surveillance by the DSB is to continue, to see whether the recommendations of the panel or the Appellate Body have been implemented.
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
(WTO) as the central pillar of the multilateral trading system
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
, and as the organization's "unique contribution to the stability of the global economy
World economy
The world economy, or global economy, generally refers to the economy, which is based on economies of all of the world's countries, national economies. Also global economy can be seen as the economy of global society and national economies – as economies of local societies, making the global one....
". A dispute arises when one member country
WTO accession and membership
All World Trade Organization members have joined the organization as a result of negotiation, and membership consists of a balance of rights and obligations. The process of becoming a World Trade Organization member is unique to each applicant country, and the terms of accession are dependent upon...
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. A former WTO Director-General characterized the WTO dispute settlement system as "the most active international adjudicative mechanism in the world today."
Dispute Settlement Understanding
In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes or Dispute Settlement Understanding (DSU) (annexed to the "Final Act" signed in Marrakesh in 1994). Pursuant to the rules detailed in the DSU, member states can engage in consultations to resolve trade disputes pertaining to a "covered agreement" or, if unsuccessful, have a WTO panel hear the case. The priority, however, is to settle disputes, through consultations if possible. By January 2008, only about 136 of the nearly 369 cases had reached the full panel process.| Duration of a Dispute Settlement procedure | |
|---|---|
| These approximate periods for each stage of a dispute settlement procedure are target figures The agreement is flexible. In addition, the countries can settle their dispute themselves at any stage. Totals are also approximate. |
|
| 60 days | Consultations, mediation, etc |
| 45 days | Panel set up and panellists appointed |
| 6 months | Final panel report to parties |
| 3 weeks | Final panel report to WTO members |
| 60 days | Dispute Settlement Body adopts report (if no appeal) |
| Total = 1 year (without appeal) | |
| 60-90 days | Appeals report |
| 30 days | Dispute Settlement Body adopts appeals report |
| Total = 1 year 3 months (with appeal) | |
| Source:Understanding the WTO: Settling Disputes - A unique contribution | |
The operation of the WTO dispute settlement process involves the parties and third parties to a case and may also involve the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts, and several specialized institutions. The General Council discharges its responsibilities under the DSU through the Dispute Settlement Body
WTO Dispute Settlement Body
The Dispute Settlement Body of the World Trade Organization makes decisions on trade disputes between governments that are adjudicated by the Organization...
(DSB). 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. The DSB meets as often as necessary to adhere to the timeframes provided for in the DSU.
From complaint to final report
If a member state considers that a measure adopted by another member state has deprived it of a benefit accruing to it under one of the covered agreements, it may call for consultations with the other member state. If consultations fail to resolve the dispute within 60 days after receipt of the request for consultations, the complainant state may request the establishment of a Panel. It is not possible for the respondent state to prevent or delay the establishment of a Panel, unless the DSB by consensus decides otherwise. The panel, normally consisting of three members appointed ad hocAd hoc
Ad hoc is a Latin phrase meaning "for this". It generally signifies a solution designed for a specific problem or task, non-generalizable, and not intended to be able to be adapted to other purposes. Compare A priori....
by the Secretariat, sits to receive written and oral submissions of the parties, on the basis of which it is expected to make findings and conclusions for presentation to the DSB. The proceedings are confidential, and even when private parties are directly concerned, they are not permitted to attend or make submissions separate from those of the state in question. Disputes can also arise under Non-violation nullification of benefits claims.
The final version of the panel's report is distributed first to the parties; two weeks later it is circulated to all the members of the WTO. In sharp contrast with other systems, the report is required to be adopted at a meeting of the DSB within 60 days of its circulation, unless the DSB by consensus decides not to adopt the report or a party to the dispute gives notice of its intention to appeal. A party may appeal a panel report to the standing Appellate Body, but only on issues of law and legal interpretations developed by the panel. Each appeal is heard by three members of the permanent seven-member Appellate Body set up by the Dispute Settlement Body and broadly representing the range of WTO membership. Members of the Appellate Body have four-year terms. They must be individuals with recognized standing in the field of law and international trade, not affiliated with any government. The Appellate Body may uphold, modify or reverse the panel's legal findings and conclusions. Normally appeals should not last more than 60 days, with an absolute maximum of 90 days. The possibility for appeal makes the WTO dispute resolution system unique among the judicial processes of dispute settlement in general public international law.
Members may express their views on the report of the Appellate Body, but they cannot derail it. The DSU states unequivocally that an Appellate Body report shall be adopted by the DSB and unconditionally accepted by the parties, unless the DSB decides by consensus within thirty days of its circulation not to adopt the report. Unless otherwise agreed by the parties to the dispute, the period from establishment of the panel to consideration of the report by the DSB shall as a general rule not exceed nine months if there is no appeal, and twelve months if there is an appeal.
Compliance
The DSU addresses the question of compliance and retaliation. Within thirty days of the adoption of the report, the member concerned is to inform the DSB of its intentions in respect of implementation of the recommendations and rulings. If the member explains that it is impracticable to comply immediately with the recommendations and rulings, it is to have a "reasonable period of time" in which to comply. If no agreement is reached about the reasonable period for compliance, that issue is to be the subject of binding arbitration; the arbitrator is to be appointed by agreement of the parties. If there is a disagreement as to the satisfactory nature of the measures adopted by the respondent state to comply with the report, that disagreement is to be decided by a panel, if possible the same panel that heard the original dispute, but apparently without the possibility of appeal from its decision. The DSU provides that even if the respondent asserts that it has complied with the recommendation in a report, and even if the complainant party or the panel accepts that assertion, the DSB is supposed to keep the implementation of the recommendations under surveillance.Compensation and retaliation
If all else fails, two more possibilities are set out in the DSU:- If a member fails within the "reasonable period" to carry out the recommendations and rulings, it may negotiate with the complaining state for a mutually acceptable compensation. Compensation is not defined, but may be expected to consist of the grant of a concession by the respondent state on a product or service of interest to the complainant state.
- If no agreement on compensation is reached within twenty days of the expiry of the "reasonable period", the prevailing state may request authorization from the DSB to suspend application to the member concerned of concessions or other obligations under the covered agreements. The DSU makes clear that retaliation is not favored, and sets the criteria for retaliation. In contrast to prior GATT practice, authorization to suspend concessions in this context is semi-automatic, in that the DSB "shall grant the authorization [...] within thirty days of the expiry of the reasonable period", unless it decides by consensus to reject the request. Any suspension or concession or other obligation is to be temporary. If the respondent state objects to the level of suspension proposed or to the consistency of the proposed suspension with the DSU principles, still another arbitration is provided for, if possible by the original panel members or by an arbitrator or arbitrators appointed by the Director-General, to be completed within sixty days from expiration of the reasonable period.
While such "retaliatory measures" are a strong mechanism when applied by economically powerful countries like the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
or the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
, when applied by economically weak countries against stronger ones, they can often be ignored. This has been the case, for example, with the March 2005 Appellate Body ruling in case DS 267, which declared US cotton subsidies illegal. Whether or not the complainant has taken a measure of retaliation, surveillance by the DSB is to continue, to see whether the recommendations of the panel or the Appellate Body have been implemented.