Dispute Settlement

Mukhdoom Waseem Qureshi

Attorney-At-Law (LLM)

University Of South Asia Lahore Pakistan.

IDEAL LEGAL CONSULTANTS PAKISTAN

CONTACT: +92-334-9990969

E-mail; waseem_qureshi@hotmail.com,www.ideallegalconsultants.org

Historical development of the WTO dispute settlement system The (WTO) dispute settlement system is often praised as one of the most

important innovations of the Uruguay Round (1986-1994). This should not, however, be misunderstood to mean that the WTO dispute settlement system was a total innovation and that the previous multilateral trading system based on GATT 1947 did not have a dispute settlement system.

On the contrary, there was a dispute settlement system under GATT 1947 that evolved quite remarkably over nearly 50 years on the basis of Articles XXII and XXIII of GATT 1947. Several of the principles and practices that evolved in the GATT dispute settlement system were, over the years, codified in decisions and understandings of the contracting parties to GATT 1947. The current WTO system builds on, and adheres to, the principles for the management of disputes applied under Articles XXII and XXIII of GATT 1947 (Article 3.1 of the DSU). Of course, the Uruguay Round brought important modifications and elaborations to the previous system.

How Dispute Arises & Settle 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.

Dispute Settlement underGATT,1947

Shortcomings of the GATT DSS Appointment of panel, adoption of rulings, imposition of sanctions: done

through positive consensus

No detailed procedures

No fixed timetable

Rulings easier to block

Cases dragged on for years

Very limited rules

Overall an inefficient system; not very popular

Dispute Settlement under WTO: Instruments

Article XXII and XXIII of GATT,1947

Understanding on Rules and Procedures Governing the Settlement of Disputes

Few specific rules in other WTO agreements

Dispute Settlement under WTO: Improvements over GATT, 1947 It remedies the inherent defects of the GATT DSS Introduces the negative consensus rule Resulting in automatic establishment of panel & appellate body (AB), automatic

adoption of panel/ AB reports and automatic authorization of countermeasures against the non-complying party

Integrated framework applying to all agreements with only minor variations Provides more detailed procedures for each stage of dispute Establishes specific time frames and deadlines for prompt settlement of disputes Provision for appellate review Overall an efficient system Effectively used by members to settle more than 300 disputes in the last 12

years.

Structure of the WTO DSS Ministerial Conference: top most decision making body of the WTO

The DSB is the administrative body which handles Day-to-day work of dispute settlement and comprises of all WTO member countries.

The DSB reports to the Ministerial Body.

DSB comprises of ad hoc Dispute Panels and a standing Appellate Body (AB)

Methods of WTO dispute settlement: Consultation or negotiations

Adjudication by panel and the Appellate body

Arbitration

Good office, conciliation and Mediation

Legal Effect Panel/Appellate Body Reports Report becomes binding after adoption by the DSB Reports binding only on the Parties to the dispute Since reports relate to specific matters in the dispute between the Parties to

the dispute: Reports have no precedent value However Panels and Appellate Body accord due deference to previous

Reports for the purposes of: Enhancing the “security and predictability” of the multilateral trading

system (Art. 3.2, DSU) Upholding the “legitimate expectations” created among the WTO Members

from previous adopted Reports (AB Report, Japan Alcoholic Beverages II

Dispute Settlement Panel: Function and Composition Quasi-judicial body, similar to domestic tribunals

Adjudicates disputes in the first instance

No permanent panel at the WTO; different panel composed for each dispute

Normally composed of three( in some cases five) experts on an ad hoc basis

Selected by the DSB in consultation with the disputing parties, possibly from the indicative list maintained by the WTO Secretariat

Preferably one member is from a developing country and the other two from countries not party to dispute.

Panel reviews the factual and legal aspects of the case, records its findings and makes recommendations

On acceptance by the DSB, the Panel report becomes binding on the parties

Dispute Settlement AB: Functions and Composition Unlike Panel, AB is a permanent body of seven members

Reviews legal aspects of reports issued by the Panel.

AB members appointed by the DSB by consensus(Art.2.4 DSU) for a four years term and can be reappointed once (Article 17.2 DSU)

AB members to be persons of recognized 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 (Art. 17.3 DSU)

AB members to be broadly representative of the membership of the WTO (Art. 17.3 DSU)

Legal Basis for a Dispute Violation The DSU is primarily concerned with settlements of disputes that involve an

infringement of an obligation assumed under one or more of the WTO agreements.

Non Violation and Situation Complaints: GATT Art. XXIII(1)(b): When a benefit under the WTO Agreements, accruing

to a Member directly or indirectly, is nullified or impaired as a result of another Member country applying a measure, irrespective of whether or not such measure conflicts with any of the WTO Agreements (Non Violation)

GATT Art. XXIII(1)(c): extends such nullification or impairment as resulting from a broader range of circumstances, captured by the phrase ‘existence of any other situation’. (Situation Complaint)

Non-Violation or Situation Complaints Non Violation

The burden of proof is on the complainant, who must present a “detailed justification” of the complaint by:

Defining the “benefit” being nullified or impaired

Defining the “measure” responsible

Showing a casual relationship between the measure and the nullification or impairment Eg. Photographic Paper, Asbestosis

Where the elements of a non-violation complaint are proved, there is no obligation to withdraw the measure – only that the offending member must make a “mutually satisfactory adjustment.”

Situation

All other nullification or impairment of benefits are deemed to be impeded by “any situation.”

Basic Stages of Dispute Settlement The (national) dispute

initiation stage. Consultation stage Panel stage Appellate review stage Adoption Implementation and

Surveillance

Basic Stages of Dispute Settlement: Dispute Initiation Complaints made: By a particular Business or Industry To its government Against trade restrictive measures by a WTO member country Concerned Government may conduct an internal enquiry to ascertain the

legality of the complained measures On being satisfied it may decide to challenge the measure of that WTO

member country

Basic Stages of Dispute Settlement: Consultations Request for Consultations: In writing & state the reasons for request Forms Legal basis of complaint (Art.4.4 DSU) Notified to DSB and concerned Councils & committees (Art. 4.4 DSU) Typically take place in Geneva & are Confidential( Art. 4.6 DSU) Dispute not resolved: Request DSB for establishment of Panel

Basic Stages of Dispute Settlement: Request for establishment & Constitution of Panel Request for establishment of panel initiates the adjudication process Request to be made to the Chairman of the DSB Indicate whether: consultations were held, identify the specific measures at issue, and provide a brief summary of the legal basis of the complaint (Article 6.2 of the

DSU). Constitution of Panel: The WTO Secretariat proposes names, parties either agree or for compelling reasons

oppose( Art.8.6 DSU) If panel not composed within 20 days of its establishment by this method, either

party may request the Director General (DG) WTO to compose the panel. The DG appoints the panel members in consultation with the chairperson of the DSB

and the chairperson of the relevant Council or Committee, after consulting with the parties, within 10 days after sending this request to the chairperson of the DSB. ( Art.8.7 DSU)

Basic Stages of Dispute Settlement:Panel Proceedings In accordance with working procedures ( DSU appendix III)

Fixing of Terms of references

Oral & written submissions of the parties

Meetings of parties & Panel

Interim Report & review

Final report issued to the parties within 6 months of the terms of reference

Final report submitted to DSB

Basic Stages of Dispute Settlement:Panel Proceedings (Cntd.)

Third parties may also participate, provided they establish “substantial interest”.

3rd Parties have limited rights of participation & right to seek information

Amicus Curiae briefs may be entertained on Panels discretion.

Expert review groups may be appointed by the Panel ( DSU appendix IV)

Confidentiality to be maintained.

Basic Stages of Dispute Settlement:Appeal

Standing Appellate Body

Only parties to dispute can appeal

Appeal limited to issues of law and legal interpretations developed by the panel( Art. 17.6 DSU)

AB may uphold, modify or reverse the legal findings & conclusions of the panel (Art. 17.13 DSU)

Basic Stages of Dispute Settlement:Appeal (Contd.)

Panel report adopted by the DSB within 60 days after the circulation to members unless:

Party notifies decision to appeal DSB decides by consensus not to adopt it AB report adopted by the DSB within 30 days after circulation to

members. Where violation of WTO Agreements is found, panel/AB may:

(Art.19.1 DSU) Recommend members to bring the measures in conformity Suggest ways of implementing the recommendations

Dispute Settlement under WTO: Implementation & Surveillance Panel/AB report to be adopted within “reasonable period of time” (Art. 21.3

DSU): RPT proposed by member & approved by DSB, or mutually agreed by the parties, or determined through arbitration (15 months) Compliance review: (Art. 21.5 DSU) must be decided by original panel, if

possible. Status report by the member on progress in surveillance

Remedies for Non- compliance On failure to bring the measure in conformity within reasonable

period of time, possibility of: Compensation; or Suspension of concessions equivalent to the level of nullification

or impairment Authorization to suspend within 20 days of expiry of reasonable

period of time

Remedies for Non- compliance Compensation: if implementing party fails to achieve full compliance within a

reasonable period of time (Art. 22.2 of DSU): Has to enter negotiations with the complaining party to ascertain

mutually acceptable compensation Compensation not in terms of monetary payments Respondent supposed to offer a benefit (e.g. tariff reduction)

Suspension of concessions in (Art. 22.2 DSU): Same sector, or Other sector. Or Other agreement. Arbitration on the level of suspension (Art. 22.6 DSU)

Rules of Interpretation WTO Agreement points two sources of law:

The covered agreements The international agreements incorporated in the covered agreements

In addition, the decisions, procedures and customary practice followed by the GATT Contracting Parties throughout the GATT years shall also be followed( Art. XVI.1, WTO Agreement)

WTO adjudicating bodies have identified the following interpretative elements: Panel/Appellate Body reports Decisions & recommendations by various WTO organs International agreements not reflected in the WTO agreement Customary international law (e.g. Art. 31 of the Vienna Convention on

Law of Treaties) The travaux preparatoires of the WTO Agreement

Amicus Curiae Briefs Acceptance of amicus curiae briefs from third parties- A

controversial issue Recent rulings of Appellate Body-Clearly show that the power of

Panels/Appellate Body to accept amicus curiae briefs is an established principle

Shrimp-Turtle Case: Appellate body stated that: Art. 13.1 of the DSU confer power to “seek” information from

any individual/body Power to “seek” shall be interpreted to include the power to

accept and consider amicus curiae briefs. Two methods for submission & consideration of amicus curiae

briefs( EC-Sardines): An amicus curiae brief can be submitted to Panel/Appellate

Body with the consent of participating WTO Members. Private organizations/individuals can submit amicus curiae

briefs directly to the Panel (Art. 13.1) & to the Appellate Body (Art. 17.9, DSU)

Whether to accept/consider amicus curiae is up to the Panels/Appellate Body’s discretion.

Standard of Review Art. 11 of DSU:

Panel should make an objective assessment of matter before it Including and objective assessment of the facts of the case; and The applicability & conformity with the relevant covered agreements. Panel must observe due process of law ( Appellate Body in Chile Price –Bands

Case) Art. 17.6(i) of Antidumping Agreement-Special standard of review for antidumping

proceedings: Panel not to overturn the proper establishment of facts and unbiased &

objective evaluation made by national antidumping authorities Art. 17.6(ii) of Antidumping Agreement-National Deference principle:

If in Panel’s view a relevant provision admits two permissible interpretation, it shall accept the interpretation which supports the finding of the concerned national antidumping authority.

Art. 17.6 of the Antidumping Agreement is supplementary to Art. 11 of DSU (Appellate body in US-Hot-rolled steel)

Characteristics of an Ideal DSM Clear procedure

Effective administration

Impartial, Speedy, Transparent, Inexpensive

Upholding principles of Pvt. and Public International Law

Develops coherent jurisprudence

WTO DSS: India’s Experience India is one of the leading developing country users of the WTO DSS Involved in total of 84 cases at the WTO DSS: As complainants in 17 cases As respondents in 19 cases As third party in 48 cases

Mixed success at the DSS: India-QRs Case: India forced to dismantle QR regime on complaint from US India-Patents Case: India forced to change its IPR law regime and bring it in

consonance with the TRIPS on complaint from EC EC-Bed Linen Case: India’s claim that practice of “zeroing” while establishing

the existence of margins of dumping was inconsistent with Anti-Dumping agreement was held to be correct and EU was forced to change its measures.

EU-GSPs Case: No clear benefit to India, even though the measure complained against was held to be WTO non-compliant

WTO DSS: India’s ExperienceOngoing Dispute India is presently involved in a dispute with the USA (WT/DS360) concerning the

imposition of “Additional Duties” on imports of alcoholic beverages and certain identified industrial & agricultural products

Initial complaint was brought by the European Communities against levy of “Additional Duties” on imports of Alcoholic Beverages under Section 3(1) & 3(5) of the Customs Tariff Act,1975(WT/DS356); USA joined as a complainant later on

Following consultations India removed the “Additional duties” on alcoholic beverages levied under Section 3(1), Customs Tariff Act,1975

Thereafter EC requested the Panel to suspend the proceedings USA decided to continue with the Panel proceedings In substance the dispute now concerns the “Additional Duties” imposed under

Section 3(5) of the customs Tariff Act,1975

Ongoing Review of the WTO DSS Broad consensus that DSS has worked reasonably well

Nevertheless review is desirable

As agreed by the Members during the Uruguay Rounds, review of the DSU started in 1997-not part of Doha Round “Single Undertaking”

Has not resulted in any agreed outcome

Doha Ministerial Declaration contained a mandate for “negotiations on improvements and clarifications” of the DSU.

No results till date, though countries have made their submissions on desired changes in the system.