WTO Dispute Settlement System

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Settlement of Trade Dispute

Dr. Mrs. Vijaya KattiProfessor & Chairperson,IIFT

New Delhi


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Significance of WTOs DisputeSettlement Understanding

DSU: Termed as WTOs Most IndividualContribution

DSU procedure underscores the Rule ofLaw, makes the trading system moresecure

Nature of Dispute: (a) Adoption of trade

policy measure that violates a WTOAgreement; or (b) Not living up toobligation under a WTO Agreement


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GATT - WTO Differences

GATT

No time frames.

Rulings adoptedonly by consensus.Single party couldblock.

No effectivemonitoring andenforcement ofrulings.

WTO

Clear Time Tables.

Automatic adoption.Rejection only byconsensus.

DSB monitors howrulings are adopted.


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Nullification or Impairment

Art.XXIII, GATT: States may bringcomplaints if they consider that

benefits accruing to them underGATT are nullifiedor impaired

Breach of rules leads topresumption

of an adverse impact. Can berebutted by a defending party.


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Third Party

Members having substantialinterest in a matter can be a

third party, and have a right tobe heard by the Panel & makewritten submissions to the

Panel.


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Amicus Curiae

Art.13: Panel has right to seekinformation & technical advice fromindividual or body.

AB rulings: Any individual or body canmake submissions to the Panel. Panel hasdiscretion whether or not to considerthese.

Concerns: Interest groups fromdeveloped world will have greaterresources & access & prejudicedeveloping country interests.


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Stages of DisputeSettlement

I Consultation Stage: Upto 60 Days. Tosee if dispute can be avoided

II Appt of Panel: Upto 45 days + 6 mthsfor Panel to conclude

III Appeals from Panel to Appellate Body.To be decided within 60 days; max 90days

IV DSB to accept AB report within 30days. Rejection possible only byconsensus


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After DSB Adoption

Losing Party to bring its policy in line withthe decision. Prompt compliance reqd.Party to tell DSB its intention of

compliance within 30 days. If immediatecompliance impractical, DSB will giveMember reasonable time period to do so.

If dispute whether measures adopted

comply with DSB ruling, a CompliancePanel will hear the matter & rule within90 days.


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After DSB Adoption (Contd)

Failure to act Adequate Compensationto Complaining party/parties

Amount of Compensation throughnegotiations

If no satisfactory agreement, complainingside may seek DSBs permission for ltdtrade sanctions

Trade sanctions: Suspension ofconcessions or obligations. In principle, inthe same sector as the dispute. If this isnot effective or practical, action underanother agreement.


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Suspension of Concessions

Level of suspension of concessionsshall be equivalentto the level of

nullification or impairment If party objects to level determined,

matter shall be referred to

arbitration by the original panel.


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Flowchart of DisputeSettlement

Art 1 if DSU states that all the CoveredAgreementsincluded in Annex I of the Marrakesh Agreement wouldbe subject to dispute settlement.


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Art 2 establishes the Dispute Settlement Body (DSB) toadminister the rules and procedures except those

otherwise provided in the covered agreement


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Art 3 states that Members shall affirm adherence to theprinciples for the management of disputes heretofore

applied under Articles XXII and XXIII of GATT47 andthe rules and procedures as further elaborated andmodified.


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Clause (3) of Art 3 - prompt settlement of situation sinwhich a Member considers that any benefits accruing to it,directly or indirectly, under the covered agreement are

impaired by measures taken by another member is essentialto the effective functioning of the WTO. (it may be recalledhere that GATT dispute settlements took inordinately longtime to be settled.

In clauses (4) and (5) mutual consultations prior toregistering a dispute are also provided for. Clause (7) of Art3 is more categorical stating that a Member shall exerciseits judgement as to whether action under these procedureswould be fruitful


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Clause 8 of Art 4 of significance to developing countries. It providesfor cases of urgency including those of perishable products. Membersare expected to enter into consultations within a period of no morethan 10 days after the date of receipt of the request. If the

consultation fails to settle the dispute within a period of 20 days afterthe date of receipt of the request, the complaining party may requestthe establishment of panel. Clause 9 of this Art stipulates that thepanels and the Appellate Body shall make the necessary effort toaccelerate the proceedings.


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Art 5 envisages good offices conciliation andmediation for procedures that are undertakenvoluntarily if the parties to the dispute so

agree. Such proceedings shall be confidential.The complaining party must allow 60 daysafter the date of request for consultationbefore requesting for establishment of a

panel. The complaining party may seekestablishment of a panel if the parties to thedispute jointly find that the good officesconciliation on mediation process have failed.


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Art 6 provides for the establishment of panels if acomplaining party requests. This request shall be made inwriting.

Art 7 stipulates the terms of reference of the panels. Art 8provides for the composition of the panels. They are to becomposed of well qualified governmental and/or non-governmental individuals.


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Art 9 provides that a single panel may beestablished when more than one Member

request the establishment of a panel. Thissingle panel shall organise its examinationand present its findings to the DSB insuch a manner that the rights which the

parties to the dispute would have enjoyedhad separate panels examined thecomplaints are in no way impaired.


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Art 10 takes care of the interests of the parties to adispute and those of other members under coveredagreement. All issues in the dispute shall be fully taken

into account. Art 11 stipulates the functions of the panels. Broadly, the

function of the panel is to assist the DSB in discharging itsresponsibilities under this Understanding and the coveredagreement.


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Art 12 spells out the detailed procesure.Clause 8 of this Art gives the time table

for the panels working. The general ruleis that an issue taken up by a panelshould not exceed six months of itsconsideration. In cases of urgency

including those relating to perishablegoods the panel shall aim to issue itsreport within a period of three months.


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Clause 10 of Art 12 provides for giving sufficient time for adeveloping country member to prepare and present itsargumentation.

Clause 11 of the same Article stipulates that when adeveloping country or developing countries are a party to adispute the panel has to explicitly indicate the form in whichaccount has been taken of the relevant provisions on special

and differential treatment to the developing country Memberthat forms part of the covered agreements which have beenraised by the developing country member in the course ofthe dispute settlement procedure.


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Art 13 provides for right to seek informationfrom any member or individual and Art 14emphasises the need for confidentiality. Art 15

states the stages of interim review by thepanel.

Art 16 gives 20 days to the Members before thepanel reports are adopted by the DSB.

Significantly, it provides Members atleast 10days for their objections to the panel reportsbefore the DSB considers them. Clause 4 of Art16 expects that the panel reports should be

adopted within 60 days.


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Art 19 states that when a panel or the Appellate Bodyconclude that a measure is inconsistent with the coveredagreement, it shall recommend that the Member concerned

bring the measure in conformity with the agreement.Art 20 spells out the time period. Adoption of the panel orAppellate Body report is not expected to exceed nine monthswhen there is no appeal or 12 months when the report isunder appeal.


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Art 21 details out the procedures for surveillance ofimplementation of the recommendations and rulings.

The most controversial Article is Article 22 which embodiesthe principle of cross retaliation. This has legitimised anduniversalised Section 301 of the U.S. Trade andCompetitiveness Act.


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Art 22, Clause (1) emphasizes theimportance of full implementation of a

recommendation to bring measures inConformity with covered agreement.Compensation and suspension ofconcessions is not preferred.

Compensation is voluntary and if grantedshall be consistent with coveredagreements.


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The emphasis has been on reasonable period of time. Ifno satisfactory compensation has been agreed within 20days after the date of expiry of the reasonable period of

time, any party having invoked the dispute settlementprocedures may request authorisation from the DSB tosuspend the application of the Member concerned orconcessions or other obligations under coveredagreements.


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Clause 3 of Art 22 gives the principles to beobserved by the complaining party whilesuspending concessions:

(a) General principle is that thecomplaining party should first seek to suspendconcession or other obligations with respect to

the same sector (s) as the panel or AppellateBody has found a violation or other nulificationor impairment.


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(b) If that party considers that it is not practicable or effective tosuspend concessions of other obligations with respect to samesector(s) it may seek to suspend concessions or other obligations inother sectors under the same agreement, and that if circumstancesare serious enough if may seek to suspend concessions or otherobligations under another covered agreement.

(c) In applying the above principles, that party shall take into accountthe trade in the sector or under the agreement which the panel orAppellate body has found a violation or other nullification orimpairment and the importance of such trade to the party; (ii)broader economic consequence of suspension of concession or otherobligation.


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Art 24 provides for special procedures involving the leastdeveloped country members. Clause 1 of the Articleemphasises that particular consideration shall be given to the

special situation of the least developed country members. Itexhorts members to exercise due restraint in raising mattersunder the procedures involving such a country. Further, italso exhorts Members to exercise due constraint in asking forcompensation if nullification or impairment is found to resultfrom a measure taken by a least developed country member.


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Clause 2 of Art 24 provides for good offices of theDirector-General or the Chairman of DSB if a request ismade by a least developed country Member when

consultations between the contending parties do notcome up with a satisfactory solution. The WTO dispute settlement mechanism recognises the

role of arbitration as an alternative means of settlement.Art 25 states the WTOs approach to arbitration. Clause 2of the Article states that resorting to arbitration shall besubject to mutual agreement of the parties which shallagree on the procedure to be followed.


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THANK YOU

Documents

WTO Dispute Settlement System