This article is written by Naveen Tao, pursuing a Certificate Course in Intellectual Property Law and Prosecution from LawSikho.
Table of Contents
Introduction
The World Trade Organisation (WTO) is the only global organisation that deals with rules of trade between its member countries. The goal of WTO is to ensure that global trade flows smoothly, predictably and freely between nations. It gets its powers from the bulk of WTO agreements, negotiated and signed by nations, who are its members. The said agreements and negotiations are later ratified in their respective Parliaments.
WTO frames the number of principle rules that becomes the foundation for the multilateral trade system among nations. The main focus of WTO is to open trade, for the benefit of all.
At present WTO has 169 nations as its members, which is 98% of the world trade. For a nation to join WTO, the nation has to bring its trade policies in line with the WTO rules.
Why does dispute arise among its member nations?
Disputes to WTO are generally about broken promises. A dispute might arise when one of the member nations believes that the other member nation has violated any of the agreements or a promise that it had made to any other nations or a promise made to WTO itself.
How are disputes dealt with by WTO?
As a member nation of the WTO the aggrieved member, instead of taking action unilaterally has to use the multilateral system of settling disputes.
Earlier the procedure for settling disputes existed in the GATT, which was more time consuming and had not fixed time table. Later, in the Uruguay Round agreement, a more structured process was introduced with more clearly defined stages, with flexible deadlines set at each stage.
Although much of the procedure resembles a court or a tribunal, the preferred solution for the countries concerned is to discuss the problem and settle the disputes themselves. At all the stages, disputing parties are encouraged to consult each other, in order to settle their disputes out of court.
There are three main stages in the WTO Disputes Settlement process:
(i) consultation among the disputing parties;
(ii) adjudication by panels and Appellate Body;
(iii) implementation of the recommendations and rulings, including the countermeasure in case the losing party fails to implement the ruling.
Thus, there are two main ways to settle a dispute:
(i) Bilateral consultation – wherein the parties find a mutually agreed solution;
(ii) Adjudication by the Panel and the Appellate Body, which is binding upon the parties once accepted by the Dispute Settlement Body.
How are the decisions arrived at, among WTO’s member nations?
All major decisions are made by the Governments of the member nations either through their ministers or their ambassadors. The WTO member nations meet regularly once every two years at Geneva.
The Ministerial Conference is the top decision-making body of the WTO, below this is the general Council and various other councils and committees. The ministerial conference takes place once every two years. The general council meets a number of times in a year at Geneva for day-to-day decision-making.
Using the dispute settlement system
Only the governments that are members of the WTO can participate directly in the dispute settlement as parties to the case or as a third party. The disputing party need not show its legal or economic interest in the subject matter of a dispute. For example, INDIA may complain that the European Union has given preferential access to Caribbean, African and Pacific countries, in violation of WTO’s non-discrimination rules, even though India has not itself exported Bananas to the European Union.
The formal complaint by any member automatically begins the dispute settlement process.
Rules and Procedures Governing the Settlement of Disputes
WTO’s system is based on well-defined rules with a timetable for completing a case. It facilitates its members to follow the multilateral system of settling disputes instead of the aggrieved country taking its own unilateral action.
The timeline for the Dispute settlement process is explained below and these approximate periods for each stage are target figures and the agreement is flexible. The disputing nations can settle their disputes themselves at any stage as under:
|
60 days |
Consultations |
|
45 days |
Panel set up |
|
6 months |
Final panel report circulated to parties |
|
3 weeks |
Final panel report to WTO members |
|
60 days |
If no appeal is preferred, the dispute Settlement Body adopts the report |
|
Total time = 1 year |
Without appeal |
|
60 – 90 days |
Appeals report |
|
30 days |
Appeals report is adopted by the Dispute Settlement Body |
|
Total time = 1y 3m |
With appeal |
Every member of the WTO is a signatory to this understanding which sets out the Rules and Procedures Governing the Settlement of Disputes:
Article 1: Coverage and the Applicability of the rules and procedure
The rule and procedure shall apply to the consultations and the settlement of disputes among members concerning their rights and obligations under the WTO agreement.
Article 2: Administration
A Dispute Settlement Body (DSB) is established to administer these rules and procedures. The DSB will be the authority to establish the panels, adopt the Panel and Appellate Body report, surveillance and implementation of the rulings. DSB is the main element in providing security and predictability to the multilateral trading system of the WTO.
Article 3: General Provisions
This article talks about the general provisions of the members’ adherence to the principles laid for the management of disputes.
Article 4: Consultations
Every member will give adequate opportunity for consultations, regarding any representation made by any other member concerning any measures affecting the operation of any agreements. In case a request for consultation is put forth, the member to whom such request is made shall, reply within 10 days and shall have consultations with good faith within 30 days. If no response is given the requesting member can directly proceed to request for the establishment of the panel.
The Consultations made, shall be confidential and without prejudice to the rights of members in further proceedings.
Article 5: Good Offices, Conciliation and Mediation
Good office, Conciliation and Mediation are procedures undertaken, if the parties to the dispute so agree or on a request made by any of the parties concerned. This request may be made at any time and be terminated at any time, at the option of the parties.
Article 6: Establishment of Panels
On a request, in writing by any of the disputing parties, a panel shall be established.
Article 7: Terms of Reference of Panel
Within 20 days from the establishment of the Panel, the Panel shall frame the terms of reference after examining and addressing the relevant provisions in any of the agreement or agreements cited by the parties to the dispute.
Article 8: Composition of Panels
The Panel shall be composed of well-qualified Government and non-governmental individuals, who have served on similar subject matters. The panel shall comprise three or five panellists. Citizens of the member, whose Government is a party to the dispute shall not serve on the panel concerned with the dispute.
Article 9: Procedures for Multiple Complainants
If multiple complainants are filed pertaining to the same subject matter, a single panel may be established to examine these complaints together, taking into account the rights and obligations of all Members concerned.
Article 10: Third Parties
Any member having substantial interest in a matter shall have an opportunity of being heard and make written submissions to the panel.
Article 11: Function of Panels
The function of the Panel is to assist the DSB in discharging its responsibilities under this understanding and the covered agreement/s cited by the parties.
Article 12: Panel Procedures
- The Panel shall provide sufficient flexibility so as to ensure high-quality panel reports without delaying the panel process.
- Within one week after the composition and terms of reference, fix the time table for the panel process.
- The Panel shall fix the precise deadlines for written submissions by the parties.
- Where the parties fail to arrive at a mutually satisfactory solution, the panel shall submit its findings in a written report to the DSB.
- As a general rule, the written report shall be issued within six months of the composition of the panel.
- In case one of the parties is a developing country member, more favourable treatment shall be given to developing country members.
Article 13: Right to Seek Information
The panel shall have the liberty to seek information and technical advice from any individual/ expert which it deems appropriate. The panel can also seek information from the member themself. The member shall promptly respond to such information sought.
Article 14: Confidentiality
The panel deliberation shall be confidential. The opinion expressed by individual panellists shall be anonymous.
Article 15: Interim Review
Considering the submission, rebuttal and arguments, the panel shall issue a descriptive draft report both factual and argument to the parties and invite their comments. After the expiration of the time period set out for the comments, the panel shall issue an interim report to the parties.
Within the time set, the parties can further make a written request for the panel to review precise aspects of the interim order. After a thorough deliberation over the request, the interim report shall be considered as the final report and will be circulated to the members.
The findings in the final report shall include the discussion of arguments made at the interim review stage.
Article 16: Adoption of Panel Reports
The report shall not be considered by the DSB until 20 days after the report has been duly circulated to the members. The parties to the dispute shall have the right to participate in the consideration of the panel report by the DSB.
Later within 60 days of the circulation of the final report, the report shall be adopted at the DSB meeting, unless a party to the dispute formally notifies the DSB of its decision to appeal or the DSB on its own decides by consensus not to adopt the report.
Article 17: Appellate Review
The appellate body shall be established by the DSB, to hear appeals from panel cases. Only parties to the dispute, no third party, may appeal a panel report. As a general rule, the proceedings shall not exceed 60 days.
The appellate report shall be adopted by the DSB and unconditionally accepted by the parties.
Article 18: Communications with the Panel or Appellate Body
There shall not be any ex-parte communications with the panel or appellate body in the subject matter concerning the dispute.
The written submissions to the panel or the appellate body shall be treated as confidential but will be made available to the disputing parties.
Article 19: Panel and Appellate Body Recommendations
Where the panel or the appellate body concludes that a measure taken by either party is inconsistent with the covered agreement, the panel or the appellate body can recommend and bring the measure into conformity with that agreement and suggests ways in which the member concerned could implement the recommendations.
Article 20: Time frame fixed for DSB Decisions
The time period from the date of establishment of the panel by the DSB until the date of considering the panel or appellate report for adoption shall not exceed nine months.
Article 21: Implementation of Recommendations and Rulings
Prompt compliance with the recommendation and ruling is essential. After the adoption of the final report by the DSB, the member concerned will have a reasonable time to implement the recommendations or rulings.
If the case is one, brought by a developing country member, the DSB shall not only consider the trade coverage of measures complained of but also look into the impact on their economy.
Article 22: Compensation and the Suspension of Concessions
Compensation and the suspension of concessions are temporary measures available in the event that the recommendations and rulings are not implemented by the losing party.
Article 23: Strengthening of the Multilateral System
When a member seeks violation of any of the obligations under the covered agreement, they shall have recourse to and abide by the rules and procedures of this understanding.
Article 24: Procedures for Least Developed Country Members
At all stages of determination of the dispute, consideration shall be given to the least-developed country members.
Conclusion
To conclude, if a member country has found to be at fault, it should swiftly correct its fault. If the country continues to break its agreement, it has to compensate or face a suitable response in the form of Compensation and the Suspension of Concessions. The response although not actually a punishment but is a “remedy”, and the ultimate goal being for the country to comply with the ruling. Further, the priority is for the defaulting country to bring its policy into line with the ruling or recommendations. Sufficient time would be given to remedy the same.
Resolving international trade disputes is one of the core objectives of WTO. A rule-based system without a means to settle disputes will be less effective if the rules cannot be enforced. Dispute settlement system is the core pillar based on which a multilateral trading system works, which is a contribution of WTO to the world economy. By this, WTO makes the trading system more sure and predictable. It is pertinent to note that, the point is not to pass judgement but to settle disputes.
Reference
https://www.wto.org/english/docs_e/legal_e/28-dsu_e.htm
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