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Background back to top
It was negotiated during the Uruguay Round,
and is a legally-binding agreement 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. When the
Uruguay Round ended in April 1994 at the Marrakesh Ministerial
Conference, ministers agreed that their governments
would complete a full review of this new system by January
1999, and to decide whether to continue, modify or terminate
it. During the review several members proposed possible
improvements and clarifications to the agreement. But
even after extending the review to July 1999, members
did not reach an agreed conclusion.
All member governments
share the conviction that the dispute settlement system
has served them well since it started operating in January
1995. More than 330 disputes have been filed under the
system since then, of which some 130 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.
The Doha mandate back to top
The Doha Ministerial Declaration
mandates negotiations on improvements and clarifications
of the DSU. It states that the negotiations will not
be part of the single undertaking — i.e. that they will
not be tied to the success or failure of the other negotiations
mandated by the declaration. The Doha mandate also set
a deadline of May 2003. In July 2003, the General Council
extended the deadline to May 2004. A further extension
was agreed by the General Council in the context of
the “July package” on 1 August 2004 without setting
a new deadline.
Developments since Doha to May
2004 back to top
As a measure of the DSU’s pivotal
role in the whole multilateral trading system of the
WTO, more member governments have participated actively
in these talks than in any other negotiation (except
agriculture) under the Doha mandate. Well over 80 WTO
members have subscribed to more than 40 proposals, each
of which contains several suggested changes, covering
virtually all stages of the dispute settlement system.
Some
of the proposed changes address housekeeping issues
such as how to deal with inactive cases which remain
dormant for several years without any indication that
the complaining countries want to pursue these any further.
In such cases countries would be expected to formally
withdraw their complaints. Other proposals seek to introduce
new stages such as the possibility of remanding, or
referring, the case back to the original panel if a
factual issue arises at the appellate stage which had
not been examined by the panel. Several proposals contain
suggestions for enhancing the special and differential
treatment of developing and least-developed countries.
The
issue on which there is, perhaps, the most widespread
support for change is the procedural issue of “sequencing”.
The issue arises from a lack of clarity in the Dispute
Settlement Understanding’s text as to the order in which
two phases of the procedure should occur when a member
believes that another has failed to comply fully with
the final rulings.
Conversely, the issue on which
members are, perhaps, the most strongly divided is external
transparency — what kind of access the public might
have to panel proceedings or their input into the procedure
by means of amicus curiae briefs (see explanation below).
On
16 May 2003, the chairman of the negotiations circulated
a draft legal text under his own responsibility. The
text contained members’ proposals on a number of issues,
including: enhancing third-party rights; introducing
an interim review and “remand” (referring a case back
to a panel) at the appeals stage; clarifying and improving
the sequence of procedures at the implementation stage;
enhancing compensation; strengthening notification requirements
for mutually-agreed solutions; and strengthening special
and differential treatment for developing countries
at various stages of the proceedings.
According to the
chairman, a number of other proposals by members were
not included in his text due to the absence of a sufficiently
high level of support. These proposals covered issues
such as accelerated procedures for certain disputes;
improved panel selection procedures; increased control
by members on the panel and Appellate Body reports;
clarification of the treatment of amicus curiae briefs;
and modified procedures for retaliation, including collective
retaliation or enhanced surveillance of retaliation.
Members
continued to discuss the chairman’s text until
the end of May 2003. Some felt that the text captured
the essential elements for a final agreement; others
felt that there were serious omissions in the text.
All members, however, expressed a readiness to continue
work beyond 31 May 2003 towards an agreement.
At its
meeting on 24 July 2003, the General Council agreed
to extend negotiations from 31 May 2003 to 31 May 2004.
Current status of negotiations back to top
Although all proposals are still
on the table, during the last year or so, active negotiations
have centered on the following issues:
Third-party rights: Under the
current DSU rules, it is possible for members, under
certain conditions, to join in consultations in a
dispute in which they are not the complaining or responding
party, to become third-parties at the panel stage,
and
to become third-participants in the appellate stage.
Members are generally supportive of enhanced third-party
rights, provided that an adequate balance between
the rights of main parties and third-parties is maintained.
Remand authority: At present,
the Appellate Body’s function is limited to the examination
of issues of law and legal interpretation developed
by panels, and it is not empowered to make factual findings.
This can lead to difficulties if a factual issue arises
at the appellate stage which had not been examined by
the panel. The issue therefore arises as to whether
the Appellate Body should have the possibility to remand
the case back to the panel.
Sequencing: The word “sequencing” is
shorthand for the procedural steps and time-periods
needed to deal with a situation where the complaining
country claims that the defending country has not implemented
the rulings.
- Article 21.5 states that where
the two parties disagree whether the rulings have
been implemented or not, a panel examines the dispute
and
reports within 90 days.
- Article 22.2 states that if
the defending country fails to implement, the
complaining country can ask the Dispute Settlement
Body to authorize
it to retaliate. Article 22.6 states that, within
30 days from the end of the reasonable period of
time for
implementation, the Dispute Settlement Body authorizes
the complaining country to retaliate.
So,
there are two key steps with their own time-periods:
90 days for a panel to examine whether a ruling has
been implemented; and 30 days for Dispute Settlement
Body to authorize retaliation. The wording of the Dispute
Settlement Understanding does not specify whether these
steps have to come one after the other. Hence, according
to the current wording of the agreement, it seems that
the 30-day period for the Dispute Settlement Body to
authorize retaliation runs out before the panel has
examined whether the defending country has implemented
or not.
Post-retaliation: The issue
arises from the fact that the DSU does not provide any
specific procedure for the removal of an authorization
to retaliate, once the member concerned has complied,
or claims to have complied, with the rulings.
Composition of panels: The DSU
currently provides for disputes to be examined by panelists
selected on an ad hoc basis for each case, in consultation
with the parties. This process can often cause delay.
Negotiators are discussing the possibility of a permanent
roster of individuals, retained on a full-time basis,
from which panelists would be drawn for each case to
speed up the process and to reinforce the independence
of panels and quality of their reports.
Time savings: Some negotiators
have proposed ways of streamlining the procedures, while
others are concerned that the procedures already impose
a tight schedule and that any shortening of timeframes
would prejudice developing countries ability to effectively
defend their rights.
Additional guidance
to WTO adjudicative bodies: Proposals have been submitted relating to the
manner in which the Appellate Body and panels carry
out their functions, and aimed at increasing the level
of member-control over the content of rulings of these
bodies.
Transparency: Dispute settlement
proceedings are confidential to the main parties and,
where appropriate, third parties to a dispute. Transparency
means opening up the dispute settlement proceedings
either to the public (i.e. external transparency) or
to WTO members other than those who are already parties
to the dispute (i.e. internal transparency). Some developed
countries have proposed opening dispute settlement proceedings,
while a number of developing countries have opposed
such proposals.
Some terms frequently used in
DSU negotiations back to top
Implementation (DSU
Articles 21 & 22): After the Dispute Settlement Body has adopted
the final rulings in a case, the defending country has
to implement these rulings by changing or completely
removing its trade measure which has been ruled illegal.
Reasonable period of
time (DSU Article 21.3): If the defending country cannot comply
with the rulings immediately, it is given a “reasonable
period of time” to implement the rulings. This period
of time is either agreed mutually between the two parties,
or, failing that, it is decided by an arbitrator. Article
21.3(c) states that a guideline for the arbitrator should
be that the reasonable period of time “should not exceed
15 months from the date of adoption”.
Determination of compliance
(DSU Article 21.5): Article 21.5 addresses a situation
where the two parties disagree whether the rulings have
been implemented or not. It states that such a dispute “shall
be decided through recourse to these dispute settlement
procedures, including wherever possible resort to the
original panel” which has 90 days to report its findings.
The panel is referred to as a “compliance panel” — i.e.
it examines whether the defending country has complied
with the rulings.
Besides
referring to “these dispute settlement procedures” and
a 90-day panel, Article 21.5 does not specify any other
elements or time-periods for determining compliance.
However, normal procedures under the Dispute Settlement
Understanding also include a 60-day period for consultations,
a possibility of two Dispute Settlement Body meetings
before a panel is established, a possibility of appeal
of the panel findings, and a 2-3 months appeal process — together,
they add up to more than 90 days.
Compensation (DSU Articles
3.7, 22.1, & 22.2): Compensation can be negotiated between
the two parties in a dispute if the defending country
fails to comply with the rulings within the reasonable
period of time for implementation. Articles 3.7 & 22.1,
however, state that compensation is a temporary measure
pending full implementation. Article 22.2 allows 20
days, from the end of the period of implementation,
to conclude negotiations. If the negotiations conclude
unsuccessfully, the complaining country is allowed to
request authorization from the Dispute Settlement Body
to retaliate.
Suspension of concessions
or other obligations (DSU Articles 3.7, & 22): This is
commonly referred to as “retaliation” or “sanctions”.
A concession is, for example, an importing country’s
legal commitment not to raise its customs duty on an
import above a certain agreed level of tariff. A suspension
of this concession would mean that the importing country
would raise the tariff. An obligation is, for example,
a country’s legal responsibility to provide protection
for intellectual property rights, such as patents and
copyrights etc. A suspension of this obligation would
mean that the country would be free of its legal responsibility
to provide such protection. According to the Dispute
Settlement Understanding, suspension of concessions
or other obligations should be used as a last resort
by the complaining country subject, of course, to authorization
by the Dispute Settlement Body (Art.3.7), and is a temporary
measure pending full implementation (Art.22.1).
Cross-retaliation (DSU
Article 22.3): The phrase “cross-retaliation” does not appear
in the Dispute Settlement Understanding, but is shorthand
to describe a situation where the complaining country
retaliates (i.e. suspends concessions or other obligations)
under a sector or an agreement which has not been violated
by the defending country. The circumstances under which
cross-retaliation can be authorized are explained in
the agreement’s Article 22.3. In preparing its request
for authorization by the Dispute Settlement Body to
suspend concessions or other obligations (i.e. to retaliate),
the complaining country should first seek to retaliate
in the same sector where the violation has occurred.
If that is not practicable or effective it can seek
to retaliate in another sector but under the same agreement
where the violation has occurred. And if that is also
impracticable or ineffective it can seek to retaliate
under another agreement.
Carousel: Among the procedures
and disciplines for retaliation, the Dispute Settlement
Understanding does not contain any obligation on the
retaliating country to submit a list of products targeted
for sanctions. Nor does the agreement contain any mention
of whether or not the retaliating country can change
its selection of targeted products. The word “carousel” refers
to the possibility of changing the targeted products
as and when the country wants, so long as it stays within
the authorized level of retaliation.
Amicus curiae briefs: Amicus
curiae means “friend of the court” or “disinterested
adviser”.
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