This article is written by Prateek Jain. 

Introduction

The World Trade Organization (WTO) is responsible for maintaining the free flow of trade between its member countries. WTO, in the form of Dispute Settlement Undertaking (DSU), provides an instrument for the settling of trade disputes between the parties. The dispute generally arises when any member country violates any provision of WTO agreement which other member countries think unreasonable. 

This dispute settlement process is the outcome of the Uruguay round (1996-1994). This mechanism provides a speedy resolution of a trade dispute. This settlement system applies to all disputes covered under the WTO agreement. The Dispute Settlement Body (DSB) is responsible for DSU to resolve a dispute between parties.

Stages in settlement of trade disputes

Stage 1: Consultations (Article 4 of the DSU)

Before referring any dispute to mediation or taking any other actions, both the WTO member countries shall affirm to resolve their disputes through consultation. If a WTO member requests for consultation with another Member concerning measures affecting the operations of the former member, the latter member must accept such request within a period 10 days after the date of receipt of such request and shall enter into consultation within 30 days. 

If the consultation fails to provide a satisfactory solution to the problem within 60 days after the date of receipt of the request for consultation, then the complaining party may request for construction of the panel. All such requests for consultation and construction shall be notified in writing including reasons for such requests to the Dispute Settlement Body by the complaining member.

Stage 2: Establishment of Panels (Articles 6, 8 and 11 of the DSU)

If no satisfactory solution is reached through consultation between the member countries, the complaining member may request for the establishment of panels in writing to the Dispute Settlement Body including a summary of the case and issues involved. The panel is established at the second meeting of DSB at which request appears as an agenda item of the meeting.

The function of the Panel is to aid the Dispute Settlement Body in resolving the matter in dispute. The panel assesses the entire dispute, including the facts of the case and issues involved therein and examines whether it conforms with the covered agreement between the member countries. The Panel shall provide its final report to the parties within 6 months from the date when panel procedures start.

Stage 3: Selection of panellists (Article 8 of the DSU)

After the establishment of the panel, the next step is to select panellists. The panellists are selected by the WTO Secretariat. The parties cannot oppose the selection unless they state reasons satisfactory to the Secretariat. The panel shall consist of three panellists. The parties can agree to have five panellists on board if they consider necessary within 10 days from the establishment of the panel. 

The WTO Secretariat assists the parties in the selection of panellists by creating a list of all governmental and non-governmental individuals having certain qualifications from which panellists may be chosen by the parties. 

Members may, at any reasonable time, make an addition to the list of individuals by suggesting the name of individuals who can assist the parties by providing any information related to international trade law or any of the matter as covered in the agreement because of which dispute arose in the first place. The addition to the list can be made only after the approval of the Dispute Settlement Body.

If panellists are not selected within 20 days after the date of establishment of the panel, the Director-General, in consultation with the Chairman of Dispute Settlement Body and Chairman of relevant Council or Committee appoint panellists which they consider appropriate. The chairman of the Dispute Settlement Body, then informs the members of the composition of the panel within 10 days. 

Stage 4: Procedure of Panel (Articles 10 and 12 of the DSU)

The panellists shall, within one week after the composition of the panel fix a timetable for the panel process. After this, the panel decides a deadline for written submission to be made by each party. Each party has to submit its submissions with the secretariat which shall transfer each submission to the panel and submission made by one party shall be sent to the other party as well. At the first substantive meeting of the panel, the complaining party shall be the first to present their case ahead of the responding party. 

The third parties who have notified the Dispute Settlement Body having substantial interest in the subject matter of the dispute are also asked to present their views during the same meeting. Any rebuttals between the parties shall be made at the subsequent meeting of the panel. Here, the responding party shall be the first to respond against the complaining party. The parties, before that meeting, have to submit their written rebuttals to the panel. The panel, if they consider necessary, put any questions before the parties to be answered in the duration of that meeting.

Where after the examination, a solution has been reached between the parties, the panel shall submit a written report to the Dispute Settlement Body which shall have a brief description of the case along with the solution which has been reached. Where the solution has not been found, the panel shall send a written report to the Dispute Settlement Body mentioning its findings of the case and recommendations, if any, it makes. 

The report has to be sent within six months of its examination. In case of urgency, including the case of perishable goods, the report has to be sent within three months. The maximum period during which the report has to send is nine months from the establishment of the panel. 

Stage 5: Interim report (Article 15 of the DSU)

Following the oral arguments and rebuttal that has been performed and examination has been made, the panel shall issue a draft report to the parties. The parties have to submit their comments in writing after receiving the draft report within the period set by the panel.

After the expiration of the said period for receiving the comments from the parties, the panel shall issue an interim report, including its findings in the draft report and its new findings and conclusion. Both the parties, within the time given the panel may submit its written request to revise its interim report accordingly. 

At the request made by the parties, the panel shall call for a further meeting to discuss the comments made by the parties to the dispute. If both the parties are satisfied with the solution reached, then such a revised interim report shall be the final panel report and is circulated among the members.

In case, the parties are not satisfied with the outcome of the report reached then any objections of the members shall be considered at the meeting of the Dispute Settlement Body. Such objections have to be reported at least 10 days before the meeting of the Dispute Settlement Body. 

The final report shall be adopted by the Dispute Settlement Body within 60 days from the date panel report is circulated to the members unless any party to the dispute is unsatisfied with such report and notifies its decision of appeal to Dispute Settlement Body or the Dispute Settlement Body unanimously decides not to adopt such report, as the case may be. In case of an appeal, the report shall deem to be invalid for adoption by the Dispute Settlement Body unless the Standing Appellate Body provides its Appellate Body Report. 

Stage 6: Appeal (Article 17 of the DSU)

Either of the parties unsatisfied with the ruling of the panel report can appeal to the Standing Appellate Body established by the Dispute Settlement Body. Only parties to the dispute can appeal to a panel report and not the third parties. Third parties can be allowed to be heard only in case such third party has notified in writing to the Dispute Settlement Body of its substantial interest in such dispute.

The proceeding of the Appellate Body shall not exceed 60 days from the date a party to the dispute notifies its intention of appealing to the Appellate Body to the Dispute Settlement Body. In case of delay, the maximum period granted to the Appellate Body is 90 days. The Appellate Body has to submit in writing to the Dispute Settlement Body its reasons for the delay together with the period within which the final decision is notified. 

The Appellate Body will not re-examine any shreds of evidence, issues or previous arguments but its examination shall be limited to laws covered in the panel report or legal interpretation evolved by the panellists. The Appellate Body has the power to uphold, modify or reverse the panel report and provide a conclusive report. 

Stage 7: Acceptance of report by Dispute Settlement Body (Article 30 of the DSU)

The Dispute Settlement Body has to either accept the Appellate Body report or reject it within a maximum period of 30 days after receiving such a report. The report can only be rejected unanimously.

Time framework for Dispute Settlement

The Director-General

• The Director-General of WTO in his official capacity assists both the parties in settling their disputes by providing his good offices, conciliation, and mediation. (Article 5.6 of the DSU)
• In a dispute settlement case involving a least-developed country where a settlement of the dispute through consultation is a failure, such least-developed member nation may request the Director-general to provide his good offices, conciliation, and mediation before requesting for establishment of the panel. The Director-General, when considered satisfactory, will provide his good offices, conciliation, and mediation to settle the dispute between the parties. (Article 24.2 of the DSU)
• When there are no panellists appointed by either of the parties to dispute, the Director-General, at the request of either party, in consultation with the Chairman of Dispute Settlement Body and Chairman of the relevant Council or Committee, appoints panellists as he considers appropriate. (Article 8.7 of the DSU) 

WTO Secretariat (Article 27 of the DSU)

The Secretariat has the responsibility to select panellists for the panel. It must provide a panel with all the support they need.

The Secretariat also help member countries in dispute by offering legal assistance by making an available qualified legal expert from the WTO to the members.

The Secretariat also conducts special training courses for members interested in the dispute settlement mechanism. 

Panel

The panel established in the second meeting of Dispute Settlement Body, are bodies responsible for adjudicating disputes between the parties.

Composition of the panel:

The panel generally consists of three panellists but can be a maximum of five, if the parties consider it necessary. (Article 8.5 of the DSU)

The Panel shall consist of well-qualified governmental and non-governmental individuals, including the persons who have served a panel or presented a case to a panel. The panellists shall be from amongst the persons who have served as a representative of a member or a contracting party to GATT, 1947 or as a representative to the Council or Committee of any covered agreement or its predecessor agreement, or in the Secretariat, taught or published on international trade law or policy, or served as a senior trade policy official of a member.

The parties at dispute can select any individual having the above-mentioned qualifications from the list created by the Secretariat to the panel to resolve their dispute. (Article 8.1 of the DSU) 

Dispute Settlement Body (DSB)

Dispute settlement Body is a body established for resolving the disputes between the conflicting parties by overseeing the entire dispute settlement mechanism. The General Council of WTO, which carry out the functions of the Ministerial Conference, renders its obligations under the Dispute Settlement Understanding through Dispute Settlement Body. (Article 4.3 of the WTO agreement)

Composition (Article 4.3 of the WTO agreement)

The Dispute Settlement Body consists of a Chairman and representatives of all WTO members (usually government representatives). [1] The Chairman is usually a leader of the permanent mission of one of the member countries of WTO. The Chairman is elected with the consent of all WTO members. [2]

Functions 9 (Article 2 of the DSU)

• The main function of the Dispute Settlement Body is to administer the rules and procedures which are provided in the Dispute Settlement Understanding.
• It has the authority to establish a panel for adjudication of the dispute between the parties in the meeting of Dispute Settlement Body unless it is decided in that meeting not to establish a panel.
• It has to adopt the panel or Appellate Body reports to make these reports binding on both the parties to the dispute.
• The parties must comply with the rulings and recommendations of the Dispute Settlement Body. The Dispute Settlement Body will scrutinize the application of adopted recommendations and rulings by the parties. If the parties do not comply with these recommendations and ruling within a prescribed period then measures in the form of compensation and termination of concessions will be adopted by the Dispute Settlement Body. (Article 21.6 and 22.1 of the DSU)

Time-frame for the decision of Dispute Settlement Body (Article 20 of the DSU)

• Where no appeal is preferred by the parties

The Dispute Settlement Body has to render its decision within nine months (i.e., the period starting from the date of establishment of panel till the adoption of the panel or appellate body report by the Dispute Settlement Body). If there is a delay on the part of the panel or Appellate Body in providing its report, then additional period granted will be added to nine months.

• Where an appeal is preferred by the parties

Where the panel report or the Appellate body report is appealed by the parties, then the Dispute Settlement Body has to give its decision within 12 months and if there is any delay in providing the reports, then such an additional period granted will be added to 12 months.

Standing Appellate Body (Article 17 of the DSU)

The Dispute Settlement Body shall be responsible for the establishment of the Appellate Body. Where the parties are not satisfied with the decision of the panel report, then either of the parties may appeal to the Appellate Body who shall prove his award in the form of Appellate Body report which shall ultimately be adopted by the Dispute Settlement Body.

The Appellate body consists of seven persons. But only three of them shall serve in one case. These three people shall be selected based on rotation. The appointed person shall be in service for four years and can be re-appointed once. Therefore, a member can serve for a maximum of eight years. The persons comprising the Appellate body shall be persons of a recognized authority having expertise in the field of law, international trade and subject matter of the agreement in dispute. The person shall not be part of any governmental service. They shall be made themselves available till the end of the dispute. 

Arbitration (Article 25 of the DSU)

The parties to a dispute can refer a dispute to arbitration as an alternative means for the settlement of their dispute. Referring a dispute to arbitration shall be made with the mutual consent of both the parties. Third parties can be a party to a dispute only after the mutual consent of the parties in arbitration. The arbitral awards are binding on both the parties and are not appealable. The arbitral award shall be notified to the Dispute Settlement Body and the Council or Committee.

References

1. https://www.wto.org/english/docs_e/legal_e/04-wto.pdf
2. https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c3s1p1_e.htm
3. https://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm
4. A.K. Kaul, Guide to the WTO and GATT: Economics, Law and Politics, Kluwer Law International, 2006.
5. Dr S.R. Myneni, Allahabad Law Agency, 3rd edition, reprint 2018.
6. International Trade, Advocate Shweta Nimwal, Singhal Law Publication, edition 2020.