WTO Dispute Settlement

The WTO provides a strengthened and expanded framework for international trade. This would be worth little without an effective dispute settlement system to enforce rights and obligations.

For this reason, the GATT dispute settlement system has long been considered a cornerstone of the multilateral trading system. It has provided countries with the ability to challenge actions taken by trading partners and obtain rulings from independent panels of experts on the GATT-consistency of such measures. Upon their adoption by the GATT Council, such rulings have represented an authoritative basis on which to seek the removal of a GATT inconsistent measure.

More effective procedures

The WTO Dispute Settlement Understanding (DSU) incorporates major improvements in GATT dispute settlement procedures.

The first, and perhaps most significant, consensus is no longer required to proceed in disputes. A consensus decision is now only required to halt the proceedings at any stage of the formal dispute settlement procedures. This change greatly enhances the confidence of all trading nations, large or small, in the multilateral trading system since the potential for procedural blockage is removed.

However, in order to ensure that this automaticity comes with a greater confidence in the results of the dispute settlement system, a new element is the independent review by an appellate body before a panel's recommendations become legally binding.

Another change is the introduction of more precise and shorter time-limits for each stage of the procedures.

One of the central provisions of the Understanding on Dispute Settlement is that unilateral action is forbidden. WTO members are required to use the multilateral dispute settlement rules and procedures of the WTO to resolve all disputes.

Developing country interests

For developing countries, the elements of the 1966 Decision on Dispute Settlement continue to apply under the WTO dispute settlement procedures. Up to now, this Decision has seldom been used, mainly because developing countries have only recently become frequent users of the GATT dispute settlement procedures.

The Decision contains features of specific interest to developing countries, however, including automatic access to the "good offices" of the Director-General of the GATT/WTO to mediate and seek to find a satisfactory resolution to the dispute, and shorter time-limits in which panels must complete their deliberations.

In the case of Least Developed member countries, the DSU further requires Members to ‘exercise restraint’ in bringing formal complaints or, if a complaint succeeds, to exercise restraint in seeking compensation or authorization to suspend equivalent rights or concessions (Article 24.1)

Unique dispute process

Another major change - in the functioning of dispute settlement within the WTO system - is the integration of all the individual agreements’ dispute settlement procedures - goods, services, TRIPS - into a single system under a Dispute Settlement Body.

This integration of enforcement across the agreements is the mirror image of the integration of rights and obligations implied by the single undertaking of WTO Members. This structure ensures that WTO Members deal with issues that arise in the enforcement of obligations in one area, such as anti-dumping, at the highest political level.

Experience of dispute settlement

The number of disputes brought to the WTO has grown rapidly since the DSU came into effect in January, 1995. The cases brought, although still predominantly about 'traditional' GATT concerns of market for goods have also shown a broadening of the concerns of the international trade community, raising issues of

• environmental protection
• discriminatory trade assistance for developing countries
• the use of phytosanitary barriers to protect domestic industries
• the protection of intellectual property rights such as broadcast rights, and pharmaceutical patents
• failure to abide by principles of the General Agreement on Trade in Services, and
• the management of textile quotas and
• the management of anti-dumping procedures.

By the numbers

From January 1995 to the end of July 1998, the number of WTO disputes formally begun – by notification to the DSB of a request for consultation – had reached 141. Of these, more than 100 cases were distinct matters - not various aspects of the same dispute.

Data from Jackson, J H “The World Trading System”, 1994 p 99

Eight reports have been issued by the Appellate Body and three further cases are currently being appealed.

Developed and developing

Under the GATT and its associated agreements, more than three-quarters of all cases were bought by a developed country. Up to July, 1998, the proportions under the WTO system are similar: 75 out of 105 matters brought before the WTO have been brought by developed countries, 27 matters – approximately one-quarter of all disputes - have been the result of complaints by developing countries (there have been 4 matters brought jointly by developed and developing countries).

Developing country complainants have launched eighteen cases against developed country respondents and 9 cases against other developing countries. Fifty-one developed countries and 27 developing countries have been the targets of cases initiated exclusively by developed countries.

The larger developing countries are among the most frequent initiators of complaints (India 9, Brazil 4, Mexico 4, Thailand 3). Several smaller developing economies have also taken advantage of the system (Costa Rica, St Lucia, Guatemala). So far, no developing African members have brought a complaint.

The complaints on the ‘new’ issues under the General Agreement on Trade in Services (GATS), the agreements on Trade Related Intellectual Property Rights (TRIPS) and Trade Related Investment Measures (TRIMS) have all been bought by developed countries - with the exception of the complaint against the EU Banana import regime, bought by both developed and developing countries - that alleged a violation of the TRIMS agreement (not determined in the Panel report).