return to Simulations 

| ENVIRONMENT/HEALTH BACKGROUND | GENERAL BACKGROUND | OUTLINE/BIBLIOGRAPHY |
| WTO DISPUTE SETTLEMENT SYSTEM |

 

INTERNATIONAL NEGOTIATION, MEDIATION,
AND DISPUTE RESOLUTION

METHYL BROMIDE CASE

 

WTO DISPUTE SETTLEMENT
SYSTEM: How It Works

by Michael Johnson

 

Profs. Geza Feketekuty and William W. Monning
425 Van Buren Street
Monterey, Ca, USA 93940

 

THE WTO DISPUTE SETTLEMENT SYSTEM: HOW IT WORKS

by MICHAEL JOHNSON

Senior Consultant, Malmgren Golt Kingston Ltd., London
Visiting Research Fellow, Center for Trade and Commercial Diplomacy, MIIS, Monterey

 

Introduction: 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 (GATT).

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.

Administrative structure

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 retaliation).

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.

How 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 the WTO. The only course which is then acceptable between WTO members is to use the WTO disputes provisions.

Consultations 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.

Panel procedures

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 dispute.

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 responsibilities.

Timetable

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:

3-6 weeks

The complainant (A) makes its initial written submission. If there are other complainants in addition to A (B. etc.) they participate at every stage from here on in the same way.

2-3 weeks

The defendant party (X) makes its initial written submission.

1-2 weeks

The panel has its first substantive meeting with the parties. The parties make oral presentations of their cases and the panel puts questions to the parties. Similar session(s) are arranged with interested third parties who have requested a hearing. The panel may ask the parties to submit answers to questions in writing.

2-3 weeks

The parties may submit to the panel in writing their rebuttals of the case initially submitted by the opposing party or parties.

1-2 weeks

Second substantive meeting of the panel with the parties. The procedure is as for the first substantive meeting. The panel may at this point decide that extra meetings with the parties are needed and if so may extend its timetable accordingly.

2-4 weeks

The panel issues the descriptive part of its report to the parties in confidence for comment and factual correction. This part comprises the description of the facts of the case, the complaint(s) made against X and the arguments advanced by all the parties and by interested third parties.

2 weeks

The parties submit their written comments on the descriptive section.

2-4 weeks

 In the light of its deliberations on the issues, the panel prepares findings and conclusions and releases its draft report in confidence to the parties. This may comprise just the discussion of issues and panel findings, or alternatively a complete draft of the report if the descriptive section has been amended enough to warrant reissue at this stage.

I week

A, B etc. and X may request the panel to review any part of the report

In practice such a request at this stage would concern interpretation, legal argument and findings. This is an opportunity to ask the panel to look again at points in the report which are disputed by one or more parties. It is rare for any significant amendment to be accepted by a panel at this stage, and under the revised procedures now put in place by the WTO important differences of view and interpretation will be much more likely to be taken up through the appeals procedure (see below).

2 weeks

Period of review by panel, including provision for an additional meeting with the parties.

2 weeks

The final panel report is issued in confidence to the parties.

3 weeks

The final report is circulated to the members of the DSB.

60 days

Adoption 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 until 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.

Note:

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 matters.

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.

Implementation and surveillance
Appeals procedure

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.

Recommendations

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.

DSE) timetable

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 arbitration.

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 towards implementation.

Compensation

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

top

return to Simulations