Description of dispute settlement process

The DSU emphasizes the importance of consultations in securing dispute resolution, requiring a Member to enter into consultations within 30 days of a request for consultations from another Member.

If after 60 days from the request for consultations there is no settlement, the complaining party may request the establishment of a panel. Where consultations are denied, the complaining party may move directly to request a panel.

The parties may voluntarily agree to follow alternative means of dispute settlement, including good offices, conciliation, mediation and arbitration.

Where a dispute is not settled through consultations, the DSU requires the establishment of a panel, at the latest, at the meeting of the DSB following that at which a request is made, unless the DSB decides by consensus against establishment. The DSU also sets out specific rules and deadlines for deciding the terms of reference and composition of panels. Standard terms of reference will apply unless the parties agree to special terms within 20 days of the panel's establishment. Where the parties do not agree on the composition of the panel within the same 20 days, this can be decided by the Director-General.

Panels normally consist of three persons of appropriate background and experience from countries not party to the dispute. The Secretariat will maintain a list of experts satisfying the criteria. Panel procedures are set out in detail in the DSU. It is envisaged that a panel will normally complete its work within six months or, in cases of urgency, within three months. Panel reports may be considered by the DSB for adoption 20 days after they are issued to Members. Within 60 days of their issuance, they will be adopted, unless the DSB decides by consensus not to adopt the report or one of the parties notifies the DSB of its intention to appeal.

The concept of appellate review is an important new feature of the DSU. An Appellate Body will be established, composed of seven members, three of whom will serve on any one case. An appeal will be limited to issues of law covered in the panel report and legal interpretations developed by the panel. Appellate proceedings shall not exceed 60 days from the date a party formally notifies its decision to appeal. The resulting report shall be adopted by the DSB and unconditionally accepted by the parties within 30 days following its issuance to Members, unless the DSB decides by consensus against its adoption.

Once the panel report or the Appellate Body report is adopted, the party concerned will have to notify its intentions with respect to implementation of adopted recommendations. If it is impracticable to comply immediately, the party concerned shall be given a reasonable period of time, the latter to be decided either by agreement of the parties and approval by the DSB within 45 days of adoption of the report or through arbitration within 90 days of adoption. In any event, the DSB will keep the implementation under regular surveillance until the issue is resolved.

Further provisions set out rules for compensation or the suspension of concessions in the event of non-implementation. Within a specified time-frame, parties can enter into negotiations to agree on mutually acceptable compensation. Where this has not been agreed, a party to the dispute may request authorization of the DSB to suspend concessions or other obligations to the other party concerned. The DSB will grant such authorization within 30 days of the expiry of the agreed time-frame for implementation.

Disagreements over the proposed level of suspension may be referred to arbitration within 90 days of the date of adoption of the recommendations and rulings. The arbitration will be done by an arbitrator mutually agreed upon by the parties to the dispute. If there is no agreement on who should be the arbitrator within 10 days of the matter being referred to arbitration, the Director-General of the WTO has to appoint an arbitrator within another period of 10 days of consulting the parties. The guideline to the arbitrator will be that the reasonable period of time to implement the panel or Appellate Body recommendation should not exceed 15 months from the date of adoption of the panel or Appellate Body report. If the panel or the Appellate Body has taken additional time, such time will be added to the 15-month period. But in any case, the time shall not exceed 18 months except if the parties to the dispute agree on a longer period in exceptional circumstances.

In principle, the level of suspension will be equivalent to the level of nullification or impairment, i.e., it cannot be higher, and concessions should be suspended in the same sector as that in issue in the panel case. If this is not practicable or effective, the suspension can be made in a different sector of the same agreement (cross-sector suspension). In turn, if this is not effective or practicable and if the circumstances are serious enough, the suspension of concessions may be made under another agreement (cross-agreement suspension), for example, action can be taken on goods for some actions or for some omission to take action in the area of services or IPRs.

One of the central provisions of the DSU reaffirms that Members shall not themselves make determinations of violations or suspend concessions, but shall make use of the dispute settlement rules and procedures of the DSU (multilateral process in dispute settlement).

The DSU contains a number of provisions taking into account the specific interests of the developing and the least-developed countries. It also provides some special rules for the resolution of disputes which do not involve a violation of obligations under a covered agreement but where a Member believes nevertheless that benefits are being nullified or impaired (non-violation nullification or impairment). Special decisions to be adopted by Ministers in 1994 foresee that the Montreal Dispute Settlement Rules, which would otherwise have expired at the time of the April 1994 meeting, are extended until the entry into force of the WTO. Another decision foresees that the new rules and procedures will be reviewed within four years after the entry into force of the WTO.

Coverage of DSU.

The dispute settlement process covers the WTO Agreement (i.e., the Agreement on Establishing the World Trade Organization), GATT 1994, GATS, TRIPs.

Preconditions for resorting to dispute settlement process

· Any benefit accruing to the Member under a particular agreement is being nullified or impaired;

· The attainment of any objective of the agreement is being impeded as a result of the failure of another Member to carry out its obligations under the agreement, or as a result of the application by another Member of any measure which conflicts with the provisions of the agreement.

Nature of cases.

Violation cases: If the nullification or impairment of a benefit is caused by a Member failing to carry out its obligations under the agreement, or applying a measure which conflicts with some provision of the agreement, the situation occurs because of the violation of some provision of the agreement. For example, if a Member impairs the benefit flowing out of its tariff binding by imposing an internal charge on an imported product which it does not apply to the like domestic product, it is violating the provisions of Article III of GATT 1994 (National Treatment).

In these violation cases, the establishment of the following elements is necessary:

· Existence of an obligation in the relevant agreement

· Failure of a Member to carry it out, or

· A Member has taken a measure conflicting with a provision in the relevant agreement.

Particularly, because Members are required to bring their laws and procedures into conformity with the provisions of the WTO agreements, the mere existence of a violating provision in the legislation of a Member would amount to a violation, even when no measure might have been taken in pursuance of the legislation. The market access commitments in the GATT are generally on the conditions of competition for trade and not on the volumes of trade.

Non-violation cases: When a Member applies a measure which does not conflict with the agreement and yet causes the nullification or impairment of benefits, it is doing so without violating the provisions of the agreement. For example, a Member may negotiate tariff concessions with another Member, resulting in the binding of the tariff on a product, but then grant a subsidy to the domestic industry producing a like product within permissible limits, and may thereby affect adversely the prospects of the export of another Member. This may, under certain circumstances, be held to impair the benefit accruing to this Member, though it does not violate the disciplines on subsidies. The reason behind this conclusion is that the exporting Member had no anticipation at the time the negotiation for the tariff concession took place that such a subsidy would be granted.

The main elements in non-violation cases are:

· The existence of a benefit,

· Subsequent action by a Member curtailing the benefit,

· The existence of a reasonable expectation that the competitive conditions would not be upset.