DISPUTE RESOLUTION MECHANISMS UNDER GATT AND THE WTO

It is said that knowledge is power...well... I hope that you do feel empowered. 

BRIEF HISTORY OF GENERAL AGREEMENT ON TRADE AND TARIFFS AND THE WORLD TRADE ORGANIZATION

The General Agreement on Trade and Tariffs was established right after the World War II when the world economies realized that there was need for international economic cooperation. It is at this time when multilateral institutions realized that there was need to strengthen their economic power in order to survive the economic hardships that prevailed at the time. The multilateral institutions noteworthy at the time were the Breton Woods Institutions; World Bank and the International monetary fund. 

It is at this point that I would like to acknowledge the efforts of two renowned world economists Harry Dexter White and John Maynard Keynes. The two are recognized for their efforts to promote a liberal international trade environment and the establishment of the IMF to deal with fiscal and monetary issues, World Bank to deal with financial and structural issues and the ITO to deal with international financial cooperation. However the latter never materialized and as a consequence the GATT has assumed this role in de facto.

GATT is a multilateral instrument that governs international trade. The GATT has been in operation since 1948 with amendments being made on it. There were a total of seven rounds of negotiations under this instrument these rounds include; Round one which dealt with further reduction of tariffs, The Kennedy round which brought about the anti dumping agreement; The Tokyo round which made an attempt to tackle trade barriers other than tariffs, the Uruguay round which was the final round and which established the GATT 1994 further led to the birth of the world trade organization (WTO).

It is important to note that as a result of the Uruguay negotiations the following agreements were reached:

v  The agreement establishing the WTO

v  Goods and investment- multilateral agreements on trade in goods including the GATT 1994 and the Trade Related Investment Measures

v  The general agreement on trade in services

v  Agreement on Trade related Aspects of Intellectual Property Rights

v  Dispute settlement

v  Review by Governments’ trade policies

The focus of this discussion shall be on the dispute settlement mechanisms as set out in the GATT/WTO. As stated above an understanding was reached in the 1994 round on dispute settlement and the same is annexed as annexure two to the “Final Act”. Dispute settlement is regarded as the central pillar of the multilateral trading systems and has a unique contribution to the stability of the global economy. Consequently the members have agreed that if there is a violation of trade rules, then the parties will use the multilateral system to settle their disputes instead of taking action unilaterally.

Coverage and Application

This article provides that the understanding shall apply to disputes brought pursuant to consultation and dispute settlement provisions of the agreements under GATT/WTO. Further the understanding applies to consultations and the settlement of disputes between members concerning their rights and obligations under the provisions of the agreement that established the World Trade Organization either in isolation or together with another agreement. This understanding is subject to any special or additional rules and procedures on dispute settlement contained in the covered agreements.  

However where the dispute in question arises where there is a conflict between the rules and procedures of the Understanding and the special or additional rules and procedures set forth in the Agreements, the special or additional rules shall prevail.

Further in disputes involving rules and procedures under more than covered agreement the parties are given an opportunity to determine the applicable rules within twenty days. However where there is a disagreement on the applicable rules and procedures, the Chairman upon the motion of one of the parties shall determine the rules and procedures applicable. In doing so the Chairman shall apply the principle “special or additional rules or procedures should be used where possible and the rules and procedures set out in this understanding should be used to the extent necessary to avoid conflict.”

Administration

This article sets up the Dispute Settlement Body which is mandated to administer the rules and procedures and the consultation and dispute settlement provisions of the Agreements. DSB has the authority to establish panels, adopt panels and appellant body report, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concession and other obligations under the covered agreements.

In addition with regards to disputes to disputes arising under the Agreements which is a plurilateral trade agreement, the term member shall refer only to members that are parties to the plurilateral trade agreements. Therefore where the DSB administers the dispute settlement provisions of a plurilateral trade agreement, the same shall only apply to members that are parties to that agreement and only such parties may participate in decisions or actions taken by the dispute settlement board with respect to that dispute.

Where there is any development in disputes related to provisions of the respective covered agreements, the DSB shall endeavor to inform the WTO councils and committees. 

General Provisions

This Article provides for adherence to the principles for management of disputes under Articles XXII and XXIII of GATT 1947 and the rules and procedures as further elaborated and modified therein. The article further elaborates that the dispute settlement system of the WTO is central in providing security and predictability to the multilateral trading system. It further provides for the need of members to recognize that it serves to preserve the rights and obligations of members under the various Agreements and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. And that the recommendations and rulings of the DSB do not serve to add or diminish the rights and obligations provided in the agreements but rather to maintain sanity and mutual relations of the parties concerned.

The Understanding recognizes that it is imperative for situations in which a member considers that any benefits accruing to it directly or indirectly under the Agreements are being impaired by measures taken by another country Member to be settled promptly. This is because such settlement is essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of members.

Further this Article provides for the aims of the rulings and the recommendations of the DSB as that of achieving satisfactory settlement of the matter in accordance with the rights and obligations under the understanding of the other GATT WTO agreements. In addition such rulings and recommendations must be consistent with the Agreements and must not in any way nullify or impair benefits accruing to any Member under those agreements nor impede the attainment of any of the objectives of any of those Agreements.

As mentioned earlier, mutually agreed solutions on matters formally raised under consultation and dispute settlement provisions shall be notified to the DSB and the relevant Councils and Committees where ant member may raise any point thereto for further discussion.

The Understanding further aims at positive solution of disputes. Consequently members are advised to exercise their judgement as to whether an action under the procedures would be fruitful to them. As a result it is preferred that the parties to a dispute come to a mutual solution of their dispute which solution should be consistent with the covered agreements. Further in the event that the parties fail to come to a mutual agreement, the first objective of the DSB would be to secure withdrawal of any measures inconsistent with the provisions of any of the covered Agreements. However, where the immediate withdrawal of the measure is impracticable, compensation may be awarded as a temporary measure pending the withdrawal of the measure which is inconsistent with the covered agreement. In addition, as a last resort, a Member may, with the permission of the DSB invoke the application of concessions or other obligations under the covered agreements on a discriminatory basis vis-a-vis the other member.

Members are allowed to seek authoritative interpretation of the provisions of the covered agreements through decision making under the WTO or a covered agreement which is a Plurilateral Trade Agreement.

Further members are expected to engage the service of the DSB in good faith and with the aim of settling the dispute.

Finally this Article provides that it shall not Act in retrospective and any disputes arising prior to its formation shall apply the law used before the Understanding came into force.

Forums for Dispute Settlement

Consultations

Each member is expected to undertake consideration and afford an opportunity for consultation regarding any representations made by another member concerning measures affecting the operation of any covered agreement taken within the territory of the former. Once a request for consultation is made, a reply to the request shall be made not more than 10 days from the date of receipt of the request and the parties shall enter into consultation with the aim of finding a solution to the problem not more than 30 days from the date of receipt of the request for consultation unless otherwise agreed by the parties. Failure to do so affords the matter a hearing at the DSB.

It is imperative that all consultations be confidential and without prejudice to the rights of any Member in any further proceedings.

Good Offices, Conciliation and Mediation

These are dispute settlement procedures undertaken voluntarily if parties to the dispute so agree. They are confidential and without prejudice to the rights of either party in any further proceedings under the same procedure. The procedures may be requested at any time by any party to a dispute. They may also be commenced and terminated at any time. Where the good offices, conciliation and mediation procedures fail the complaining party must wait for the expiry of at least sixty days before requesting the WTO to establish a panel.

It may also be noted that the consultations and the panel may exist concurrently.

Panels

Establishment

A request for establishing a panel is made in writing and shall indicate whether consultations were made, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. 

Terms of Reference of Panels

The function of the panel as provided for under article 11 of the Understanding is to enable the DSB perform its functions. The panels shall have the following terms of reference:

v  To examine in the light of the relevant provisions the matter referred to the DSB by the complainant and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the agreement.

v  Address the relevant provisions in any covered agreement cited by the parties to the dispute.

v  While establishing the panel the DSB may authorize its chairman to draw up the terms of reference of the panel in consultation with the parties to the dispute subject to the provisions of paragraph 1 of the Article.

Composition of the panel

The panelists shall be well qualified governmental and nongovernmental individuals of the members states. The panelists shall however work in their capacity as individuals and not as state representatives. Further the states are refrained from influencing the panelists members selected from their states. In addition the panelists shall be composed of members whose governments are not party to the dispute. A panel shall consist of three panelists unless parties to the dispute agree to have five members.

The Secretariat keeps a list of potential panelists and members may from time to time propose names to be added to the list. Upon establishment of a panel, the Secretariat randomly proposes names and the parties to the dispute shall not oppose to those names except for compelling reasons. If the parties disagree on the panelists, then upon request of either party the Director General in consultation with the chairman of the Dispute Settlement Board and the Chairman of the relevant council or committee from which the dispute arises shall appoint the panelists.

Procedure where there are multiple complaints

On the other hand relates to procedures for multiple complaints. In essence, where more than one member requests for the establishment of a panel related to the same matter, a single panel may be established to determine the matter. The panel shall however take into account the interests of all the parties concerned. However where several panels are formed the panelists shall to a greater extent serve in all the panels.

Subject to article 10 of the understanding, the interests of third parties shall be taken into account and such parties shall be awarded an opportunity to be heard and make any written submissions for as long as it has notified the DSB of its interests.

Arbitration

Another mode of dispute settlement is arbitration. This method may be sought as an alternative to the other methods discussed above. Arbitration under WTO is meant to facilitate the solution of certain disputes that concern issues that are clearly defined by both parties. The parties concerned must reach a mutual agreement to arbitration and the procedures for the process. If a third party wishes to join the arbitration proceedings the third party may request the parties to the process and only upon their agreement may the third party join the proceedings. The parties to the arbitration proceedings must also agree to abide to the arbitration award which award shall be notified to the Dispute Settlement Board and the Council or Committee of the relevant agreement where any member may raise any point relating thereto.

Appeal

Where a party is not satisfied with the ruling and recommendations of the Dispute Settlement Board, the party shall appeal to the Appellate body. The Appellate body is established by the Dispute Settlement Body to hear appeals from the panels. The body is composed of seven persons three of whom shall serve on any one case.

The persons serving in the Appellate body are persons of recognized authority with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally. In reviewing the ruling or recommendations of the panel, the Appellate body shall consider only issues of law covered in the panel report and legal interpretations developed by the panel. The proceedings are confidential and reports anonymous. This is to ensure that the body members are not made the subject of retaliation by governments disgruntled by the decisions of the body. Such retaliation with no doubt would with no doubt corrupt the fairness of the dispute settlement process. 

In making their decision, the Appellate body may uphold, modify or reverse the legal findings and conclusions of the panel. The DSB is compelled to adopt the decisions of the Appellate body without any amendments unless it decides by consensus not to adopt the decision of the Appellate body.

Remedies

These are the repercussions for the member whose measure or trade practice is found to violate the covered agreements by a panel or the Appellate body. Once the matter is heard and determined, the dispute panel issues recommendations with suggestions of how a nation is to come into compliance with the trade agreements. If the party fails to do so within the determined time then the complainant may request negotiations for compensation. If satisfactory compensation is not agreed on then the complaining party may request authorization from the DSB to suspend the application to the member concerned of concessions (benefits and favors) or other obligations under the covered agreements.

Retaliation is another remedy. However this is applied as a last resort. At first it shall be limited to the same sector of trade. However if the complaining member considers the retaliation insufficient, it may seek to extend the retaliation across sectors.