Warm up

Questions

  • What are the WTO trade dispute settlement system, its dispute settlement body and dispute settlement understanding, appellate body?
  • How do they work respectively?
  • What experiences concerning dispute settlement can they offer to other international institutions and treaties?
  • What is the author's opinion about the role of sanctions in correcting non-compliance?
Background

    The author

    Steve Charnovitz £¨born in 1953£© is a scholar of public international law living in the United States. He now teaches at George Washington University Law School in Washington, DC, and is best known for his writings on the linkages between trade and environment and trade and labor rights.

    Charnovitz is a native of Savannah, Georgia. He was an analyst in the U.S. Department of Labor from 1975 to 1986 covering international labor issues. During 1984-85, he was an American Political Science Association Congressional Fellow. From 1987-89, he was a legislative assistant to U.S. House of Representatives Speaker Jim Wright, and served once again in 1989-91 for Speaker Tom Foley. In 1991, Charnovitz became Policy Director of the newly established Competitiveness Policy Council. In 1995, he co-founded and directed the Global Environment & Trade Study located at Yale Center for Environmental Law and Policy. After several years in private practice at Wilmer Cutler Pickering Hale and Dorr in Washington DC, he joined George Washington University in 2004.

    He received a B.A. degree from Yale College in 1975, an M.P.P.£¨Master of Public Policy£© degree from the Kennedy School of Government of Harvard University in 1983, and a J.D.£¨Juris Doctor£© degree from the Yale Law School in 1998.

    The WTO dispute settlement system

    Dispute settlement is regarded by the World Trade Organization £¨WTO£© as the central pillar of the multilateral trading system, and as the organization's "unique contribution to the stability of the global economy". A dispute arises when one country adopts a trade policy measure or takes some action that one or more fellow-members considers to be breaking the WTO agreements, or to be a failure to live up to obligations. WTO members have agreed that if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. That means abiding by the agreed procedures, and respecting judgments.

    Dispute Settlement Body

    The Dispute Settlement Body £¨DSB£© of the World Trade Organization makes decisions on trade disputes between governments that are adjudicated by the organization.

    The DSB is, in effect, a session of the General Council of the WTO£ºthat is, all of the representatives of the WTO member governments, usually at ambassadorial level, meeting together. It decides the outcome of a trade dispute on the recommendation of a Dispute Panel and £¨possibly£© on a report from the Appellate Body of WTO, which may have amended the Panel recommendation if a party chose to appeal. Only the DSB can make these decisions: Panels and the Appellate Body are limited to making recommendations.

    The DSB uses a special decision procedure known as 'reverse consensus' or 'consensus against' that makes it almost certain that the Panel recommendations in a dispute will be accepted. The process requires that the recommendations of the Panel £¨as amended by the Appellate Body£© should be adopted "unless" there is a consensus of the members against adoption. This has never happened, and because the nation 'winning' under the Panel's ruling would have to join this reverse consensus, it is difficult to conceive of how it ever could.

    Once it has decided on the case, i.e., whether the complaint had been shown to be right or wrong, the DSB may direct the 'losing' Member to take action to bring its laws, regulations or policies into conformity with the WTO Agreements. This is the only direction that emerges from a WTO dispute. There is no concept of "punishment" or even restitution. The DSB will give the losing party a "reasonable period of time" in which to restore the conformity of its laws etc.

    If the losing party fails to restore the conformity of its laws within the "reasonable period of time", the DSB may -- on an exceptional basis -- authorize a successful complainant to take retaliatory measures to induce action on the part of the losing party. This is very rare. Almost all WTO members "voluntarily" implement DSB decisions in time. Of course, when a losing party brings its laws etc. into conformity it may choose how to do so; indeed, it may not necessarily make the changes that the winning party would prefer.

    Dispute Settlement Understanding

    In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes or DSU £¨annexed to the "Final Act" signed in Marrakesh in 1994£©. Pursuant to the rules detailed in the DSU, member states can engage in consultations to resolve trade disputes pertaining to a "covered agreement" or, if unsuccessful, have a WTO panel hear the case. The priority, however, is to settle disputes, through consultations if possible. By July 2005, only about 130 of the nearly 332 cases had reached the full panel process.

    The operation of the WTO dispute settlement process involves the parties and third parties to a case and may also involve the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts, and several specialized institutions. The General Council discharges its responsibilities under the DSU through the Dispute Settlement Body £¨DSB£©. Like the General Council, the DSB is composed of representatives of all WTO Members. The DSB is responsible for administering the DSU, i.e. for overseeing the entire dispute settlement process. It also has the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize the suspension of obligations under the covered agreements. The DSB meets as often as necessary to adhere to the timeframes provided for in the DSU.