DISPUTE SETTLEMENT SYSTEM TRAINING MODULE: CHAPTER 6
The process — Stages in a typical WTO dispute settlement case
With the DSB’s adoption of the panel (and Appellate Body) report(s), there is now a “recommendation and ruling” by the DSB addressed to the losing party (in the case of a successful violation complaint) to bring itself into compliance with (WTO) law or (in the case of a successful non-violation complaint) to find a mutually satisfactory adjustment.
Article 3.7the DSU states that in the absence of a mutually agreed solution, the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures found inconsistent with WTO law. Article 21.1the DSU adds that prompt compliance with the recommendations or rulings of the DSB is essential in order to ensure the effective resolution of disputes.
The DSB is the WTO body responsible for supervising the implementation of panel and Appellate Body reports (Article 2 of the DSU). As in the previous stages of the dispute settlement system, it is the WTO Members, whose delegates compose the DSB, that must take the initiative to place items on the DSB agenda (and not the WTO Secretariat).
Intentions of implementation back to top
The first duty of the “losing” Member is to inform the DSB, at a meeting within 30 days after the adoption of the report(s), of its intentions to implement the recommendations and rulings of the DSB (Article 21.3 of the DSU).
Time-period for implementation back to top
It is usually at that same meeting that the Member concerned states whether it is able to comply immediately with the recommendations and rulings. If immediate compliance is not possible, the implementing Member has a reasonable period of time for achieving that compliance (Article 21.3 of the DSU). It is thus clear that the reasonable period of time for complying with the recommendations and rulings is not available unconditionally, but only if immediate compliance is impracticable.1 In practice, WTO Members very often claim that they cannot immediately comply with the DSB’s recommendation and ruling. It is also true that the Member concerned is frequently required to amend its domestic law in order to achieve implementation. Where legislative changes are required, such changes take time.
The reasonable period of time should not be understood as a time during which the WTO Member concerned is acting in accordance with its obligations under the WTO Agreement (assuming a violation complaint that succeeded2). It has already been established in the adopted report(s) of the panel (and the Appellate Body) that this is not the case. Rather, the reasonable period of time is a grace period granted to the Member concerned, during which it continues to apply WTO-inconsistent measures3, for bringing its measures into compliance. During that period, the Member concerned will not (yet) face the consequences foreseen by the DSU in the event of non-implementation (i.e. the need to offer compensation or face retaliation).
One should also note that the reasonable period of time of Article 21.3 of the DSU does not apply in all cases. In the event of prohibited subsidies, the panel must, pursuant to Article 4.7 of the SCM Agreement “recommend that the subsidizing Member withdraw the subsidy without delay” and must specify the time-period for this withdrawal.4
As for the determination of the reasonable period of time, which is counted as of the day of adoption of the report(s), Article 21.3 foresees three different ways. This time-period can be: (i) proposed by the Member concerned and approved by consensus5 by the DSB; (ii) mutually agreed by the parties to the dispute within 45 days after adoption of the report(s); or (iii) determined by an arbitrator.
The first option, approval by the DSB, has so far never happened. The DSB has, however, on a few occasions approved the implementing Member’s request to extend a reasonable period of time that had previously been awarded through arbitration.6
Where the DSB has not approved a Member’s proposal and both parties cannot agree on the reasonable period of time, the parties may resort to arbitration under Article 21.3(c) of the DSU. This procedure is initiated by one party’s request for arbitration, which it communicates to the chairperson of the DSB.7 Although the arbitrator can be any individual or group of individuals8, all arbitrators acting under Article 21.3(c) of the DSU so far have been current or former Appellate Body members. If the parties cannot agree on who should serve as the arbitrator(s) within ten days after referral of the matter to arbitration, the Director-General appoints the arbitrator within another ten days after consulting the parties (footnote 12 to Article 21 of the DSU).
A guideline for the arbitrator is that the reasonable period of time to implement panel or Appellate Body recommendations should not exceed 15 months from the date of adoption of the report(s). However, that time may be shorter or longer, depending upon the particular circumstances (Article 21.3(c) of the DSU). The 15-month period is a “guideline”, and not an average or standard period. This guideline is also expressed in the DSU as a maximum period, subject to “particular circumstances”.9 Recognizing the principle of prompt compliance, several arbitrators have held that “the reasonable period of time, as determined under Article 21.3(c), should be the shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB.” 10 This is not to give an advantage to those Members with a lengthy and cumbersome internal process of law and decision-making, but to give the implementing Member the time it truly needs under its normal procedures, making use of use any available flexibility11, but “not having to utilize an extraordinary legislative procedures”.12
The implementing Member bears the burden of proof to show that the duration of any proposed period of implementation constitutes a “reasonable period of time”, and the longer the proposed period of implementation, the greater this burden.13 Suggesting ways and means of implementation or assessing whether the step proposed by the implementing Member brings about conformity with WTO law is not part of the mandate of the arbitrator under Article 21.3(c) of the DSU. If there are several possible ways to bring about conformity, the implementing Member has the discretion to choose among these options. Whether the chosen option truly achieves full conformity is to be decided according to the procedure of Article 21.5 of the DSU.14 For those reasons, arbitrators determine the “reasonable period of time” on the basis of the proposal of the implementing Member.15
The reasonable periods of time awarded by arbitrators to date have ranged from six to fifteen months. Those that have been agreed between the parties have ranged from four to eighteen months.
In non-violation complaints, Article 26.1(c) of the DSU stipulates that the arbitrator acting under Article 21.3(c) “upon request of either party, may include a determination of the level of benefits which have been nullified or impaired, and may also suggest ways and means of reaching a mutually satisfactory adjustment; such suggestions shall not be binding upon the parties to the dispute.”
Article 21.3(c) of the DSU contemplates an arbitration award to be issued within 90 days of the adoption of the panel (and Appellate Body) report(s), but this time-period is nearly always too short, also because the request for arbitration is often made at a late stage.16 Thus, the parties have mostly agreed to extend the deadline. Parties may also ask the arbitrator to suspend the procedure or withdraw the request for arbitration in view of a mutually agreed solution on the issue of implementation.17
2. In the event of a successful non-violation complaint, the Member concerned is in compliance with WTO law, but it nullifies or impairs benefits accruing to the complainant. back to text
3. Respectively, to nullify or impair benefits accruing to another Member, in the case of a non-violation complaint. back to text
4. According to Article 26.2 of the DSU, Article 21.3 of the DSU also would not apply in the event of a situation complaint. According to the view of some Members and trade law experts, Articles 8.2 and 8.3 of the Agreement on Safeguards also provide for a procedure partially departing from Article 21.3 of the DSU, thus bypassing the reasonable period of time. back to text
10. Award of the Arbitrator, EC — Hormones, para. 26; quoted with approval in Award of the Arbitrator, Indonesia — Autos, para. 22; Award of the Arbitrator, Korea — Alcoholic Beverages, para. 37; Award of the Arbitrator, Canada — Pharmaceutical Patents, para. 47; Award of the Arbitrator, US — 1916 Act, para. 32. back to text
11. Award of the Arbitrator, Canada — Autos, para. 47; Award of the Arbitrator, US — Section 110(5) Copyright Act, para 39; Award of the Arbitrator, US —- 1916 Act, para. 39; Award of the Arbitrator, Canada — Patent Term, para. 64; Award of the Arbitrator, Canada — Pharmaceutical Patents, para. 63. back to text
12. Award of the Arbitrator, Korea — Alcoholic Beverages, para. 42. back to text
13. Award of the Arbitrator, Canada — Pharmaceutical Patents, para. 47; quoted with approval in Award of the Arbitrator, US — 1916 Act, para. 32. back to text
16. Moreover, these arbitrations have developed from a hardly reasoned time determination of one paragraph length in the first award (Award of the Arbitrator, Japan — Alcoholic Beverages II, para. 27) to fully-fledged legal discussions and a detailed reasoning in the more recent awards, which makes more time necessary for deliberation, drafting and translation. back to text