TENTH WTO MINISTERIAL CONFERENCE, NAIROBI, 2015
Briefing note: Dispute settlement
In November 2015, the WTO reached a significant milestone when the 500th trade dispute was submitted to its dispute settlement mechanism. In the 20 years since the WTO opened its doors, there have been more disputes initiated in this period than in the 47 years of the organization’s predecessor, the GATT (General Agreement on Tariffs and Trade). This is mainly due to the fact that since 1995 the dispute settlement mechanism has established a much more effective and reliable system as well as the possibility to appeal panel reports.
Far from encouraging litigation, the strengthened dispute settlement system has provided a solid base for WTO members to solve their problems through dialogue and negotiations. Of the 500 cases filed, almost half never reached the panel adjudication stage and were resolved instead through a process of “consultations” among the parties involved in the dispute.
Commenting on the importance of reaching the figure of 500 trade disputes, WTO Director-General Roberto Azevêdo said it showed that the system “enjoys tremendous confidence among the membership who value it as a fair, effective and efficient mechanism to solve trade problems. It is a system recognized the world over for providing high quality results that respond to both developing and developed members.”
DG Azevêdo also stressed that the success of the system has brought challenges and while it is faster than most if not all international dispute settlement systems operating today, “we are clearly in a situation where the high demand is testing our capacity”. Over the past two years, the Director-General has been in regular contact with members through the Dispute Settlement Body to keep them informed about the measures taken to address the increase in the number of cases and their complexity, and to encourage them to seek appropriate solutions.
Disputes are generally much more complicated now than they were in the first decade of the WTO. As the jurisprudence has grown, so have the size and nature of parties’ submissions and the length of panel and Appellate Body reports. The disputes of today are very different from those the drafters of the dispute settlement rules had in mind. Appeals, for instance, are not the rare occurrences that members thought they would be. As a result, members and the WTO Secretariat have had to adjust to the new world of WTO dispute settlement.
The dispute settlement mechanism of the WTO was negotiated during the Uruguay Round, and 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 GATT.
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 would decide whether to continue, modify or terminate it. This mandate was confirmed at the WTO’s Fourth Ministerial Conference in Doha in 2001. During the review, several members proposed possible improvements and clarifications to the system. This is the subject of 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, and disputes have been handled without 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 third year of the "new" Dispute Settlement Understanding, 1997, saw the biggest number of disputes so far, with a total of 50 “request for consultations”, the first step in a dispute. In 1998, a total of 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 were 20 requests for consultations, and in 2014 there were 14. The Appellate Body has dealt with more than 135 appeals since 1995.
Of the 500 disputes brought to the WTO, only 282 proceeded to the litigation phase. Of the others, 110 were resolved bilaterally or withdrawn. For the remainder, no outcome was notified to the WTO. A total of 102 members have participated in a dispute either as a complainant or as a respondent or as a third party, meaning 63 per cent of the membership. The Appellate Body has upheld the rulings of dispute panels in 82 per cent of the cases, modified the rulings in 14 per cent of them and reversed them in 4 per cent of the cases.
The authorization for a member to retaliate once another member has been found to be in violation of its WTO obligations has been given 18 times
The compliance rate with dispute settlement rulings is very high, at around 90 per cent.
The members that have initiated the most complaints 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 biggest number of cases brought against it, with around 27 per cent of the cases, followed by the European Union, with 19 per cent, China, India, Argentina and Canada.
Compared with other similar international mechanisms for resolving disputes, the WTO’s dispute settlement system is very efficient. The average timeframe for a dispute at the WTO, excluding composing of the panel and translation of reports, is about ten months. For the International Court of Justice, it is four years, for the European Court of Justice it is two years and for NAFTA (North American Free Trade Agreement) it is from three to five years.
For more information on current and past disputes, statistics on members’ use of the system and other data, see the dispute settlement area of the WTO website.