1. Unit I: An overview of WTO law —WTO Dispute Settlement
Tsai-yu Lin
Summer Program
NTU College of Law
2016

2. 1. Introduction How the WTO enforces the WTO agreements ?
Whenever member has a complaint against any other WTO member for any matter falling under WTO covered agreement (as defined in DSU art.1), it can invoke the WTO’s dispute settlement system, without needing the approval of the defending party.

3. WTO dispute settlement has detailed procedural rules, an appellate process and back-up arbitration mechanisms to deal with non-implementation and the calculation of trade sanctions in response to continued non-compliance.
The WTO system has not divorced from the former rules in the GATT Agreement (especially GATT art. XXII and XXIII). Those rules remain an important part of the dispute settlement system.

4. 2. General DSU Provisions
2.1. Applicability of the DSU to Covered Agreements
The WTO dispute settlement system provided for in the Understanding on Rules and Procedures for the Settlement of Disputes(commonly refer to as the Dispute Settlement Understanding or DSU). (Annex 2 to the WTO Agreement)
The DSU applies to the covered agreements, which are listed in its Appendix 1.

5. Discussion What agreements are so –called “covered agreements”?
Listed in Appendix 1 to the DSU
All of the Multilateral Trade Agreements, plus the plurialteral Agreement on Government Procurement.
E.g. WTO Agreement;
E.g. The GATT 1994;
E.g. Multilateral agreements on trade in goods;
E.g. the GATS;
E.g. the TRIPS Agreement
E.g. the DSU

6. 2.2 The Dispute Settlement Body(DSB)
The DSU is administered by the DSB, which is the WTO’s General Council meeting to discharge the responsibilities of the DSB under the DSU.
All WTO Members are members and may participate in the DSB.
The DSB has the following authority (DSU Article 2)
to establish panels,
adopt panel and Appellate Body reports,
maintain surveillance of implementation of panel/AB’s recommendations and rulings
authorize suspension of concessions (trade sanction).

7. 2.3 Integrated system for Dispute Settlement
The WTO dispute settlement system has jurisdiction over any dispute between WTO members arising under the “covered agreements”.( DSU Article 1.1)
The DSU provides for a single, coherent system of rules and procedures for dispute settlement.
Only a few special or additional rules in the covered agreements which prevail over the DSU. 7

8. 2.3.1 What are the Objectives of DS?
DSU Article 3.2:
The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system.
The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. 8

9. DSU Article 3.7: The aim of the dispute settlement mechanism is to secure a positive solution to a dispute.
A solution mutually acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be preferred.

10. 2.3.2 What is the Nature of DS? DSU Article 23.1:
When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding. [Compulsory jurisdiction; Exclusive jurisdiction]
Article imposes a general obligation to redress a violation of WTO law through the multilateral DSU procedures, and not through unilateral action.
Members may not make a unilateral determination that a violation of WTO law has occurred and may not take retaliation measures unilaterally in the case of a violation of WTO law.

11. 2.4. Rule of interpretation
DSU Article 3.2: “…The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law.
Vienna Convention on the Law of Treaties (VCLT) has been signed by many countries, some of which are deemed as customary international law.
Panels and the AB has relied on VCLT (Articles ) to interpret the wording of WTO Law.

12. In Japan-Alcoholic Beverages II, the AB added:
Examples:
In US-Gasoline, the AB noted:
The general rule of interpretation set out in Article 31(1) of the VCLT has attainted the status of a rule of customary or general international law.
Article 31 (1): A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
In Japan-Alcoholic Beverages II, the AB added:
Article 32 of the VCLT, dealing with the role of supplementary means of interpretation, has also attained the same status of a rule for customary international law.

13. Discussion What are the major stages in WTO dispute settlement?
Do you see parallels in any of the stages to domestic legal proceedings with which you are more familiar?

14. 3. Methods of WTO dispute settlement
Consultations
Adjudicating by panels and the appellate body
Alternative ways to resolve a dispute
Arbitration (DSU Article 25)
Parties’ agreement
Notification to all Members ...
Good offices, conciliation and mediation (DSU Article 5)
Informal means of assisting in reaching a mutually acceptable solution ...
At any time after request for consultations, parties’ agreement ...

15. Adoption of report by the DSB
Main Stages
Consultations
60 days
Good offices,
conciliation and
mediation
possible at any
moment
Panel review
6 – 9 months
AB review
60 – 90 days
Adoption of report by the DSB
Implementation 15

16. How to conduct consultations? (DSU Article 4.3; 4.6)
Under the WTO dispute settlement system, the first step in the process is consultation.
The goal of the consultation stage is to enable the disputing parties to understand better the factual situation and the legal claims regarding the dispute and to resolve the matter without further proceedings.
How to conduct consultations? (DSU Article 4.3; 4.6)
Confidential – No intervention by the Secretariat
Consultation period either 60 days or a mutually agreed period of time
If the respondent does not respect time frame, the complainant can request directly the establishment of a Panel

17. 5. The Panel Process
How to initiate the panel review process …
How panels are established and composed …

18.  Articles 6, 7, 8, 9, 10 of the DSU Relevant provisions
Request for establishment
Terms of reference of the panel
Composition of the panel
Multiple complainants
Third parties

19. 5.1 Panel Establishment
If consultations fail to resolve the dispute within 60 days of the request for consultations, the complaining member may request the DSB to establish a panel to rule on the dispute.
If requested, the DSB is required to establish a panel no later than the second meeting at which the request for a panel appears on the agenda, unless there is a consensus in the DSB to the contrary. (negative consensus) (DSU Article 6.1)
Quasi-automatic establishment – Significant difference from GATT panels

20. Discussion What is “reverse (negative) consensus”?
The reverse consensus means that the DSB is deemed to take a decision unless there is a consensus among WTO Members not to take that decision.
There will be at least one Member with a strong interest in these proceedings; i.e., the complainant.
It is unlikely that there will be a consensus not to adopt these decision.

21. Q. What decisions taken by the DSB should resort to “reverse consensus”?
The decision on the establishment of panels;
The adoption of panel and Appellate Body reports; and
The authorization of suspension of concession and other obligations

22. 5.2 Panel composition
After the panel is established by the DSB, it is necessary to select the three individuals who will serve as panelists.
No permanent panels / panelists, ad hoc
Indicative list of panelists
WTO Secretariat suggests the names of possible panelists to the disputing parties, parties can oppose for “compelling reasons.”
If disagreement: any party to the dispute may request the WTO Director-General to appoint the panel.
Current or former government officials; former Secretariat officials; trade academics or lawyers.
Panelists have come from a range of Members.

23. 6. The Appellate Process
Relevant provisions
DSU Article 17
Article 16.4 of the DSU
DSU Articles 1, 3, 18, 19 (general rules)
Working Procedures for Appellate Review (2005)

24. 6.1 The structure of the Appellate Body
A standing body of 7 Members. 4-year term, renewable once, a part-time job.
Requirements:
Authority and expertise in international trade law
Unaffiliated with any government
Impartiality, broad representativeness
Appointed by the DSB on consensus, based on nominations by WTO Members.

25. 6.2 What can be appealed? (DSU Article 17.6) Appeals limited to
“issues of law covered in the panel report and legal interpretations developed by the panel”
No factual findings by the Appellate Body
Panels’ factual findings: In principle, outside the scope of appellate review
Appeal only open to the Parties to a dispute.
Percentage of Panel reports appealed: approximately 68%
Duration of appeals: 90 days (with only a few exceptions)

26. What is the alcoholic content of vodka and gin?
FACT
Are imported and domestic products “like products” within the meaning of Article III:2 of the GATT 1994?
LAW
Is a Member’s municipal law consistent with its WTO-obligations?
LAW

27. 6.3 Content of AB Report
The Appellate Body may
Uphold
Modify
Reverse
…the findings and conclusions of panels (DSU Article 17.13)

28. Discussion: Are third Parties Allowed to attend the panel?
No-disputing Members have opportunities to be heard by panels and to make written submission as third parties.(DSU Article 10)
These Members must have a “substantial interest” in the matter before the panel and they must notify their interest to the DSB.
What rights that third parties can enjoy?
Right to receive the first written submissions
Right to make written submissions to the panel
Right to be heard by the panel during the first substantive meeting

29. Discussion: Who would be friend of the court?
Panels and the AB have the authority to accept and consider written briefs submitted by the individual, company, or non-governmental organization(NGO) to participate in the WTO dispute settlement procedure ; which are commonly referred to as amicus curiae briefs (“friend of the court” brief).
Do you agree on having such a mechanism? Any concern should be addressed?
It is the panel’s authority to accept or reject any information or advice in a specific case?
A legal right of non-Members to make submission?
unduly delaying the panel process?

30. Discussion: Should the Panel’s proceedings be open to public?
Example: BEEF HORMONES DISPUTE: WTO OPENS PROCEEDINGS TO PUBLIC
Panel meetings in front of which the disputants are invited to appear will be open to public observation via closed-circuit television broadcast. However, the panel’s meetings with the third parties to the dispute will remain closed.

31. Professor Robert Howse said that it would "enhance the legitimacy of the WTO, bringing its practices more in line with today’s values of good governance, transparency, and accountability.“
Do you agree with Professor Howse’s opinion?

32. 7. Adoption of Panel / Appellate Body reports
The DSB adopts
Panel Report (as upheld/modified/ reversed)
Together with the Appellate Body Report
By negative consensus
Within 30 days from circulation of AB Report (60 days from circulation of Panel Report if no appeal)

33. Discussion: To what extent would you expect to find respect for “precedent” in the WTO?
Appellate Body in Japan-Alcoholic Beverages II
“Adopted panel reports are an important part of the GATT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO Members, and , therefore, should be taken into account where they are relevant to any dispute.”

34. Appellate Body in US-Stainless steel
“The Panel’s failure to follow previously adopted Appellate Body reports addressing the same issues undermines the development of a coherent and predictable body of jurisprudence clarifying Members’ rights and obligations under the covered agreements… ”

35. 8. Implementation
What remedies does the WTO offer?
What happens if a WTO member refuses to implement a WTO ruling?
Can WTO members obtain monetary compensation for harm caused by the violation?

36. 8.1 Surveillance of implementation
Member concerned informs the DSB...of its intentions in respect of implementing the recommendations and rulings (DSU Article 21.3)
Rule: immediate compliance
Bringing the inconsistent measure into conformity with WTO-obligations
By withdrawing such measure completely, or modifying it by correcting the offending portion of the measure involved

37. How to determine the reasonable period of time for implementation ?
If immediate implementation is not feasible, a Member is to be afforded a reasonable period of time for implementation (RPT)
How to determine the reasonable period of time for implementation ?
Proposed by Member and approved by DSB, or
Mutually agreed by the parties, or
Determined through arbitration (Art. 21.3(c))
The period should not exceed 15 months.
RPTs determined through arbitration have averaged around 11 months.

38. 8.2 Non-implementation
If a Member fails to bring measure into conformity within reasonable period of time, the prevailing party may request temporary measures:
Compensation, or
Retaliation (suspension of concessions or other obligations)

39. 8.2.1 Compensation (DSU Article 22.2)
Negotiations – mutually acceptable compensation
Voluntary
Compatible with WTO Agreements
Offer of a benefit – Not monetary payment
only few cases
To be agreed within 20 days after expiry of the RPT

40. 8.2.2 Retaliation (suspending concessions or other obligations under the covered agreements, Article 22.2 of the DSU)
If, within 20 days after the expiry of the RPT, no satisfactory compensation agreed on..
Complainant may request the DSB for permission to impose trade sanctions against the respondent that has failed to implement
To induce compliance, not punitive measures
DSB must decide within 30 days after the expiry of the RPT, by negative consensus.

41. Suspension of obligations takes place on a discriminatory basis only against the Member that failed to implement.
Retaliation is the final and most serious consequence a non-implementing Member faces in the WTO dispute settlement system.
The suspension of obligation is temporary and the DSB is to keep the situation under surveillance as long as the ere is no implementation.

42. Article 22.3 of the DSU (subject)
Request for authorization to retaliate Requirement 1: Selection of the sector
Article 22.3 of the DSU (subject)
Defendant-
Member B
Violation of
WTO obligations
Complainant-
Member A
Example: A’s exports of goods decline due to B’s WTO-inconsistent measure …
A requests the DSB to authorize retaliation …
A must retaliate within the same sector (goods) …
Only if impracticable or ineffective, A may retaliate within other sectors / agreements …

43. If the non-complying Member objects to the level of suspension proposed, the matter may be referred to arbitration before the DSB takes a decision.
The arbitration under article 22.6 of the DSU is carried out by the original panel.

44. Requirement 2: Equivalence
Article 22.4 of the DSU (extent)
Defendant-
Member B
Violation of
WTO obligations
Complainant-
Member A
Example: A’s exports of goods decline due to B’s WTO-inconsistent measure …
A requests the DSB to authorize retaliation (e.g. suspension of tariff concessions on goods) …
Level equivalent to nullification or impairment (for A, trade effects of the declined exports) …
No punitive retaliatory measures.

45. Arbitration Defendant- Member B Violation of WTO obligations
DSU Articles 22.6, 22.7
Defendant-
Member B
Violation of
WTO obligations
Complainant-
Member A
Example: A’s exports of goods decline due to B’s WTO-inconsistent measure …
A requests the DSB to authorize retaliation …
B objects to the level of retaliation proposed …

46. Examples of suspension of concessions
The U.S. v. the EC regarding the Banana case
Canada/The U.S. v. EC regarding the Hormones case
US — Gambling (DS285)
Antigua and Barbuda / United States
US$ 21 mio/year
US – FSC (DS108)
EC / United States
US$ 4,043 mio/year

47. EC – Hormones(Canada, DS26)(United States, DS48)
Canada / EC; United States / EC
CAN$ 11.3 mio/year (Canada);
US$ mio/year (United States)