DISPUTE SETTLEMENT MECHANISM UNDER WTO

LIST OF NOTIFICATIONS REPRODUCED IN THE <!--[if gte mso 9]> DISPUTE SETTLEMENT MECHANISM UNDER WTO By Amar Farooq, M.A. LL.B., Law Officer, Punjab Irrigation and Drainage Authority, Lahore The World Trade Organization (WTO) is the only Global International Organisation dealing with the rules of trade between Nations. At its heart are the -WTO agreements, negotiated and signed by the bulk of the world's trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. The dispute settlement procedure is the WTO's most individual contribution to the stability of the global economy. Without enforcement, the rules-based system would be worthless. The WTO's procedure underscores the rule of law, * Former. Editor Urdu Nama. Official Language Committee Punjab, Services and General Administration Department, Government of the Punjab, Civil Secretariat, Lahore and has obtained D.I.T.L- Post LL.B Diploma in International Trade (W.T.O. Laws). D.T.L- Post LL.B Diploma in Taxation Laws, P.G.D.I.A-Post Graduate Diploma in International Affairs, D.L.L.- Post LL.B. Diploma in Labour Laws, D.E.L- Post LL.B Diploma in Environment Laws and D.I.P.L- Post LL.B Diploma in Intellectual Property Laws. and it makes the trading system more secure and predictable. It is clearly structured, with flexible timetables set for completing a case. First rulings arc made by a panel. Appeals based on points of law are possible. All final rulings or decisions are made by the W'1'O's full membership. No single country can block these. The WTO's EDGE ON OLD GATT The Dispute Settlement Understanding (DSU) is often seen as one of the most important achievements in the World Trade Organization (WTO) Agreement. While the GM-1' also contained provisions for conflict resolution, the DSU contains a number of innovations. In particular, it is generally seen as being superior to its predecessors in terms of the clarity of its provisions concerning procedural matters, and its provisions establishing a monitoring scheme to overview implementation. The WI'O system of settling the dispute is much faster and more automatic than the system in the old GAIT. Without a means of settling disputes, the rules-based system would be worthless because the rules could not be enforced. In WTO's procedure for settling disputes first rulings are made by a panel and endorsed (or rejected) by the WTO's full membership. Appeals based on points of law are possible. However, the point is not to make rulings but the priority is to settle disputes, through consultations if possible. By mid-March, 2001, 38 out of 228 cases had been settled out of Court without going through the full panel process. DISPUTE SETTLEMENT METHODS The WTO dispute settlement system provides for more than one dispute settlement method. The DSU allows for the settlement of disputes through consultations (Article 4 of the DSU): through good offices, conciliation and mediation (Article 5 of the DSU), through adjudication by ad hoc panels and the Appellate Body (Articles 6 to 20 of the DST') or through arbitration (Article 25 of the DSU). Consultations As discussed above, the DSU expresses a clear preference for solutions mutually acceptable to the parties to the dispute, rather than solutions resulting frorm adjudication. Therefore, resort to adjudication by a panel must be preceded by consultations between the complaining and responding parties to the dispute with a view to reaching a mutually agreed solution. Consultations are basically a pre-litigation, diplomatic method of dispute settlement. Adjudication if consultations fail to resolve the dispute, the complaining party may resort to adjudication by a panel and, if either party to the dispute appeals the findings of the panel, the Appellate Body. Adjudication may be termed as a quasi-judicial method of dispute settlement. Arbitration The dispute settlement methods set out in Articles 4 to 20 of the DSU (consultations and adjudication by panels and the Appellate Body) are by far the most frequently used methods. However, the WTO dispute settlement system provides for expeditious arbitration as an alternative means of dispute settlement. Pursuant to Article 25 of the DSU, parties to a dispute arising under a covered agreement may decide to resort to arbitration, rather than follow the procedure set out in Articles 4 to 20 of the DSU. In that case, the parties must clearly define the issues referred to arbitration and agree on the particular procedure to be followed. (Articles 25.1 and 25.2 of the DSU). The parties must also agree to abide by the arbitration award. (Article 25.3 of the DSU). Pursuant to Article 3.5 of the DSU, the arbitration award must be consistent with the covered agreements. Good Offices, Conciliation and Mediation The WTO dispute settlement system also provides, pursuant to Article 5 of the DSU, for the possibility for the parties to a dispute if they all agree to do so to use good offices, conciliation or mediation to settle a dispute. Institutions of WTO Dispute Settlement Among the institutions involved in WTO dispute settlement, there is a distinction between the political institutions of the WTO and in particular, the Dispute Settlement Body, and independent, judicial-type institutions such as ad hoc dispute settlement panels and the standing Appellate Body. While the WTO has entrusted the adjudication of disputes to panels at the first instance level and the Appellate Body at the appellate level, the Dispute Settlement Body continues to play an active role in the WI'O dispute settlement system. DSB The Dispute Settlement Body, or DSB, is an alter ego of the General Council of the W1'O. The General Council convenes as the DSB to administer the rules and procedures of the DSU. (Article 11.2 of the WTO Agreement and Article 2.1 of the DSU.) Article 2.1 of the DSU states:-‑ ... the DSB shall have the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions and other obligations under the covered agreements. Article 2.4 of the DSU stipulates that where the DSU provides for the DSB to take a decision, such a decision is always taken by consensus. (Footnote 1 to the DSU states: "The DSB shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present the meeting of the DSB when the decision is taken, formally objects to the proposed decision"). It is important to note, however, that for most key decisions, such as the decision on the establishment of a panel, the adoption of panel and Appellate Body reports and the authorization of suspension of concessions and other obligations, the consensus requirement is in fact a "reverse" or "negative" consensus requirement. (Articles 6.1, 16.4, 17.14 and 22.6 of the DSU. Other decisions of the DSB,. such as the appointment of the Members of the Appellate body are taken by "normal" consensus.) The "reverse" consensus requirement means that the, DSB is deemed to take a decision unless there is a consensus among WTO Members not to take the decision. Since there will usually be at least one Member with a strong interest in that the DSB takes the decision to establish a panel, to adopt the panel and/or Appellate Body reports or to authorize the suspension of concessions, it is very unlikely that there will be a consensus not to adopt these decisions. As a result, decision-making by the DSB on these matters is, for all practical purposes, automatic. Furthermore, it should be rioted that the DSU provides for strict "timeframes" within which decisions on these matters need to be taken. (For example, the decision to adopt an Appellate Body report shall be taken within 30 days following its circulation to the Members (Article 17.14 of the DSU).. If there is no meeting of the DSR scheduled during this period, such a meeting shall be held for this purpose (footnote 8 to the DSU). Panels At the request of a complaining party, the DSB will establish a panel to hear and decide a dispute. The DSB will do so by reverse consensus. The establishment of a panel is therefore "automatic". As a rule, panels consist of three persons, who are not nationals of the Members involved in the dispute. These persons are often trade diplomats or government officials but also academics and practising lawyers regularly serve as panelists. The terms of reference of the panel are determined by the request for the establishment of a panel, which identifies the measure at issue and the provisions of the covered agreements allegedly breached. It is the task of panels to make an objective assessment of the matter, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements. Appellate Body The Appellate Body hears appeals from the reports of dispute settlement panels. Unlike panels, the Appellate Body is a permanent, standing international tribunal. It is composed of seven persons, referred to as Members of the Appellate Body. Members of the Appellate Body are appointed by the DSB for a term of four years, once renewable. Only the complaining or responding party can initiate appellate review proceedings. Appeals are limited to issues of law covered in the panel report or legal interpretations developed by the panel. The Appellate Body may uphold, modify or reverse the legal findings and conclusions of the panel that were appealed. Other Institutions Apart from the DSB, panels and the Appellate Body, there are a number of other institutions and persons involved in the WTO's efforts to resolve disputes between its Members. 'These institutions and persons include arbitrators under Articles 21.3, 22.6 or 25 of the DSU, the Textile Monitoring Body under the ATC, the Permanent Group of Experts under the SCM Agreement. Experts and Expert Review Groups under Article 13 of the DSU and Article 11.2 of the SPS Agreement, the Chairman of the DSB and the Director-General of the WTO. Furthermore, the WTO Secretariat and the Secretariat of the Appellate Body play important roles in providing administrative and legal support to panels and the Appellate Body respectively. BASIC PRINCIPLES FOR SETTLING DISPUTES WTO members have agreed that if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. That means abiding by the agreed procedures, and respecting judgments. Typically, 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 third group of countries can declare that they have an interest in the case and they have some rights. The agreement on settling the disputes emphasizes that prompt settlement is essential if the W'I'O is to function effectively. It sets out inconsiderable detail the procedures and the timetable to be followed in resolving 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), then the case should take three months less. The Uruguay Round Agreement also made it impossible for the country losing a case to block the adoption of the ruling. ESTABLISHMENT OF DISPUTE SETTLEMENT BODY (Article 2) (Legal Text) 1. The Dispute Settlement Body is hereby established to administer these rules and procedures and, except as otherwise provided in a covered agreement, the consultation and dispute settlement provisions of the covered agreements. Accordingly, the DSB shall have the authority to establish panels, adopt, panel and. Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorise suspension of concessions and other obligations under the covered agreements. With respect to disputes arising under- a covered agreement which is a Plurilateral Trade Agreement, the term "Member" as used herein shall refer only to those Members that are parties to the relevant Plurilateral Trade Agreement. Where the DSB administers the dispute settlement provisions of a Plurilateral Trade Agreement, only those Members that are parties to that Agreement may participate in decisions or actions taken by the DSB with respect to that, dispute. 2. The DSB shall inform the relevant WTO Councils and Committees of any developments in disputes related to provisions of the respective covered agreements. 3. DSB shall meet as often as necessary to carry out its functions within the time-frames provided in this Understanding. 4. Where the rules and procedures of this Understanding provide for the DSB to take a decision, it shall do so by consensus. (Annex 2 Understanding on Rules and Procedures Governing the Settlement of Disputes). HOW ARE DISPUTES SETTLED? (THE PROCEDURE AND DIFFERENT STAGES) Settling disputes is the responsibility of the Dispute Settlement Body (the General Council in another. guise). The Dispute Settlement Body has the sole authority to establish "panels" of experts to consider the case, and to accept or reject the panels' findings or the results of an appeal. It monitors the implementation of the rulings and recommendations, and has the power to authorize retaliation when a country does not comply with a ruling. There are four stages in WTO dispute settlement proceedings which arc fellows:-‑ 1. Consultations 2. Panel Proceedings 2. Appeals/Review 4. Implementation of the Recommendations and Rulings FIRST STAGE: CONSULTATION (up to 60 days). Before taking any other actions the countries in dispute have to talk to each other to see if they can settle their differences by themselves. If that fails, they can also ask the WI'O Director-General to mediate or try to help in any other way. The actual grounds for consultation depends on the specific agreement, but are generally those of GATT Article XXIII. SECOND STAGE: THE PANEL (ARTICLE 6) (up to 45 days for a panel to be appointed, plus 6 months for the panel to conclude). If consultations fail the complaining country can ask for a panel to be appointed. The country "in the dock" can block the creation of a panel once, but when the Dispute Settlement Body meets for a second time, the appointment can no longer be blocked (unless there is a consensus against appointing the panel). Officially, the panel is helping the Dispute Settlement Body to make rulings or recommendations. As the panel's report can only be rejected by consensus in the Dispute Settlement Body, its conclusions are difficult to overturn. The panel's findings have to be based on the agreements cited. The panel's final report should normally be given to the parties to the dispute within six months. In cases of urgency, including those concerning perishable goods, the deadline is shortened to three months. NATURE OF PANELS The panels are like tribunals. But unlike in normal tribunal, the panelists are usually chosen in consultation with the countries in dispute. If the two sides cannot agree then the WTO Director General, appoints them. This happens rarely. Panels consist of three or five experts from different countries who examine the evidence and decide who is right and who is wrong.. The panel's report is passed to the dispute settlement body, which cannot reject the report on consensus. Panelist can be chosen from a permanent list of well- qualified candidates, or elsewhere. They serve in their individual capacities. They cannot receive an instruction from any government. The agreement describes in some detail how the panels are to work. The main stages are: 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.