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DISPUTE SETTLEMENT: ANALYSIS BY FREDERICK AGAH

WTO Dispute Settlement Body developments in 2010

Ambassador Yonov Frederick Agah served as Chairman of the Dispute Settlement Body from 19 March 2010 to 24 February 2011. In a speech delivered in March 2011, he reflected on the achievements of the WTO's dispute settlement system during his chairmanship.

This article will also be published in summer 2012 in a special issue on dispute settlement at the WTO of Trade, Law and Development, a bi-annual, student-run, academic journal published by the National Law University, Jodhpur, India
www.tradelawdevelopment.com


 

Analysis by H.E. Mr Yonov Frederick Agah

Serving as Chairman of the DSB in 2010 allowed me to preside over one of the most active and productive bodies of the WTO.  Dispute settlement is the “perpetual motion” of the WTO mechanism, and the DSB keeps the machine running.  I am grateful to have had the opportunity to be a part of the most important success story of the WTO to date.

 

2010 — A Very Special Year !

2010 was a very special year for WTO dispute settlement, as it marked the 15th anniversary of the WTO dispute settlement system.

In just 15 years, with over 400 disputes to have appeared on its docket1, the WTO dispute settlement system stands as the most prolific of all international dispute settlement systems.  Indeed, it far outstrips the International Court of Justice — the principal UN adjudicative body — which has received just 150 disputes since its establishment over 65 years ago.  The International Tribunal for the Law of the Sea started shortly after the WTO in 1996; it has heard 15 cases; the Chamber for Environmental Matters was established by the ICJ in 1993, but shut down in 2006, never having heard a single case.

What does this say about the WTO?  That WTO Members are a litigious group, it seems!  But it also says that WTO Members have confidence in their dispute settlement system and consider that solutions can be found to their conflicts through resort to this mechanism. 

Quantity is not the only achievement of our DS system.  Even more impressive (and important) is its record in achieving its main objective, namely, settle disputes between Members so as to provide “security and predictability to the multilateral trading system.”2  Since its establishment, for more than half of the disputes lodged at the WTO, it was not necessary to proceed beyond the preliminary phases to the adversarial panel process.  With a few exceptions, the remaining disputes that did go to full-fledged panel proceedings were resolved by Members who brought themselves into compliance with the rulings and recommendations of the DSB.

 

Is the Panel System Efficient?

As indicated above, the WTO dispute settlement system is very active and effective at resolving disputes.  The next question is whether the system provides for “prompt settlement” of situations, which the DSU reminds us is “essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members.”3

Is the panel system efficient?  Some say it is not.  There is a myth that the WTO dispute settlement system is too slow — that panels take too long.  It is simply not true

WTO dispute settlement is remarkably efficient.  On average, WTO disputes run significantly faster than cases in other international or regional fora, such as the ICJ, the ECJ and NAFTA.  The average timeframe for WTO panel proceedings is 10 months, excluding the time it takes to compose a panel and translate reports.  Compare this to the ICJ’s 4 years, the ECJ’s 2 years and NAFTA’s Chapter 20 and 11 proceedings of 3 years and 5 years, respectively.4

WTO dispute settlement proceedings are also faster than the investor‑state arbitrations at the World Bank’s International Centre for the Settlement of Investment Disputes, known as ICSID.  An ICSID arbitration takes, on average, over 3 1/2 years.  This is not just because of the time involved in parties making submissions.  The decision-makers take a long time to do their work.  Surprisingly, it takes about 14 months between the last hearing and the issuance of an ICSID award! 

Of course, there are some WTO panel proceedings that have taken longer than 10 months, and in recent years the average time for a panel process is closer to a year.  Two high profile cases have taken several years to go through the system.  These are of course the “Airbus” and “Boeing” cases.  But these are exceptional cases.  Many press reports have labelled these cases as “the largest, most difficult and most expensive in the history of the WTO.”  It is therefore hardly surprising that these two cases have resulted in longest panel proceedings to date.  But they do not represent the norm.  We do a disservice to the WTO dispute settlement system when we describe the system by reference only to the most exceptional cases, rather than by the norm. 

That is not to say we cannot find efficiencies or that there is no room for improvement.  Various ideas have been proposed by Members and are under consideration in the on-going talks about possible DSU reform. The important point to note is that the WTO dispute settlement continues to serve the Membership very well.  

 

Achievements in 2010

Turning now to the highlights of WTO dispute settlement in 2010, I would draw attention in particular to the following:

  • in 2010, the number of consultations requests went up from 2009.5  The 17 requests made in 2010 were slightly above the annual average of the previous 5 years6, but only a little more than half the annual average of the last 15 years;7
  • 6 panels  were established in 2010, which is less than in 2009.8  This is about half of the annual average number of panels established in the last 15 years;9 
  • however, the total number of on-going disputes was almost 40 per cent higher in 2010 than 2009;  the number of on-going disputes peaked at 23 during the summer of 2010;
  • the majority of panels established in 2010 were composed by the Director‑General10, which has been the case every year since 2001;
  • finally, the number of panel reports and arbitration awards circulated to Members rose from a historic low of 6 in 2009 to 9 last year.

 

What Issues are Being Litigated?

Trade remedies dominated the dispute settlement agenda for 2010: the majority of the consultation requests, panels established and reports circulated in 2010 related to trade remedies11 — that is, anti‑dumping, countervailing duties, and safeguards.   There were three new “zeroing” cases in 2010: US ‑ Shrimp from Vietnam; US ‑ Anti-dumping Measures Involving Products from Korea; and US — Carrier Bags from Thailand.  In the US — Tyres case, China brought its first challenge under the China-specific safeguard restrictions under China’s Protocol of Accession.12 

We saw relatively new subjects like renewable energy13 and wind power equipment14 find their way onto the WTO dispute settlement docket, in cases brought by Japan against Canada and by the United States against China. We witnessed the establishment of the first WTO panel dealing with a tobacco-control measure in Indonesia’s case against the United States; unlike previous tobacco cases, this one is not about local content and taxation measures but addresses a ban on cigarettes containing certain additives including clove.15  We also saw cases dealing with the interpretation of agreements that have had little or no DS attention in the past:  

  •  Thailand–Cigarettes addressed several novel interpretation issues under the Customs Valuation Agreement16; and 
  • in EC- IT Products, a Panel Report that was not appealed,  the Information Technology Agreement (ITA) made its DS debut.17

We also saw the return of familiar issues, such as a case dealing with claims of tax discrimination and alcoholic beverages.18  Three SPS cases, notorious generally for their complexity, occupied panels in 2010: these were Australia—Apples, US—Poultry from China, and Korea—Bovine Meat.19

2010 was “par for the course” in that all the panels established in 2010 involved goods.  Disputes on goods continue to be the most common disputes brought before the WTO.  As of the end of 2010, of the 419 disputes lodged in the WTO, only 28 did not involve goods.  In other words, since the establishment of the WTO in 1995 until the end of 2010, about 94% of disputes involved goods, while only about 6% did not.

2010 will no doubt be cited in the record books as the year in which the Panel Report in one of the biggest WTO cases to date was circulated.  I am speaking of course of the “Airbus” case.20  This complex dispute involves allegations of some 300 separate instances of alleged subsidization by the EU and its Member States over a period of almost forty years.  The Panel Report was appealed on July 2010 and virtually monopolised the attention of the Appellate Body for several months, causing it to make special arrangements with WTO Members to delay consideration of appeals in several other cases.21

The “sister” case, the “Boeing” panel, involves allegations of prohibited and actionable subsidies provided to US producers of large civil aircraft.22  The Panel Report was circulated in March 2011 and appealed in April 2011.

Finally, we saw two examples in 2010 of suspension of proceedings, which happens relatively rarely.  Both cases involved arbitrations under Article 22.6 of the DSU, where the United States objected to the level of suspension of concessions proposed by the European Union in one zeroing case and by Japan in another zeroing case.23 

 

Which Members Were Active in DS in 2010?

Turning to consider which Members were active participants in DS in 2010, of the 17 new requests for consultations, the United States is the only multiple requesting party, launching 4 of the requests.  Both China and the Dominican Republic are on the receiving end in 4 requests (although the 4 requests to the Dominican Republic relate to the same matter).  The EU received 3 requests and the United States, 2. 

In terms of the 6 panels established in 2010, the United States is respondent in 4 panels; the EU and the Philippines are each respondent in the other 2.  

Including these 6, there were 11 active panels at the end of 2010: the United States was respondent in 7 of those cases and China, the EU, Korea, and the Philippines were each respondent in 1 case. 

Complainants included 3 each from the EU and Mexico, and 1 case brought by each of Brazil, Canada, China, the EU, Indonesia, Korea, Viet Nam and the United States.

 

Developing Countries Were Active in 2010

2010 was a busy DS year for developing countries.  In fact, the majority of the cases initiated in 2010 were brought by developing countries.  El Salvador and Viet Nam each brought their first case as complainant: El Salvador was one of four developing country Members from Central America to bring a safeguards case on bags and tubular fabric against the Dominican Republic24, and Viet Nam brought a dumping case on shrimp against the United States. 

Peru requested consultations against Argentina regarding anti‑dumping duties on fasteners and chains.25  We also saw the circulation of the Panel Report in Thailand — Cigarettes, involving two Asian developing countries.26 

Further, in 2010 there were more developing countries than developed countries involved as third parties.

In 2010 we also saw some “newcomers” in the DS arena:  Ukraine requested the establishment of a panel against Armenia, a first for both countries27.  So far, this has not moved beyond the first request for panel establishment. 

 

Most Frequent Users

The United States and the EU still top the charts in terms of the most frequent users of the WTO dispute settlement system, both as complainants and respondents.  Canada, Brazil, India and Mexico are frequent complainants, while India and China have defended numerous cases. 

 

Panelists

An interesting statistic for 2010 relates to panelists.  Historically, in the 15 years of WTO dispute settlement, a little less than half of the panelists have come from developing countries.28  Seven of the 9 panel reports circulated in 2010 were decided by a panel composed mostly of panelists from developing countries.29   

At the end of 2010, 21 of the 33 panelists serving on active panels were from developing countries.

 

Notes :

1. 419 disputes (i.e. requests for consultations) were lodged between January 1995 and December 2010.  About 200 have proceeded through to completion or settlement. back to text
2. Article 3.2 of the DSU.back to text 
3. Article 3.3 of the DSU.back to text
4. Timeframes referred to in this comparison refer to actual procedures. They exclude political processes such as consultations, good offices, mediation or conciliation.back to text
5. 14 consultations were requested in 2009.back to text
6. The annual average of the previous 5 years is 15.6 requests.back to text
7. The annual average of the previous 15 years is 27.9 requests.back to text
8. These 6 panels represent 7 disputes because two identical disputes were brought by the EU and US against the Philippines (Philippines ‑  Taxes on Distilled Spirits) and a single panel was established by the DSB (WT/396/403). Ten panels were established in 2009.back to text
9. The annual average of the previous 15 years is 11.8.back to text
10. 4 of the 6 panels established in 2010 were composed by the DG.back to text
11. 11 of the 17 consultations requests made in 2010 relate to “trade remedies”; 4 of the 6 panels that were established were “trade remedy” panels; and 5 of the 9 panel/Appellate Body reports circulated dealt with trade remedies.back to text
12. WT/DS399.back to text
13. Canada ‑ Certain Measures Affecting the Renewable Energy Generation Sector (WT/DS412).back to text
14. China ‑ Measures Concerning Wind Power Equipment (WT/DS419).back to text
15. US — Clove Cigarettes (WT/DS406).back to text
16. WT/DS371 (brought by the Philippines).  See also Colombia-Ports of Entry, WT/DS366.back to text
17. EC — IT Products, WT/DS375/376/377 (brought by the US, Japan and Chinese Taipei).back to text
18. Philippines — Taxes on Distilled Spirits (WT/DS396/403, brought by the EU and US).  There have been a line of similar “alcohol” cases:  Japan — Alcohol in 1996; Korea — Alcohol in 1999 and Chile — Alcohol in 2000.back to text
19. WT/DS367; WT/DS392; WT/DS391.back to text
20. EC ‑ Measures Affecting Trade in Large Civil Aircraft, WT/DS316.back to text
21. The “Airbus” final report was more than 1000 pages long, with more than 6000 footnotes.  It was circulated on 30 June 2010. Similarly, the Appellate Body report on this case, circulated on 18 May 2011, was that body’s longest ever.  It contained over 600 pages and 3000 footnotes. back to text
22. US ‑ Measures Affecting Trade in Large Civil Aircraft (2nd complaint), WT/DS353.back to text
23. US — Laws, Regulations and Methodology for Calculating Dumping Margins (DS294 — EC); US — Measures Relating to Zeroing and Sunset Reviews (DS322 — Japan).back to text
24. Dominican Republic ‑ Safeguard Measures on Imports of Polypropylene Bags and Tubular Fabric (DS415/416/417/418, requested by Costa Rica, Guatemala, Honduras and El Salvador on October 2010, and later established on February 2011).back to text
25. Argentina — Anti-Dumping Duties on Fasteners and Chains from Peru (DS410, requested by Peru in May 2010).back to text
26. Thailand ‑ Cigarettes, DS371 (brought by the Philippines against Thailand).back to text
27. Armenia ‑ Cigarettes and Alcoholic Beverages (DS411).back to text
28. According to worldtradelaw.net, the total number of panelists involved in WTO disputes was 209, of which 110 were from developed countries and 99 from developing countries. The number of panelists from developing countries thus represents 47% of the total.  This data does not include panelists currently serving on ongoing panels.back to text
29. The exceptions were: EC—IT Products (no panelists from a developing country) and EC — Fasteners (only one panelist from a developing country).back to text

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