DISPUTE SETTLEMENT MECHANISM

The World Trade Organization (WTO) is responsible for maintaining the free
flow of trade between its member countries. WTO, in the form of Dispute
Settlement Undertaking (DSU), provides an instrument for the settling of trade
disputes between the parties. The dispute generally arises when any member
country violates any provision of WTO agreement which other member
countries think unreasonable. This dispute settlement process is the outcome
of the Uruguay round (1996-1994). This mechanism provides a speedy
resolution of a trade dispute. This settlement system applies to all disputes
covered under the WTO agreement. The Dispute Settlement Body (DSB) is
responsible for DSU to resolve a dispute between parties.

Stages in settlement of trade disputes

Stage 1: Consultations (Article 4 of the DSU)
Before referring any dispute to mediation or taking any other actions, both the
WTO member countries shall affirm to resolve their disputes through
consultation. If the consultation fails to provide a satisfactory solution to the
problem within 60 days after the date of receipt of the request for
consultation, then the complaining party may request for construction of the
panel. All such requests for consultation and construction shall be notified in
writing including reasons for such requests to the Dispute Settlement Body by
the complaining member.

Stage 2: Establishment of Panels (Articles 6, 8 and 11 of the DSU)

If no satisfactory solution is reached through consultation between the
member countries, the complaining member may request for the
establishment of panels. The panel is established at the second meeting of
DSB. The function of the Panel is to aid the Dispute Settlement Body in
resolving the matter in dispute. The panel assesses the entire dispute,
including the facts of the case and issues involved therein and examines
whether it conforms with the covered agreement between the member
countries. The Panel shall provide its final report to the parties within 6 months
from the date when panel procedures start.
Stage 3: Selection of panellists (Article 8 of the DSU)
After the establishment of the panel, the next step is to select panellists. The
panellists are selected by the WTO Secretariat. The parties cannot oppose the
selection unless they state reasons satisfactory to the Secretariat. The panel
shall consist of three panellists. The parties can agree to have five panellists on
board if they consider necessary within 10 days from the establishment of the
panel. The WTO Secretariat assists the parties in the selection of panellists by
creating a list of all governmental and non-governmental individuals having
certain qualifications from which panellists may be chosen by the parties.

Stage 4: Procedure of Panel (Articles 10 and 12 of the DSU)

The panellists shall, within one week after the composition of the panel fix a
timetable for the panel process. After this, the panel decides a deadline for
written submission to be made by each party. Each party has to submit its
submissions with the secretariat which shall transfer each submission to the
panel and submission made by one party shall be sent to the other party as
well. Any rebuttals between the parties shall be made at the subsequent
meeting of the panel. Where after the examination, a solution has been
reached between the parties, the panel shall submit a written report to the
DSB. Where the solution has not been found, the panel shall send a written
report to the DSB mentioning its findings of the case and recommendations.

Stage 5: Interim report (Article 15 of the DSU)

Following the oral arguments and rebuttal that has been performed and
examination has been made, the panel shall issue a draft report to the parties.
The parties have to submit their comments in writing after receiving the draft
report within the period set by the panel. After the expiration of the said
period for receiving the comments from the parties, the panel shall issue an
interim report, including its findings in the draft report and its new findings and
conclusion. Both the parties, within the time given the panel may submit its
written request to revise its interim report accordingly.
Stage 6: Appeal (Article 17 of the DSU)
Either of the parties unsatisfied with the ruling of the panel report can appeal
to the Standing Appellate Body established by the Dispute Settlement Body.
Only parties to the dispute can appeal to a panel report and not the third
parties The proceeding of the Appellate Body shall not exceed 60 days from the
date it notifies of appealing to the Appellate. The Appellate Body has the
power to uphold, modify or reverse the panel report and provide a conclusive
report.

Stage 7: Acceptance of report by Dispute Settlement Body (Article 30 of the

DSU)
The Dispute Settlement Body has to either accept the Appellate Body report or
reject it within a maximum period of 30 days after receiving such a report. The
report can only be rejected unanimously.
NATIONAL TREATMENT PRINCIPLE OF WTO

The NTP prohibits any of the member nations from favouring or giving any
advantages or raising any benefits to their domestic products/ goods over
imported products of other member nations. Article III of GATT 1994
specifically deals with NTP and explains the secondary need of NTP. NTP deals
with the products of any member imported by any other member shall not be
treated less favourable than that to like products of national or domestic
product.
Reasons Behind NTP
The main reason why GATT/ WTO drafter has proposed NTP was:
To avoid protectionism measure by the domestic country.
To maintain equality between imported and domestic products.
To protect the imported products from unjust tariffs.
Scope of NTP
The scope of the NTP covers the scope of de jure and de facto discrimination of
imported products. A stance is de jure discriminatory when discrimination can
clearly be seen between imported and domestic like products in term of a legal
manner. And when the discrimination is very much clear on the face of a legal
instrument that it doesn’t have any complexity to understand, then it can be
de facto discrimination. The most important part of NTP is that it only applies
to internal measures, and it does not at the border on imported goods.
Interpretation of Article III
Article III:1 General Obligation- It talks about the general obligation of Article III
and lays tells about the concept of NTP that how it works and what the
essentials of it.
Article III:2 Internal Taxation- It tells about the non- discriminatory principle
through internal taxation.
Article III:2 – Two-Tier Test
Article III gives a platform for testing if the action of importing nation is
discriminatory, for testing such action a two-tier test has to be passed:
 1. If the imported and domestic products are like products-
2. If the imported products are taxed in excess of the domestic products.

Exception to NTP
NTP has various exceptions which provide the nation from following the NTP
blindly and grants any of the nations the power to refuse on implementing
such principles on their trade. Some specific exceptions which deal with the
national treatment principle can be summarized as follows:
1. Government Procurement (Article III:8A)
It explains a concept or principle that when government agencies hire or
purchase any imported goods for their benefit or for government purpose,
then the domestic government can give preference to domestic products over
imported products
2. Subsidies to Domestic Producers (Article III:8B)
Governments have the power and can provide subsidies even including
subsidies to domestic manufacturers for aiding those manufacturers from a tax
benefit and can impose some restrictions on the kind of trade or business they
can carry. And such subsidies granted by domestic government are not
considered necessarily be legal by GATT/ WTO members.
3. Internal Maximum Price Control Measures (Article III:9)
4. Cinematograph Films (Articles III:10 and IV)
A wide concept of discrimination between international and nation fils are
discussed under this article which says that the possibility of giving preferences
to products emerging from the national movie industry can be granted and it
will not be covered under NTP.

The NTP prohibits any of the member nations from favouring or giving any
advantages or raising any benefits to their domestic products/ goods over
imported products of other member nations .
Salient Features of FEMA
The Foreign Exchange Management Act (FEMA) was an act passed in the
winter session of Parliament in 1999, which replaced Foreign Exchange
Regulation Act. This act seeks to make offences related to foreign exchange
civil offences. It extends to the whole of India.
The Foreign Exchange Regulation Act (FERA) of 1973 in India was replaced on
June 2000by the Foreign Exchange Management Act (FERA), which was passed
in 1999. The FERA was passed in 1973 at a time when there was acute shortage
of foreign exchange in the country.
It had a controversial 27 years stint during which many bosses of the Indian
corporate world found themselves at the mercy of the Enforcement
Directorate. Moreover, any offence under FERA was a criminal offence liable to
imprisonment. But FEMA makes offences relating to foreign civil offences.
Objectives
1.To reinforce and amend the law relating to foreign exchange.
2.To simplify and ease the external trade and payments.
3.To promote the systematized development and maintenance of a healthy
foreign exchange market in India.
4.To remove disparity of payments.
5.To control and direct the employment business and investment of the non-
residents.
6.To utilise the foreign exchange resources effectively for the country.
Features of FEMA
1. FEMA does not apply to the Indian citizens who resides outside India.
This criteria is checked by the number of days a person stays in India for
more than 182 days in the preceding financial year.
2. Central Government has the authority given by FEMA to impose
restrictions on and supervise three things which are- payments made to
any person outside India or receipts from them, forex and foreign
security deals.
 3.It specified the areas for holding of forex that required specific permission
of the Reserve Bank of India (RBI) or the government.
4. FEMA classified the transaction into a current and capital account.
Applicable of FEMA
1. It is applicable to the whole of India.
2. Any branch, office, and agency, which is situated outside India, but it is
owned or controlled by a person resident in India
In general, FEMA includes three different types of categories and deals
separately which are: -
a. Person
b. A person resident in India
c. Person resident outside India

FEMA only permits an authorized person to deal in Foreign exchange or foreign

security ( shares, stocks, bonds etc). FEMA became the need of an hour to be
replaced by an old act which was FERA as FERA was stringent and FEMA is
liberal and also more flexible than FERA.