The new dispute settlement system aimed to introduce a significant change in the way of
settling the GATT 1947 disputes. Specifically, the “positive consensus” rule was reversed
210 Junior, R. D. S., (2009). An Advisory Center on WTO Law for Mercosur Members: Bridging Disparities
through Collective Action. Institut québécois des hautes études internationales – IQHEI.
211
This Article was dealing with disputes claimed by any member that suffered loss as a result of being nullified or impaired by any other member.
212
Junior, R. D. S., (2009). An Advisory Center on WTO Law for Mercosur Members: Bridging Disparities through Collective Action.
213 Ibid. also see, Davey, William J., (1987). ‘Dispute Settlement in GATT’. p. 65. 214 Wilson, B., (2003). ‘Dispute Settlement System Training Module’.
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and the litigation process became more rules-based. These were the two principal changes
which made the system more “predictable and less susceptible to power politics”215.
The WTO dispute settlement system was introduced in January 1995, and disputes brought to
the WTO covered a wide range of economic activities216. The WTO Members established the
current dispute settlement system during the Uruguay Round of Multilateral Trade
Negotiations and highlighted the importance of compliance by all Members with their
obligations under the WTO Agreement217. The system was based on the principle that a
stronger, more binding system to settle disputes would help to ensure that the WTO’s carefully negotiated trading rules are respected and enforced218. Also, the system is referred
to as the “WTO’s unique contribution to the stability of the global economy”219
. Today, the
backbone and the fundamental support of the multilateral trading regime is the WTO dispute
settlement system.
The current WTO dispute settlement system is referred to as the Dispute Settlement Body
(DSB) which includes the Dispute Settlement Panels (DSP) and the Appellate Body (AB).
The first phase of the DSB is the “Consultations” phase which could be regarded as a
political process within the WTO, while the DSP and AB are judicial-type institutions220. The
DSB is embodied in the Understanding on Rules and Procedures Governing the Settlement of
Disputes, commonly referred to as the Dispute Settlement Understanding (abbreviated as
215 Junior, R. D. S., (2009). An Advisory Center on WTO Law for Mercosur Members: Bridging Disparities
through Collective Action.
216 Wilson, B., (2003). ‘Dispute Settlement System Training Module’. 217
Ibid.
218 Ibid. 219 Ibid.
220 Bossche, P. V., (2008). The Law and Policy of the World Trade Organization, (2nd ed, Cambridge
67
“DSU”). The DSU provides rules and procedures for the dispute settlement system. It is the result of the evolution of rules, procedures and practices developed over almost 50 years
under the GATT 1947 building on the principles for the management of Articles XXII and
XXIII of GATT 1947221.
In the WTO DSU, a trade dispute arises when any of the WTO Members adopts a trade
policy measure allegedly violating their WTO obligations, and one or more other Members
takes action against this222. In essence, disputes in the WTO are essentially about broken
promises. WTO Members have agreed that “if they believe fellow-members are violating
trade rules, they will use the multilateral system of settling disputes instead of taking action
unilaterally”223. That means “abiding by the agreed procedures, and respecting judgments”224.
Also, the function of the DSU is the prevention of the detrimental effects of international
trade conflicts and alleviation of the imbalances between stronger and weaker nations through
having their disputes settled pursuant to DSU225. Therefore, since the DSU entered into force,
it has been a practical significant system as the WTO Members often use the WTO system to
settle their disputes226.
221
Wilson, B., (2003). ‘Dispute Settlement System Training Module’.
222 See WTO Website available at https://www.wto.org/, [Accessed: October 20, 2015]. See also, Wilson, B.,
(2003). ‘Dispute Settlement System Training Module’.
223 See WTO Website available at https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm [Accessed:
October 20, 2015].
224 See WTO Website available at https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm [Accessed:
October 20, 2015].
225 Wilson, B., (2003). ‘Dispute Settlement System Training Module’. 226
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Moreover, the function of the DSU227 is providing security and predictability for the
multilateral trading system, as businesses involved in international trade in goods and
services need predictability and stability in the government rules, regulations and laws
relating to their trade activity. Thus, offering a fast, effective, dependable and rule-oriented
system to resolve disputes under the provisions of the WTO Agreement is the function of the
DSU. Strengthening the rule of law of the dispute settlement system eventually makes the
trading system more secure as well as predictable228. Further, the dispute settlement system
facilitates a fast resolution of the matter through an independent ruling which must be applied
promptly, or else the possible trade sanctions will be applied for the non-implementing
Member229.
The WTO dispute settlement system has been often praised as one of the significant
innovations of the Uruguay Round230. Compared to the previous system, the DSU provides
more procedures for the various stages including specific time-frames for dispute
settlement231.
The DSU is an integrated framework for all the WTO agreements232. It has departed from the
GATT by eliminating the right of individual parties “whose measure is being challenged, to
block the establishment of panels or the adoption of a report”233
. The DSB “automatically
establishes panels and adopts panel and Appellate Body reports unless there is a consensus
227 See Article 3.2 of the DSU.
228 Wilson, B., (2003). ‘Dispute Settlement System Training Module’. 229 Ibid. 230 Ibid. 231 Ibid. 232 Ibid. 233 Ibid.
69
not to do so”234
. This negative consensus rule is in contrast with the practice under the GATT
1947. The DSU also applies “to the authorization of countermeasures against a party which fails to implement a ruling”235. Besides, it authorises “the appellate review of panel reports
and a formal surveillance of implementation [of rulings and recommendations] following the
adoption of panel (and Appellate Body) reports”236
. These rules also are incongruent with the
practice under the GATT 1947. Hence, the DSU process has shifted from a “diplomatic to a
legalized process and from a power-based to rule-based procedure”237. It has been classified
as a judicialized method of trade dispute settlement.
One of the GATT duties was resolving disputes between the parties by a friendly
accommodation238. Moreover, “disputes were mainly treated as internal, to be resolved
quickly within the organization”239
. These features were approved by the DSU. Article 3.3
states that “the prompt settlement […] is essential to the effective functioning of the WTO
and the maintenance of a proper balance between the rights and obligations of Members”.
Article 3.4 provides that “recommendations or rulings […] shall be aimed at achieving a
satisfactory settlement of the matter”. As for Article 3.7, it illustrates that “the aim of the
dispute settlement mechanism is to secure a positive solution to a dispute. A solution
234 Ibid. 235
Ibid.
236 Wilson, B., (2003). ‘Dispute Settlement System Training Module’. See also, Anyiwe, L., & Ekhator, E.,
(2013). ‘Developing Countries and the WTO Dispute Resolution System: A Legal Assessment and Review’.
237 Van der Borght, K., (1999). ‘The Review of the WTO Understanding on Dispute Settlement: Some
Reflections on the Current Debate’. American University International Law Review, 14, 1224.
238 McRae, D., (2004). What is the Future of WTO Dispute Settlement? Journal of International Economic Law,
7(1), p. 7.
239 TRADE Analysis., (2005). The WTO Dispute Settlement System: Issues to Consider in the DSU
Negotiations. Geneva, Switzerland. Available online:
http://www.southcentre.int/wp-content/uploads/2013/07/AN_DS1_WTO-Dispute-Settlement-Issues-to-
consider-in-DSU-negotiations_EN.pdf [Accessed: October 20, 2015]; also see, Weiler, J. H., (2001). ‘The Rule of Lawyers and the Ethos of Diplomats Reflections on the Internal and External Legitimacy of WTO Dispute Settlement’. Journal of World Trade, 35(2), 191-207, at p. 5.
70
mutually acceptable […] is clearly to be preferred”. In addition, Article 17.4 states the
following: “only parties to the dispute, not third parties, may appeal a panel report”. These
provisions imply an intention to focus on the actual dispute itself and “to ensure that it is
resolved quickly and to the satisfaction of the parties”240.
The function of Panels and the Appellate Body is prompt settlement and a focus on resolving
the dispute that are the essential aspects of their work. The obvious indication of this was in
US-Shirts and Blouses dispute, the Appellate Body stated that “panels are not required to
decide issues that are not necessary to dispose of a particular dispute; and that the basic aim
of dispute settlement in the WTO is to settle disputes”241 .
The DSU is more than just a mechanism for “the application of legislation to disputing
parties”242. It is also “a mechanism of governance and guidance”243
. Some DSU provisions
provide that the WTO dispute settlement system has a greater role than just resolving the
dispute between the parties to disputes that, by its rulings “affect entities other than the main
parties”244
. For example, Article 3.2 provides that “the dispute settlement system of the WTO
is a central element in providing security and predictability to the multilateral trading
system”. To ensure predictability under the DSU, it has to adopt well-reasoned rulings to
make WTO Members learn what the provisions mean and how they should be applied.
240 TRADE Analysis., (2005). The WTO Dispute Settlement System: Issues to Consider in the DSU
Negotiations.
241 Ibid. see also, US-Measure Affecting Imports of Woven Wool Shirts and Blouses from India
(WT/DS33/AB/R), p. 19.
242 TRADE Analysis., (2005). The WTO Dispute Settlement System: Issues to Consider in the DSU
Negotiations.
243 Ibid. 244
71
Article 3.2 also states that the aim of the DSU is to “preserve the rights and obligations of
Members under the covered agreements, and to clarify the existing provisions”245.
Concerning Article 3.5, it provides that all “solutions […] shall be consistent with [covered]
agreements and shall not nullify or impair benefits accruing to any Member under those
agreements, nor impede the attainment of any objective of those agreements”. Article 3.6, for
its part, requires “[m]utually agreed solutions [by disputants] shall be notified to the DSB”.
Also, Article 21 provides rules for the multilateral surveillance of the implementation of DSB
rulings and recommendations. Articles 3.5, 3.6 and 21 illustrate that “dispute settlement
reports are of interest to all the WTO Members”246 .
Indeed, some of the WTO case laws detected that the rulings and recommendations of the
DSU may affect a much wider community than just the parties to disputes247. In EC-Bananas,
the Appellate Body approved the panel statement stressing that “increased interdependence of
the global economy means Members have a greater stake in enforcing WTO rules than in the
past since any deviation from the negotiated balance of rights and obligations is more likely
than ever to affect them, directly or indirectly”248
. Moreover, a panel has clearly stated that
the WTO disciplines have an impact not only upon WTO Member governments: “it would be
entirely wrong to consider the position of individuals is of no relevance to the GATT/WTO
245 Jackson, J. H., (2004). International Law Status of WTO Dispute Settlement Reports: Obligation to Comply
or Option to “Buy Out”? American Journal of International Law, p.116. “Preserving rights and obligations supports the notion of the desirability of developing jurisprudence that not only would accord particular disputants some predictability and reliability but also would provide guidance to all government Members of the WTO”.
246 TRADE Analysis., (2005). The WTO Dispute Settlement System: Issues to Consider in the DSU
Negotiations.
247 Ng’ong’ola, C., (2004). ‘African Contributions to Dispute Settlement Negotiations in the World Trade
Organisation: An Appraisal’. SATRN Working Paper No. 8, p.44.
248 See European Communities–Regime for the Importation, Sale and Distribution of Bananas
72
legal matrix”249. Many of the benefits to Members which are meant to flow as a result of the
acceptance of various disciplines under the GATT/WTO depend on “[…] the activity of
individual economic operators in the national and global market places250. The purpose of
many of these disciplines, “[…] indeed one of the primary objects of the GATT/WTO as a
whole, is to produce certain market conditions which would allow this individual activity to
flourish”251 .
At the very least, the DSU has to resolve disputes satisfactorily and promptly. It is the only
way for WTO Members to enforce their rights and obligations under the covered agreements.
The DSU deals with trade disputes between the WTO Members to ensure that trade flows as
smoothly, predictably and freely as possible252. This is achievable by promoting fairness and
equality among all the WTO Members253.