strategy

Developing dispute settlement mechanisms in world trade agreements

Context:
One of the major changes to the international trading system resulting from the [Uruguay Round Agreements] was the advent of the Dispute Settlement Body (DSB). This provided an effective method to resolve trading disputes between WTO members for violations of trade rules as well as non-violation (constructive) complaints. There are no limitations to requesting a panel and the opportunity for third party involvement is available. Decisions by panels are automatically adopted by the parties unless there is a consensus ultimately rejecting the decision. Dissatisfied with the result, the losing party could mount an appeal to the Appellate Body authorised to review panel decisions for errors of law and interpretation of the WTO agreements.

There is an underlying concern about access to the dispute settlement body. WTO members with ample governmental and institutional resources dominate the mechanism. In light of this, a number of provisions were included in the Dispute Settlement Understanding (DSU) that accord special attention to developing countries. Particular consideration is to be given to the special situation of Least Developed Countries (LDCs) in the determination of causes of the cases involving them. LDCs have the opportunity to request Alternative Dispute Resolution processes under the DSU that include the good offices of the Directorate General, mediation or conciliation, where consultations fail to yield a satisfactory solution.

The Dispute Settlement Mechanism is essentially a resolution body designed exclusively for states. Claims of WTO violations can only be brought by WTO members against other WTO members. There is a lack of transparency in the dispute settlement process. Submissions to the panels are not available to the public, thereby avoiding public scrutiny of its content. Panel and appellate body practice opened up the process to address issues not raised by the parties. Their authority to receive third party information in their deliberations was confirmed. Where documents are unsolicited, panels and appellate bodies enjoy wide discretion to accept amicus briefs or other sources of information. Moreover, they can seek expert opinions on particular subject matter. As a result, this broadens the dispute settlement mechanism beyond the exclusive domain of states. Moreover, it allows for the filtering of information external to international trade matters (economic, social or environmental) that decision-makers can take into account.

The provision of technical and legal assistance pursuant to the DSU is under inherent limitations. The Secretariat legal technical assistance services are provided by two academic experts who are available only on a part-time basis. Assistance can only be provided after a member has decided to submit a dispute to the WTO, precluding advice on the likelihood of success in front of a panel. Overall, the consensus amongst both developed and developing country members is that the assistance is inadequate.

Implementation:
The dispute mechanism under the new system is not only being employed by developed countries members but also their developing country counterparts. Twenty-five per cent of all cases were brought by developing countries and developing countries were respondents in another 25 percent of all cases. Some developing country members have been successful in their disputes against developed countries, lending legitimacy to the equity of the process. Nevertheless, the fact that a group of countries making up three quarters of the WTO membership have used the DSU one quarter of the time, demonstrates that improvements in making the process more accessible to developing countries can be made. Despite the provisions facilitating accessibility of the dispute settlement mechanism, LDCs have not engaged the process. This underscores more systemic problems that inhibit using the mechanism for many WTO members. One barrier to participation has been the poor dissemination of information in the particular countries themselves. Most of the stakeholders in the countries are poorly informed and cannot benefit from an effective process to voice concerns to their particular governments.

Implementation of DSB decisions, and the correlative weakness of available remedies, are major sources of concern, especially among developing countries. Although the overall record of implementation of decisions has been good, a few high profile cases have shattered the illusion of an effective dispute resolution mechanism. Some members argue that compensation or restitution should be remedies available to the WTO members in the dispute settlement process. Compensation is an optional remedy in the DSU, but only as an interim measure if panel recommendations are not implemented within a reasonable period of time. The outcome of a decision is usually an order for the party found not to be in compliance with their WTO obligations to come into accordance with WTO rules. The nature of this undertaking touches off a new series of disagreements that frustrates the process. This can give rise to a recurring series of panel hearings addressing essentially the same issue, with the respondent country effectively obstructing recourse to DSU sanctioned retaliation measures from the complaining country by arguing that they have honoured the panel's recommendations. This can ultimately have a significant effect on the smaller exporting countries who suffer disproportionately from the delays in implementation. As a result, implementation decisions should take into account the economic factors in addition to the legal rights of the parties.

Claim:
1. The DSB system is legal in nature and therefore favours the WTO members with access to such expertise. This is enhanced by those countries' export interests that feed information to the members, and who also benefit from a worldwide network of commercial and diplomatic representation. By contrast, developing countries lack the informational sources to collect data in order to prosecute a case before the DSB. Third party expertise must be relied on.

2. Although the dispute settlement mechanism is designed to ensure fairness amongst WTO members, there is an asymmetrical relationship between developed and developing countries that engage the process. As mentioned, a developed country can withstand the delayed implementation of a ruling. Developing country exporters suffer more immediate impacts and could permanently lose access to valuable markets due to competitors or substitute products. Although retaliation is a remedy, once approved by the DSB, this is problematic where the developing country is highly dependent on developed country markets for its economic development. A review of the DSU could increase the confidence of developing countries in the DSB process, where delays in implementation and lack of compensatory remedies can be an inhibiting factor when deciding to bring a complaint to the DSB.

3. The WTO dispute settlement system is regularly used to challenge domestic environmental regulations. Moreover it is closed to public, lacks environmental knowledge, exhibits a strong trade bias, and it has failed to make appropriate use of environmental experts. The dispute settlement system requires both procedural and substantive reform to ensure deference to national standards, to keep environmental disputes out of the WTO, and to guarantee adequate public participation.

Subjects:
Trade
Arbitration
Agreements
Development
Type Classification:
F: Exceptional strategies