WTO Dispute Settlement
The WTO dispute settlement system
The meaning of dispute covers all forms of discrepancies between two or more parties. The impression of dispute can have the element of can or cannot i.e. parties may differ about the meaning of an existing law or otherwise what the substantive rules within a system might be. Members can have dissimilarity about the rules that are in place or about the ways rules should be expressed. There can be a disagreement after these rules are articulated or dispute for the meaning of terms or the manner in which they are applied. Disputes at the rule making stage are part of the in progress negotiation and law making function of the system.
The WTO dispute settlement system came into existence on 1st January, 1995. It has taken nearly fifty years of practice in the settlement of trade dispute in the framework of the GATT 1947. Basically international disputes can be settled by two methods which are
- Through diplomatic consultations between the dispute States (with varying degrees of third party involvement and assistance)
- Through adjudication by an independent entity (arbitration and judicial settlement).
This system is ahead of the important development in international relations between states.
The provisions of the Rules and Procedures Governing the Settlement System of Dispute (DSU) are in ‘Agreements covered by the Understanding', which relates to ‘Multilateral Trade Agreements'. These agreements are between many nations at one time and are complex to settle. They are very powerful once all parties sign the agreement. The primary purpose of multilateral agreements is that all states are treated equally. This advantage goes to poorer nations especially because they are less competitive by nature e.g. The Doha round of trade agreements is a multilateral trade agreement between all 149 members of the World Trade Organization.
Dispute settlement is the cornerstone of the multilateral trading system, and the unique gift given by WTO for the global economy. It will be less effective and cannot be enforced if by no means there is settlement of dispute. The machinery of WTO works within the rule of law which makes the trading system more protected and conventional. It is based on crystal clear rules with the limitation of time for completing the case. Firstly the declarations are made by a panel and approved or discarded by the WTO full membership. Appeals based only on points of law are possible. It function is not to pass judgement. The main concern is to settle disputes, through consultations if it is possible. By July 2005, only about 130 of the nearly 332 cases had achieved the full panel process and rest of them have either been notified as settled out of court or remain in a process of consultation stage, some since 1995. Here is an illustration in relation to WTO dispute settlement system i.e. United States gave an application for formation of a panel. Allegation by US was that the Japanese Government treated imported film and paper less favourably through these methods in infringement of GATT Articles III and X. These methods quashed the benefits accruing to the US. It was held “that the US had not demonstrated that the Japanese ‘measures' cited by the US nullified or impaired, either individually or collectively, benefits accruing to the US within the meaning of GATT Article XXIII: 1(b); that the US had not demonstrated that the Japanese distribution ‘measures' cited by the US accord less favourable treatment to imported photographic film and paper within the meaning of GATT Article III: 4; and that the US did not demonstrate that Japan failed to publish administrative rulings of general application in violation of GATT Article X: 1.”
The provisions of the Understanding on Rules and Procedures Governing the Settlement of Dispute (DSU)
The Dispute Settlement Body (DSB) is responsible for controlling the DSU. It includes representatives of all WTO members. The procedure used by DSB for settling the dispute is similar to a court or tribunal. It prefers that the countries should discuss and settle the disputes by themselves and this is known as consultation stage. If the case makes advancement in other stages still consultation and mediation are possible. If that fails, they can also ask the WTO director-general to try to solve the dispute by other means. If they again fail, the complaining state can ask for a panel to be appointed.
Panels consist minimum of three or maximum of five experts from different countries who examine the evidence and decide who is right and who is wrong. Panellists for each case can be chosen from a permanent list of well-qualified candidates, or from elsewhere. They serve in their individual capacities. They cannot receive instructions from any government. The respondent state can block the creation of a panel for the first time but when the Dispute Settlement Body meets for a second time, the appointment cannot be blocked unless there are rejected by consensus against appointing the panel so its conclusions are difficult to overturn. The panel helps the Dispute Settlement Body in forming rules and recommendations. The panel's findings must be supported on the agreements cited. These reports are normally given in six months time but if there is need like perishable products the time is shortened to three months. The total time for settling the dispute including the appellate stage is approximately of one year and three months.
Arguments for and against a legalistic approach to international dispute settlement in the context of the WTO
People believe in courts and the rule of law that is why they are moving toward courts instead of taking the law in their own hands. This is happening in the WTO as well. No one likes to witness states arguing but if there are going to be trade disputes it is better that the cases are solved according to internationally agreed rules. There are strong grounds for arguing that the increasing number of disputes is simply the result of expanding world trade and the strictest rules negotiated in the Uruguay Round and that the fact that more are coming to the WTO reflects a growing faith in the system. The WTO Dispute settlement is applicable to all WTO agreements and has been constructed as an integrated system. It covers many instruments that compose the legal framework of the WTO and give different ways for the settlement of dispute. These ways are given under the central administration of the Dispute Settlement Body. It has broad judicial coverage and which gives parties at dispute several ways for solving that dispute. Its quasi-judicial and quasi-automatic nature enables it to handle more difficult cases and gives assurance to the Members that wish to protect their rights and gives the treatment of Most Favoured Nation, which means that all the members should provide to other members the treatment just like the nation which is most favoured one. It discourages all type of prejudice between the domestic product and product coming from any other member's territory. It also provides consultation and legal methods of solving the disputes under WTO rules. Like formation of a panel procedure at the request of the complainant party. After panel report the party may appeal to the appellate body against the report and appellate body may uphold, modify or reverse the legal findings and the conclusion of the panel. DSU also allows the arbitration as an alternative means of dispute settlement. It requires the agreement of the parties which also give option of third party involvement if the original parties so accept.The DSU and the Appellate Body's Working Procedures contain provisions reflecting need for consensus-based decision-making.
The WTO dispute settlement system is successful in a way that by the end of 1998 more than 150 cases has been commenced, which represents something like a huge impact on the rate at which GATT procedure was invoked. WTO has now cleared the way for the private council to handle the cases, rather than only government lawyers and has made proceedings more practicable for corporation to suppress their governments to start WTO procedure and this may be expected to continue. DSU presents the vastest network of compulsory dispute settlement obligations in existing international law. It is foreseeable that the WTO system disputes could not easily find a opportunity elsewhere, and recasting them a trade dispute.
On the other hand the WTO Dispute settlement system takes extensive time to reach its conclusion during which complainant bear continuous economic injury if it is inconsistent with WTO. And the complainant who is successful will not get any kind of interim relief to protect its economic and trade interests during dispute settlement procedure. It will not receive any compensation for the harm done to it during which the respondent implements the ruling. And winning party will not get any compensation from its opposite party for legal expenses after settling of dispute.
Other problems faced in respect to disputes between parties of equal or almost equal strength, i.e. when the United States and the European Union have found themselves on opposite sides of a dispute, they can block each other's actions through forged legalistic techniques that can delay the disputes. In recent years, this has been the case with both the banana and the hormone-beef disputes between the US and the EC, when old style negotiations entered the conflict. After lengthy and tedious debates, the WTO panels reached a conclusion and come to its implementation, the parties use their relative power base in the global trading system to work out trade offs and face saving techniques before matters come to rest. Another dilemma the WTO Dispute settlement mechanism faces is in relation to weaker or poorer members of the organization, especially the developing countries and the economies in transition. These members cannot afford the high cost of litigation. International law firms charge from US$250 to $1,000 per hour in fees for WTO cases and very few can afford the fees due to which there are hundreds of cases that they can bring to the WTO on non-implementation by the developed countries of their obligations to these members and they cannot afford to use the dispute settlement system of the WTO and the rich gets away easily because the poor cannot afford the cost of litigation. In the first five years of the WTO, out of more than 100 developing countries and transitional economies, only 20 have participated as party and 16 as third party in 24 dispute settlement panels. To make matters worse, they can be dragged and forced to defend their rights in front of WTO panel only to find that matters are so complex and legalistic that in order to defend these they have to hire American or European lawyers whose fees are very high. So they face the prospect of losing cases through default. The system becomes more difficult and unjust for the weaker members of the WTO because they are now subject to a legalistic system to which they are a party and from which they cannot escape. They can escape sanctions because of the negligence of its system under GATT but now they become member of the WTO system, and are bound by the decisions of its panels because they are signatories of the Treaty. Given that dispute settlement is becoming increasingly legalistic, the WTO dispute settlement system is becoming an impediment around their necks.
The difference between WTO dispute settlement system and the legal system of the sovereign state
The governing international legal theories are based on an understanding of international law in terms of exclusively state based system. WTO system is distinct from states in independent international rights, responsibilities, and abilities to bring claims, as well as clear roles in the creation, development, and enforcement of international law, which are separate to that of states. While states currently have a primary role in the international legal system, this role is not limited.
Legal system of sovereign state distinguishes itself from the WTO dispute settlement system in several ways. The sovereign state system gives rights and obligations to the economic actors within a state which includes natural persons, business corporations, partnerships, cooperatives or labour unions. They can sue within the state and cannot sue other governments unless they are the legal entity of that state as well. If any individual has to sue they will involve the government of their state which will act on behalf of that individual. On the other hand the WTO embraces a system of rights and obligation for member governments meaning that member governments can only litigate each other. These obligations will not apply on the economic actors within the context of WTO with an exception that it can only secure rights indirectly from the WTO.
Another difference is that the legal system of state deals with all kind laws within the state like civil, criminal or the laws of commerce but in WTO dispute settlement system member countries are forced to follow the rule of law in commerce only. Legal system of the state has both judicial and quasi-judicial characteristics but WTO system offers an amicable way to settle disputes and is quasi-judicial in nature having qualities that are the hallmark of all democracies. It has no enforcement authority and cannot enforce fines, levy sanctions, modify tariff rates or change the laws of any country. The only sanction for an infringement of WTO rules is that affected WTO member countries may impose disciplinary methods on the trade of the country that violates the rules. On the other hand legal system of the sovereign state can impose punishments like death sentences, jailhouses etc. for violating the rules of the state.
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