The process — Stages in a typical WTO dispute settlement case

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6.9 Compensation

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Preface

Introduction to the WTO dispute settlement system

Historic development of the WTO dispute settlement system

WTO Bodies involved in the dispute settlement process

Legal basis for a dispute

Possible object of a complaint — Jurisdiction of Panels and the Appellate Body

The process — Stages in a typical WTO dispute settlement case

Legal effect of panel and appellate body reports and DSB recommendations and rulings

Dispute Settlement without recourse to Panels and the Appellate Body

Participation in dispute settlement proceedings

Legal issues arising in WTO dispute settlement proceedings

Developing countries in WTO dispute settlement

Evaluation of the WTO dispute settlement system: results to date

If the implementing Member does not achieve full compliance by the end of the reasonable period of time, it has to enter into negotiations with the complaining party with a view to agreeing a mutually acceptable compensation (Article 22.2 of the DSU). This compensation does not mean monetary payment; rather, the respondent is supposed to offer a benefit, for example a tariff reduction, which is equivalent to the benefit which the respondent has nullified or impaired by applying its measure.

The parties to the dispute must agree upon the compensation, which must also be consistent with the covered agreements (Article 22.1 of the DSU). This latter requirement is probably one of the reasons why (WTO) Members have hardly ever been able to work out compensation in cases reaching this stage. Conformity with the covered agreements implies, notably, consistency with the most-favoured-nation obligations (Article I of GATT 1994, among others). Therefore, WTO Members other than the complainant(s) would also benefit, if compensation is offered e.g. in the form of a tariff reduction. This makes compensation less attractive to both the respondent, for whom this raises the “price”, and the complainant, who does not get an exclusive benefit. These obstacles could to some extent be overcome, however, if the parties were to select a trade benefit (e.g. tariff reduction) in a sector of particular export interest to the complainant and other Members had little export interest in that sector or product.

Disclaimer

This interactive training module is based on the “Handbook on the WTO Dispute Settlement System” published in 2004. The second edition of this handbook published in 2017 can be found at here.

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