WTO Dispute Settlement

Mechanism
Introduction
• WTO’s Dispute Settlement Mechanism is one of the most used international
dispute settlement mechanism
• Under GATT 1947, dispute settlement mechanism was mostly
political/diplomatic in nature.
• It was transformed into judicial body under WTO. However, it maintained
the political/diplomatic features too.
• The GATT 1947 contained only two brief provisions on dispute settlement:
Articles XXII and XXIII
• Under WTO, elaborate judicial mechanism rules were laid down under
Understanding on Rules and Procedures for the Settlement of Disputes,
commonly referred to as the Dispute Settlement Understanding (DSU)
Jurisdiction
• Nature: (1) compulsory; (2) exclusive; and (3) only contentious (i.e. it does
not provide for advisory opinions)
• Compulsory implies a responding Member has, as a matter of law, no
choice but to accept the jurisdiction of the WTO dispute settlement system
• Article 6.1 of the DSU: If the complaining party so requests, a panel shall be
established at the latest at the DSB meeting following that at which the
request first appears as an item on the DSB’s agenda, unless at that
meeting the DSB decides by consensus not to establish a panel.
• Unlike ICJ, there is no need for the parties to a dispute, arising under the
covered agreements, to accept, in a specific declaration or agreement, the
jurisdiction of the WTO dispute settlement system to adjudicate the dispute
• Exclusive implies trade related disputes cannot be litigated under any
other international dispute settlement forum.
• Article 23.1 of the DSU: 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
• Article 23.1 of the DSU both ensures the exclusivity of the WTO vis-à-
vis other international fora and protects the multilateral system from
unilateral conduct by states.
• Contentious implies it does not render advisory opinions.
• Article 3.2 of the DSU: the WTO dispute settlement system is called upon to
clarify WTO law only in the context of a dispute.

• Scope of Jurisdiction: i.e. (1) which disputes are subject to WTO dispute
settlement?; and (2) which measures can be subject to WTO dispute
settlement?
• Article 1.1 of the DSU: The rules and procedures of this Understanding shall
apply to disputes brought pursuant to the consultation and dispute
settlement provisions of the agreements listed in Appendix 1 to this
Understanding (covered agreements)
• The covered agreements include the WTO Agreement, the GATT 1994
and all other multilateral agreements on trade in goods, the GATS, the
TRIPS Agreement, the DSU and the plurilateral Agreement on
Government Procurement.
• The scope is very broad including disputes over measures regarding
customs duties, disputes regarding sanitary measures, disputes
regarding subsidies, disputes regarding measures affecting market
access for services, to disputes regarding intellectual property rights
enforcement measures
• The word ‘measure’ has not been defined by DSU
• US – Corrosion-Resistant Steel Sunset Review: any act or omission
attributable to a WTO Member can be a measure of that Member for
purposes of dispute settlement proceedings
• What about (1) action or conduct by private parties attributable to a
Member; (2) measures that expire or are withdrawn during the proceedings
and are thus no longer in force; (3) legislation as such (as opposed to the
actual application of this legislation in specific instances); (4) discretionary
legislation (as opposed to mandatory legislation); (5) unwritten norms or
rules of Members, including practices or policies which are not set out in
law; (6) ongoing conduct by Members and concerted, systematic action or
practice of Members; (7) measures composed of several different
instruments; and (8) measures by regional and local authorities?
• With respect to (1), Japan – Film case: will depend on govt. nexus i.e. level of government
involvement
• Also relevant is Article 8 of the Articles on Responsibility of States for Internationally
Wrongful Acts: The conduct of a person or group of persons shall be considered an act of a
State under international law if the person or group of persons is in fact acting on the
instructions of, or under the direction or control of, that State in carrying out the conduct.
• With respect to (2), China – Raw Materials case: Panel noted that previous Panels have
made findings on expired measures in some cases and declined to do so in others,
depending on the particularities of the disputes before them. However, the Panel clarified
that a recommendation made with respect to such measure is ‘prospective in nature in
the sense that it has an effect on, or consequences for, a WTO Member’s implementation
obligations that arise after the adoption of a panel and/or Appellate Body report by the
DSB.
• With respect to (3), US – 1916 Act case noted that WTO panel can deal
with such legislation. This is so because the disciplines of the WTO and its
dispute settlement system ‘are intended to protect not only existing trade
but also the security and predictability needed to conduct future trade’.
• US – Oil Country Tubular Goods Sunset Reviews case: In essence,
complaining parties bringing ‘as such’ challenges seek to prevent
Members ex ante from engaging in certain conduct.
• With respect to (4), US – 1916 Act case noted that mandatory and
discretionary legislation should be distinguished from each other,
reasoning that only legislation that mandates a violation of GATT
obligations can be found as such to be inconsistent with those obligations.
• US – Corrosion-Resistant Steel Sunset Review case however noted that the
discretionary nature of a measure is not, in and of itself, determinative of the
question of WTO consistency. However, the discretionary nature of a measure may
inform whether the measure is capable of operating in a WTO consistent manner,
or whether it is ‘necessarily inconsistent with a Member’s WTO obligations’
• EU – Biodiesel case noted that there is no basis […] for finding that only certain
types of measures (such as mandatory legislation) can be challenged ‘as such’.
• However, to challenge a discretionary measure successfully, party needs to show
either that the measure at issue mandated the investigating authority to act
inconsistently with the relevant provision of WTO law, or that such law ‘restrict[ed]
in a material way’ the authority’s discretion to make a determination consistent
with WTO law
• With respect to (5), US – Zeroing (EC) case the Appellate Body ruled that the determination
whether a measure can be challenged in WTO dispute settlement proceedings ‘must be
based on the “content and substance” of the alleged measure, and “not merely on its form”
• The Appellate Body further ruled that, when bringing a challenge against such an unwritten
rule or norm, a complaining party must clearly establish: (1) that the rule or norm is
attributable to the responding Member; (2) the precise content of the rule or norm; and (3)
that the rule or norm does have general and prospective application
• The evidence may include proof of the systematic application of the unwritten rule or
norm. (High Threshold requirement)
• US – Countervailing Measures (China) case: (1) the policy had normative value and was
therefore a ‘rule or norm’; (2) the policy was attributable to the United States; (3) the
precise content of the policy was clear; (4) the policy seemed to have general and
prospective application; and (5) the policy had been applied consistently for a considerable
period of time.
• With respect to (6), it can be challenged under WTO DSM (US –
Continued Zeroing case)
• With respect to (7), it will be challenged as a single measure
(Argentina– Import Measures case); US – COOL case: (i) the manner in
which the complainant presented its claim(s) in respect of the
concerned instruments; (ii) the respondent’s position; and (iii) the
legal status of the requirements or instrument(s), including the
operation of, and the relationship between, the requirements or
instruments, namely whether a certain requirement or instrument
has autonomous status
Access to WTO’s DSM
• Access is limited to Members of the WTO. This access is not available,
to individuals or international organizations, whether governmental
or non-governmental.
• The WTO dispute settlement system is a government-to-government
dispute settlement system for disputes concerning rights and
obligations of WTO Members.
• The WTO Secretariat cannot prosecute breaches of WTO law (i.e. suo
motu/advisory opinion)
• Read Art. XXII and XXIII
• Intervention by other members apart from plaintiff and respondent is allowed if
that member is having ‘substantial trade interest’
• Indirect access: companies/industry associations are the real driving force

• OTHER KEY FEATUERS: (1) the single, comprehensive and integrated nature of
the WTO dispute settlement system; (2) the methods of WTO dispute settlement
(consultation Art. 4, adjudication Art 6-20, arbitration Art. 25, other ADR Art. 5 of
DSU); (3) the preference for mutually acceptable solutions; (4) the mandate to
clarify WTO provisions (Art. 3.2 of DSU and Art. 31, 32 of VCLT but judicial
activism prohibited); and (5) remedies for breach of WTO law (3 remedies, Art.
3,19,21, 22 of DSU); (6) the short time frames, (7) confidentiality and
transparency, and (8) appellate review
• Institutions under DSM of WTO: DSB, Appellate Body, Ad hoc Panel
• Process of dispute resolution: See the flowchart in Peter van den Bossche
book
• Key features to focus for dispute resolution: (1) the short time frame for
each of the steps in the process; (2) the confidentiality and resulting lack of
transparency of the process; (3) the burden of proof in WTO dispute
settlement proceedings; (4) the important role of private legal counsel in
representing parties in WTO dispute settlement; (5) the controversial issue
of amicus curiae briefs; and (6) the obligation on Members to act in good
faith in WTO dispute settlement proceedings, and the obligation on panels
and the Appellate Body to ensure due process in these proceedings.
Special Rules of Developing Countries
• See Article 3.12 (regarding the application of the 1966 Decision),
Article 4.10 (regarding consultations), Article 8.10 (regarding the
composition of panels), Article 12.10 (regarding consultations and the
time to prepare and present arguments), Article 12.11 (regarding the
content of panel reports), Article 21.2 (regarding implementation of
adopted recommendations and rulings), Article 21.7 (regarding the
DSB surveillance of the implementation of adopted recommendations
or rulings), Article 24 (regarding least-developed countries) and
Article 27 (on the assistance of the WTO Secretariat).
Challenges and Reforms
• EU’s proposals: (1) time frames and time-saving by, e.g., halving the time for
mandatory consultations, and establishing panels by reverse consensus at the first
DSB meeting; (2) improved conditions for Members seeking to join consultations;
(3) the notification of mutually agreed solutions; (4) the facilitation of panel
composition; (5) the extension of third party rights; (6) the protection of business
confidential information; (7) the issue of amicus curiae briefs; (8) enhanced
transparency through opening panel meetings and Appellate Body hearings to the
public; (9) the suspension of panel proceedings; (10) the introduction of remand
in Appellate Body proceedings; (11) the ‘sequencing’ issue; (12) the
‘postretaliation’ issue; (13) the promotion of prompt and effective compliance by
strengthening the remedies available for breach of WTO law, including collective
retaliation and monetary compensation; and (14) the strengthening of special and
differential treatment for developing-country Members.