Dispute Settlement Mechanism under WTO (World Trade Organisation)

The task of ensuring that all Members live up to their commitments and that there is a common understanding of the nature of those commitments is a central part of the work of the WTO. WTO’s procedure is a mechanism which is used to settle trade dispute under the Dispute Settlement Understanding (DSU). A dispute arises when a member government believes that another member government is violating an agreement which has been made in the WTO. And the dispute settlement under WTO not only ensures security and predictability to the multilateral trading system but is also concerned with the situations where a Member seeks remedy for damage to its trade interests caused by the actions/inactions of other members.

Stages in WTO Dispute Settlement Mechanism

There are mainly three stages to the WTO dispute settlement process:

First Stage – Dispute Settlement Mechanism

Consultations (Article 4) – A WTO Member to consult with another Member regarding “measures affecting the operation of any covered agreement taken within the territory” of the latter. If a WTO Member requests consultations with another Member under a WTO agreement, the latter Member must enter into consultations with the former within 30 days. If that fails, they can also ask the WTO Director-General to mediate or try to help in any other way.

If the dispute is not resolved within 60 days, a panel can be requested.

Second Stage – Dispute Settlement Mechanism

Establishing a Dispute Panel (Articles 6, 8, 12, 15, Appendix 3)

A panel request, which must be made in writing, must “identify the specific measures at issue and provide a brief summary of the legal basis for the complaint sufficient to present the problem clearly” (Art. 6.2). If a panel is requested, the country ‘in the dock’ can block the creation of panel once but the DSB must establish it at the second DSB meeting at which the request appears as an agenda item unless it decides by consensus not to do so.

The panel is ordinarily composed of three persons. The WTO Secretariat proposes the names of panelists to the disputing parties, who may not oppose them except for “compelling reasons” (Art. 8.6). If there is no agreement on panelists within 20 days from the date that the panel is established, either disputing party may request the WTO Director-General to appoint the panel members. The maximum time period for the panel to be appointed is 45 days and also, it has to conclude its decision within 6 months.

A final report is submitted to the two sides and three weeks later, it is circulated to all WTO members. The report becomes the Dispute Settlement Body’s ruling or recommendation within 60 days unless a consensus rejects it. Both sides can appeal against the report in the Appellate Body for review.

Appellate Body Review

The DSB establishes a standing Appellate Body that will hear the appeals from panel cases. The Appellant Body is thus the second and final stage in the adjudicatory part of dispute settlement system. The Appellate Body “shall be composed of seven persons, three of whom shall serve on any one case.” Those persons serving on the Appellate Body are to be “persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the Covered Agreements generally.” The Body shall consider only “issues of law covered in the panel report and legal interpretations developed by the panel.”

Decisions made by the Appellate Body “may uphold, modify, or reverse the legal findings and conclusions of the panel.” Normally the appeals should not last more than 60 days, with an absolute maximum of 90 days. The DSB and the parties shall accept the report by the Appellate Body without amendments unless the DSB decides by consensus not to adopt the Appellate Body report within thirty days following its circulation to the members.

Third Stage – Dispute Settlement Mechanism

Implementation of Panel and Appellate Body Ruling (Article 21)

• After the adoption of the rulings/reports of the panel or Appellate Body, the conclusions and recommendations in the report become binding on the parties.
• A member who does bring its WTO inconsistency into the conformity with the WTO Agreement risks consequences, like facing retaliatory countermeasures.
• There is no obligation to withdraw the WTO-consistent measure in the event of a successful non-violation complaint.
• The adopted report is also binding with regard to panel’s or the Appellate Body’s conclusion as to whether or not a benefit accruing to the complainant under a covered agreement has been nullified or impaired. There is no obligation to withdraw the WTO-consistent measure that resulted in nullification or impairment. The parties shall find a mutually satisfactory adjustment.
• The adopted report is also binding on the complainant.
• The complainant shall not determine unilaterally that a violation of the WTO Agreement or that nullification or impairment of a benefit has occurred if it is inconsistent with the findings contained in the report.

Other Measures

Good Offices, Conciliation and Mediation

Unlike consultation in which “a complainant has the power to force a respondent to reply and consult or face a panel,” good offices, conciliation and mediation “are undertaken voluntarily if the parties to the dispute so agree.” No requirements on form, time, or procedure for them exist. Any party may initiate or terminate them at any time. The complaining party may request the formation of the panel,” if the parties to the dispute jointly consider that the good offices, conciliation or mediation process has failed to settle the dispute.” Thus the DSU recognized that what was important was that the nations involved in a dispute come to a workable understanding on how to proceed and that sometimes the formal WTO dispute resolution process would not be the best way to find such an accord. Still, no nation could simply ignore its obligations under international trade agreements without taking the risk that a WTO panel would take note of its behaviour.

This may take place during any stage of dispute settlement system.

Arbitration

Members may seek arbitration within the WTO as an alternative means of dispute settlement to facilitate the solution of certain disputes that concern issues that are clearly defined by both parties.”Those parties must reach a mutual agreement to arbitration and the procedures to be followed. Agreed arbitration must be notified to all members prior to the beginning of the arbitration process. Third parties may become a party to the arbitration “only upon the agreement of the parties that have agreed to have recourse to arbitration.” The parties to the proceeding must agree to abide by the arbitration award. “Arbitration awards shall be notified to the DSB and the Council or Committee of any relevant agreement where any member may raise any point relating thereto.”

Contributed By – Lakshay Anand

Sources:

1. SCC Online
2. T. Ramappa, Competition Law in India, Oxford Publication, 2013

---

Disclaimer: This document is intended to provide information only. If you are seeking advice on any matters relating to information on this website, you should – where appropriate – contact us directly with your specific query or seek advice from qualified professionals only. We have taken all reasonable measures to ensure the quality, reliability, and accuracy of the information in this document. However, we may have made mistakes and we will not be responsible for any loss or damage of any kind arising because of the usage of this information. Further, upon discovery of any error or omissions, we may delete, add to, or amend information on this website without notice.

---

Click Here to Read Law Notes on International Trade Law

Click Here to Read Law Notes on Competition Law