Geza Feketekuty and William W. Monning
WTO DISPUTE SETTLEMENT SYSTEM: HOW IT WORKS
Consultant, Malmgren Golt Kingston Ltd., London
Coverage of WTO Disputes Procedures
1. The World Trade Organization (WTO),
established in 1994, incorporates and extends the body of agreements
which constituted the former General Agreement on Tariffs and Trade
2. The WTO, like the GATT before it, is
essentially a contractual framework between consenting member
countries. It codifies their rights and obligations in international
trade and is underpinned by detailed provisions for the settlement of
disputes. While the disputes system is now more rigorous and imposes
stronger obligations on parties than formerly, its main object is
still to encourage parties to settle differences by negotiation in the
light of their rights and obligations as determined by the WTO.
Retaliation against the trade of an opposing party is still an
unwelcome option, to be used only as a last resort.
3. The WTO Understanding on Rules and
Procedures Governing the Settlement of Disputes (the
"Understanding") is an integral part of the WTO Agreements.
It applies to all those Agreements and is binding on all WTO members,
subject to two exceptions.
4. The first exception is that in the case of
the four so‑called "Plurilateral Trade Agreements",
which are not signed by all WTO members, the application of the
Understanding is subject in each case to a decision by the parties to
the Agreement setting out the terms for such application, plus any
additional rules or procedures which the parties decide to adopt for
handling disputes under that Agreement. The four Agreements concerned
are those on Government Procurement and Trade in Civil Aircraft, the
International Dairy Agreement and the International Bovine Meat
Agreement. The second exception is that several of the more technical
Agreements which all WTO members have signed - such as those on
Technical Barriers to Trade ("standards"), Antidumping
measures or Subsidies and Countervailing Measures ‑ include
extra provisions relating to the conduct of disputes on matters which
they cover. There is no need for present purposes to go into more
detail on these exceptions.
5. Subject to the exceptions, the
Understanding specifies that only the procedures which it sets out may
be used to determine whether breaches of WTO obligations have occurred
or whether the benefits of members have been nullified or impaired.
Members may not determine unilaterally that their WTO rights have been
infringed, nor resort unilaterally to trade retaliation.
6. The following description covers the basic
procedures and timetables in dispute cases. It disregards a number of
qualifications and points of detail.
7. The WTO incorporates a Dispute Settlement
Body (DSB) which administers the disputes provisions. The DSB has
authority to establish disputes panels, adopt panel reports, maintain
surveillance of implementation of its own rulings and recommendations,
and in the last resort authorize suspension of concessions (ie trade
8. Subject to the procedures described below,
the normal course when WTO members refer a dispute to the Organisation
is for a panel to be set up to study the case, report to the DSB with
findings and conclusions as to the compliance of the parties with WTO
rights and obligations, and where appropriate make recommendations. A
panel usually has three members, who have to be well‑qualified
governmental or non‑governmental individuals. In the case of
disputes under the General Agreement on Trade in Services (OATS) they
have to be experienced in trade in services andfor associated
regulatory matters. They serve in a purely personal capacity and are
drawn from a roster of suitable people nominated by WTO member
governments which is held by the WTO Secretariat
9. In addition an Appellate Body has been set
up, comprising seven members with "demonstrated expertise"
in law and international trade. The members broadly represent the
geographical spread of WTO membership. They are appointed for four
years, in each case with the possibility of one reappointment for a
further four years. Three will be selected to serve on any one case.
Once a panel has completed its work this Body may be requested by
either party to a dispute to review questions of law which are covered
in a panel report and legal interpretations developed by the panel. It
does not reconsider the facts of a case. It too reports to the DSB.
trade disputes arise in the WTO
10. Assume that country A considers that a
trade practice in country X adversely affects A's trade. This practice
may represent a breach of X's obligations under the WTO (a
"violation" case). Alternatively it may not be illegal but
may still nullify or impair benefits which A is entitled under the WTO
to expect (a "non‑violation" case). Nonviolation
cases in turn fall into two types. The first is where X has taken a
measure which may not be illegal in terms of WTO obligations but is
still damaging to A's trade. The second is where no identifiable
government measure exists but "the existence of any other
situation" in country X has damaging consequences for A.
I 1. Complaints may of course be pursued
bilaterally between the parties, and it is the WTO's preference for
countries to settle differences amicably in the observance of their
obligations If bilateral contacts fail to produce a solution, A is not
entitled to take action against X in the form of trade reprisals since
these would most likely also be breaches of
and good offices
12. The normal first step under WTO procedures
is for A formally to ask for consultations with X and to notify that
request to the DSB. X must respond within 10 days of the request and
enter into consultations with A within a further 20 days.
13. If consultations fail to settle a dispute
within an overall 60 days from the request, or if X has not responded
to the request, A has the right to ask the DSB to set up a panel
14. During the above period, or at any
subsequent time during a dispute, the parties can jointly agree to ask
the Director‑General of the WTO to use his good offices to
conciliate or mediate in a dispute. This does not alter or detract
from the legal rights of the parties in the dispute.
15. In the following description of the WTO
disputes procedures words like "normally" or"generally"
often appear. The Undertaking sets out precise expectations or
instructions on many matters, but the DSB has effective authority over
the disputes procedures and can decide on or endorse different
procedures in some cases where appropriate.
16. A requests the DSB in writing to set up a
panel. X cannot block this process and normally a panel is established
at the DSB meeting following that at which the request first appears
on the DSB agenda. The standard terms of reference for panels are
broad and provide for them "to make such findings as will assist
the DSB in making the recommendations or in giving the rulings
provided for" in the relevant WTO Agreement(s). Parties to a
dispute can however agree to choose different terms of reference.
17. Where more than one WTO member requests a
panel on a particular matter these complaints can be gathered together
under a single panel, which is usually a more efficient way of
proceeding. Interested third parties have the right to make
submissions to a panel even if they are not directly party to a
18. Panels do not themselves have an
adjudicatory role. They are essentially analytical. Their job is to
make an objective assessment of all the matters laid before them and
to reach findings and conclusions which will help the DSB, as the body
with formal competence in disputes cases, to discharge its
19. The Understanding lays down an outline,
including time limits, for the formal and open stages of panel
proceedings. The timetable for individual cases may vary according to
the number of parties involved, and if the issues are exceptionally
difficult. The time limits suggested for the stages, as set out below,
are successive and do not overlap.
20. From establishment of the panel:
of review by panel, including provision for an additional meeting with
final panel report is issued in confidence to the parties.
final report is circulated to the members of the DSB.
of report by the DSB unless a party notifies its decision to appeal or
the DSB decides by consensus not to adopt the report. To allow proper
time for study of the report, the DSB may not consider it
20 days of this period have elapsed. Any member (in practice members
not involved in the dispute) which has objections to a panel report
has to state the reasons in writing at least 10 days before the DSB
meeting at which the panel report is for discussion.
21. "Substantive" meetings take
place for transparency in the presence of all the parties to a
dispute. This extends, in cases involving the European Union, to
representatives of the individual Member States. Otherwise panel
deliberations are conducted in private and are strictly confidential.
22. Panels are serviced and assisted at every
stage by the WTO Secretariat, especially the Legal Service.
23. Panels may seek outside technical advice
if they find that necessary, including the establishment of technical
review groups to advise on scientific or other technical and factual
24. A panel may be suspended at any time for
up to 12 months at the request of the complainant(s). Typically this
would happen if the parties decided after all to try to find a
negotiated solution, or if they sought good offices. If the suspension
lasts longer than 12 months the panel lapses.
25. A party wishing to appeal against the
terms of a panel report must formally notify that intention. Third
parties which notified a substantial interest during panel proceedings
also have the right to make written submissions to, and to be heard by,
the Appellate Body. The Body must as a general rule report within 60
days of formal notification of an appeal. In difficult cases it can
extend this period up to an absolute maximum of 90 days, subject to a
written explanation to the DSB of its reasons.
26. Following consideration of the legal
issues raised in an appeal the Body may uphold, modify or reverse the
legal findings and conclusions of a panel.
27. An Appellate Body report must be adopted
by the DSB, and unconditionally accepted by the parties to the dispute,
unless within 30 days of the circulation of the report the DSB decides
by consensus not to adopt it.
28. Where a panel or the Appellate Body
conclude in a violation case that a measure complained of is
inconsistent with WTO obligations they are required as standard
procedure to recommend that X bring the measure into conformity with the
relevant Agreement(s). They may suggest ways in which this could be
done. In a non-violation case based on a measure applied by country X
they may conclude that trade benefits to which A is entitled have been
nullified or impaired by the actions of X, and may suggest the extent of
such damage and the negotiation of "a mutually satisfactory
adjustment''. In non-violation cases deriving from "(an)other
situation" the automatic disputes procedures apply only up to the
point of circulation of the panel report to the DSB, and the panel
cannot make effective recommendations to the parties.
29. The power of decision is reserved to the
DSB. These provisions preserve the position that WTO dispute settlement
is ultimately a matter of contractual obligations between the parties.
30. In general the time from agreement on
composition and terms of reference of a panel to issuance of the final
report to the parties is not to exceed 6 months (in cases of urgency,
ea. relating to perishable goods, this can be reduced to 3 months). The
time from establishment of a panel to adoption of the final report by
the DSB must not exceed 9 months, or 12 months where there is an appeal.
These periods may be extended pro rata in difficult cases where a panel
and/or the Appellate Body have extended their own procedures.
31. Within 30 days from adoption by the DSB of
the final report, and in the event of a finding that X is in breach of
WTO obligations, X has to notify its intentions as to coming into
conformity with the report. If X so requests, the DSB may allow it a
"reasonable period of time" to comply In the absence of such
agreement the parties to the dispute can mutually agree within 45 days
from adoption on an implementation period; or within 90 days from
adoption a period not exceeding 15 months may be set by binding
32. The DSB is required to keep a watch on the
implementation by X of the recommendations or rulings which it has
adopted. 6 months after a "reasonable period of time" has been
agreed for implementation, and if implementation has not been completed,
the issue of implementation must be placed on the DSB's agenda and stay
there from meeting to meeting until the issue is resolved. In this event
X has to provide the DSB with regular written reports on progress
33. The preference of the WTO, explicitly
stated in Articles 3 and 22 of the Understanding, is for DSB
recommendations to be implemented by parties taking action to observe
their obligations. However if X still does not come into line within the
time limits determined, it must negotiate with A, B etc. for
satisfactory compensation (ie. in terms of improved trade access). If
this has not been agreed within 20 days from expir>' of any agreed
reasonable period, A, B etc. may ask the DSB for authority to suspend
concessions or other obligations towards X under relevant WTO
agreements, ie. to retaliate in trade terms. Detailed provisions are
laid down for the determination and application of such retaliation.
This is very much a last resort, but the WTO permits it if complainants
cannot secure redress by any other means
Monterey, April 1996