GATT & WTO - DSB

8/8/2019 GATT & WTO - DSB

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GATT-WTO Dispute Settlement

Mechanism

Structure of the WTO Agreement

Annex 1

1A: GATT1B: GATS

1C: TRIPs

Annex 2

Dispute

SettlementUnderstanding

Annex 3

Trade Policy

ReviewMechanism

Annex 4

Plurilateral

Agreements


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GATT 1947:

Nearly 50 years of dispute settlement under theGATT 1947.

Still no specific procedure or provision for

settlement of disputes. No provision for establishment of Tribunals for

settling questions of law or interpretation.

But even then;

GATT 1947 resolved many disputes througharound Nineteen Clauses which obligated thecontracting parties to consult in specific instances.


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What is a Dispute ?What is a Dispute ?

Disputes in the WTO are essentially about broken promises. WTO members have agreedthat if they believe fellow-members are violatingtrade rules, they will use the multilateral system

of settling disputes instead of taking actionunilaterally. That means abiding by the agreedprocedures, and respecting judgments.

A dispute arises when one country adopts a tradepolicy measure or takes some action that one ormore fellow-WTO members considers to be

breaking the WTO agreements, or to be a failure

to live up to obligations.


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Objectives

Article 3.2 of the DSU

Security and predictability in international trade ;

Preserving Members rights and obligations ;

Peaceful settlement of disputes.

Clarifying the existing provisions.


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Outcome ?


Positive solution to a dispute;

Preferred outcome: Mutually acceptable solution

Withdrawal of measures inconsistent with the

covered agreements


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...and if no mutually agreed solution

reached ? Panel proceedings

(Appellate Body review)

Inconsistent measures...

1. Withdrawal

2. Compensation / Suspension of concessions

Measure


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Article XXII and XXIII deal with provisions

regarding dispute settlement in GATT.

Art. XXII made consultations, a basis for

GATTs dispute settlement procedure.

Art. XXIII says, the complainant must show that

either;

1. Benefits accruing to him under GATT are beingnullified or impaired; or

2. Attainment of any objectives of GATT is beingimpeded; and that;


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such nullification or impairment is a result of

either:

1. breach of obligations by respondent;

2. application of any conflicting measure byrespondent;

3. existence of any other situation.

Over the years, some semblance of formality was

added to the dispute settlement process in 1979when Tokyo Round adopted an Understanding

on Notification, Consultation, Dispute Settlement

and Surveillance.


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Complainants

EC, 81

Canada, 33India, 18

Mexico, 21

Argentina, 15Korea, 14

Others

(developed), 34

US, 93

Brazil, 24

Others

(developing), 90


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Main actors in the WTO

Dispute Settlement System

Art.2 DSU establishes Dispute Settlement Body(DSB)

Administers the WTO Dispute Settlement System

Establishes panels

Adopts panel and Appellate Body reports

Maintains surveillance of implementation

Non-implementation? Authorizes retaliatory measures

The panel 3 5 panelists, ad hoc body

The Appellate Body Standing body of 7 members, 4-yearterm

Assist panels and theAppellate BodyWTO and AB Secretariat


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Recourse to WTO dispute settlement:

Who?Only WTO Members (153 as of November 2009)

NOT NGOs, individuals (although may lobbygovernments indirect access)

Appellate Body: No DSU provision requiring legal interest

Members have a broad discretion whether or not tobring a case


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Recourse to WTO dispute settlement:

Regarding what?

Appendix 1 to the DSU

Disputes under the following agreements must be resolvedpursuant to the DSU:

WTO Agreement

Multilateral Trade Agreements (GATT 1994 + 12 other

agreements on trade in goods)GATS

TRIPS

DSU

(Plurilateral Trade Agreements)


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Kinds of Jurisdiction:

Compulsory jurisdiction

Members obliged to bring disputes under the Covered

Agreements to WTO dispute settlement

Accession: Consent to accept jurisdiction

Exclusive jurisdiction

No other fora

No unilateral action


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Main Stages:

Consultat ons60 days

Panel review6 9 months

AB review60 90 days

Adoptionof report by the DSB

Implementation

Good offices,conciliation and

mediationpossible at any

moment


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...Consultations

Article 4 of the DSU

Diplomatic method of settling the dispute

Confidential No intervention by the Secretariat

Without prejudice to the rights of any Member in further legal

proceedings

As of April 2010:

406requests for consultations! !


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Third parties joining consultations


Request filed underArticle XXII of the GATT

Substantial trade interest

Notification to the consulting Parties and the DSB

Within 10 days of the circulation of the original request

(WT/DSXXX/1)

Respondent decides:

Substantial interest? No review, but the Member can

separately request consultations

DSB informed about the decision to accept


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GATT(1994), WTO & Dispute Settlement

Principle: the settlement of disputes shall be rule orientedandnot power oriented.

Art. 2 of DSU: establishment ofDSB.

DSU = 27 Articles + 4 Appendices

DSU is often referred to as the jewel in the crown of WTO.

DSU confers compulsory jurisdiction to DSB, hencetransforming GATT 1947s soft law status to GATT 1994s

stringent law mechanism.


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Functions of DSB:

1. Power to establish panels;

2. Adopt panel reports;

3. supervisory powers;

4. Implementation of recommendations and rulings;

5. Authorizing sanctions on failure in complying

with dispute settlement decisions.

The General Council of WTO serves as DSB.

But, DSB has its own chairman and follows itsown separate procedure.


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Good Offices, Conciliation & Mediation

Art. 5 : Failure of Consultation

Within 60 days

WTO members may approach DSUs Good Offices,

Conciliation or Mediation services

* Good Offices, Conciliations & Mediation available beforesetting up of Panel, and not afterwards.


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Request for the establishment

of a panelIn writing

Addressed to the DSB

Indicate whether consultations were held

Identify the specific measures at issue

Brief summary of the legal basis claims

Article 6.2 of the DSU and specific disputesettlement provisions

to Members as document WT/DSXXX/X


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Functions of Panels

1. To enquire into the facts of the case;

2. To assess relevant elements for a decision on themeasures;

3. To submit a proposal for such a decision;

The panel reports donot have legal force behind them.

The panel reports then go to the contracting partieswhere mediating and political aspects are re-consideredand the panel report if gets adopted, achieves legalforce.


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Due to the lack of legal sanction behind behind panel reports, the

dispute settlement mechanism of GATT 1947 is often termed as softlaw.

An eminent result of which was blocking of unfavorable panelreports by the contracting parties.

This consequent blocking of panel reports was later overcome byMontreal rules, 1989.

Montreal Rules were applied on trial basis from May 1, 1989 till

conclusion of Uruguay Round in 1994.

Montreal Rules placed time limits on consultations and providedfor automatic establishment of panels.


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Panel proceedings

Appendix 3DSU

Generalworkingprocedures

1. First written submissions of the parties

2. [Third party submissions]

3. First substantive meeting with the parties and third

parties - Third party session4. Written rebuttals of the parties

5. Second substantive meeting with the parties

6. Descriptive part of the report to the parties

7. Parties comments on the descriptive part

8. Interim review

9. Final report issued to parties

10. Final report circulated to all Members


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Adoption of Panel Reports

Procedure of GATT1947

( Faulty)

Procedure of GATT1994

(Improved)

GATT1947: Panel Reports to be adopted only by Consensus; possibility of blocking of unfavorable panel reports.

GATT1994:DSU changed the procedure; Interim review of pros and cons of dispute; Parties may ask for review of interim report or its

parts.


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Appellate Body

..Established in 1995, under Art. 17 of DSU;innovation of WTO dispute settlement system

A standing body of 7 Members. 4-year term,renewable once.

Requirements:Authority and expertise in internationaltrade law;Unaffiliated with any government;Impartiality, broad representativeness.

*Appointed by the DSB on consensus, based on

nominations by WTO Members

Requirements:Authority and expertise in internationaltrade law;Unaffiliated with any government;Impartiality, broad representativeness.


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What can be appealed?


Appeals limited to issues of law covered in the panel

report and legal interpretations developed by the panel;

No factual findings by the Appellate Body;

Panels factual findings: In principle, outside the scope ofappellate review.


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Role of third parties in Appellate hearings

Only those Members that were third parties on the panel

stage;

Cannot appeal;

Right to file written submissions and to participate in theoral hearing.


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Implementation Mechanism

Art.21 : Mechanism for surveillance of implementation ofrecommendations and rulings of Panel & Appellate BodyReports.

* If Recommendations/Rulings of Panelor Appellate Body are notimplemented; the winning party isentitled to :

seek compensation; and/or request the Authority to suspend

Concessions previously made to theoffending member.


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CASESCASESBANANA DISPUTE:

The recent Banana dispute has thrown up problems relatingto Articles 21, 22 and 23 of the DSU.

FACTS: The dispute involves the EU's regulatory regime for

imported bananas, enacted in 1993. Prior to 1992 each of the 12 EU member states had its own

banana import regime. Germany operated on a free marketsystem and had no import restrictions. The other 11 membersimposed a 20% tariff, and 6 members (France, Italy, Portugal,Spain, Greece, and the UK) also applied quotas on bananas

produced in Central and South America. These latter restrictionswere designed to protect the EU market from bananas producedin former EU territories and in ACP countries (developingcountries in Africa, the Caribbean and the Pacific). As part of its1992 integration program the EU established, an EU-wide

banana trade regime.


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Complaints made by Ecuador, Guatemala, Honduras, Mexico andthe US. The complainants alleged that the EC's regime for import,sale and distribution of bananas is inconsistent with GATT

Articles I, II, III, X, XI and XIII as well as provisions of theImport Licensing Agreement, the Agreement on Agriculture, theTRIMs Agreement and the GATS.

Panel established on 8 May 1996.Panel found that the EC's banana

import regime, and licensing procedures for import of bananas,were inconsistent with GATT.

Following an appeal by the EC, the Appellate Body mostly upheldthe Panel's findings. In September 1997, the Appellate Bodyreport and the modified Panel report were adopted by the DSB.Subsequently, the Arbitrator settled the reasonable period forimplementation to be the period from 25 September 1997 to 1January 1999.


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The dispute entered another phase when the complainantsquestioned the WTO-consistency of the measures introduced bythe EC. On 15 Dec. 1998, EC requested the establishment of a

panel to determine that its implementing measures must bepresumed to conform to WTO rules unless challenged.

About the same time, Ecuador also requested the re-establishmentof the original panel to examine whether the EC measures are

WTO-consistent.

DSB agreed on 12 Jan. 1999 to reconvene the original panel toexamine both Ecuador's and the EC's requests. On 14 Jan. 1999,the US, pursuant to Art. 22.2 ofDSU, requested authorization fromthe DSB for suspension of concessions to the EC in an amount ofUS$520 million. At the same time, the original panel determinedthat the EC bananas regime was still not fully WTO-compatible.


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Conclusion

Thus we can ascertain that the dispute-settlement process ofWTO, which came into existence as a result of the UruguayRound of trade negotiations on 1st Jan. 1995, is by any objectivestandard, a resounding success.

Over 100 cases have been brought to the WTO, and at the end of1997, 25 cases had been settled at the consultation stage, 61 wereunder consultations and 36 were in or beyond the panel-appeal

process.

The newly created Appellate Body has decided nine cases, thequality of its opinions as well as those of the dispute-settlement

panels is generally excellent. Member States of the WTO arecomplying with the rulings and recommendations adopted by theDSB.


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Thank You..!!

Presented by- Navneet KaurLLM (ITBL) Bat h: 2009-11

NALSAR Univ. of Law, Hyderabad.

Documents

GATT & WTO - DSB