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9TH WTO MINISTERIAL CONFERENCE, BALI, 2013

Briefing note: Dispute settlement — force of argument, not argument of force

The WTO's Dispute Settlement Mechanism was negotiated during the Uruguay Round. It is a legally binding system committing member governments to settle their disputes in an orderly and multilateral fashion. It is the first such system for settling trade disputes between governments but it reflects the evolution of rules and practices in almost 50 years of the General Agreement on Tariffs and Trade (GATT).

Updated: November 2013

THIS EXPLANATION is designed to help the public understand developments in the WTO. While every effort has been made to ensure the contents are accurate, it does not prejudice member governments’ positions.

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When the Uruguay Round ended in April 1994 at the Marrakesh Ministerial Conference, ministers agreed that their governments would complete a full review of the new dispute settlement system by January 1999 and decide whether to continue, modify or terminate it. This mandate was confirmed at the Fourth WTO Ministerial Conference in Doha in November 2001. During the review, several members have proposed possible improvements and clarifications to the agreement. This is the subject of the current negotiations to improve and clarify the Dispute Settlement Understanding.

All member governments share the conviction that the dispute settlement system has served them well since it started operating in January 1995. More than 460 disputes have been filed under the system since then, of which some 200 have gone through a full legal examination. Most of the rest have been settled without litigation to the mutual benefit of the disputing countries. All of them have been handled without any lingering acrimony. It is this quasi-judicial characteristic — a blend of political flexibility and legal integrity — which makes this a unique process for settling international disputes peacefully through force of argument rather than through argument of force.

In 1997, the third year of the “new” Dispute Settlement Understanding, the WTO saw the biggest number of disputes so far, with a total of 50 “request for consultations” (the first step in the dispute settlement process). In 1998, 41 disputes were initiated and in 1996, the total was 39. The lowest figure was registered in 2011, with only eight disputes. In 2013, there have been 15 requests for consultations up to the beginning of November. The overall number of disputes initiated at the WTO totalled 469 by early November 2013, with panels established by the Dispute Settlement Body for 258 of those disputes. Within the same period, the Appellate Body dealt with 125 of these disputes.

The Appellate Body has upheld the rulings of the panels in 82 per cent of the cases, modified the rulings in 14 per cent of cases and reversed them in 4 per cent of the cases. 

The overall rate of compliance with the recommendations and rulings of the Dispute Settlement Body is very high: more than 90 per cent. Only in 4 per cent of the cases — 17 disputes — have one of the parties requested “trade sanctions”. The majority of the disputes are resolved during the period of consultations without the formal establishment of a panel and without the need for one of the parties to resort to “trade sanctions”.

The members that have initiated the most disputes are the United States, with around 22 per cent of the cases, and the European Union, with around 18 per cent, followed by Canada, Brazil, Mexico and India. As respondents, the United States has had the largest number of cases brought against it, with around 27 per cent of the cases, followed by the European Union, with 19 per cent, and by China, India, Argentina and Canada.

Compared with other similar international mechanisms for resolving disputes, the WTO Dispute Settlement System is very efficient. The average timeframe for dispute settlement at the WTO, excluding composing of the panel and translation of reports, is about ten months. For the International Court of Justice the timeframe is four years, for the European Court of Justice it is two years and for the North American Free Trade Agreement (NAFTA) it is from three to five years.

 

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