ENHANCING WTO’S DISPUTE SETTLEMENT UNDERSTANDING · Enhancing the WTO’s Dispute Settlement...

1Enhancing the WTO’s Dispute Settlement Understanding

ENHANCING THE WTO’S

DISPUTE SETTLEMENT UNDERSTANDING

A Working Group Report

enlightening the debate on good governance

TTTTTHE FEDERAL TRUSTHE FEDERAL TRUSTHE FEDERAL TRUSTHE FEDERAL TRUSTHE FEDERAL TRUSTfor education & researchfor education & researchfor education & researchfor education & researchfor education & research

2 The Federal Trust for Education and Research

Working Group Members

Chair: Christopher RobertsChair: Christopher RobertsChair: Christopher RobertsChair: Christopher RobertsChair: Christopher Roberts Covington and Burling

Rapporteur:Rapporteur:Rapporteur:Rapporteur:Rapporteur: Philip MarsdenPhilip MarsdenPhilip MarsdenPhilip MarsdenPhilip Marsden Linklaters

Secretary:Secretary:Secretary:Secretary:Secretary: Alexis KrachaiAlexis KrachaiAlexis KrachaiAlexis KrachaiAlexis Krachai The Federal Trust for Education and Research

Deborah CassDeborah CassDeborah CassDeborah CassDeborah Cass Department of Law, London School of Economics

Mark Clough QCMark Clough QCMark Clough QCMark Clough QCMark Clough QC International Trade Practice, Ashurst Morris Crisp

John CookeJohn CookeJohn CookeJohn CookeJohn Cooke International Relations, Association of British Insurers

Alison HookAlison HookAlison HookAlison HookAlison Hook International Unit, The Law Society of England and Wales

Raoul JennarRaoul JennarRaoul JennarRaoul JennarRaoul Jennar Oxfam Solidarité

Constance KannConstance KannConstance KannConstance KannConstance Kann Global Public Affairs, Unilever

Ambassador Marithza Ruiz de VielmanAmbassador Marithza Ruiz de VielmanAmbassador Marithza Ruiz de VielmanAmbassador Marithza Ruiz de VielmanAmbassador Marithza Ruiz de Vielman Embassy of Guatemala to the UK

Philippe RuttleyPhilippe RuttleyPhilippe RuttleyPhilippe RuttleyPhilippe Ruttley EC and WTO Group, Clyde and Co

Tsutomu (Tom) TakahashiTsutomu (Tom) TakahashiTsutomu (Tom) TakahashiTsutomu (Tom) TakahashiTsutomu (Tom) Takahashi WIPO Arbitration and Mediation Center, World Intellectual PropertyOrganization

John WeekesJohn WeekesJohn WeekesJohn WeekesJohn Weekes Global Trade Practice, APCO Worldwide

Group members joined and contributed to the group in their individual capacity. While all subscribe to the main argumentsof the report, the views expressed in detail may not be necessarily shared by the entire membership of the working group orby the Federal Trust. As a registered educational charity the Federal Trust does not hold views of its own on this issue.


ContentsWorking Group Members

Foreword by the Chairman 5

Summary of Recommendations 7

Introduction

Mandate of the Working Group and Terms of Reference 11

Meetings, testimony and submissions 11

Contributing to the debate 11

Review of the effectiveness of WTO dispute settlement to date 13

Greater Effectiveness

Inducing compliance 17

Suspension of the right of complaint 18

Compensation 18

Market opening compensation 18

Financial compensation 19

The threat of retaliation 20

Enhancing the effectiveness of developing country participation 21

Advisory Centre on WTO Law 22

Timing matters 22

GATS - A special case? 23

Improving the efficiency of the process

Interpreting Issues - Role of the panels and the Appellate Body 25

Deference to the decisions of Members’ authorities 25

What role for the General Council? 26

Non liquet and the potential for remand 27

The role of the Director General 27

Mediation and arbitration 27

A More Acceptable Process

Transparency - Open hearings 29

Civil Society participation and the submission of amicus curiae briefs 29

Annex

A brief description of the Dispute Settlement Understanding

List of witnesses

Formal submissions to the DSB talks



Few if any international organisations have expanded asrapidly as the WTO, both in terms of membership and ofthe range of issues that it seeks to resolve. Few have movedmore quickly into the limelight. The WTO’s predecessoruntil 1995, the General Agreement on Tariffs and Trade,was often seen as an obscure, rather technical institution.The WTO now gets a good deal of public attention, bothfrom its supporters and its critics.

So it is entirely right that the Federal Trust should haveturned to the WTO as the context for three of its well-regarded series of studies of good governance issues. Thefirst WTO study, published shortly before the Ministerialmeeting in Doha in November 2001, dealt with theprospects for that meeting and what should be the agendafor the global negotiation that was in the event agreed atDoha. The second is the present report on disputesettlement. The Trust is also currently exploring thepossibility of convening a third group with the remit todetermine what scope there is to negotiate WTO rules onthe so-called ‘Singapore Issues’.1

A study of dispute settlement is certainly timely. In recentyears no trade issues have been more intractable, or aschallenging to the effectiveness of the WTO, as the EU-USdisputes over bananas, hormones in beef and the ForeignSales Corporations system of tax relief. All are cases wherecompliance with WTO judgements has proved hard toachieve. At the same time there are doubts whether WTOdispute settlement can be used effectively by the developingcountries, particularly the smaller and poorer ones.National representatives in Geneva are currently discussingwhat changes need to be made in the WTO rules governingdispute settlement, with a mandate to come up withrecommendations by next May.

The Federal Trust and the authors of this report intend itas relevant input to the debate now gathering momentumin Geneva. We commend our conclusions, some clear-cut, some more tentative, to the negotiators. To the extentthat a number of the issues covered in our report are notresolved in the current talks, we believe that they shouldbe addressed by Governments in the longer term, eitheras part of the continuing Doha agenda or separately.

WTO dispute settlement will only work well if two keyconditions are met. First, there needs to be, as we thinkthere very largely is, a system of decision taking by panelsand the Appellate Body which both deserves and securesrespect, and whose conclusions are implemented. Second,when disputes may arise in areas where the WTO rulesare unclear or incomplete, Governments must be ready toagree in the WTO on how the gaps should be filled in. Itis no good Government representatives complaining that

the Appellate Body, through its decisions andinterpretations, is creating new WTO law if they fail to meetthe need themselves.

This report would not exist but for essential help from avariety of sources. We benefited from sponsorship inparticular from the UK Department for InternationalDevelopment, from my own and two other law firms(Covington & Burling; and Linklaters and Ashurst MorrisCrisp), and from the Law Society of England and Wales. Iwould also like to thank APCO Worldwide’s Global TradePractice for their help in arranging a programme ofmeetings in Geneva. As to the report itself, I am grateful tothose who gave evidence to us, as well as to the membersof the Working Group, all busy people, for the advice andcontributions they willingly offered. Special thanks mustgo to our rapporteur, Philip Marsden of Linklaters, whoseskilful and elegant drafting will be evident to readers, andto Alexis Krachai of the Federal Trust, our efficient secretaryand organiser, and provider of regular reassurance to hisnervous chairman that a demanding timetable andpublication date would be achieved.

Christopher Roberts5 December 2002

London

1 Competition, Investment, Trade Facilitation and GovernmentProcurement

FOREWORD BY THE CHAIRMAN



SUMMARY OF RECOMMENDATIONS

Greater Effectiveness

Compliance•Inducing compliance with a Member’s commitments is

the primary and preferred result in any case where aninconsistency with the commitments has been identified.No reforms should undermine this fundamental objectiveof the dispute settlement process.

•Reforms should encourage the panels and Appellate Bodyto make more detailed suggestions and recommendationsabout how compliance could be achieved. Theserecommendations should remain non-binding.

•The need for prompt compliance is absolutely essential.Rules should be developed to require the respondent toindicate to the Dispute Settlement Body (DSB) how longcompliance is expected to take.

•Following a decision, the DSB should be required to issue- at regular intervals - a public statement concerning theextent of any remaining non-compliance, the history of thecase, the specific suggestions or recommendations thatthe panel or Appellate Body made, the deadlines that theMember has missed, itemise any recommendations made,and make a firm and authoritative statement that therelevant Member is in violation of its commitments.

•A respondent that is not in compliance with itscommitments should not have its rights as a complainantin other cases suspended.

Compensation•Where compliance is viewed to be not immediately

possible, the preferred method of compensation shouldbe to liberalise another sector, albeit outside the disputein question.

•Any compensatory resolution of a dispute should beguided by a firm adherence to and confirmation of theprinciple of Most-Favoured-Nation (MFN) treatment.

•Complainants should be allowed to specify precisely thesectors in which the respondent might further open itsmarket.

•Members should seriously consider introducing into thedispute settlement process an ability to recommendretroactive compensation, particularly where there arepervasive violations (absent good faith efforts on the partof the respondent to remedy the situation) or where the natureof the violation itself leads logically only to that solution.

•An objective assessment of the amount of the harm (andconsequent compensation) involved should be made asearly on in the dispute settlement process as possible.

Retaliation•The remedy of retaliation should be maintained.

•Controls clearly need to be introduced to minimise anyundue harm on ‘innocent victims’.

•The level of harm created by a violation should bedetermined very early on in a dispute.

•The complainant should be allowed at an earlier stagethan at present to list the sectors where retaliation may in

its opinion be necessary.

•Retroactive retaliation should be available for pervasiveviolations, particularly where the complainant evidencesa breach of good faith on the part of the respondent.

•Ways of facilitating joint retaliation should beencouraged.

•This is not an appropriate time to be considering allowingthe Secretariat the power to collect penalties, either onbehalf of Members directly or for distribution within theOrganisation more broadly; perhaps as contributions tocapacity-building initiatives.

•The suggestions of a truce or for decisions in disputesin disputesin disputesin disputesin disputesbetween particularly large Members to be non-bindingwould lead the WTO in the wrong direction.

Addressing developing countryconcerns

•Developing should be encouraged to do as much as theycan to develop their own capacity building and expertisewithin their own governments so that they can effectivelybenefit from and enforce their rights under the WTOagreements.

•The WTO Secretariat should be encouraged to assist allMembers with the distribution of pleadings but mostparticularly should take this ‘delivery’ cost off developingcountries.

•Members should work to help reduce Advisory Centre onWTO Law costs to least developed countries to a minimum.

•Least developed countries should be encouraged to relyon the good offices of the WTO Director General asmuch as possible.

•Developed country respondents should be prohibitedfrom refusing to mediate with complainants from leastdeveloped countries.

Timing•Expedited procedures should be introduced for the review

of services cases or situations where a preliminary reviewindicates that there has been a clear violation.

•Some extension of time - possibly 4-6 weeks - should beadded to dispute settlement proceedings to account forthe length of time of translation and other administrativeduties.

•If this is viewed as undesirable, then a clear picture ofthe actual time that is available for dispute settlementitself is required.

•The dispute settlement process should operate on the basisof working days rather than calendar days, and includedefined holiday periods.

•Some form of expedited consultation period should beintroduced for existing long-running disputes, or in caseswhere the issue of violation is clear, but the primaryquestion relates to the appropriate remedy.

•The 20-day period (following expiry of the ‘reasonableperiod’ for implementation) should be extended.

Special Prosecutor/Advocate General•At this time there is no need to create a Special Prosecutor,

or an Advocate General.


GATS – A Special Case?•The DSU practitioners should recognise that there is more

overall ambiguity in the text of the GATS (includingspecific commitments, provisions for GATS disciplines oradditional commitments) than exists in other trade lawcommitments.

•Where panels are satisfied that a disputed matter fallsclearly in the area where Members evidently intendedto leave a degree of freedom to national agencies, thepanels should defer to such agencies.

•While accepting the interpretative role inherent in thedispute settlement process, we think that furtherclarification by Members of GATS commitments wouldbe desirable. Clarification might also extend to suchwider questions as whether administrative regimes forservices should normally be exempt from challenge ifthey meet internationally agreed standards or principles.

•When there is sufficient experience of services disputes,governments may need to reach considered decisionsas to how far the DSU is the best vehicle for such disputesand how far they might prefer to reach bilateral orplurilateral understandings about particular problemssuch as standards for the ‘justiciability’ or ‘appealability’of administrative decisions affecting services.

•Specialists in services trade, experts on particular servicessectors, and those directly familiar with the applicationof domestic regulation should be recruited as panellists.

Improving Efficiency

Panels and the Appellate Body•Panels should be professionalised.

•Panellists should be appointed full-time for a fixed term,and be drawn from a longer list of experts proficient invarious aspects of WTO law and dispute settlement.

•It would be helpful if panellists and Members of theAppellate Body had had some form of governmentexperience.

•The requirement that panellists not be from one of theparties should be abolished.

•Members of the Appellate Body should be appointedon a full-time basis, and be paid more in compensationfor giving up their other obligations.

Deference•There should be a greater acceptance, across the range

of the WTO agreements, of the propriety of a disputesettlement panel or the Appellate Body deferring to thedecisions of a national authority, where the subject inissue involves a factual assessment or when it is clearthat it has been left open to interpretation by the Member.

•Individual Members should not create ‘DoleCommissions’ to review the propriety of DSB decisions.

The role for the General Council•There is a need to improve the quality and detail of

commitments generally, so as not to over-burden thedispute settlement system.

•The use of Article IX of the Agreement establishing theWTO should be encouraged with respect to furtherinterpretation of the Agreements.

•Increased clarification should not, however, beimplemented through an ongoing process betweenRounds of ‘interpretative committees’ operating to clarifyexisting WTO obligations with binding recommendations.

•Existing Working Parties on the various subjects relatedto the various agreements should be tasked withproducing non-binding interpretative guidelines so as toclarify the meaning of various ambiguities.

Non liquet and the potential forremand

•The panels and the Appellate Body should not be allowedto claim that they cannot come to a decision with respectto a particular issue that is within their competence. Indifficult cases, though, it may be appropriate for a panelto recommend that the General Council address a certainissue, for example when the question at hand is clearlypolitical.

•The Appellate Body should not be allowed to remand adispute or issues before it to a panel.

Independent Advisory Committee•With respect to problems that may arise relating to the

operation of the DSU itself, a permanent IndependentAdvisory Committee, made up of Secretariat officials,academics and other experts should be formed, torecommend to Members various improvements to the DSU.

The Director General•Resort to the offices of the Director General should be

used to a greater extent.

Mediation and Arbitration•There should be greater effort to use alternative methods

of dispute resolution, or activities that can better clarifyissues for the dispute settlement process itself, so long asthey accelerate and do not delay settlement of disputes.

A More Acceptable Process

Transparency•WTO hearings should be opened to the public.

Appropriate limits on that access will be necessary toensure that panel hearings are not disrupted.

•With open hearings, the panel chair will need to be wellschooled in dispute settlement procedure.

•All submissions that are made to the panels and AppellateBody should be released on the WTO website withoutundue delay.

Civil society participation and thesubmission of amicus curiae briefs

Standing:Standing:Standing:Standing:Standing:•NGOs of whatever nature should not have standing as

a party or third party in dispute settlement themselves.

Intervention:Intervention:Intervention:Intervention:Intervention:•National civil society organisations should be able to feed

their comments into dispute settlement proceedings throughtheir relevant Member. They should not participate in the


WTO dispute settlement proceedings directly, unlessexpressly requested by the Panel or Appellate Body.

Interest:Interest:Interest:Interest:Interest:•The decisions so far taken by the Appellate Body setting

out criteria with respect to the submission of amicus curiaebriefs are satisfactory.

•There should be a clear identification of an NGO’s non-national interest at issue, i.e. the international publicgood that it is representing (environment, etc).

•Panels should explain their decisions to reject or to notconsider any brief so submitted.



INTRODUCTION

Mandate of the Working Group andTerms of Reference

This Report is a product of the Federal Trust Working Groupon the Reform of the WTO Dispute SettlementUnderstanding (DSU). In focussing on the reform of theDSU, the Working Group seeks to contribute to the reviewprocess which Members of the WTO agreed should takeplace soon after the WTO agreements and the DSU cameinto force in 1995. The Dispute Settlement Body (DSB)began its process of review in 1997. However, followingthe collapse of the Seattle Ministerial Conference inNovember 1999, no consensus on reform was everreached. At the Doha Ministerial Conference in December2001, WTO Members agreed to begin negotiations witha view to improving and clarifying the DSU. Thesenegotiations are taking place in special sessions of the DSB.Ambassador Peter Balas, Hungary’s PermanentRepresentative to the WTO is chairing the talks. A numberof constructive proposals and discussions have beenexchanged among the WTO membership with respect toissues relating to the reform of the DSU. The aim ofMembers is to conclude the talks and agree on reforms by1 May 2003.

The mandate of our Working Group on the WTO DSUstems from the belief that the WTO’s dispute settlementsystem is the central pillar of the multilateral trading system,and that there is need for a broad-ranging and in-depthstudy of how the DSU is operating, to air expert opinionsboth on its successes and on areas where it needs to beimproved, and to make specific recommendations in thatregard. The Working Group was convened in early 2002with an eye to shadowing the formal talks in the DSB andoffering WTO Members comprehensive, expert andimpartial advice with respect to how the DSU might bemade more effective, more efficient more effective, more efficient more effective, more efficient more effective, more efficient more effective, more efficient and how its decisionscan be seen to be more acceptablemore acceptablemore acceptablemore acceptablemore acceptable.

Within this broad remit, early on in its meetings theWorking Group identified the following as among thequestions that it should address:

1. How successful has WTO dispute settlement so farproved, notably in respect of securing satisfactoryresolution of disputes and acceptance of the outcomeby the losers, and of satisfying the interests of all WTOMembers?

2. How can the mechanisms for dispute settlement be mademore effective and more acceptable to opinion in theMember countries? Is the balance right betweencompliance, compensation and retaliation? What is theproper role of sanctions? Is there a greater need fordiplomatic negotiation to supplement the more formaland legal processes of the DSU? Can better use be madeof arbitration and/or the ‘good offices’ of the DirectorGeneral?

3. Is the Appellate Body going too far in creating WTOlaw, which should be the task of Members? Is it right

that the Appellate Body can only be overruled by aunanimous decision of the Dispute Settlement Body?

4. How can DSU procedures be made more responsive tothe needs of WTO Members, especially developingcountries which may have limited human and capitalresources and in some cases be without permanentrepresentation in Geneva? What is the role for externalCounsel?

5. Has the DSU operated, or is it likely to operate, aseffectively for disputes over services and other sectors asfor disputes in trade in goods?

6. Are there sufficient/adequate opportunities for civilsociety participation in the DSU process under presentrules?

Meetings, testimony andsubmissions

The group met nine times in London. They considered thepositions of WTO Members tabled at the formal DSB talksand other relevant literature. They also invited experts tosubmit oral testimony and participate in discussions.Representatives of the group visited Brussels andWashington to meet with policy-makers, practitioners andother parties interested in the DSU. They also travelled toGeneva where they met with representatives from Missions,the WTO Secretariat and other parties. A full list of thewitnesses that the group met with can be found at the backof this report in Annex B. There is also a listing of theformal Member positions submitted to the formal talks.

Contributing to the debate

The Working Group has explored the impact of the DSUon the resolution of trade disputes, and hereby proposesimprovements to make the DSU more ‘user-friendly’ andeffective, in particular for developing countries. Of course,there is considerable potential to closely examine themechanics of the system and to make detailed suggestionsas to alternative wording for various DSU provisions.However, the purpose of the Working Group was to leavethe technical analysis - already well in hand in nationalcapitals and at the DSB meetings - to the expert governmentofficials. There was also a general belief amongst almostall witnesses that despite the broad mandate of the formaltalks ongoing in the DSB, there was little chance ofMembers either wanting to or being able to agree onsubstantial reforms. A number of witnesses argued thatdespite the review process being initiated in 1997 andagain in 1999, there was still not enough time for Membersto agree on substantial reform by May 2003. Othersargued that it would be impossible to reach a consensusamongst Members on some of the bigger, fundamentalquestions in any event. This was particularly relevant inthose areas where issues – such as panel selection andtransparency – led to a polarisation of views. Somewitnesses also thought the key obstacle to the reformprocess would be the procedures for amendment of theDSU and achieving national ratification of suchamendments. In particular it was argued by some that the


current negative perception of the WTO could mean thatthere would not be sufficient national parliamentary supportfor DSU amendments to be approved in many Memberjurisdictions.

The current official review of the DSU is timely andwelcome and will enable Members to attain consensus -and perhaps even some agreement - on actual reform.However, as the Working Group is also concerned aboutseveral issues that are unlikely to be settled in the currentofficial review, we determined that it was also necessary

• to consider some more fundamental questions associatedwith the resolution of disputes;

• to make an assessment of the potential problems thatthe system could encounter in the future; and thus

• to identify areas where reform at a deeper but stillpragmatic level would be helpful and should beconsidered.

The Working Group recognises that itsrecommendations for more fundamental reforms go beyondthe areas likely to be included in any final agreementannounced by the DSB in May 2003. However, our reportalso includes a detailed discussion of many issues that areon the DSB’s reform agenda, and in particular reflects theviews of various experts. It is hoped that Member officialsand other interested partners will find the report’s synthesisof such submissions to be interesting and pertinent to theiranalysis of the functioning of the DSU. The deeper concernsexpressed to the Working Group will remain valid and assuch will merit continuing consideration by WTO Membersand experts alike in the coming years. To this end, thisreport attempts to provide a relatively comprehensiveassessment of the areas where there has been success andwhere there is still room for improvement. It is hoped thatthis will contribute to an eventual acceptance amongMembers that reform of the DSU must address more thanmere mechanical issues and that it should consider andattempt to forge consensus on a pragmatic means ofaddressing existing and potential future problems.


REVIEW OF THE EFFECTIVENESS OF

WTO DISPUTE SETTLEMENT TO DATE

Current record

Summary of submissions

Areas of successAreas of successAreas of successAreas of successAreas of success

One of the first general areas that we discussed with allwitnesses was how the DSU had been functioning, as ameans of avoiding conflict and settling disputes and howthe panels and Appellate Body had been seen to beinterpreting Members’ obligations. Many commentators saidthat the WTO commitments themselves were, in the main,complied with and that disputes were the exception. Manywitnesses also argued that where disputes had occurred,the DSU had been operating well and had made a crucialcontribution to bringing about Members’ compliance withWTO commitments. Of these disputes, the vast majority havebeen resolved during the consultation phase; of those thatwent to a full Panel and Appellate Body hearing, the majorityalso resulted in compliance. One expert considered that afar greater percentage of WTO dispute settlement decisionsresulted in compliance than the decisions of otherinternational adjudicative bodies such as the European Courtof Justice and the International Court of Justice.

Perhaps for these reasons, and due to the sharp contrastbetween the current DSU and the dispute settlementmechanism under the original GATT, many public officialsthat we spoke with felt that the official review of the DSUitself need only result in small, rather than drastic, reforms.

Differences of opinionDifferences of opinionDifferences of opinionDifferences of opinionDifferences of opinion

That said there was a noteworthy body of opinion fromthose outside the ambit of public service that suggestedthat the quality of panel and Appellate Body findings wasincreasingly unacceptable. Many witnesses argued thatthere was a ‘free trade bias’ in many reports and that thepanels themselves were unable to interpret adequately thelegal agreements between Members. The Working Groupalso heard the view that the current system of resolvingdisputes was unsustainable as it impinged too much onnational sovereignty.

Implicit in all of these criticisms was the belief that theWTO’s ‘judicial’ aspects were stronger than its negotiatingand ‘legislating’ processes and somehow out of balancewith them. The Working Group heard two sets of viewsabout how this imbalance could be redressed. The firstsuggestion was that the judicial system ought to beweakened, for example through a return to ‘non-binding’decisions, an increase in deference to the decisions ofnational authorities, and/or greater control on panels orthe Appellate Body to prevent them from ‘creating’ lawrather than interpreting the existing commitments. Thealternative view was that the rule-making process shouldbe enhanced in some way, for example through a decisionby Members to build greater clarity into existing

commitments, or through the creation of an interpretativeadvisory body that would supplement both the disputesettlement and negotiating processes. These specificsuggestions will be addressed individually later in thereport. However, it is useful to examine in more detail theconcerns that were voiced, particularly by non-public sectordiscussants, about panels and the Appellate Body doingmore than merely interpreting the commitments themselves.

The judicial creation of law?The judicial creation of law?The judicial creation of law?The judicial creation of law?The judicial creation of law?

Throughout our deliberations we heard conflictingarguments about whether dispute settlement panels andthe Appellate Body were in effect resolving disputes bycreating new commitments. We heard three sets of viewsassociated with this point. Some witnesses stated that thepanels and the Appellate Body were going too far ininterpreting agreements and that this resulted in anunacceptable strengthening of the judicial aspects of theWTO, particularly given the negative consensus model.Others agreed that there was judicial ‘over-reaching’ butthat this was because the existing agreements andcommitments were ambiguous; thus the panels and theAppellate Body had a responsibility to ‘fill in the gaps’,particularly where the gap was due to an evident ambiguity,rather than resulting from a deliberate degree of freedombeing left for a more ‘subjective’ review by individualMembers’ agencies. The third view was that even thoughthere were evident ambiguities in the texts of theagreements, the panels and Appellate Body had not ‘filledin the gaps’ nor created law but had actually been relativelyrestrained in their interpretations, and had merely reliedon textual analysis to try to identify the meaning of thecommitments themselves.

Responding to the needs of developing countriesResponding to the needs of developing countriesResponding to the needs of developing countriesResponding to the needs of developing countriesResponding to the needs of developing countries

The majority of witnesses felt in general that the DSU workedwell for some of the larger and more advanced developingcountries and that compared to other domestic andinternational judicial systems the system was generally fair(flaws and all). However, witnesses argued that the mostsignificant flaw was that while the majority of developingcountries - and in particular the least developed of them(LLDCs) - had a theoretical opportunity to use the systemthey did not always perceive that they had access to it, orthat anything beneficial would come of using it. Variousreasons were offered in support of this view, the generalconsensus being that developing countries were impededby financial and administrative constraints and that theyfeared that developed countries might punish them forbringing a case by denying them development aid orabolishing preferences. That said very few witnesses arguedin favour of according developing countries ‘special anddifferential treatment’ (SDT) under the dispute settlementprocedures, as they thought that the rules governing thejudicial system ought to be universal whereas SDT shouldonly be given with respect to the commitments relating togoods and services themselves.


Witnesses also told us that although many developingcountries had not so far engaged in the dispute settlementprocess, their involvement was increasing. A significantmajority of cases now involved developing countries ascomplainants or defendants. That said many witnessesagreed that although the operation of the DSU should beof considerable importance to developing countries, manyregarded improved market access as far more significant.

Room for improvementRoom for improvementRoom for improvementRoom for improvementRoom for improvement

There are a range of issues discussed in this report that reflectareas where the DSU might be improved. However, theprimary concern that almost all witnesses mentioned as crucial,was that Members actually implement recommendations tobring inconsistent measures into compliance with theircommitments. In this regard, timing was also an issue, as itwas agreed that justice delayed was frequently justice denied.There were two related concerns. The first was that the DSUmust not be permitted to allow non-compliance to gounpunished. The second was that it was imperative that anysettlement, while aiming to resolve the dispute in question,must lead to actual compliance with the agreed commitments,rather than some ‘back room’ agreement that helped obviatea particular bilateral trade problem, while allowing measuresto remain inconsistent with commitments.

Analysis and Recommendations

To the Working Group, the DSU and the commitments that itenforces are, if you will, part of a legal contract amongst theMembers. It is only sensible that a dispute settlementmechanism become involved in interpreting the terms of thatcontract, which in this case are the commitments themselves.However, the Working Group finds that there is a fundamentaldifference between a dispute settlement mechanism that isused to interpret what has been agreed, and thereby extendthe WTO acquis, and a dispute settlement mechanism that isviewed as extending the area of agreement itself (enhancingmarket access). We reject the latter interpretation. The disputesettlement system is designed for two purposes: to settledisputes, and ensure the predictability and certainty ofcommitments that have been agreed. It is not to add anything- other than clarification - to what has been provisionallyagreed. Where the agreements contain the kind of ambiguitythat can be resolved through legal interpretation, then it isonly appropriate for the dispute settlement panels and theAppellate Body to try to clarify that ambiguity. However,where any perceived or real ‘gap’ in a commitment is due toa decision by Members to leave themselves a degree offreedom in interpreting a commitment, then the disputesettlement system should not be seen to substitute its legalanalysis for the subjective and expert opinion of the authoritiesof an individual Member.2

Of course, it must be appreciated that a Member’scommitment to liberalise a market, on the one hand, andits decision to retain protectionist or discriminatory

measures, on the other, are going to reflect different politicalchoices and different constituencies that will always existin tension with one another. Some of the most difficultdisputes that panels and the Appellate Body have had tograpple with have been due to these inherent tensions. Evenfor a legal mechanism as rigorous as is the DSU, it is difficultto resolve disputes that are based on fundamentally differentapproaches and interpretations by Members of thecommitments that they have made to each other. Reformof the DSU itself will not be able to resolve fundamentaldifferences of opinion about the precautionary principle,the tax treatment of Foreign Sales Corporations, or evenabout the balance between compliance, compensation andretaliation. However, these kinds of difficulties need to beconsidered in any analysis of the functioning of the DSU,so that Members can ensure that dispute settlement itselfdoes not ‘break down’ under the weight of such problems.

Furthermore, in its corrective enforcement capacity, theDSU can only be seen to operate effectively when thereare measures that are found to be inconsistent with WTOcommitments. This means that there is a natural limitationto the DSU. After all, there are many ways that Members’commitments can be nullified or impaired without triggeringa violation, or even a non-violation (NVNI) or situationcomplaint. One-off denials of a right of access, or of alicence requested by an exporter or investor, may fall shortof being a sufficient trigger for formal consultations underthe DSU. But the DSU is not the only mechanism thatgovernments can use to address impediments to marketaccess.

At the same time, however, the DSU and the WTOAgreements that it enforces are not merely part of a legalmechanism. Just as principles of contractual interpretationand of public international law are not the only relevantconsiderations in settling trade disputes between Members,there are many means both more and less subtle than thelaw that can be used to enforce a contract. The DSU is animportant mechanism for communicating the concerns ofMembers, along with their different perspectives andinterests. That said, a Panel decision will only beimplemented where there is political support for compliancewith WTO commitments, or when any resistance to it isoutweighed by concerns about the threat of retaliation fromthe complaining party.

This is where we find that the dispute settlement systemat the WTO is most in need of serious reform. While theWTO itself is a rules-based system, and while these rulesthemselves are what ensure that Members with smalleconomies are allowed the same legal parity with theirlarger trading partners, this parity is only as strong as thelegal mechanism itself. That mechanism may afford smallerMembers equal recourse to remedies (as the current DSUsurely does). However, if their economic size does nottruly afford them an equal ability to enforce compliance orretaliate, they will have little incentive to use the system inthe first place. These aspects receive detailed considerationin the report. It is not enough to have a legal mechanism

2 This will be discussed further in the sections on the GATS and ondeference below at pages 23 and 25 respectively.


that is only truly effective in the hands of the largereconomies. Even though there have been notablesuccesses of Members with small economies prevailing inWTO dispute settlement, and actually seeing a respondentMember with a large economy comply with itscommitments, the reality is still that smaller economies haveless leverage when it comes to enforcing their rights. Thechallenge is thus not just to increase the awareness andknowledge of the DSU in the smaller and developingeconomies, but also to convince them that any victory oftheirs will be more than pyrrhic. Smaller and developingeconomies need to be convinced of the efficacy of theWTO dispute settlement system, and of those areas wherethey may be able to use it to truly ‘punch above theirweight’. At the same time, their governments too have anobligation to ensure that they can at least use the systemeffectively. This means that they will need to invest to someextent in internal capacity-building, in terms of bothrecruiting trade officials and trade lawyers and building amore general recognition among their own officials of therights and obligations that accrue to them as Members ofthe WTO. Indeed, there is room for far more technicalassistance to the least developing countries to help themto prepare adequately for the negotiations themselves, sothat they appreciate more fully the nature of the process,the commitments that they are making, the reforms that theymay need to implement, as well as how to use the disputesettlement process itself. Indeed, it could be argued thatthe more recognition there is of commitments themselveswithin all Members, the more they are likely to be incompliance with their commitments, and the less that casesare likely to be brought against them in the first place.

In the following sections we consider submissions fromour expert witnesses, and make recommendations on manyof the above issues. As indicated, our primary focus is tocontribute to an ongoing reform process of enhancingdispute settlement. The three broad themes that we coverbelow in our suggestions for reform relate to making disputesettlement more effectivemore effectivemore effectivemore effectivemore effective and more efficientmore efficientmore efficientmore efficientmore efficient as well as howit can be seen to be more acceptablemore acceptablemore acceptablemore acceptablemore acceptable.



SUGGESTIONS FOR REFORM

GREATER EFFECTIVENESS

In terms of increasing the effectiveness of dispute settlementat the WTO, we believe that the primary focus should beto increase the prospect of compliance with WTOcommitments and with the decisions of the DSB. While wehave heard some arguments about how to encouragecompliance by amending aspects of the decision-makingprocedures relating to compliance itself, in the main thecomments that we received focussed on how reform of theother remedies (i.e, compensation and retaliation) mighthelp to induce compliance itself.

Inducing compliance


On a number of occasions the Working Group heard theargument that the DSU’s record of inducing compliancewas generally good, apart from a few highly politicisedand high profile cases. As indicated above, the argumentwas made - and we believe it to be a fair one - thatcompared to other international tribunals the DSU had anextremely good record in terms of Members bringing theirmeasures into compliance with their commitments. Thatsaid some witnesses were anxious to point out that therewere situations where the manner in which a dispute wasindeed settled did not result in compliance as such. Inparticular it was argued that settlements between thecomplainant and respondent might not necessarily alwayscompletely remove an inconsistent measure. This wouldparticularly be the case if the matter were resolved betweenthe parties on a non-MFN basis.


The Working Group agrees that inducing compliance withThe Working Group agrees that inducing compliance withThe Working Group agrees that inducing compliance withThe Working Group agrees that inducing compliance withThe Working Group agrees that inducing compliance witha Member’s commitments is the primary and preferred resulta Member’s commitments is the primary and preferred resulta Member’s commitments is the primary and preferred resulta Member’s commitments is the primary and preferred resulta Member’s commitments is the primary and preferred resultin any case where an inconsistency with the commitmentsin any case where an inconsistency with the commitmentsin any case where an inconsistency with the commitmentsin any case where an inconsistency with the commitmentsin any case where an inconsistency with the commitmentshas been identified. No reforms should undermine thishas been identified. No reforms should undermine thishas been identified. No reforms should undermine thishas been identified. No reforms should undermine thishas been identified. No reforms should undermine thisfundamental objective of the dispute settlement process.fundamental objective of the dispute settlement process.fundamental objective of the dispute settlement process.fundamental objective of the dispute settlement process.fundamental objective of the dispute settlement process.

Reforms should be considered, however, that wouldReforms should be considered, however, that wouldReforms should be considered, however, that wouldReforms should be considered, however, that wouldReforms should be considered, however, that wouldencourage the panels and Appellate Body to make moreencourage the panels and Appellate Body to make moreencourage the panels and Appellate Body to make moreencourage the panels and Appellate Body to make moreencourage the panels and Appellate Body to make moredetailed suggestions and recommendations about howdetailed suggestions and recommendations about howdetailed suggestions and recommendations about howdetailed suggestions and recommendations about howdetailed suggestions and recommendations about howcompliance could be achieved. However, we believe thesecompliance could be achieved. However, we believe thesecompliance could be achieved. However, we believe thesecompliance could be achieved. However, we believe thesecompliance could be achieved. However, we believe theserecommendations should remain non-bindingrecommendations should remain non-bindingrecommendations should remain non-bindingrecommendations should remain non-bindingrecommendations should remain non-binding, as it is likelythat anything else would be seen by several Members asan inappropriate and unacceptable ‘intrusion’ on nationalsovereignty. However, an opportunity or perhaps even arequirement for a panel to make such recommendationswould at least provide the respondent with some guidance,and perhaps a degree of added strength when trying topush through the necessary implementation domestically.It would also help to demonstrate that the panellists hadnot just carefully considered whether, for example, themeasure or situation in question was in or was not in

compliance with WTO commitments, but had also fullyappreciated the nature of the violation, its impact on trade,possible solutions to bring about compliance, and the kindsof difficulties that a respondent Member might face inbringing a non-conforming measure into compliance.

The Working Group is also of the opinion that suchrecommendations that are made in announcing the initialdecision should also be repeated and referred tospecifically in any subsequent notices that the DSB makesin reporting on the extent to which the respondent hascomplied with the decision.

Prompt compliancePrompt compliancePrompt compliancePrompt compliancePrompt compliance

A number of witnesses put the argument that the rules onmanaging the implementation of a panel report were sovague that a respondent was able to drag out itsimplementation process over a number of years. TheWorking Group also heard examples of Members making‘cosmetic’ amendments that maintained the inconsistencyof a measure, simply to delay compliance or the threat ofretaliation.

The Working Group is of the opinion that the need forThe Working Group is of the opinion that the need forThe Working Group is of the opinion that the need forThe Working Group is of the opinion that the need forThe Working Group is of the opinion that the need forprompt compliance is absolutely essential, and that delayprompt compliance is absolutely essential, and that delayprompt compliance is absolutely essential, and that delayprompt compliance is absolutely essential, and that delayprompt compliance is absolutely essential, and that delayis one of the greatest problemsis one of the greatest problemsis one of the greatest problemsis one of the greatest problemsis one of the greatest problems, not just due to themaintenance of the inconsistent measure, but also withrespect to the credibility of the WTO system as a whole.While the timelines for dispute settlement may well result ina fast ‘hearing’, delay in implementation (other than thatinherent in exhausting legitimate appeal and otherprocedural rights) is perceived by many to mean that theslim chances of a timely remedy do not merit initiating acomplaint in the first place. This is the wrong message tosend to traders from all countries, and more particularlythe wrong message to send to governments who maytherefore feel encouraged to accede to protectionistdemands and introduce or maintain measures or practicesthat are inconsistent with their WTO commitments.

We have heard various ideas on which firm deadlines forcompliance we believe may both add some value and alsobe possible to implement. The ‘reasonable period’ in whicha respondent must comply with a decision of the DSB mustnot be allowed to differ too much from case to case. WeWeWeWeWeencourage the development of rules that would require theencourage the development of rules that would require theencourage the development of rules that would require theencourage the development of rules that would require theencourage the development of rules that would require therespondent to indicate to the DSB how long compliance isrespondent to indicate to the DSB how long compliance isrespondent to indicate to the DSB how long compliance isrespondent to indicate to the DSB how long compliance isrespondent to indicate to the DSB how long compliance isexpected to take. expected to take. expected to take. expected to take. expected to take. In terms of enforcing such a ‘compliancetime-line’, we note that the DSB currently reviews on a monthlybasis whether or not a Member has brought its measures intocompliance with its commitments. However this, is not sufficient.We believe that, in addition, the DSB should be required toWe believe that, in addition, the DSB should be required toWe believe that, in addition, the DSB should be required toWe believe that, in addition, the DSB should be required toWe believe that, in addition, the DSB should be required toissue a public statement to the membership, as well as to theissue a public statement to the membership, as well as to theissue a public statement to the membership, as well as to theissue a public statement to the membership, as well as to theissue a public statement to the membership, as well as to themedia, with respect to whether compliance has beenmedia, with respect to whether compliance has beenmedia, with respect to whether compliance has beenmedia, with respect to whether compliance has beenmedia, with respect to whether compliance has beenimplemented or not, and if not, to detail the history of theimplemented or not, and if not, to detail the history of theimplemented or not, and if not, to detail the history of theimplemented or not, and if not, to detail the history of theimplemented or not, and if not, to detail the history of thecase, set out the specific suggestions or recommendations thatcase, set out the specific suggestions or recommendations thatcase, set out the specific suggestions or recommendations thatcase, set out the specific suggestions or recommendations thatcase, set out the specific suggestions or recommendations thatthe the the the the pppppanel or Appellate Body made, specify the deadlines thatanel or Appellate Body made, specify the deadlines thatanel or Appellate Body made, specify the deadlines thatanel or Appellate Body made, specify the deadlines thatanel or Appellate Body made, specify the deadlines thatthe Member has missed, itemise any recommendations made,the Member has missed, itemise any recommendations made,the Member has missed, itemise any recommendations made,the Member has missed, itemise any recommendations made,the Member has missed, itemise any recommendations made,and make a firm and authoritative statement that the Memberand make a firm and authoritative statement that the Memberand make a firm and authoritative statement that the Memberand make a firm and authoritative statement that the Memberand make a firm and authoritative statement that the Memberis in violation of its commitments.is in violation of its commitments.is in violation of its commitments.is in violation of its commitments.is in violation of its commitments.


Suspension of the right ofcomplaint


On a number of occasions the Working Group heard theproposal that if a respondent Member failed to complywith a ruling, or to compensate for that failure through othermarket-opening means, then it should be barred from beingable to request consultations or to initiate further complaintsunder the DSU itself. The witnesses who made this proposalagreed that this could induce compliance amongst regular‘users’ of the DSU system and that it would serve as a lesstrade-restrictive alternative to retaliation. However, evenits proponents agreed that while such a proposal might betheoretically practicable, it was likely to prove politicallyimpossible and even undesirable. Certainly no wellspringof support for such suspension of rights of complaint wasidentifiable in the group of government officials to whomwe spoke. Suspension of rights might actually work againstits goal of inducing compliance by ‘permitting’ a Memberto decide that the benefits of not complying with itsobligation in a particular case may outweigh the need touse the dispute settlement system in others. Indeed, in anextreme case, such suspension might result in a Memberchoosing to simply withdraw from the WTO itself.


The Working Group does not believe that complainantThe Working Group does not believe that complainantThe Working Group does not believe that complainantThe Working Group does not believe that complainantThe Working Group does not believe that complainantrights should be suspendedrights should be suspendedrights should be suspendedrights should be suspendedrights should be suspended. In addition to the concernsalready raised above, the Working Group is of the viewthat by denying the respondent a right of complaint,important violations about which that Member might haveinitiated consultations will not come to WTO Members’attention (other than through the Trade Policy ReviewMechanism, which does not address complaints about non-compliance in as focussed a way as does disputesettlement). Similarly, if enough Members (or a largeMember) are denied a right of complaint, a systemic lackof faith in the dispute settlement system may develop. Mostobviously, of course, if the Member in question is contentto lose its right of complaint, then the sought-aftercompliance may well never come about, even though theMember in question will still benefit from its fellow Members’commitments.

We now turn our attention to the alternative methodsto induce compliance that were mentioned to us, namelythe other remedial options of compensation and retaliation.

Compensation


The Working Group agrees that compensation is rightlyplaced as the next best remedy after compliance. Wenote the dif ficult issues that arise with respect tocompensation, including quantifying the amount due, therequirement that any compensation be offered on an MFN

basis, and the problem of on-going non-compliance andhence a need for on-going compensation (or evenretaliation). More generally, we appreciate the fact thatin choosing market opening compensation overcompliance, the respondent usually has to convince anothersector to become more open to foreign competition than ithad expected, while the complainant has to convince itscomplaining industry to accept that it will receive no remedyin the short-term but that another sector will reap the benefitsof its efforts. We also recognise that to avoid some ofthese problems it may sometimes be tempting to providefor financial compensation. But financial compensationraises its own problems, some general to the entire issue ofcompensation (namely quantification and the MFN-requirement) and others unique (for example the prospectthat a payment from a respondent’s treasury is not goingto be as effective in inducing compliance as is a market-opening solution that is specific to a particular sector).Financial compensation could also come to be reckonedas a necessary ‘overhead’ of WTO membership, and thusundermine what should be occurring, which is thatMembers should be complying with their commitments,rather than paying for violations.

The Working Group is agreed however that the optionof compensation is far preferable to that of retaliation, andthat if such a ‘safety valve’ is not provided in the system,then retaliation is likely be relied upon more frequently, withan increased likelihood of a resulting protectionist spiral.While retaliation may be rare, the pain and harm that itcauses can still be severe. The fact that retaliation harms‘innocent victims’ can reduce support for trade liberalisation.Other methods of redress clearly need to be considered.Other methods of redress clearly need to be considered.Other methods of redress clearly need to be considered.Other methods of redress clearly need to be considered.Other methods of redress clearly need to be considered.However, in considering the suggestions below, an eye mustHowever, in considering the suggestions below, an eye mustHowever, in considering the suggestions below, an eye mustHowever, in considering the suggestions below, an eye mustHowever, in considering the suggestions below, an eye mustalways be kept on how they will help to induce compliancealways be kept on how they will help to induce compliancealways be kept on how they will help to induce compliancealways be kept on how they will help to induce compliancealways be kept on how they will help to induce compliance(where compliance is still possible). Throughout the operation(where compliance is still possible). Throughout the operation(where compliance is still possible). Throughout the operation(where compliance is still possible). Throughout the operation(where compliance is still possible). Throughout the operationof the of the of the of the of the DSUDSUDSUDSUDSU, compensation must only be viewed as an, compensation must only be viewed as an, compensation must only be viewed as an, compensation must only be viewed as an, compensation must only be viewed as analternative to compliance where for one reason or anotheralternative to compliance where for one reason or anotheralternative to compliance where for one reason or anotheralternative to compliance where for one reason or anotheralternative to compliance where for one reason or anothercompliance is not going to happen. compliance is not going to happen. compliance is not going to happen. compliance is not going to happen. compliance is not going to happen. That said, once aMember has made a commitment to liberalise a sector, itought not to be allowed to then state that it finds compliancewith its commitments to be ‘impossible’. However, on therare occasion when after the ratification of an Agreement itbecomes not immediately possible for a Member to complywith its commitments, then and only then shouldcompensation be viewed as a viable alternative.

Market opening compensation


The Working Group agrees that where compliance isThe Working Group agrees that where compliance isThe Working Group agrees that where compliance isThe Working Group agrees that where compliance isThe Working Group agrees that where compliance isviewed to be not immediately possible, the preferredviewed to be not immediately possible, the preferredviewed to be not immediately possible, the preferredviewed to be not immediately possible, the preferredviewed to be not immediately possible, the preferredmethod of compensation is to liberalise another sector albeitmethod of compensation is to liberalise another sector albeitmethod of compensation is to liberalise another sector albeitmethod of compensation is to liberalise another sector albeitmethod of compensation is to liberalise another sector albeitoutside the dispute in questionoutside the dispute in questionoutside the dispute in questionoutside the dispute in questionoutside the dispute in question. As has been identifiedabove, a respondent may experience dif ficulties,domestically, with implementing a decision to open upanother sector, just as the complainant may find it difficultto accept such an offer. Then there are other problems.


On the usual assumptions, the market opening should beavailable on an MFN-basis. Yet it is as difficult to see howan MFN approach would provide the complainant withan effective and complete remedy as it is to see howoffering only the complainant better market access wouldsatisfy other Members whose industries may still be harmedby the measure provoking the original dispute. Of course,where that measure does no more than protect therespondent’s market from the complainant’s products orthose of competitors, then compliance itself would only havebenefited those products or competitors. It follows that insuch a case there is less reason for compensation to beoffered on an MFN basis, where compliance is viewed asnot immediately possible. In most cases, however, themeasure in question will be less specific, and there wouldbe the seemingly intractable problem mentioned above.

Witnesses’ views on the MFN issue were mixed. Somewitnesses argued that MFN was a key underpinning of themultilateral trading system and should not be undermined.Many cited some WTO Members who had recently comeout strongly in favour of MFN. In contrast some witnessesargued that MFN compensation may not be so ideal as inmany cases a respondent might find accepting retaliationmuch cheaper than MFN compensation.

While these are difficult issues, the Working Group isWhile these are difficult issues, the Working Group isWhile these are difficult issues, the Working Group isWhile these are difficult issues, the Working Group isWhile these are difficult issues, the Working Group isagreed that any resolution should be guided by a firmagreed that any resolution should be guided by a firmagreed that any resolution should be guided by a firmagreed that any resolution should be guided by a firmagreed that any resolution should be guided by a firmadherence to and confirmation of the principle of Most-adherence to and confirmation of the principle of Most-adherence to and confirmation of the principle of Most-adherence to and confirmation of the principle of Most-adherence to and confirmation of the principle of Most-Favoured-Nation treatment. Favoured-Nation treatment. Favoured-Nation treatment. Favoured-Nation treatment. Favoured-Nation treatment. While this may result in amarket opening measure that is less targeted at the problemthan might be hoped, it has to be remembered that themarket opening compensation being contemplated is notactually directed at removing the inconsistent measure; itis directed at ensuring that the dispute between the partiesis resolved in accordance with the maintenance of thepredictability and certainty of the WTO system. As MFNis one of the most important corner stones of the WTOsystem, it should not be amended or altered lightly.

The Working Group has also considered where somereform of matters relating to compensatory remedies mayactually be helpful in inducing compliance. One of themain aspects in this regard is making the respondent - andother Members - more aware of the injury caused by therespondent’s violation. In that regard, we recommend thatwe recommend thatwe recommend thatwe recommend thatwe recommend thatmore specific compensation be explored as an option, i.e.more specific compensation be explored as an option, i.e.more specific compensation be explored as an option, i.e.more specific compensation be explored as an option, i.e.more specific compensation be explored as an option, i.e.the complainant could specify precisely the sectors in whichthe complainant could specify precisely the sectors in whichthe complainant could specify precisely the sectors in whichthe complainant could specify precisely the sectors in whichthe complainant could specify precisely the sectors in whichthe respondent might further open its marketthe respondent might further open its marketthe respondent might further open its marketthe respondent might further open its marketthe respondent might further open its market. This wouldserve two purposes - it would provide a remedy that ismore relevant to the interests of the injured party (albeitnot in the sector where the original violation occurs), and itmay also be more likely to lead to the specification of asector where the respondent feels more ‘pain’ and thus ismore likely to be led towards compliance, rather thancompensation.

We view with favour the prospect of retroactiveWe view with favour the prospect of retroactiveWe view with favour the prospect of retroactiveWe view with favour the prospect of retroactiveWe view with favour the prospect of retroactivecompensation, particularly where there are pervasivecompensation, particularly where there are pervasivecompensation, particularly where there are pervasivecompensation, particularly where there are pervasivecompensation, particularly where there are pervasiveviolations or where the nature of the violation itself (e.g. aviolations or where the nature of the violation itself (e.g. aviolations or where the nature of the violation itself (e.g. aviolations or where the nature of the violation itself (e.g. aviolations or where the nature of the violation itself (e.g. a

subsidy or an anti-dumping duty) leads logically only tosubsidy or an anti-dumping duty) leads logically only tosubsidy or an anti-dumping duty) leads logically only tosubsidy or an anti-dumping duty) leads logically only tosubsidy or an anti-dumping duty) leads logically only tothat solutionthat solutionthat solutionthat solutionthat solution. (Also, in such cases, for example, no issue ofMFN treatment would arise.) While it is not clear howretroactivity would operate for market-openingcompensation, we believe that it should be explored forfinancial compensation. In that regard, however, webelieve that neither the individual panels and the Appellateneither the individual panels and the Appellateneither the individual panels and the Appellateneither the individual panels and the Appellateneither the individual panels and the AppellateBody nor the DSB itself should be granted the power toBody nor the DSB itself should be granted the power toBody nor the DSB itself should be granted the power toBody nor the DSB itself should be granted the power toBody nor the DSB itself should be granted the power toorder retroactive compensation, until there has been a firmorder retroactive compensation, until there has been a firmorder retroactive compensation, until there has been a firmorder retroactive compensation, until there has been a firmorder retroactive compensation, until there has been a firmagreement among the Members to that effect.agreement among the Members to that effect.agreement among the Members to that effect.agreement among the Members to that effect.agreement among the Members to that effect.

We also believe, however, that while retroactiveWe also believe, however, that while retroactiveWe also believe, however, that while retroactiveWe also believe, however, that while retroactiveWe also believe, however, that while retroactiveremedies may, generally, be necessary to addressremedies may, generally, be necessary to addressremedies may, generally, be necessary to addressremedies may, generally, be necessary to addressremedies may, generally, be necessary to addresspervasive violations, they would be inappropriate wherepervasive violations, they would be inappropriate wherepervasive violations, they would be inappropriate wherepervasive violations, they would be inappropriate wherepervasive violations, they would be inappropriate wherethe respondent is still acting in good faiththe respondent is still acting in good faiththe respondent is still acting in good faiththe respondent is still acting in good faiththe respondent is still acting in good faith. Such an examplemay be where it is reasonable to believe that a Membergenuinely thinks that its measures are in compliance withits commitments, as opposed to - for example - a situationwhere that is no longer credible, or where the issue ofinconsistency is clear, and the only question is the extentof the injury.

Also, when compensation is a likely outcome, we believeAlso, when compensation is a likely outcome, we believeAlso, when compensation is a likely outcome, we believeAlso, when compensation is a likely outcome, we believeAlso, when compensation is a likely outcome, we believethat there is an obvious need for an objective assessment ofthat there is an obvious need for an objective assessment ofthat there is an obvious need for an objective assessment ofthat there is an obvious need for an objective assessment ofthat there is an obvious need for an objective assessment ofthe amount of the harm (and consequent compensation)the amount of the harm (and consequent compensation)the amount of the harm (and consequent compensation)the amount of the harm (and consequent compensation)the amount of the harm (and consequent compensation)involved, and that this assessment should be made as earlyinvolved, and that this assessment should be made as earlyinvolved, and that this assessment should be made as earlyinvolved, and that this assessment should be made as earlyinvolved, and that this assessment should be made as earlyon in the dispute settlement processon in the dispute settlement processon in the dispute settlement processon in the dispute settlement processon in the dispute settlement process as possible as possible as possible as possible as possible. . . . . The partieswill then be able to better evaluate their options and identifywhat settlement may be appropriate, but always with thehope that the final decision will be to remove a trade-barrierrather than simply compensate for maintaining it.

Financial compensation


We heard several comments on this issue. Most witnessesagreed that financial compensation could prove difficultfor a variety of reasons but that further work should bedone to assess its viability as a useful remedy. Somewitnesses argued that financial compensation would notoffer enough incentive to countries to comply and that itcould open the way to developed countries, in particular,to simply buy their way out of complying. Othersdisagreed, citing the fact that this remedy could be a usefulmeans of recourse for developing countries that lackedthe economic weight or political will to threaten retaliation,let alone retaliate, against a developed country.

By far the most frequently cited problem associatedwith compensation, however, was how to quantify theamount owing to a successful complainant, especially incases involving trade in services. A number of witnessesagreed that economic experts would have to work in closeco-operation with panels if this idea was to be viable.Witnesses also raised the problem of whethercompensation should be offered to the State or directly tothe damaged industry.

The Working Group also heard the suggestion that anycompensatory amount should be given to the WTO


Secretariat to help support its technical assistance andcapacity-building programmes. A number of witnessesretorted that WTO Members would never accept such arule and that even if they did the idea of compensatorypayments going into the system might impinge on theperceived neutrality of the DSB, which would benefitindirectly from this income.

Analysis and Recommendation

The Working Group is agreed that financial compensationshould continue to be available, but should be availableon an MFN basis where that is feasible.

The threat of retaliation


The majority of witnesses recognised that retaliation wasan option of last resort, and that it was very rarely used.Given its nature, however, they also recognised that itsthreat was more likely to lead to compliance, and that whileit would be difficult to determine which cases were settleddue to there being a ‘Damoclean’ sword of retaliationhanging over the dispute, the number was likely to besignificant.

Witnesses also recognised the obvious deficiencies ofretaliation, including the fact that it is a market-closing solutionrather than a market-opening one, and that in its operation itwill always harm ‘innocent victims’. Another criticism wasthat retaliation was increasingly futile in the global economyas most industries now have close working relationships,contracts and supply chains with international counterparts.Retaliation can thus damage Members’ domestic industriesby reducing demand for primary product exports andincreasing the price of essential imports. That said, manywitnesses argued that the threat of retaliation should not beremoved, as it concentrates the minds of the representativesof governments like no other remedy, and the WTO disputesettlement system needed such a definite threat.

More significantly perhaps many witnesses argued thatretaliation was not a viable means for developing countriesto obtain recourse from developed countries because thesmall size of their markets means that their impeding oftheir own imports through retaliation would not reducedemand for the developed country’s exports significantlyenough to bring about compliance. Some witnesses alsoargued that this course of action might ultimately damagea developing country as trade restrictions may furtherreduce their access to the exports of developed countriesthat they may need to improve their own industries. Othersalso raised the important point that developing countrieswere reluctant to use retaliation because they feared theymight lose their special preferences and development aid.

We heard two suggestions to help developing countriesovercome these obstacles. The first was to provide a specialand automatic option for developing countries to choosein which sectors and when to retaliate, thus maximising the

potential for them to have any effect. The secondsuggestion was to encourage the use of collectiveretaliation. Some witnesses even went so far as to arguein favour of universal retaliation by all Members becausea country that introduces an illegal measure is in effectoffending against the whole system, not just a singleMember or group of countries.

Others were also concerned about the harm thatretaliation between developed countries can cause to theinternational trading system as a whole, let alone themarkets of the parties in question. They thus suggested theidea of a trans-Atlantic ‘truce’, or an agreement betweenthe EU and US that decisions in cases between them shouldbe non-binding.

Others suggested that in all disputes perhaps a systemof fines was more appropriate than retaliation. With fines,at least any harm to ‘innocent victims’ would he significantlyreduced, although the pain of the fine would have to beborne by the economy of the fined party, and thus wouldcatch even more ‘innocent victims’, albeit to a lesser extent.


In the opinion of the Working Group, the threat of retaliationIn the opinion of the Working Group, the threat of retaliationIn the opinion of the Working Group, the threat of retaliationIn the opinion of the Working Group, the threat of retaliationIn the opinion of the Working Group, the threat of retaliationis essential to induce compliance. is essential to induce compliance. is essential to induce compliance. is essential to induce compliance. is essential to induce compliance. There is no better wayof focussing the mind of parties, or of putting pressure ongovernments to actually comply with a DSB decision, thanthrough the threat of retaliation, particularly against‘innocent’ sectors. As such, the remedy of retaliation shouldthe remedy of retaliation shouldthe remedy of retaliation shouldthe remedy of retaliation shouldthe remedy of retaliation shouldbe maintained. In particular, it should not be withdrawnbe maintained. In particular, it should not be withdrawnbe maintained. In particular, it should not be withdrawnbe maintained. In particular, it should not be withdrawnbe maintained. In particular, it should not be withdrawnfor disputes between particular parties, as this wouldfor disputes between particular parties, as this wouldfor disputes between particular parties, as this wouldfor disputes between particular parties, as this wouldfor disputes between particular parties, as this woulddamage the credibility and effectiveness of the WTO systemdamage the credibility and effectiveness of the WTO systemdamage the credibility and effectiveness of the WTO systemdamage the credibility and effectiveness of the WTO systemdamage the credibility and effectiveness of the WTO systemas a whole. as a whole. as a whole. as a whole. as a whole. Indeed, any introduction of truces or non-binding decisions would simply lead to a proliferation ofsuch ‘agreements’, with if not a complete return to the systemunder the GATT, then at least a substantial dilution of theeffectiveness of the DSU.

What is problematic about retaliation is how it isWhat is problematic about retaliation is how it isWhat is problematic about retaliation is how it isWhat is problematic about retaliation is how it isWhat is problematic about retaliation is how it isimplemented. Controls clearly need to be introduced toimplemented. Controls clearly need to be introduced toimplemented. Controls clearly need to be introduced toimplemented. Controls clearly need to be introduced toimplemented. Controls clearly need to be introduced tominimise any undue harm on ‘innocent victims’minimise any undue harm on ‘innocent victims’minimise any undue harm on ‘innocent victims’minimise any undue harm on ‘innocent victims’minimise any undue harm on ‘innocent victims’, for example.Without trying to minimise its effectiveness in inducingcompliance, we have the following suggestions:

An early assessment of the effects of the injuryAn early assessment of the effects of the injuryAn early assessment of the effects of the injuryAn early assessment of the effects of the injuryAn early assessment of the effects of the injuryand the expected level of retaliationand the expected level of retaliationand the expected level of retaliationand the expected level of retaliationand the expected level of retaliation

As discussed above with respect to compensation, thethethethethelevel of harm created by a violation should belevel of harm created by a violation should belevel of harm created by a violation should belevel of harm created by a violation should belevel of harm created by a violation should bedetermined very early in a dispute. determined very early in a dispute. determined very early in a dispute. determined very early in a dispute. determined very early in a dispute. Again, this is tohelp focus the minds of the parties and to allow themto appreciate the alternatives that are possible to them.Of course, in calculating the injury, difficult factualquestions will arise, relating not only to direct damagebut also potential damage that a measure may becausing, and how that should be factored into anyestimate of retaliation. This is clearly an issue thatMembers should consider very carefully, and if possibleagree to address before implementing.


Publication of retaliation listPublication of retaliation listPublication of retaliation listPublication of retaliation listPublication of retaliation list

In addition, it would be helpful if the complainant wasit would be helpful if the complainant wasit would be helpful if the complainant wasit would be helpful if the complainant wasit would be helpful if the complainant wasallowed, at an earlier stage than at present, to list theallowed, at an earlier stage than at present, to list theallowed, at an earlier stage than at present, to list theallowed, at an earlier stage than at present, to list theallowed, at an earlier stage than at present, to list thesectors where it thinks retaliation may be necessary. sectors where it thinks retaliation may be necessary. sectors where it thinks retaliation may be necessary. sectors where it thinks retaliation may be necessary. sectors where it thinks retaliation may be necessary. Thisshould not be any earlier than the issuance of the firstpanel report, as at any time before that, any damagewill be purely speculative and the publication of such aretaliation list would cause undue harm to the sectors inquestion. Nevertheless, without prejudice to therespondent’s rights of appeal, it would seem sensible forthe complainant to be able to issue its retaliation list (ordemand for compensation, if it is so minded) as soon asit has received an affirmative decision from a panel onits complaint. The Working Group does not think thatsuch an amendment to the DSU would be agreed easily,or that it would in all cases lead to compliance by therespondent. However, such a reform might offersignificant benefits, and thus should be considered.

Retroactive RetaliationRetroactive RetaliationRetroactive RetaliationRetroactive RetaliationRetroactive Retaliation

Retroactive retaliation should be available for pervasiveRetroactive retaliation should be available for pervasiveRetroactive retaliation should be available for pervasiveRetroactive retaliation should be available for pervasiveRetroactive retaliation should be available for pervasiveviolations, particularly where they evidence a breachviolations, particularly where they evidence a breachviolations, particularly where they evidence a breachviolations, particularly where they evidence a breachviolations, particularly where they evidence a breachof good faith on the part of the respondent. of good faith on the part of the respondent. of good faith on the part of the respondent. of good faith on the part of the respondent. of good faith on the part of the respondent. Asdiscussed above, a decision to allow the disputea decision to allow the disputea decision to allow the disputea decision to allow the disputea decision to allow the disputesettlement process to include this remedy should besettlement process to include this remedy should besettlement process to include this remedy should besettlement process to include this remedy should besettlement process to include this remedy should bemade by Members as a whole.made by Members as a whole.made by Members as a whole.made by Members as a whole.made by Members as a whole.

Fines and the option of universal retaliationFines and the option of universal retaliationFines and the option of universal retaliationFines and the option of universal retaliationFines and the option of universal retaliation

The Working Group is of the opinion that it is highlyThe Working Group is of the opinion that it is highlyThe Working Group is of the opinion that it is highlyThe Working Group is of the opinion that it is highlyThe Working Group is of the opinion that it is highlyunlikely that the Members would introduce either a systemunlikely that the Members would introduce either a systemunlikely that the Members would introduce either a systemunlikely that the Members would introduce either a systemunlikely that the Members would introduce either a systemof fines, or allow for universal retaliation.of fines, or allow for universal retaliation.of fines, or allow for universal retaliation.of fines, or allow for universal retaliation.of fines, or allow for universal retaliation. Joint retaliationwould of course be feasible when there are multiplecomplainants, and where they might find that bycoordinating their retaliation, compliance might be morelikely. Any ways of facilitating this should be encouraged.. Any ways of facilitating this should be encouraged.. Any ways of facilitating this should be encouraged.. Any ways of facilitating this should be encouraged.. Any ways of facilitating this should be encouraged.

In contrast we are concerned that fines would notbe effective in inducing compliance. Furthermore, giventhe recent concerns that have been voiced about thesupposed monolithic power of the ‘WTO’ and thealleged non-accountability of its decisions and its staff,we do not believe that this is an appropriate time to bewe do not believe that this is an appropriate time to bewe do not believe that this is an appropriate time to bewe do not believe that this is an appropriate time to bewe do not believe that this is an appropriate time to beconsidering allowing the Secretariat the power toconsidering allowing the Secretariat the power toconsidering allowing the Secretariat the power toconsidering allowing the Secretariat the power toconsidering allowing the Secretariat the power tocollect penalties, either on behalf of Members directlycollect penalties, either on behalf of Members directlycollect penalties, either on behalf of Members directlycollect penalties, either on behalf of Members directlycollect penalties, either on behalf of Members directlyor for distribution within the Organisation more broadly,or for distribution within the Organisation more broadly,or for distribution within the Organisation more broadly,or for distribution within the Organisation more broadly,or for distribution within the Organisation more broadly,perhaps as contributions to capacity-building initiatives.perhaps as contributions to capacity-building initiatives.perhaps as contributions to capacity-building initiatives.perhaps as contributions to capacity-building initiatives.perhaps as contributions to capacity-building initiatives.

Truces and non-binding decisionsTruces and non-binding decisionsTruces and non-binding decisionsTruces and non-binding decisionsTruces and non-binding decisions

We also believe that the suggestions of a truce or forWe also believe that the suggestions of a truce or forWe also believe that the suggestions of a truce or forWe also believe that the suggestions of a truce or forWe also believe that the suggestions of a truce or fordecisionsdecisionsdecisionsdecisionsdecisions in disputes in disputes in disputes in disputes in disputes between particularly large Members between particularly large Members between particularly large Members between particularly large Members between particularly large Membersto be non-binding would lead the WTO in the wrongto be non-binding would lead the WTO in the wrongto be non-binding would lead the WTO in the wrongto be non-binding would lead the WTO in the wrongto be non-binding would lead the WTO in the wrongdirectiondirectiondirectiondirectiondirection. Some believe that the degree of retaliation that ispossible between such economies may jeopardise thetrading system itself. The Working Group are of the opinionthat removing retaliation, and its harm, in this manner wouldalso remove a credible and powerful threat from the system,and thereby return Members to a situation where they wouldhave to rely on moral suasion to remove what are equallydamaging and inconsistent measures in the first place.

Enhancing the effectiveness ofdeveloping country participation


All witnesses that addressed developing country concernsagreed that less (LDC) and least developed (LLDC)countries should be assisted in their efforts to use the DSU.Some concern was expressed that the current emphasison short training courses for developing country lawyersand legal advisers, while extremely helpful, was notenough. More needed to be done to ensure that thecapacity was self-sustaining, and indeed self-provided. Anumber of witnesses suggested it was more important tofirst help developing countries to understand their own rightsand obligations and to determine the impact of othercountries’ trade policies on their own economies. At theheart of this argument was the belief that trade policy wasin effect an extension of domestic policy and that thereforeequal emphasis, at a minimum, should be placed oneducating officials across a developing country governmentand helping them to improve their understanding of privatesector needs.

When asked who should take the lead in providingtechnical assistance and capacity building a number ofwitnesses thought that the WTO Secretariat had animportant role to play in this area but that further assessmentwas needed to clarify what its actual responsibilities oughtto be. A number of witnesses also felt that both academiaand the private sector ought to play more prominent roles.


In making its recommendations about developing countryissues, the Working Group distinguishes between the largerdeveloping countries that are active and frequent users ofthe DSU and those LLDCs that have simply not yetdeveloped the capacity to appreciate the benefits of thesystem, let alone the ability to use it. While appreciatingthe clear need for more publicity of the sources of potentialadvice that might be available to LLDCs, the WorkingGroup noted that the Advisory Centre on WTO Law andthe ability of private counsel to participate in proceedingshad both helped LDCs and LLDCs to participate more fullyin the DSU system. That said, many LLDCs could neitherafford the Advisory Centre nor private lawyers, nor couldthey necessarily recognise an issue where the DSU mightbe relevant. Equally, the concerns about parity with respectto the legal remedy remain: i.e. even if a LLDC felt it wasworth it to bring a case, knew how to do it, could afford todo it and won, it might still not have the economic weightto gain redress. The Working Group The Working Group The Working Group The Working Group The Working Group appreciates that theseare all difficult issues. However, it recommends that LLDCs recommends that LLDCs recommends that LLDCs recommends that LLDCs recommends that LLDCsdo as much as they can to develop the expertise withindo as much as they can to develop the expertise withindo as much as they can to develop the expertise withindo as much as they can to develop the expertise withindo as much as they can to develop the expertise withintheir own governments as this is essential for them to benefittheir own governments as this is essential for them to benefittheir own governments as this is essential for them to benefittheir own governments as this is essential for them to benefittheir own governments as this is essential for them to benefitfrom the commitments that the WTO already affords them.from the commitments that the WTO already affords them.from the commitments that the WTO already affords them.from the commitments that the WTO already affords them.from the commitments that the WTO already affords them.Once they have the capability to recognise a WTO issue,then many LLDCs will still need help in being freed fromlitigation costs. There is clearly room for greaterThere is clearly room for greaterThere is clearly room for greaterThere is clearly room for greaterThere is clearly room for greater


involvement of the WTO Secretariat in assisting allinvolvement of the WTO Secretariat in assisting allinvolvement of the WTO Secretariat in assisting allinvolvement of the WTO Secretariat in assisting allinvolvement of the WTO Secretariat in assisting allMembers to distribute pleadings but most particularly toMembers to distribute pleadings but most particularly toMembers to distribute pleadings but most particularly toMembers to distribute pleadings but most particularly toMembers to distribute pleadings but most particularly totake this ‘delivery’ cost off developing countries.take this ‘delivery’ cost off developing countries.take this ‘delivery’ cost off developing countries.take this ‘delivery’ cost off developing countries.take this ‘delivery’ cost off developing countries.

While we recognise that a more substantial reductionof their costs is crucial to LLDCs’ participation in the system,the Working Group recognises that no one solution willresolve this very difficult problem. A combination of actionsA combination of actionsA combination of actionsA combination of actionsA combination of actionsis required. In particular, we recommend that Membersis required. In particular, we recommend that Membersis required. In particular, we recommend that Membersis required. In particular, we recommend that Membersis required. In particular, we recommend that Members

• work to help reduce the Advisory Centre on WTO Law’swork to help reduce the Advisory Centre on WTO Law’swork to help reduce the Advisory Centre on WTO Law’swork to help reduce the Advisory Centre on WTO Law’swork to help reduce the Advisory Centre on WTO Law’scosts to least developed countries to a minimum;costs to least developed countries to a minimum;costs to least developed countries to a minimum;costs to least developed countries to a minimum;costs to least developed countries to a minimum;

• encourage least developed countries to rely on the ‘goodencourage least developed countries to rely on the ‘goodencourage least developed countries to rely on the ‘goodencourage least developed countries to rely on the ‘goodencourage least developed countries to rely on the ‘goodoffices’ of the WTO Director General as much as possible;offices’ of the WTO Director General as much as possible;offices’ of the WTO Director General as much as possible;offices’ of the WTO Director General as much as possible;offices’ of the WTO Director General as much as possible;

• prevent a developed country respondent from refusingprevent a developed country respondent from refusingprevent a developed country respondent from refusingprevent a developed country respondent from refusingprevent a developed country respondent from refusingto mediate when such is requested by a least developedto mediate when such is requested by a least developedto mediate when such is requested by a least developedto mediate when such is requested by a least developedto mediate when such is requested by a least developedcountry; andcountry; andcountry; andcountry; andcountry; and

• ensure that least developed and other developingensure that least developed and other developingensure that least developed and other developingensure that least developed and other developingensure that least developed and other developingcountries understand that they too have a concomitantcountries understand that they too have a concomitantcountries understand that they too have a concomitantcountries understand that they too have a concomitantcountries understand that they too have a concomitantobligation to their rights under the WTO system, andobligation to their rights under the WTO system, andobligation to their rights under the WTO system, andobligation to their rights under the WTO system, andobligation to their rights under the WTO system, andindeed an important bolstering of such rights, is anindeed an important bolstering of such rights, is anindeed an important bolstering of such rights, is anindeed an important bolstering of such rights, is anindeed an important bolstering of such rights, is anobligation on their part to invest in their own capacity-obligation on their part to invest in their own capacity-obligation on their part to invest in their own capacity-obligation on their part to invest in their own capacity-obligation on their part to invest in their own capacity-building, so that they can effectively benefit from andbuilding, so that they can effectively benefit from andbuilding, so that they can effectively benefit from andbuilding, so that they can effectively benefit from andbuilding, so that they can effectively benefit from andenforce their rights under the WTO agreements.enforce their rights under the WTO agreements.enforce their rights under the WTO agreements.enforce their rights under the WTO agreements.enforce their rights under the WTO agreements.

Advisory Centre on WTO Law


The majority of witnesses agreed that the Advisory Centreon WTO Law was a welcome initiative with an importantrole to play. However, dissenting views were heard fromthose who felt that the Centre’s fees were too high for thesmallest and poorest developing countries. We also hearda number of conflicting viewpoints about what the specificrole of the Centre ought to be. Some witnesses arguedthat it should not become a litigation specialist but insteadconcentrate on supporting developing countries duringconsultation and mediation processes. A number ofwitnesses also pointed out that even with the best intentionsthe Advisory Centre was unable to resolve a number ofproblems faced by developing countries. Most significantwas the fact that no matter how well equipped or supporteddeveloping countries may be, many were still reluctant tobring cases against developed countries, as they wereconscious of losing their special preferences anddevelopment aid. Other problems that could not be solvedby the Centre included a distinct lack of communicationbetween developing country representations in Genevaand their respective national governments, and a lack ofknowledge about the impact of trading partners’ policies.

Timing matters


Witnesses generally agreed that the problem of timing wasa common concern for Members and that a balance hadto be found between efficiency and practicality. That saidthere was a majority view that ‘justice delayed was justicedenied’, particularly in cases involving developing

countries. There was a general view that the system hadbeen successful in sticking to reasonable timeframes. Somewitnesses even argued that the system was one of thequickest dispute resolution systems in the world.

We also heard a number of witnesses explain that therewas a belief that the Appellate Body was finding it difficultto complete their reports within the 90-day deadline. Theproblem cited by witnesses was not the process of appeal;rather the time required to translate reports. Witnessesalso argued that over the years the Appellate Body’s jobhad become more difficult because appeals were morecomplex and panel reports themselves were much longer.


A number of proposals exist for ways of reducing the delaysthat still exist in the system. While the Working Group doesnot believe that the existing timelines should be shortened,there are some other related aspects that are worth exploring.

Interim reliefInterim reliefInterim reliefInterim reliefInterim relief

A proposal for some form of interim relief, or injunctionpending a final decision has frequently been suggested asa potential means of speeding up the settlement of disputes,and redressing a perceived wrong during the litigationprocess itself. While the Working Group accepts thatmeasures that are inconsistent with commitments can causesevere damage to business interests, and in some casescould prove fatal to a company if allowed to remain inplace for the full length of the dispute settlement process, itremains the case that a review of the facts is needed beforeany penalties can be applied, interim or not. Instead, wewewewewerecommend introducing expedited procedures for therecommend introducing expedited procedures for therecommend introducing expedited procedures for therecommend introducing expedited procedures for therecommend introducing expedited procedures for thereview of services cases or situations where a preliminaryreview of services cases or situations where a preliminaryreview of services cases or situations where a preliminaryreview of services cases or situations where a preliminaryreview of services cases or situations where a preliminaryreview indicates that there has been a clear violation.review indicates that there has been a clear violation.review indicates that there has been a clear violation.review indicates that there has been a clear violation.review indicates that there has been a clear violation.

Timeliness of reviewTimeliness of reviewTimeliness of reviewTimeliness of reviewTimeliness of review

The Working Group agrees that there needs to be greaterThe Working Group agrees that there needs to be greaterThe Working Group agrees that there needs to be greaterThe Working Group agrees that there needs to be greaterThe Working Group agrees that there needs to be greaterrecognition of the very short time that panels have to makerecognition of the very short time that panels have to makerecognition of the very short time that panels have to makerecognition of the very short time that panels have to makerecognition of the very short time that panels have to maketheir decisions; translation requirements in particular,their decisions; translation requirements in particular,their decisions; translation requirements in particular,their decisions; translation requirements in particular,their decisions; translation requirements in particular,appear to take up a disproportionate amount of theappear to take up a disproportionate amount of theappear to take up a disproportionate amount of theappear to take up a disproportionate amount of theappear to take up a disproportionate amount of theavailable time. available time. available time. available time. available time. If panellists have insufficient time to considera case, then this will impact on the quality of their decisions,or at least harm the clarity and extent of their reasoning.The Working Group therefore recommends that there beThe Working Group therefore recommends that there beThe Working Group therefore recommends that there beThe Working Group therefore recommends that there beThe Working Group therefore recommends that there besome extension of time - possibly 4-6 weeks - to cater forsome extension of time - possibly 4-6 weeks - to cater forsome extension of time - possibly 4-6 weeks - to cater forsome extension of time - possibly 4-6 weeks - to cater forsome extension of time - possibly 4-6 weeks - to cater fortime for translation and other administrative duties. If thistime for translation and other administrative duties. If thistime for translation and other administrative duties. If thistime for translation and other administrative duties. If thistime for translation and other administrative duties. If thisis viewed as undesirable, then a clear picture of the actualis viewed as undesirable, then a clear picture of the actualis viewed as undesirable, then a clear picture of the actualis viewed as undesirable, then a clear picture of the actualis viewed as undesirable, then a clear picture of the actualtime that is available for dispute settlement itself is required.time that is available for dispute settlement itself is required.time that is available for dispute settlement itself is required.time that is available for dispute settlement itself is required.time that is available for dispute settlement itself is required.At the very least, it seems sensible to operate on the basisit seems sensible to operate on the basisit seems sensible to operate on the basisit seems sensible to operate on the basisit seems sensible to operate on the basisof working days rather than calendar days. In addition,of working days rather than calendar days. In addition,of working days rather than calendar days. In addition,of working days rather than calendar days. In addition,of working days rather than calendar days. In addition,defined holiday periods would also be sensibledefined holiday periods would also be sensibledefined holiday periods would also be sensibledefined holiday periods would also be sensibledefined holiday periods would also be sensible, andcertainly would not reduce in any way the expectation ofthe parties of a hearing within a fixed time.

Of course, in many cases a dispute will have beendiscussed in consultations between the parties for severalyears prior to becoming the subject of WTO consultations.The Working Group does not think however that this is a


sufficient reason to shorten the consultation period. First,even if parties have been in bilateral talks, the consultationperiod is already quite short as it is. Second, in manycases parties who have not been in bilateral talks previouslymay require some initial period of consultation in order toresolve their dispute. The Working Group would onlyThe Working Group would onlyThe Working Group would onlyThe Working Group would onlyThe Working Group would onlysuggest that Members consider some form of expeditedsuggest that Members consider some form of expeditedsuggest that Members consider some form of expeditedsuggest that Members consider some form of expeditedsuggest that Members consider some form of expeditedconsultation period for existing long-running disputes, orconsultation period for existing long-running disputes, orconsultation period for existing long-running disputes, orconsultation period for existing long-running disputes, orconsultation period for existing long-running disputes, orfor cases where the issue of violation is clear but the primaryfor cases where the issue of violation is clear but the primaryfor cases where the issue of violation is clear but the primaryfor cases where the issue of violation is clear but the primaryfor cases where the issue of violation is clear but the primaryquestion relates to appropriate remedies.question relates to appropriate remedies.question relates to appropriate remedies.question relates to appropriate remedies.question relates to appropriate remedies.

Timeliness of remedyTimeliness of remedyTimeliness of remedyTimeliness of remedyTimeliness of remedy

The Working Group is concerned that there may be anincreasing likelihood of delay in the implementation ofdecisions. This can be due either to the perceived waningof political support for the WTO in some quarters, or theincreasing requirement in some Members of approval bythe legislature in order to bring a measure into compliance.....Our main suggestion in this regard is - as stated above - toOur main suggestion in this regard is - as stated above - toOur main suggestion in this regard is - as stated above - toOur main suggestion in this regard is - as stated above - toOur main suggestion in this regard is - as stated above - toincrease the ‘embarrassment’ factor of non-compliance, byincrease the ‘embarrassment’ factor of non-compliance, byincrease the ‘embarrassment’ factor of non-compliance, byincrease the ‘embarrassment’ factor of non-compliance, byincrease the ‘embarrassment’ factor of non-compliance, byrequiring the DSB to issue public statements detailing thoserequiring the DSB to issue public statements detailing thoserequiring the DSB to issue public statements detailing thoserequiring the DSB to issue public statements detailing thoserequiring the DSB to issue public statements detailing thosesituations where implementation is overdue.situations where implementation is overdue.situations where implementation is overdue.situations where implementation is overdue.situations where implementation is overdue.

At the same time, however, the Working Group isconcerned that the 20-day period (following expiry of the‘reasonable period’ for implementation) allowed for theparties to agree on compensation is too short. While theviolation and the amount of ‘injury’ may well be clear bythis time, and while the parties may have already been indetailed discussions concerning what kind of compensationmight be appropriate if compliance is not possible, webelieve that the brevity of this negotiating period inparticular may impede the prospect of negotiation.

Introduction of an Advocate General or SpecialIntroduction of an Advocate General or SpecialIntroduction of an Advocate General or SpecialIntroduction of an Advocate General or SpecialIntroduction of an Advocate General or Special‘Prosecutor’?‘Prosecutor’?‘Prosecutor’?‘Prosecutor’?‘Prosecutor’?

Some witnesses have proposed that an Advocate Generalor other such prosecutor should be introduced into thedispute settlement process to initiate proceedings againstviolations, in general, and in particular when affectedMembers are reticent or unable to bring a complaint. TheWorking Group appreciates the benefits that such an officemight bring, but believes that it is not necessary. Disputesettlement should only be initiated where there is a clearlyidentifiable economic interest at stake. As things stand it isat present possible for cases to be brought without evidenceof injury, or without a strong and well-defined businessinterest. Expanding the scope of dispute settlement stillExpanding the scope of dispute settlement stillExpanding the scope of dispute settlement stillExpanding the scope of dispute settlement stillExpanding the scope of dispute settlement stillfurther to catch all violations is not necessary. Similarly,further to catch all violations is not necessary. Similarly,further to catch all violations is not necessary. Similarly,further to catch all violations is not necessary. Similarly,further to catch all violations is not necessary. Similarly,creating a position of an official advocate to speak forcreating a position of an official advocate to speak forcreating a position of an official advocate to speak forcreating a position of an official advocate to speak forcreating a position of an official advocate to speak forMembers who are unable or unwilling to develop theMembers who are unable or unwilling to develop theMembers who are unable or unwilling to develop theMembers who are unable or unwilling to develop theMembers who are unable or unwilling to develop theexpertise necessary to litigate is not advisable. expertise necessary to litigate is not advisable. expertise necessary to litigate is not advisable. expertise necessary to litigate is not advisable. expertise necessary to litigate is not advisable. It wouldcertainly not help them to become more familiar with thecommitments and the dispute settlement proceduresthemselves, which is necessary for them to benefit fully frommembership.

GATS - A special case?


A number of witnesses gave evidence about the DSU’sstate of preparedness for disputes under the GATS. Thegeneral consensus was that it was too early to tell, bothbecause WTO Members have so far given relatively fewGATS commitments and because there has only been onedispute (still pending) centrally related to internationallytraded services. Some witnesses raised the generalquestion whether a dispute settlement system originallydeveloped in the GATT for disputes over trade in goodscould readily be transposed to the very different field ofservices. Many others referred to the nature of the GATS(as both a trade agreement and an investment agreement)and the consequent role of domestic regulation indetermining market access for services, which were farmore subject to regulation deep within a Member’s borders,rather than to the frontier barriers classically affecting flowsof goods. It was recognised that all these issues mightintensify as services took an increasing share of world trade.

Disputes over services were commonly thought to bepotentially complex as many services have public policysignificance and so are supervised by national regulatoryauthorities. Some witnesses were concerned that the DSUwould have to embrace cases that were effectively aboutthe operation of regulations which could be seen as bothtrade-distorting barriers yet also perfectly valid examplesof national regulation (standards of service delivery forinstance, or rules on qualifications or financial standing ofservice suppliers). Faced with such two equally compellingconcerns - market access and aspects of the public interest– might panels and the Appellate Body face awkwardand controversial choices between favouring the mostmarket-opening solutions, on the one hand, and ‘creative’and possibly intrusive interpretations of the relevantregulatory interest, on the other? Witnesses also thoughtthat market access for services (including the different‘modes’) might raise quite different sensitivities from thoserelating to goods. For instance, a services provider whohas incurred the sunk costs of an investment in commercialpresence (GATS Mode 3) may be particularly reluctant toencourage its home government towards a dispute with itshost country, despite discriminatory treatment.

We discussed with some witnesses whether servicesdisputes could encounter unexpected difficulty with typesof measure different from those affecting goods. Inparticular, market access for services might be restrictedby ‘episodic’ administrative decisions (such as refusal of alicence) rather than by a continuing administrative ‘courseof conduct’ of the kind often bearing on goods (such as adiscriminatory customs regime). Some witnessesconsidered it difficult, if not impossible, for the DSU torespond to ‘episodic’ decisions or to the cumulativelyadverse effects of discretionary regulation. Conversely,others were concerned that the DSU could emerge as theforum of choice for challenging individual administrative


acts, leading to greater scrutiny of Members’ regulatorydecisions and a worsening burden on the DSU system itself.Witnesses also pointed to the problem of putting a valueon a denial of access in services cases because servicesflows were hard to measure and might operate throughvarious GATS modes (substitutable, perhaps, for oneanother). A few witnesses hazarded that the DSU maynot therefore be appropriate for such disputes.

There was a common view that services disputes wouldinvolve more technical and sector-specific matters thangoods disputes, so that panel members would need moreexpertise. There was also concern that the vagueness ofmany specific commitments in GATS schedules (which oftendepend on detailed domestic regulatory measures for theirimplementation) must draw panels and the Appellate Bodyinto interpreting Members’ domestic law. In contrast, somewitnesses - particularly from governments - pointed out thatdespite similar fears, panels had proved able to interpretthe SPS Agreement’s provisions without undue difficulty.Many witnesses concluded that despite concerns aboutwhether the DSU could tackle the complexities of services,it would probably succeed, over time, in managing themeffectively.


Although specific commitments on trade in services areindividual to a Member and relatively clear the WorkingGroup thinks that DSU practitioners DSU practitioners DSU practitioners DSU practitioners DSU practitioners should recognise thatshould recognise thatshould recognise thatshould recognise thatshould recognise thatthere is more overall ambiguity in the text of the there is more overall ambiguity in the text of the there is more overall ambiguity in the text of the there is more overall ambiguity in the text of the there is more overall ambiguity in the text of the GATSGATSGATSGATSGATS(including specific commitments, provisions for GATS(including specific commitments, provisions for GATS(including specific commitments, provisions for GATS(including specific commitments, provisions for GATS(including specific commitments, provisions for GATSdisciplines or additional commitments) than in other tradedisciplines or additional commitments) than in other tradedisciplines or additional commitments) than in other tradedisciplines or additional commitments) than in other tradedisciplines or additional commitments) than in other tradelaw commitmentslaw commitmentslaw commitmentslaw commitmentslaw commitments. We appreciate that panels have beenable to interpret ambiguous provisions and make difficultdecisions. However, the various ‘services’ agreementscontain provisions that are not always clear as to the degreeof freedom to be accorded to national agencies (forfinancial services, the ‘Prudential Carve-out’ provides alarge, but ultimately undefined, degree of freedom in thearea of prudential regulation). In such circumstances, apanel’s task will not be easy. But where panels are satisfiedthat a disputed matter falls clearly in the area whereMembers evidently intended to leave a degree of freedomto national agencies, the panels should defer to suchagencies.

Nonetheless, we remain concerned about the taskfacing panels, and the fact that, in services cases, paneldecisions will bear directly on both domestic regulationand on the commercial strategies of business enterprisesthemselves, in entering markets or building market share,as opposed to having a more limited and conventionalimpact on their product flows. The dispute settlement systemneeds to avoid becoming further burdened with interpretingtoo much ambiguity in controversial areas. Thus, whilewhilewhilewhilewhileaccepting the interpretative role inherent in the disputeaccepting the interpretative role inherent in the disputeaccepting the interpretative role inherent in the disputeaccepting the interpretative role inherent in the disputeaccepting the interpretative role inherent in the disputesettlement process, we think that further clarification bysettlement process, we think that further clarification bysettlement process, we think that further clarification bysettlement process, we think that further clarification bysettlement process, we think that further clarification byMembers of Members of Members of Members of Members of GATSGATSGATSGATSGATS commitments would be desirable. commitments would be desirable. commitments would be desirable. commitments would be desirable. commitments would be desirable.Clarification might also extend to such questions as whetherClarification might also extend to such questions as whetherClarification might also extend to such questions as whetherClarification might also extend to such questions as whetherClarification might also extend to such questions as whether

administrative regimes for services should normally beadministrative regimes for services should normally beadministrative regimes for services should normally beadministrative regimes for services should normally beadministrative regimes for services should normally beexempt from challenge if they meet internationally agreedexempt from challenge if they meet internationally agreedexempt from challenge if they meet internationally agreedexempt from challenge if they meet internationally agreedexempt from challenge if they meet internationally agreedstandards or principles.standards or principles.standards or principles.standards or principles.standards or principles.

We also remain concerned about how to address‘episodic’ administrative decisions or discretionarylegislation that can adversely affect trade in a service,whether or not implying a violation or nullification orimpairment more generally. This services-related problemis likely to become more acute with time. It raises questionsthat cannot be tackled until their key features are moreclearly identifiable. At that point, when there is sufficientwhen there is sufficientwhen there is sufficientwhen there is sufficientwhen there is sufficientexperience of services disputes, governments may need toexperience of services disputes, governments may need toexperience of services disputes, governments may need toexperience of services disputes, governments may need toexperience of services disputes, governments may need toreach considered decisions as to how far the reach considered decisions as to how far the reach considered decisions as to how far the reach considered decisions as to how far the reach considered decisions as to how far the DSU DSU DSU DSU DSU is theis theis theis theis thebest vehicle for such disputes and how far they might preferbest vehicle for such disputes and how far they might preferbest vehicle for such disputes and how far they might preferbest vehicle for such disputes and how far they might preferbest vehicle for such disputes and how far they might preferto reach bilateral or plurilateral understandings aboutto reach bilateral or plurilateral understandings aboutto reach bilateral or plurilateral understandings aboutto reach bilateral or plurilateral understandings aboutto reach bilateral or plurilateral understandings aboutparticular problems such as standards for the justiciabilityparticular problems such as standards for the justiciabilityparticular problems such as standards for the justiciabilityparticular problems such as standards for the justiciabilityparticular problems such as standards for the justiciabilityor appealability of administrative decisions affectingor appealability of administrative decisions affectingor appealability of administrative decisions affectingor appealability of administrative decisions affectingor appealability of administrative decisions affectingservices.services.services.services.services.

Given that disputes can involve both goods and services(some already have) there needs to be some commonalityof skills in the qualifications required for panellists.Nonetheless, there is a need to build more servicesexpertise within the dispute settlement process. SpecialistsSpecialistsSpecialistsSpecialistsSpecialistsin services trade, experts on particular services sectors, andin services trade, experts on particular services sectors, andin services trade, experts on particular services sectors, andin services trade, experts on particular services sectors, andin services trade, experts on particular services sectors, andthose directly familiar with the application of domesticthose directly familiar with the application of domesticthose directly familiar with the application of domesticthose directly familiar with the application of domesticthose directly familiar with the application of domesticregulation should be recruited as panellists.regulation should be recruited as panellists.regulation should be recruited as panellists.regulation should be recruited as panellists.regulation should be recruited as panellists.


IMPROVING THE EFFICIENCY OF THE

PROCESS

Interpreting Issues - Role of thepanels and the Appellate Body


A number of witnesses agreed that one of the key issuesassociated with the efficiency of the review process wasensuring that panels comprised Members with an adequatelevel of expertise. The majority felt that panel membersshould have more experience in administering tradepolicies and domestic regulation. As they would thus beaware of the constraints within national legislativeprocesses, such experience may help to ensure that theirdecisions and recommendations are more likely to beimplemented. Other witnesses disagreed about the degreeof ‘domestic regulatory’ experience that was needed. Theyfelt that panellists should have an integrated understandingof cross-cutting policy issues, especially in the area ofservices which impact on a variety of policy concerns.

The Working Group also heard arguments about theneed for full-time professional panellists. Many witnessescommented that the existing system of ad hoc panellistswas unpredictable and that having full-time members mayincrease the likelihood of panels considering precedentduring their deliberations and could speed up proceedingsby eliminating much of the ‘gaming’ that often goes on atthe stage of panellist-selection.

The Working Group also heard testimony about howpanellists are selected. The main concern amongstwitnesses was that it was imperative that panellists be ofsufficient calibre but that this was made difficult by countriescontinuing to make demands about the nationality ofpanellists. The majority of witnesses argued that thisproblem would never go away, as countries would alwaystry and select panel members who might be moresympathetic to their case. Some witnesses suggested thisproblem could be resolved by agreeing that the DirectorGeneral and/or Chairman of the DSB should appointpanellists, perhaps with some consultation with the partnersin the case of major objections.


To date, there are strong differences of opinion about thequality and sufficiency of the reasoning of panels and theAppellate Body, with academics and government officialsgenerally being satisfied, and trade lawyers generallybeing dissatisfied. We are concerned about the clarity ofsome of the reasoning that is used in reports, and that thereis a perception, however unfair it may be, that much of itreflects the views of over-worked and quite junior Secretariatstaffers, or of WTO panellists or members of the AppellateBody believing (privately) that they have a ‘market access’agenda, rather than a truly interpretive function. We do

not endorse this perception, but note that it exists. Whiletextual interpretation is an appropriate form of reasoningfor a panel or Appellate Body charged with interpretingthe rights and obligations of Members, more should bedone by the adjudicators to explain the rationale for thefindings themselves.

The Working Group is of the opinion that making panelsThe Working Group is of the opinion that making panelsThe Working Group is of the opinion that making panelsThe Working Group is of the opinion that making panelsThe Working Group is of the opinion that making panelsprofessional would increase the robustness and quality ofprofessional would increase the robustness and quality ofprofessional would increase the robustness and quality ofprofessional would increase the robustness and quality ofprofessional would increase the robustness and quality ofdecisions; would be likely to add to the creation of a bodydecisions; would be likely to add to the creation of a bodydecisions; would be likely to add to the creation of a bodydecisions; would be likely to add to the creation of a bodydecisions; would be likely to add to the creation of a bodyof true precedent; and would reduce any undue influenceof true precedent; and would reduce any undue influenceof true precedent; and would reduce any undue influenceof true precedent; and would reduce any undue influenceof true precedent; and would reduce any undue influenceon the part of Secretariat officials on the part of Secretariat officials on the part of Secretariat officials on the part of Secretariat officials on the part of Secretariat officials whose role should be asupporting one. While appreciating the reasoning behindWhile appreciating the reasoning behindWhile appreciating the reasoning behindWhile appreciating the reasoning behindWhile appreciating the reasoning behindthe requirement that panellists not be from one of the parties,the requirement that panellists not be from one of the parties,the requirement that panellists not be from one of the parties,the requirement that panellists not be from one of the parties,the requirement that panellists not be from one of the parties,the Working Group is of the opinion that this requirementthe Working Group is of the opinion that this requirementthe Working Group is of the opinion that this requirementthe Working Group is of the opinion that this requirementthe Working Group is of the opinion that this requirementshould be abolished. should be abolished. should be abolished. should be abolished. should be abolished. There are too many potential harmscaused by the neutrality requirement, both in terms of delaydue to attempted ‘gaming’ and the reduced expertise dueto the limited roster of panellists from which to choose.Panellists should be appointed full-time for a fixed term,Panellists should be appointed full-time for a fixed term,Panellists should be appointed full-time for a fixed term,Panellists should be appointed full-time for a fixed term,Panellists should be appointed full-time for a fixed term,and be drawn from a longer list of experts proficient inand be drawn from a longer list of experts proficient inand be drawn from a longer list of experts proficient inand be drawn from a longer list of experts proficient inand be drawn from a longer list of experts proficient invarious aspects of WTO law and dispute settlementvarious aspects of WTO law and dispute settlementvarious aspects of WTO law and dispute settlementvarious aspects of WTO law and dispute settlementvarious aspects of WTO law and dispute settlementprocedure. The Working Group agrees that it would beprocedure. The Working Group agrees that it would beprocedure. The Working Group agrees that it would beprocedure. The Working Group agrees that it would beprocedure. The Working Group agrees that it would behelpful (although does not go so far as to make this ahelpful (although does not go so far as to make this ahelpful (although does not go so far as to make this ahelpful (although does not go so far as to make this ahelpful (although does not go so far as to make this anecessary requirement) if panellists - as well as Membersnecessary requirement) if panellists - as well as Membersnecessary requirement) if panellists - as well as Membersnecessary requirement) if panellists - as well as Membersnecessary requirement) if panellists - as well as Membersof the Appellate Body - have had some form of governmentof the Appellate Body - have had some form of governmentof the Appellate Body - have had some form of governmentof the Appellate Body - have had some form of governmentof the Appellate Body - have had some form of governmentexperience. experience. experience. experience. experience. This would enable them to appreciate andadvise on issues of implementation, may help them betterto resolve areas where they should or should not defer tothe decision of a national authority, and may lead todecisions that Members will find to be more acceptable.That said, as permanent and full-time professional panelliststhey should no longer be allied with any particulargovernment.

With respect to the role of members of the AppellateWith respect to the role of members of the AppellateWith respect to the role of members of the AppellateWith respect to the role of members of the AppellateWith respect to the role of members of the AppellateBody, the Working Group recommends that they beBody, the Working Group recommends that they beBody, the Working Group recommends that they beBody, the Working Group recommends that they beBody, the Working Group recommends that they beappointed on a full-time basis, and that they be paid moreappointed on a full-time basis, and that they be paid moreappointed on a full-time basis, and that they be paid moreappointed on a full-time basis, and that they be paid moreappointed on a full-time basis, and that they be paid morein compensation for giving up their other obligations. in compensation for giving up their other obligations. in compensation for giving up their other obligations. in compensation for giving up their other obligations. in compensation for giving up their other obligations. Thiswould further guarantee that panellists with the necessaryexpertise continue to be available.

The Working Group also urges Members to considerthe possible benefits of implementing a process wherebya request could be made to panellists to evaluate theconsistency with WTO commitments of measures that aMember proposes to enact.

Deference to the decisions ofMembers’ authorities


The Working Group heard testimony on the question ofwhether the DSU should defer to national authorities. Thegeneral consensus was that it was difficult for Members toagree on a common position on this issue, because theywould most likely prefer a deferential stance when theyare respondents and a less deferential stance when theyare complainants. Even if some Members are more usually


one rather than the other, it was thought unlikely that eventhey could agree either way on the issue. Thus an objectiverule would appear to be necessary. On a similar topic theWorking Group also heard some testimony in favour ofthe United States introducing a panel of U.S judges to reporton the acceptability of panel findings and their potentialeffect on United States’ trade laws. Proponents of theseso-called ‘Dole Commissions’ felt that having such a reviewwould add to the credibility of the WTO decisions, at leastin the U.S. Most witnesses, however, considered suchbodies to be unnecessary and more likely to weaken thecredibility of the DSU still further.


On deference, the Working Group recognises that this is asensitive issue, with strong arguments on either side. Overall,the Working Group recommends that there be a greaterthe Working Group recommends that there be a greaterthe Working Group recommends that there be a greaterthe Working Group recommends that there be a greaterthe Working Group recommends that there be a greateracceptance, across the range of the WTO agreements, ofacceptance, across the range of the WTO agreements, ofacceptance, across the range of the WTO agreements, ofacceptance, across the range of the WTO agreements, ofacceptance, across the range of the WTO agreements, ofthe propriety of a dispute settlement panel or the Appellatethe propriety of a dispute settlement panel or the Appellatethe propriety of a dispute settlement panel or the Appellatethe propriety of a dispute settlement panel or the Appellatethe propriety of a dispute settlement panel or the AppellateBody deferring to the decisions of a national authority, whereBody deferring to the decisions of a national authority, whereBody deferring to the decisions of a national authority, whereBody deferring to the decisions of a national authority, whereBody deferring to the decisions of a national authority, wherethe subject in issue involves a factual assessment or where itthe subject in issue involves a factual assessment or where itthe subject in issue involves a factual assessment or where itthe subject in issue involves a factual assessment or where itthe subject in issue involves a factual assessment or where itis clear that freedom has been left for interpretation by theis clear that freedom has been left for interpretation by theis clear that freedom has been left for interpretation by theis clear that freedom has been left for interpretation by theis clear that freedom has been left for interpretation by theMember. Member. Member. Member. Member. As such, in their assessments of the facts of a matter,panels should determine whether the national authorities’establishment of the facts was proper and whether theauthorities evaluation of those facts was unbiased andobjective. If that is the case, then even where the panelmight have reached a different conclusion, it should notoverturn the decision of the national authority. We are alsoagreed that panels and Members of the Appellate Bodyshould not undertake a de novo review of economicassessments made by Member authorities but can reviewwhether the national authority made an objectivedetermination of the facts.

Furthermore, we agree that panels should interpret theWTO Agreements in accordance with customary rules ofinterpretation of public international law. Where a panelfinds that a provision of an agreement admits of more thanone permissible interpretation, it should find that the nationalauthorities’ measure is in conformity with the agreement inquestion, so long as it rests upon one of those permissibleinterpretations.

Where the agreements contain the kind of ambiguitythat can be resolved through legal interpretation, then it isonly appropriate for the dispute settlement panels and theAppellate Body to try to clarify that ambiguity.

The Working Group rejects the proposal that individualThe Working Group rejects the proposal that individualThe Working Group rejects the proposal that individualThe Working Group rejects the proposal that individualThe Working Group rejects the proposal that individualMembers create ‘Dole Commissions’. Members create ‘Dole Commissions’. Members create ‘Dole Commissions’. Members create ‘Dole Commissions’. Members create ‘Dole Commissions’. These wouldfundamentally undermine the multilaterally agreed systemof dispute settlement. We thus reject proposals for anydomestic courts to review the propriety of WTO disputesettlement decisions. While such bodies may add to thedomestic acceptability of WTO decision-making in somecountries (and even this is doubtful), the systemic problemsthat arise from multiple national bodies reviewing thereasoning of dispute settlement decisions far outweigh anypossible benefits.

What role for the GeneralCouncil?


The Working Group is convinced that there is a need toThe Working Group is convinced that there is a need toThe Working Group is convinced that there is a need toThe Working Group is convinced that there is a need toThe Working Group is convinced that there is a need toimprove the quality and detail of commitments generally,improve the quality and detail of commitments generally,improve the quality and detail of commitments generally,improve the quality and detail of commitments generally,improve the quality and detail of commitments generally,so as not to over-burden the dispute settlement system. so as not to over-burden the dispute settlement system. so as not to over-burden the dispute settlement system. so as not to over-burden the dispute settlement system. so as not to over-burden the dispute settlement system. Atpresent, there does not appear to be any effective way ofclarifying commitments between Rounds, other than throughdispute settlement. At the same time, panels and theAppellate Body need to be very careful to ensure that theyare not seen to be over-reaching when they make suchinterpretations. Simply repeating, like a mantra, that thedecisions are not intended to add or take away from thecommitments themselves is not enough. Allegations thathave been made about undue law-making by the panelsand the Appellate Body reveal the clear need for someform of increased multilateral rule-making and/orclarification.

The Working Group encourages the increased use ofThe Working Group encourages the increased use ofThe Working Group encourages the increased use ofThe Working Group encourages the increased use ofThe Working Group encourages the increased use ofArticle IXArticle IXArticle IXArticle IXArticle IX of the Agreement establishing the WTO of the Agreement establishing the WTO of the Agreement establishing the WTO of the Agreement establishing the WTO of the Agreement establishing the WTO with with with with withrespect to further interpretation of the Agreements. respect to further interpretation of the Agreements. respect to further interpretation of the Agreements. respect to further interpretation of the Agreements. respect to further interpretation of the Agreements. It alsorecommends however that any increased clarification thatany increased clarification thatany increased clarification thatany increased clarification thatany increased clarification thatis required should not be implemented through an ongoingis required should not be implemented through an ongoingis required should not be implemented through an ongoingis required should not be implemented through an ongoingis required should not be implemented through an ongoingprocess of ‘interpretative committees’ operating betweenprocess of ‘interpretative committees’ operating betweenprocess of ‘interpretative committees’ operating betweenprocess of ‘interpretative committees’ operating betweenprocess of ‘interpretative committees’ operating betweenRounds to clarify existing WTO obligations with bindingRounds to clarify existing WTO obligations with bindingRounds to clarify existing WTO obligations with bindingRounds to clarify existing WTO obligations with bindingRounds to clarify existing WTO obligations with bindingrecommendations. recommendations. recommendations. recommendations. recommendations. This is unlikely to be fruitful, given thenature of the multilateral process to date, the natural needof a sense of urgency (that a Round provides) in order toagree text, and the frequent need to balance various interestsagainst one another. A role for the membership, pursuantto Article IX, is more appropriate. That said, we see value inwe see value inwe see value inwe see value inwe see value inexisting Working Parties on various subjects related to theexisting Working Parties on various subjects related to theexisting Working Parties on various subjects related to theexisting Working Parties on various subjects related to theexisting Working Parties on various subjects related to thevarious agreements being tasked with producing non-bindingvarious agreements being tasked with producing non-bindingvarious agreements being tasked with producing non-bindingvarious agreements being tasked with producing non-bindingvarious agreements being tasked with producing non-bindinginterpretive guidelines so as to clarify the meaning of variousinterpretive guidelines so as to clarify the meaning of variousinterpretive guidelines so as to clarify the meaning of variousinterpretive guidelines so as to clarify the meaning of variousinterpretive guidelines so as to clarify the meaning of variousambiguities, which Members, panels and Aambiguities, which Members, panels and Aambiguities, which Members, panels and Aambiguities, which Members, panels and Aambiguities, which Members, panels and Appellate Bodyppellate Bodyppellate Bodyppellate Bodyppellate Bodymmmmmembers can apply or ignore. embers can apply or ignore. embers can apply or ignore. embers can apply or ignore. embers can apply or ignore. Such non-binding guidancemight at least help to find a balance between the need forinterpretation on the one hand and the alleged problems ofpanellists and Appellate Body members over-stepping theirinterpretive mandate, on the other. (If these suggestionsabove are not feasible, then there is even more need tointroduce professional panel members as discussed above.)

With respect to problems that may arise relating to theWith respect to problems that may arise relating to theWith respect to problems that may arise relating to theWith respect to problems that may arise relating to theWith respect to problems that may arise relating to theoperation of the operation of the operation of the operation of the operation of the DSUDSUDSUDSUDSU itself, we recommend the formation itself, we recommend the formation itself, we recommend the formation itself, we recommend the formation itself, we recommend the formationof a permanent Independent Advisory Committee, madeof a permanent Independent Advisory Committee, madeof a permanent Independent Advisory Committee, madeof a permanent Independent Advisory Committee, madeof a permanent Independent Advisory Committee, madeup of Secretariat officials, academics and other expertsup of Secretariat officials, academics and other expertsup of Secretariat officials, academics and other expertsup of Secretariat officials, academics and other expertsup of Secretariat officials, academics and other expertswho can recommend to Members various improvementswho can recommend to Members various improvementswho can recommend to Members various improvementswho can recommend to Members various improvementswho can recommend to Members various improvementsto the to the to the to the to the DSUDSUDSUDSUDSU. . . . . This Committee could function independent ofany Round, as improvements in adjudicative procedure canand should be made independently of negotiations on otherissues in any event. Members would adopt the amendmentsthemselves under the procedures currently available.


Non liquet and the potential forremand


The Working Group is of the view that the panels and theThe Working Group is of the view that the panels and theThe Working Group is of the view that the panels and theThe Working Group is of the view that the panels and theThe Working Group is of the view that the panels and theAppellate Body should not be allowed to claim that theyAppellate Body should not be allowed to claim that theyAppellate Body should not be allowed to claim that theyAppellate Body should not be allowed to claim that theyAppellate Body should not be allowed to claim that theycannot come to a decision with respect to a particular issuecannot come to a decision with respect to a particular issuecannot come to a decision with respect to a particular issuecannot come to a decision with respect to a particular issuecannot come to a decision with respect to a particular issuethat is within their competence. In difficult cases, though, itthat is within their competence. In difficult cases, though, itthat is within their competence. In difficult cases, though, itthat is within their competence. In difficult cases, though, itthat is within their competence. In difficult cases, though, itmay be appropriate for a panel to recommend that themay be appropriate for a panel to recommend that themay be appropriate for a panel to recommend that themay be appropriate for a panel to recommend that themay be appropriate for a panel to recommend that theGeneral Council address a certain issue, for example whenGeneral Council address a certain issue, for example whenGeneral Council address a certain issue, for example whenGeneral Council address a certain issue, for example whenGeneral Council address a certain issue, for example whenthe question at hand is clearly political. the question at hand is clearly political. the question at hand is clearly political. the question at hand is clearly political. the question at hand is clearly political. This is a fairlycommon process in other courts. Sufficient controls need tobe imposed, however, to ensure that the issue does not liethere unaddressed for an unreasonably long period of time.

The Working Group does not recommend that thedispute settlement process introduce a process by whichthe Appellate Body can remand a dispute or issues in it toa panel.

The role of the Director General


Witnesses were split between those who wanted a limitedrole for the Director General and those who supported anenhanced role. The Working Group heard the argumentthat over the past few years the position of Director Generalhad been weakened and that this trend had to be reversedbefore s/he could play a more important role in resolvingdisputes. On a number of occasions witnesses acceptedthat their views were shaped by their perception of thesitting Director General.


The Working Group is of the opinion that while resort tothe offices of the Director General is not a panacea for allproblems that may arise during dispute settlementproceedings, if it can be used to a greater extent, then thisshould be welcomed.

Mediation and arbitration


The majority of witnesses saw arbitration and mediationas important parts of the dispute settlement process.However many accepted that these alternatives were notused as often as they might because on many occasionsMembers not only felt that they had strong cases but theywere also put under pressure by powerful special intereststo go straight to the panel stage. Witnesses also agreedthat it would be difficult to mandate that Membersparticipate in mediation and conciliation as countries hadto be willing participants in the process. That said we alsoheard arguments asserting the fact that the early years ofthe DSU had been characterised by a rush to litigate butthat the current trading environment was characterised bymore high-level diplomacy and mediation.

A number of witnesses raised the point that mediationand arbitration were theoretically an ideal mechanism fordeveloping countries to use because they had limitedcapacity to participate fully in proceedings. However manyclaimed that the political reality of the trading system meantthat during any process developing countries could sufferunwelcome pressure and threats from developed countriesto drop cases brought against them.


The Working Group encourages alternative methods ofThe Working Group encourages alternative methods ofThe Working Group encourages alternative methods ofThe Working Group encourages alternative methods ofThe Working Group encourages alternative methods ofdispute resolution, or activities that can better clarify issuesdispute resolution, or activities that can better clarify issuesdispute resolution, or activities that can better clarify issuesdispute resolution, or activities that can better clarify issuesdispute resolution, or activities that can better clarify issuesfor the dispute settlement process itself, so long as theyfor the dispute settlement process itself, so long as theyfor the dispute settlement process itself, so long as theyfor the dispute settlement process itself, so long as theyfor the dispute settlement process itself, so long as theyaccelerate and do not delay settlement of disputes.accelerate and do not delay settlement of disputes.accelerate and do not delay settlement of disputes.accelerate and do not delay settlement of disputes.accelerate and do not delay settlement of disputes.



A MORE ACCEPTABLE PROCESS

Transparency - Open hearings


Nearly every witness agreed that transparency in thesystem was a key issue that needed resolving. Howevermany accepted that finding a solution to the manyquestions associated with this would be difficult becausethe DSU involves both judicial and diplomatic aspects andthe former encourages transparency whilst the latter doesnot.

Those who were reluctant to open the system to publicscrutiny supported the views of some developing countries.Their main concerns concentrated on the belief that panelswould be pressured to consider issues (such as social andenvironmental concerns) that were not relevant to the legalissues at stake. They were also anxious about thepossibility of panel meetings being disrupted by publicprotests.

Those in favour of increased transparency argued thatthe above arguments were not sufficient to justify keepingmeetings closed and that developing countries’ concernsabout transparency were largely logistical. In responseto the claim that meetings could be disrupted some arguedthat observers could follow cases over closed-circuittelevision and that any disturbances could be met byoffenders being expelled from meetings.

Other witnesses also rejected the argument that the inter-governmental nature of the DSU required that privacy bemaintained, citing the fact that other international courtswere open to the public. They also argued that ifcommercially sensitive information was being discussed itwould be self-evidently reasonable for meetings to go intoclosed session.


We commend the proposals of many Members to openWe commend the proposals of many Members to openWe commend the proposals of many Members to openWe commend the proposals of many Members to openWe commend the proposals of many Members to openWTO hearings to the public. However appropriate limitsWTO hearings to the public. However appropriate limitsWTO hearings to the public. However appropriate limitsWTO hearings to the public. However appropriate limitsWTO hearings to the public. However appropriate limitson access will be necessary to diminish the likelihood ofon access will be necessary to diminish the likelihood ofon access will be necessary to diminish the likelihood ofon access will be necessary to diminish the likelihood ofon access will be necessary to diminish the likelihood ofpppppanel hearings being disrupted. anel hearings being disrupted. anel hearings being disrupted. anel hearings being disrupted. anel hearings being disrupted. Other likely reasonablerestrictions should also apply (e.g. for reason of resourceconstraints, concern to protect confidential information orfor security reasons). With open hearings, though, we noteWith open hearings, though, we noteWith open hearings, though, we noteWith open hearings, though, we noteWith open hearings, though, we notethat there will be greater need for the Panel Chair to bethat there will be greater need for the Panel Chair to bethat there will be greater need for the Panel Chair to bethat there will be greater need for the Panel Chair to bethat there will be greater need for the Panel Chair to bewell schooled in dispute settlement procedure. well schooled in dispute settlement procedure. well schooled in dispute settlement procedure. well schooled in dispute settlement procedure. well schooled in dispute settlement procedure. We alsobelieve that fears that open hearings may themselves reducethe possibility of a settlement are exaggerated; in any judicialenvironment, what deals that are struck are done so inchambers or corridors rather than the courtroom. There isThere isThere isThere isThere isno reason to believe that opening proceedings to the publicno reason to believe that opening proceedings to the publicno reason to believe that opening proceedings to the publicno reason to believe that opening proceedings to the publicno reason to believe that opening proceedings to the publicwill diminish the opportunities for such an ‘out-of-court’will diminish the opportunities for such an ‘out-of-court’will diminish the opportunities for such an ‘out-of-court’will diminish the opportunities for such an ‘out-of-court’will diminish the opportunities for such an ‘out-of-court’settlement. We also recommend that all submissions thatsettlement. We also recommend that all submissions thatsettlement. We also recommend that all submissions thatsettlement. We also recommend that all submissions thatsettlement. We also recommend that all submissions thatare made to the panels and Appellate Body be releasedare made to the panels and Appellate Body be releasedare made to the panels and Appellate Body be releasedare made to the panels and Appellate Body be releasedare made to the panels and Appellate Body be releasedon the WTO website without undue delay.on the WTO website without undue delay.on the WTO website without undue delay.on the WTO website without undue delay.on the WTO website without undue delay.

Civil Society participation and thesubmission of amicus curiae briefs


The majority of witnesses felt that this issue was the mostcontroversial question currently being considered in the talkson the reform of the DSU and that it had the potential todevelop into a major argument between developed anddeveloping countries. The various arguments cited bywitnesses concentrated on three main questions. ShouldNGOs have the opportunity to submit amicus curiae briefs?If so, what selection and filtering procedures should exist tomanage submissions? What ef fect would NGOparticipation have on developing countries and the burdenfelt by the system as a whole?

Views on the first question were split between those whoargued that NGOs should make their submissions directly toand through their national governments and those who feltthat NGOs had a role to play in dispute settlement as manycould present views reflecting the broader public interest.The strongest arguments against submission of amicus curiaebriefs came from or on behalf of developing countries thatwere concerned that the majority of NGOs who were ableto contribute submissions were located in the ‘north’ andtherefore espoused developed country public concernsassociated with environmental protection, labour rights andanimal welfare. This led to concerns that these issues wouldbe discussed in panels and more generally in the WTO, whichmany witnesses thought would ultimately damage the interestsof developing countries.

We also heard arguments that there was considerablepotential for the system to be flooded by NGO submissionsthus overwhelming the already limited administrativecapacity of developing countries. There was also concernthat allowing amicus curiae briefs to be submitted directlyto panels would lead some governments to ignore theirresponsibilities to civil society. Others also questioned therationale of allowing self-appointed bodies to participatein an intergovernmental system.

On the other hand there were also arguments in favourof allowing NGO submissions. These included the assertionthat many ‘northern’ NGOs do not promote developedcountry public interest viewpoints but addressed broaderpublic interest issues of concern to the whole world. Inparticular, it was argued that some NGOs operating on aglobal basis were exclusively concerned with the globalissues that were sometimes neglected by nationalgovernments but still worthy of consideration by panels.

When questioned about the potential for overwhelmingthe system with submissions a number of witnesses arguedthat it was unlikely that a large number of briefs would besubmitted at any one time. Even then, many witnesses argued,any additional burden would be an acceptable price to pay,as such submissions would enhance the credibility of thesystem.


Finally, between these two polarised sets of views therewas a group of witnesses who appreciated both sides ofthe argument. They concluded that amicus curiae had apositive role to play but only in limited circumstances. Asa result they supported both a filtering process forsubmissions and a continuation of the Appellate Body’spractice of accepting specific submissions that onlyconcentrated on legal issues. Some suggested that thefiltering process should only allow submissions from NGOswho operated at the global level.


It is the view of the Working Group that NGOs of whateverIt is the view of the Working Group that NGOs of whateverIt is the view of the Working Group that NGOs of whateverIt is the view of the Working Group that NGOs of whateverIt is the view of the Working Group that NGOs of whatevernature should not have standing as a party or third partynature should not have standing as a party or third partynature should not have standing as a party or third partynature should not have standing as a party or third partynature should not have standing as a party or third partyin dispute settlement themselvesin dispute settlement themselvesin dispute settlement themselvesin dispute settlement themselvesin dispute settlement themselves. After all the rights andobligations under the WTO agreements accrue to theMembers alone and for this reason the disputes shouldremain between Members. This does not preclude NGOparticipation in the process, however.

We believe that national civil society organisationsWe believe that national civil society organisationsWe believe that national civil society organisationsWe believe that national civil society organisationsWe believe that national civil society organisationsshould be able to feed their comments into disputeshould be able to feed their comments into disputeshould be able to feed their comments into disputeshould be able to feed their comments into disputeshould be able to feed their comments into disputesettlement proceedings through their relevant Member.settlement proceedings through their relevant Member.settlement proceedings through their relevant Member.settlement proceedings through their relevant Member.settlement proceedings through their relevant Member.They should not participate in the WTO dispute settlementThey should not participate in the WTO dispute settlementThey should not participate in the WTO dispute settlementThey should not participate in the WTO dispute settlementThey should not participate in the WTO dispute settlementproceedings directly, unless expressly requested by theproceedings directly, unless expressly requested by theproceedings directly, unless expressly requested by theproceedings directly, unless expressly requested by theproceedings directly, unless expressly requested by thepanel or Appellate Body.panel or Appellate Body.panel or Appellate Body.panel or Appellate Body.panel or Appellate Body.

However, we recognise that many issues related to theinterpretation and application of WTO commitments willimpact on important non-trade issues. As such, it isbeneficial for panellists, Appellate Body members andMembers themselves to appreciate the wider implicationsof their decisions and measures. This is particularly thecase if submissions from non-Members may cast fresh lighton the issues. For this reason, we do not oppose theFor this reason, we do not oppose theFor this reason, we do not oppose theFor this reason, we do not oppose theFor this reason, we do not oppose thedecisions so far taken by the Appellate Body setting outdecisions so far taken by the Appellate Body setting outdecisions so far taken by the Appellate Body setting outdecisions so far taken by the Appellate Body setting outdecisions so far taken by the Appellate Body setting outcriteria with respect to the submission of criteria with respect to the submission of criteria with respect to the submission of criteria with respect to the submission of criteria with respect to the submission of amicus curiaeamicus curiaeamicus curiaeamicus curiaeamicus curiaebriefs.briefs.briefs.briefs.briefs.

We believe that it is appropriate for the ‘judicial’ systemto set down the guidelines for the acceptance ofsubmissions. However while ‘the court’ is likely the mostappropriate body to determine what it will hear, it shouldnot be seen to be drafting or amending its own proceduresexcessively.

The guidelines on amicus curiae briefs are generallysatisfactory. Our main concern is that the pleadings shouldbe accepted only from ‘interested’ third parties. Interestneed not be limited to trade, obviously, but must have aclear relationship to the issues at hand. To allowsubmissions from non-interested parties could jeopardisethe legitimacy of the dispute settlement process and leadto diffuse and abstract judgements. Thus, there should be. Thus, there should be. Thus, there should be. Thus, there should be. Thus, there should bea clear identification of the NGO’s non-national interest ata clear identification of the NGO’s non-national interest ata clear identification of the NGO’s non-national interest ata clear identification of the NGO’s non-national interest ata clear identification of the NGO’s non-national interest atissue i.e. the international public good that it is representingissue i.e. the international public good that it is representingissue i.e. the international public good that it is representingissue i.e. the international public good that it is representingissue i.e. the international public good that it is representing(environment, etc)(environment, etc)(environment, etc)(environment, etc)(environment, etc)

In addition, due process would suggest that panelsshould explain their decisions to reject or to not considerany brief so submitted.

CONCLUSION

This concludes the Federal Trust’s report. With disputesettlement playing an increasingly important role in themultilateral trading system, and the system itself having todeal with difficult cases that will surely arise, particularlyrelating to trade in services and to the balance betweentrade and other aspects of public policy, the need to ensurethat its mechanisms are more than adequate to the taskwill only increase. The members of the Working Groupthank the many witnesses that gave so generously of theirtime in the consideration of how the DSU is functioning,and how it can be improved to address both the currentproblems and the impending future pressures. We lookforward to discussing our recommendations with expertsand representatives of Members and to contributing to thefurther improvement of this crucial instrument for enforcingworld trade agreements.


ANNEX AA brief description of the DisputeSettlement UnderstandingThe World Trade Organisation’s Dispute Settlement Understanding(DSU) is the mechanism by which WTO Members resolve tradedisputes between themselves, with respect to, inter alia, compliancewith their commitments to open their markets and how foreign goodsand services will be treated once they have ‘crossed the border’.The DSU was introduced in 1995, at the same time that the WTOAgreements succeeded the original General Agreement of Tariffsand Trade (GATT) of 1947. The purpose of the dispute settlementsystem under the WTO agreements is to use clearly defined rulesand timetables to resolve disputes, thus supporting the rules-basedsystem and enhancing the predictability and structure of themultilateral trading system. It does this in particular by ensuring thatMembers comply with their commitments to open their markets, andbring any measures that are inconsistent with those commitments intocompliance. While the settling of disputes is the ultimate responsibilityof the Dispute Settlement Body (DSB), which is comprised of all ofthe Members of the WTO, much of the burden falls on individualpanels of experts and the Members of the Appellate Body.

At the time the DSU was introduced many national representativesand outside observers thought that the ultimate purpose of the systemwas to not make rulings but to resolve disputes quickly and amicablythrough the processes of consultation, mediation and arbitration. Toa large extent, consultations still play a pivotal role in resolving themajority of disputes. However, mediation and arbitration have beenrelied upon to a much lesser extent than anticipated. Even whereconsultations have been requested, a great many disputes still go toa ‘full hearing’ on the merits, with a Dispute Settlement Panel beingformed to analyse and rule on the issues. As well, almost all of thePanel rulings have been appealed to the Appellate Body. Combined,this displays a much greater penchant on the part of Members for‘litigation’ of the issues than had previously been the case under thepanel system of the original GATT regime.

Of course, there are many reasons for Members to prefer to have afull hearing of the issues, not the least of which is the automaticity ofthe DSU’s timetables for resolving disputes, and the fact that thedecisions of the DSB are adopted in accordance with ‘negativeconsensus’ (i.e, they are adopted unless there is a consensus againstadoption). This is the precise opposite of the dispute settlement systemthat was in operation under the original GATT.

The procedures and timetables for resolving a dispute through apanel are set out in detail in the DSU. The first stage involves aperiod of consultation between the parties that can last up to 60days. If consultations fail to bring about an amicable result thecomplainant can request that the DSB establish a panel to considerthe case. The defendant may block this request only once; a panelhas to be established after the DSB meets for a second time toconsider such a request. Once established the selection of panelMembers can take up to 45 days after which they are given up to 6months to consider a case (3 months if a case involves perishablegoods). The procedures for submissions to panels are also set out indetail in the DSU. In sum, they include

Stage 1Stage 1Stage 1Stage 1Stage 1 - Before the first hearing the complainant(s) andrespondent present their respective arguments in writing.

Stage 2Stage 2Stage 2Stage 2Stage 2 - At the first hearing, both sides make their case.

Stage 3Stage 3Stage 3Stage 3Stage 3 - Each side is then given the opportunity to submitwritten rebuttals and also present their oral arguments.

Stage 4Stage 4Stage 4Stage 4Stage 4 - If either side refers to scientific or technical matters

the panel can consult experts or appoint an expert reviewgroup to prepare an advisory report.

Stage 5Stage 5Stage 5Stage 5Stage 5 - The panel submits the descriptive sections of itsreport and gives both sides two weeks to comment.

Stage 6 Stage 6 Stage 6 Stage 6 Stage 6 - The panel submits an interim report containingtheir findings and recommendations. It offers each side oneweek to request a review.

Stage 7 - Stage 7 - Stage 7 - Stage 7 - Stage 7 - Any review requested by a party must not exceedtwo weeks. During this time the panel is able to holdadditional meetings with the parties.

Stage 8 – Stage 8 – Stage 8 – Stage 8 – Stage 8 – A final report is first circulated to the parties andthen to all WTO Members three weeks later. If the Panelconcludes that a measure violates a WTO commitment, orotherwise nullifies or impairs the benefits that other Membersmay reasonably expect to accrue from that commitment, thenthe Panel can recommend how the measure in questionshould be changed to conform with WTO rules.

Stage 9 –Stage 9 –Stage 9 –Stage 9 –Stage 9 – The final report becomes a ruling unless there is aconsensus vote in the DSB rejecting it. At this time bothsides can request an appeal.

Stage 10Stage 10Stage 10Stage 10Stage 10 – Appeals

Appeals are based on points of law such as legalinterpretation. They do not re-examine existing or newevidence. A panel of three experts drawn from apermanent seven-Member Appellate Body hears eachappeal. The appeal can uphold, modify or reverse apanel repor t finding. Appeals normally lastapproximately 60 days with an absolute maximum of90 days.

Incorporating all these stages means that no more thanone year (15 months with an appeal) should have beenspent resolving a dispute. Implementation, of course, cantake much longer.

ImplementationImplementationImplementationImplementationImplementationIf a country has been found to have introduced a measure that doesnot comply with its WTO obligations, then it should quickly bring itsmeasure back into line with WTO rules. This is called compliance.At a DSB meeting that is held within 30 days of a report’s adoption,the respondent Member must state how it intends to comply. If quickcompliance proves to be impractical then the Member is given a‘reasonable amount of time’ to do so. If it fails to act during this timeit has to enter into negotiation with the complainant in order to agreeon a mutually acceptable form of compensation. In many cases thisis tarif f reduction in an industry of particular interest to thecomplainant. This period of negotiation cannot last for more than20 days, after which if no compensation can be agreed upon thecomplaining party can ask the DSB for permission to retaliate byimposing limited trade sanctions. Ideally these sanctions should beimposed in the same sector as the original dispute. However, if thisis impractical or ineffective, sanctions can be imposed in a differentsector covered by the same WTO agreement. If this is also ineffectivethen sanctions can be taken under another agreement. The DSBshould grant this authorisation within 30 days unless there is aconsensus vote against the request. Sanctions should be applied insuch a way as to minimise damage to a sector unrelated to that ofthe original dispute, while also offering the complainant the mosteffective means of recourse.



ANNEX B - LIST OF WITNESSES

The group met with and received verbal testimony from

Roderick AbbottRoderick AbbottRoderick AbbottRoderick AbbottRoderick Abbott then Deputy Director General, DG Trade, European Commission

Timothy AbrahamTimothy AbrahamTimothy AbrahamTimothy AbrahamTimothy Abraham Director, International Trade Policy, UK Department of Trade and Industry

Kerry AllbeuryKerry AllbeuryKerry AllbeuryKerry AllbeuryKerry Allbeury Legal Affairs Officer, World Trade Organisation

Dr. Arthur AppletonDr. Arthur AppletonDr. Arthur AppletonDr. Arthur AppletonDr. Arthur Appleton Attorney at Law, Lalive and Partners, Geneva

Claude BarfieldClaude BarfieldClaude BarfieldClaude BarfieldClaude Barfield Coordinator of Trade Policy, American Enterprise Institute, USA

Paulo BarzottiPaulo BarzottiPaulo BarzottiPaulo BarzottiPaulo Barzotti DG Trade, European Commission

Professor Jacques BourgeoisProfessor Jacques BourgeoisProfessor Jacques BourgeoisProfessor Jacques BourgeoisProfessor Jacques Bourgeois Partner, Akin Gump Strauss Hauer and Field LLP

Daniel BrinzaDaniel BrinzaDaniel BrinzaDaniel BrinzaDaniel Brinza Assistant U.S. Trade Representative, Monitoring and Enforcement, USTR

Professor Claus-Dieter EhlermannProfessor Claus-Dieter EhlermannProfessor Claus-Dieter EhlermannProfessor Claus-Dieter EhlermannProfessor Claus-Dieter Ehlermann Senior Counsel, Wilmer, Cutler and Pickering

Richard CunninghamRichard CunninghamRichard CunninghamRichard CunninghamRichard Cunningham Partner, International Trade, Steptoe & Johnson

Pornchai DanvivathanaPornchai DanvivathanaPornchai DanvivathanaPornchai DanvivathanaPornchai Danvivathana Permanent Mission of Thailand to the World Trade Organisation

Michael DavenportMichael DavenportMichael DavenportMichael DavenportMichael Davenport Consultant, formerly at the Commonwealth Secretariat

Mateo Diego-FernandezMateo Diego-FernandezMateo Diego-FernandezMateo Diego-FernandezMateo Diego-Fernandez Counsellor, Permanent Mission of Mexico to the World Trade Organisation

Shaun DonnellyShaun DonnellyShaun DonnellyShaun DonnellyShaun Donnelly Principal Deputy Assistant Secretary, Bureau of Economic and Business Affairs, Departmentof State, United States

Everett EissenstatEverett EissenstatEverett EissenstatEverett EissenstatEverett Eissenstat Chief Trade Counsel, Committee on Finance, Minority Staff, United States Senate

Phil EvansPhil EvansPhil EvansPhil EvansPhil Evans Senior Policy Adviser, The UK Consumers Association

Simon FarbenbloomSimon FarbenbloomSimon FarbenbloomSimon FarbenbloomSimon Farbenbloom Counsellor, Australian Permanent Mission to the World Trade Organisation

Ignacio Garcia-BerceroIgnacio Garcia-BerceroIgnacio Garcia-BerceroIgnacio Garcia-BerceroIgnacio Garcia-Bercero Head of Unit, Dispute Settlement and Trade Barriers Regulation, DG Trade, EuropeanCommission

John D. GreenwaldJohn D. GreenwaldJohn D. GreenwaldJohn D. GreenwaldJohn D. Greenwald Partner, International Trade Practice, Wilmer, Cutler & Pickering

Gary N. HorlickGary N. HorlickGary N. HorlickGary N. HorlickGary N. Horlick Partner, International Trade Practice, Wilmer, Cutler & Pickering

Valerie HughesValerie HughesValerie HughesValerie HughesValerie Hughes Director, Appellate Body, World Trade Organisation

Professor John JacksonProfessor John JacksonProfessor John JacksonProfessor John JacksonProfessor John Jackson Professor of International Economic Law, Georgetown University Law Center

Guy de JonquièresGuy de JonquièresGuy de JonquièresGuy de JonquièresGuy de Jonquières World Trade Editor, The Financial Times

Pieter Jan KuijperPieter Jan KuijperPieter Jan KuijperPieter Jan KuijperPieter Jan Kuijper Principal Legal Adviser, Legal Services, European Commission

Jeff LangJeff LangJeff LangJeff LangJeff Lang Counsel, International Trade Practice, Wilmer, Cutler & Pickering

Thea LeeThea LeeThea LeeThea LeeThea Lee Assistant Director for International Economics, AFL-CIO, USA

Yayoi MatsudaYayoi MatsudaYayoi MatsudaYayoi MatsudaYayoi Matsuda First Secretary, Permanent Mission of Japan to the International Organisations of Geneva.

Brendan McGivernBrendan McGivernBrendan McGivernBrendan McGivernBrendan McGivern Counsellor, Permanent Mission of Canada, Geneva

Neil McMillanNeil McMillanNeil McMillanNeil McMillanNeil McMillan Deputy UK Permanent Representative to the International Organisations in Geneva

Claudia OrozcoClaudia OrozcoClaudia OrozcoClaudia OrozcoClaudia Orozco Consultant and Co-founder of the Advisory Centre on WTO Law

Ambassador Hugo PaemenAmbassador Hugo PaemenAmbassador Hugo PaemenAmbassador Hugo PaemenAmbassador Hugo Paemen Senior Adviser, Hogan and Hartson LLP

Sheila PageSheila PageSheila PageSheila PageSheila Page Group Coordinator, International Economic Development Group, Overseas DevelopmentInstitute, UK

David PalmeterDavid PalmeterDavid PalmeterDavid PalmeterDavid Palmeter Partner, International Trade Practices, Sidley, Austin, Brown and Wood LLP

Timothy PunkeTimothy PunkeTimothy PunkeTimothy PunkeTimothy Punke Trade Counsel, Committee on Finance, Majority Staff, United States Senate

M. Koteswara RaoM. Koteswara RaoM. Koteswara RaoM. Koteswara RaoM. Koteswara Rao First Secretary (Legal), Permanent Mission of India to the World Trade Organisation.

Frieder RoesslerFrieder RoesslerFrieder RoesslerFrieder RoesslerFrieder Roessler Executive Director, Advisory Centre on WTO Law

Professor Jim RolloProfessor Jim RolloProfessor Jim RolloProfessor Jim RolloProfessor Jim Rollo Co-Director, Sussex European Institute, University of Sussex

Charlotte Seymour-SmithCharlotte Seymour-SmithCharlotte Seymour-SmithCharlotte Seymour-SmithCharlotte Seymour-Smith International Trade Department, UK Department for International Development

Ivan SmythIvan SmythIvan SmythIvan SmythIvan Smyth Legal Adviser, UK Department of Trade and Industry

Rachel ShubRachel ShubRachel ShubRachel ShubRachel Shub Office of the United States Trade Representative, Geneva

Andy StolerAndy StolerAndy StolerAndy StolerAndy Stoler then Deputy Director General, World Trade Organisation

Celso de Tarso PereiraCelso de Tarso PereiraCelso de Tarso PereiraCelso de Tarso PereiraCelso de Tarso Pereira Permanent Mission of Brazil to the World Trade Organisation

Rachel ThompsonRachel ThompsonRachel ThompsonRachel ThompsonRachel Thompson Associate Director, Global Trade Practice, APCO Worldwide



ANNEX CFormal submissions to the DSB talks

The group reviewed position papers from the following countries that were submitted to the formal negotiations ongoing in specialsessions of the Dispute Settlement Body (DSB).

In reverse chronological order

Mexico - 31 October 2002 (WTO document reference TN/DS/W/23)

Japan - 28 October 2002 (TN/DS/W/22)

Jamaica - 20 October 2002 (TN/DS/W/21)

Zambia on behalf of the LDC group - 9 October 2002 (TN/DS/W/17)

India on behalf of Cuba, Honduras, Indonesia, Malaysia, Pakistan - 9 October 2002 (TN/DS/W/19)

India on behalf of Cuba, Honduras, India, Malaysia, Pakistan, Sri Lanka, Tanzania and Zimbabwe - 7 October 2002 (TN/DS/W/18)

Paraguay - 25 September 2002 (TN/DS/W/16)

United States - 22 August 2002 (TN/DS/W/13)

Republic of Korea - 11 July 2002 (TN/DS/W/11)

Australia - 8 July 2002 (TN/DS/W/8)

Equador - 8 July 2002 (TN/DS/W/9)

Philippines and Thailand - 21 March 2002 (TN/DS/W/3)

Thailand - 20 March 2002 (TN/DS/W/2)

European Union - 3 March 2002 (TN/DS/W/1)


The Federal Trust is a London based, independent think tank committed to enlighteningthe debate on good governance. It is registered as a charity for purposes of educationand research. It acts as a forum that explores issues of governance at national, continentaland global level. Founded in 1945 on the initiative of William Beveridge to studydemocratic unity amongst states and peoples, it provides a platform to debate often-controversial issues.

The Federal Trust remains politically non-partisan, and it has no allegiance to any politicalparty. It enjoys corporate, institutional, academic and individual support. The FederalTrust is able to draw on a wide variety of intellectual resources. Its distinguished Patronsand Advisory Board members are high-profile individuals from various backgrounds andprofessions. Research Fellows and staff combine expertise in diverse disciplines includinglaw, finance, economics and politics. It also attracts a broad range of high-level externalexperts who participate in its activities and projects, thus allowing the Trust to reflectdiffering ideas and perspectives. The Trust helped to establish the Trans-European PolicyStudies Association (TEPSA) in 1974, a network of like-minded institutes from all thecountries of the enlarging European Union. It also has close links with think tanks in non-EU countries. The Federal Trust runs a number of projects on issues relating to its mainconcerns encompassing various aspects of international economic policy, political co-operation, international citizenship and good governance at the European and globallevel.

Its project work involves setting up working groups providing a forum of debate for expertsfrom a wide range of backgrounds, organising conferences and seminars with high-levelspeakers from academia, business and finance, civil society, the media, government andpolitics and developing an extensive publishing programme on topics close to its researchconcerns.

The Federal Trust’s Working Group on the Dispute Settlement Understanding is the Trust’ssecond group to examine aspects of the multilateral trading system. The first followed thepreparations for the Doha Ministerial Conference and made recommendations to WTOmembers on the coverage of a new round of trade negotiations. The Trust is currentlyexploring the possibility of convening another group with the remit to determine whatscope there is to negotiate WTO rules on the so-called ‘Singapore Issues’.

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This report forms part of the Trust’s wider programme on the international trading system and the WTO. Forfurther details about this and future studies please contact Alexis Krachai on +44 (0)20 7735 4000 or [email protected]

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