Executive SummaryThe power to settle international disputes with binding authority distinguishes the World Trade Organization from most other intergovernmental institutions. The Understanding on Rules and Procedures Governing the Settlement of Disputes gives the WTO unprecedented power to resolve trade-related conflicts between nations and assign penalties and compensation to the parties involved. Dispute settlement is administered by a Dispute Settlement Body (DSB) that consists of the WTO's General Council. The DSB has the authority to "establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions and other obligations." The Dispute Settlement system aims to resolve disputes by clarifying the rules of the multilateral trading system; it cannot legislate or promulgate new rules. When a Member believes that another party has taken an action that impairs benefits accruing to it directly or indirectly under the Uruguay Round Agreements, it may request consultations to resolve the conflict through informal negotiations. If consultations fail to yield mutually acceptable outcomes after 60 days, Members may request the establishment of a panel to resolve the dispute. Panels typically consist of three individuals with expertise in international trade law and policy; these panelists hear the evidence and present a report to the DSB recommending a course of action within six months. The panel can solicit information and technical advice from any relevant source, though it is not required to do so. Only submissions from Members are guaranteed to be heard, although in rare cases, panels have consulted submissions from interested non-governmental organizations. Third-party member nations may also involve themselves in the dispute settlement process. All deliberations and communications are confidential, and only the final panel reports become part of the public record. Once panel reports have been prepared, they are presented to the Dispute Settlement Body, which either adopts the report or decides by consensus not to accept it. Alternatively, if one of the parties involved decides to appeal the decision, the report will not be considered for adoption until the completion of the appeal. In the case of an appeal, a three-person Appellate Body chosen from a standing pool of seven persons will assess the soundness of the panel reports legal reasoning and procedure. An Appellate Body report is adopted unconditionally unless the DSB votes by consensus not to accept its findings within 30 days of circulation to the membership. The primary goal of dispute settlement is to ensure national compliance with multilateral trade rules. Accordingly, the Dispute Settlement Body encourages Members to their make best possible efforts to bring legislation into compliance with the panel ruling within a reasonable period of time established by the parties to the dispute. If a Member does not comply with rulings, the DSB can authorize the complainant to suspend commitments and concessions to the violating Member. In general, complainants are encouraged to suspend concessions with respect to the same sector as the subject of the dispute; however, if complainants find this ineffective or impracticable, they may suspend concessions in other sectors of the same Agreement or even under separate Agreements. Ecuador, for example, suspended its TRIPs commitments to the European Union in retaliation against the EUs non-compliance with panel rulings in the goods-based Banana dispute. Some groups, such as the Center for International Environmental Law, have criticized the dispute settlement process for its lack of transparency and democratic accountability, as well as for a perceived insensitivity to environmental and social standards. The increasing use of the system by developing countries, however, is one indicator of its institutional success. Ultimately, the dispute settlement system is a significant milestone in the development of a rules-based multilateral trading system.

1.CHAPTER

INTRODUCTION: WTO & DISPUTE SETTLEMENT MECHANISMThe WTO's Dispute Settlement Understanding (DSU) evolved out of the ineffective means used under the GATT for settling disagreements among members. Under the GATT, procedures for settling disputes were ineffective and time consuming since a single nation, including the nation who's actions were the subject of complaint, could effectively block or delay every stage of the dispute resolution process.(1) It remains to be seen whether countries will comply with the new WTO dispute settlement mechanism, but thus far the process has met with relative success.The DSU was designed to deal with the complexity of reducing and eliminating non-tariff barriers to trade. A non-tariff trade barrier can be almost any government policy or regulation that has the effect of making it more difficult or costly for foreign competitors to do business in a country. In the early years of the GATT, most of the progress in reducing trade barriers focused on trade in goods and in reducing or eliminating the tariff levels on those goods. More recently, tariffs have been all but eliminated in a wide variety of sectors. This has meant that non-tariff trade barriers have become more important since, in the absence of tariffs, only such barriers significantly distort the overall pattern of trade-liberalization. Frequently, such non-tariff trade barriers are the inadvertent consequence of well meaning attempts to regulate to ensure safety or protection for the environment, or other public policy goals. In other cases, countries have been suspected of deliberately creating such regulations under the guise of regulatory intent, but which have the effect of protecting domestic industries from open international competition, to the detriment of the international free-trade regime.The WTO's strengthened dispute resolution mechanism was designed to have the authority to sort out this "fine line between national prerogatives and unacceptable trade restrictions"(2) Several of the supplemental agreements to the SGATT created during the Uruguay Round, such as the SPS Agreement, sought to specify the conditions under which national regulations were permissible even if they had the effect of restraining trade. The United States, perhaps more than any other country, has found itself on both sides of this delicate balance. In 1988, it was the United States who pushed for strengthening the Dispute Settlement provisions of the GATT during the Uruguay Round, in part because Congress was not convinced that, "the GATT, as it stood, could offer the United States an equitable balance of advantage."(3) The concern was that formal concessions granted to U.S. exports going into other countries would be eroded by hidden barriers to trade. On the other hand, the United States harbors reservations in regards to its sovereignty, with much of the negative reaction to the WTO itself centered around the concern that U.S. laws and regulations may be reversed by the DSU panels or the Appellate Body.Critics argued that the WTO would "compel Congress and our states to abandon many health and environmental standards" if they were at odds with international trade rules.(4) Particularly, these critics noted that the United States would not have a veto in the WTO and that each nation would have an equal say in the DSB, which ultimately votes to adopt or reject panel reports. They further noted that the Appellate Body and the dispute settlement panels vote in secret, and that they could authorize nations to retaliate against violations of the trade agreements with unilateral sanctions. It was argued by some that the cumulative effect of WTO dispute panel decisions would be to erode the sovereignty of the United States. One of the purposes of this review is to assess the validity of this claim in light of the actual functioning of the WTO system over the last three year.

2.CHAPTER

HISTORY OF THE ORIGINAfter World War II, the United Kingdom and the United States submitted proposals to the Economic and Social Council (ECOSOC) of the United Nations regarding the establishment of an international trade body that was to be named the International Trade Organization (ITO). That is, perhaps, why the GATT is often referred to as a UN related body and its documents are sometimes mistakenly referred to as UN documents.ECOSOC convened a conference, the United Nations Conference on Trade and Employment in 1946 to consider the UK and U.S. proposals. A Preparatory Committee drafted the ITO Charter and it was approved in 1948 at the conference in Havana, Cuba. The Charter is often referred to as the Havana Charter or the ITO Charter.The first round of trade negotiations took place while the Preparatory Committee was still working on drafting the Charter because the participants were anxious to begin the process of trade liberalization as soon as possible. Their results were incorporated into the General Agreement, which was signed in 1947.Since the original signatory nations expected the Agreement to become part of the more permanent ITO Charter, the text of the GATT contains very little "institutional" structure. This lack of detail within the agreement has created increasing difficulties as the GATT membership and roles governing trade between so many of the world's nations have grown. The GATT has functioned as an international organization for many years even though it has never been formalized as such.ECOSOC established an Interim Commission for the ITO that is referred to as ICITO. Unfortunately, when it came time for the members to ratify the ITO Charter, the Congress of the United States refused and the ITO never became a reality. The GATT survived, but remained intact only due to the Protocol of Provisional Application of the General Agreement on Tariffs and Trade which was concluded in 1947 and which entered into force in 1948.The GATT completed 8 rounds of multilateral trade negotiations (MTNs). produced the World Trade Agreement (WTO) and its annexes.

OBJECTIVE

After WWII, the US & other nations established the General Agreement on Tariffs & Trade (GATT) in 1947. The GATT was designed to:

- Gradually eliminate barriers to trade.

- Provide a set of rules & a means for their enforcement.

The clarification, strengthening & extension of GATT rules saw the creation of the World Trade Organisation (WTO) on January 1st 1995 and held out the promise of more effective policing & enforcement of the global trading system.

Currently there are four main objectives of the WTO:

i. The high level of protectionism in agriculture.

ii. The continued high tariff rates on non-agricultural goods & services in many nations.

iii. The lack of strong protection for intellectual property rights in many nations.

iv. The increase in anti-dumping policies.

Functions, objectives and key features of the dispute settlement system

Providing security and predictability to the multilateral trading systemA central objective of the (WTO) dispute settlement system is to provide security and predictability to the multilateral trading system (Article 3.2of theDSU). Although international trade is understood in theWTOas the flow of goods and services between Members, such trade is typically not conducted by States, but rather by private economic operators. These market participants need stability and predictability in the government laws, rules and regulations applying to their commercial activity, especially when they conduct trade on the basis of long-term transactions. In light of this, the DSU aims to provide a fast, efficient, dependable and rule-oriented system to resolve disputes about the application of the provisions of theWTO Agreement. By reinforcing the rule of law, the dispute settlement system makes the trading system more secure and predictable. Preserving the rights and obligations of WTO MembersTypically, a dispute arises when one WTO Member adopts a trade policy measure that one or more other Members consider to be inconsistent with the obligations set out in the WTO Agreement. In such a case, any Member that feels aggrieved is entitled to invoke the procedures and provisions of the dispute settlement system in order to challenge that measure.If the parties to the dispute do not manage to reach a mutually agreedsolution, the complainant is guaranteed a rules-based procedure in which the merits of its claims will be examined by an independent body (panels and the Appellate Body). If the complainant prevails, the desired outcome is to secure the withdrawal of the measure found to be inconsistent with the WTO Agreement. Compensation and countermeasures (the suspension of obligations) are available only as secondary and temporary responses to a contravention of the WTO Agreement (Article 3.7of the DSU).Clarification of rights and obligations through interpretationThe precise scope of the rights and obligations contained in theWTO Agreementis not always evident from a mere reading of the legal texts. Legal provisions are often drafted in general terms so as to be of general applicability and to cover a multitude of individual cases, not all of which can be specifically regulated. Whether the existence of a certain set of facts gives rise to a violation of a legal requirement contained in a particular provision is, therefore, a question that is not always easy to answer. In most cases, the answer can be found only after interpreting the legal terms contained in the provision at issue.In addition, legal provisions in international agreements often lack clarity because they are compromise formulations resulting from multilateral negotiations. The various participants in a negotiating process often reconcile their diverging positions by agreeing to a text that can be understood in more than one way so as to satisfy the demands of different domestic constituents. The negotiators may thus understand a particular provision in different and opposing ways.Mutually Agreed Solutions as Preferred SolutionAlthough the dispute settlement system is intended to uphold the rights of aggrieved Members and to clarify the scope of the rights and obligations, which gradually achieves higher levels of security and predictability, the primary objective of the system is not to make rulings or to develop jurisprudence. Rather, like other judicial systems, the priority is to settle disputes, preferably through a mutually agreed solution that is consistent with theWTO Agreement(Article 3.7of theDSU). Adjudication is to be used only when the parties cannot work out a mutually agreed solution. By requiring formalconsultationsas the first stage of any dispute, the DSU provides a framework in which the parties to a dispute must always at least attempt to negotiate a settlement. Even when the case has progressed to the stage of adjudication, a bilateral settlement always remains possible, and the parties are always encouraged to make efforts in that direction (Articles 3.7and11of the DSU).Prompt settlement of disputesThe DSU emphasizes that prompt settlement of disputes is essential if the (WTO) is to function effectively and the balance of rights and obligations between the Members is to be maintained (Article 3.3of the DSU). It is well known that, to be achieved, justice must not only provide an equitable outcome but also be swift. Accordingly, the DSU sets out in considerable detail the procedures and corresponding deadlines to be followed in resolving disputes. The detailed procedures are designed to achieed, justice must not only provide an equitable outcome but also be swift. Accordingly, the DSU sets out in considerable detail the procedures and corresponding deadlines to be followed in resolving disputes. The detailed procedures are designed to achieve efficiency, including the right of a complainant to move forward with a complaint even in the absence of agreement by the respondent (Articles 4.3and6.1of the DSU). If a case is adjudicated, it should normally take no more than one year for a panel ruling and no more than 16 months if the case is appealed (Article 20of the DSU). If the complainant deems the case urgent, consideration of the case should take even less time (Articles 4.9and12.8of the DSU).Prohibition against unilateral determinationsWTO Membershave agreed to use the multilateral system for settling their WTO trade disputes rather than resorting to unilateral action (Article 23of the DSU). That means abiding by the agreed procedures and respecting the rulings once they are issued and not taking the law into their own hands.If Members were to act unilaterally, this would have obvious disadvantages that are well known from the history of the multilateral trading system. Imagine that one Member accuses another Member of breaking WTO rules. As a unilateral response, the accusing Member could decide to take a countermeasure, i.e. to infringe WTO obligations with regard to the other Member (by erecting trade barriers). Under traditional international law, that Member could argue that it has acted lawfully because its own violation is justified as a countermeasure in response to the other Members violation that had occurred first. If, however, the accused Member disagrees on whether its measure truly infringes WTO obligations, it will not accept the argument of a justified countermeasure. On the contrary, it may assert that the countermeasure is illegal and, on that basis, it may feel justified in taking a countermeasure against the first countermeasure. The original complainant, based on its legal view on the matter, is likely to disagree and to consider that second countermeasure illegal. In response, it may adopt a further countermeasure. This shows that, if the views differ, unilateral actions are not able to settle disputes harmoniously. Things may spiral out of control and, unless one of the parties backs down, there is a risk of escalation of mutual trade restrictions, which may result in a trade war.

Exclusive jurisdictionBy mandating recourse to the multilateral system of the WTO for the settlement of disputes,Article 23of the DSU not only excludes unilateral action, it also precludes the use of other fora for the resolution of a WTO-related dispute.Compulsory nature The dispute settlement system is compulsory. All WTO Members are subject to it, as they have all signed and ratified the WTO Agreement as a single undertaking2, of which the DSU is a part. The DSU subjects all WTO Members to the dispute settlement system for all disputes arising under the WTO Agreement. Therefore, unlike other systems of international dispute resolution, there is no need for the parties to a dispute to accept the jurisdiction of the WTO dispute settlement system in a separate declaration or agreement. This consent to accept the jurisdiction of the WTO dispute settlement system is already contained in a Members accession to the WTO. As a result, every Member enjoys assured access to the dispute settlement system and no responding Member may escape that jurisdiction.

IMPORTANCE OF THE WTO DISPUTE SETTELMENT SYSTEMThe best international agreement is not worth very much if its obligations cannot be enforced when one of the signatories fails to comply with such obligations. An effective mechanism to settle disputes thus increases the practical value of the commitments the signatories undertake in an international agreement. The fact that the Members of the(WTO)established the current dispute settlement system during theUruguay Roundof Multilateral Trade Negotiations underscores the high importance they attach to compliance by all Members with their obligations under theWTO Agreement.Settling disputes in a timely and structured manner is important. It helps to prevent the detrimental effects of unresolved international trade conflicts and to mitigate the imbalances between stronger and weaker players by having their disputes settled on the basis of rules rather than having power determine the outcome. Most people consider the WTO dispute settlement system to be one of the major results of the Uruguay Round. After the entry into force of the WTO Agreement in 1995, the dispute settlement system soon gained practical importance as Members frequently resorted to using this system.

Participants in the dispute settlement systemParties and third partiesThe only participants in the dispute settlement system are the Member governments of theWTO), which can take part either as parties or as third parties. The WTO Secretariat, WTO observer countries, other international organizations, and regional or local governments are not entitled to initiate dispute settlement proceedings in the WTO.TheDSUsometimes refers to the Member bringing the dispute as the complaining party or the complainant (this guide mostly uses the term complainant). No equivalent short term is used for the party to whom the request for consultations is addressed. The DSU sometimes also speaks of Member concerned. In practice, the terms respondent or defendant are commonly used; this guide mostly uses the term respondent.No non-governmental actorsSince onlyWTO Membergovernments can bring disputes, it follows that private individuals or companies do not have direct access to the dispute settlement system, even if they may often be the ones (as exporters or importers) most directly and adversely affected by the measures allegedly violating theWTO Agreement. The same is true of other non-governmental organizations with a general interest in a matter before the dispute settlement system (which are often referred to as NGOs). They, too, cannot initiate WTO dispute settlement proceedings.Of course, these organizations can, and often do, exert influence or even pressure on the government of a WTO Member with respect to the triggering of a dispute.Indeed, several WTO Members have formally adopted internal legislation under which private parties can petition their governments to bring a WTO dispute.1There are divergent views among Members on whether non-governmental organizations may play a role in WTO dispute settlement proceedings, for example, by filingamicus curiaesubmissions with WTO dispute settlement bodies.

DISPUTE SETTLEMENT BODYDispute settlement is regarded by the WTO as the central pillar of the multilateral trading system, and as a "unique contribution to the stability of the global economy". WTO members have agreed that, if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. The operation of the WTO dispute settlement process involvesThe DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts and several specialized institutions.The General Council discharges its responsibilities under the DSU through the Dispute Settlement Body (DSB). Like the General Council, the DSB is composed of representatives of all WTO Members. The DSB is responsible for administering the DSU, i.e. for overseeing the entire dispute settlement process. If a member state considers that a measure adopted by another member state has deprived it of a benefit accruing to it under one of the covered agreements, it may call for consultations with the other member state. If consultations fail to resolve the dispute within 60 days after receipt of the request for consultations, the complainant state may request the establishment of a panel. It is not possible for the respondent state to prevent or delay the establishment of a panel, unless the DSB by consensus decides otherwise. The panel, normally consisting of three members appointed ad hoc by the Secretariat, sits to receive written and oral submissions of the parties, on the basis of which it is expected to make findings and conclusions for presentation to the DSB. The proceedings are confidential, and even when private parties are directly concerned, they are not permitted to attend or make submissions separate from those of the state in question. The final version of the panel's report is distributed first to the parties, and two weeks later it is circulated to all the members of the WTO. The report must be adopted at a meeting of the DSB within 60 days of its circulation, unless the DSB by consensus decides not to adopt the report or a party to the dispute gives notice of its intention to appeal. A party may appeal a panel report to a standing Apellate Body, but only on issues of law, and legal interpretations developed by the panel.

RATIONALE BEHIND THE DISPUTE SETTLEMENT

The rationale behind the Dispute Settlement Understanding (DSU) of the WTO is to provide Members with a clear legal for solving disputes which may arise in the course of implementing WTO agreements. Clearly, agreed solutions between Members are the most desirable way of solving disputes. However, if this is not possible, Members can ask for panels followed by appeal procedures whereas the panel or the Appellate Body, by interpreting the rules, solves the dispute. If a Member does not comply with WTO recommendations and rulings on bringing its measures in line with WTO rules, then trade compensation or sanctions, for example in the form of duty increases or suspension of WTO obligations may follow.WTO Members, including the EU, are consistently making use of the dispute settlement mechanism (see: cases involving the EU). However, the EU never initiates a dispute settlement case before exhausting all other ways of finding solutions. The system has, so far, worked well to solve very important disputes and avoiding 'trade wars'. For this reason, the EU considers that, overall; the system is functioning well and has helped to ensure real market-opening. Moreover, it compares extremely well with other international dispute settlement systems in terms of speed and efficiency. By providing a multilateral forum for settling disputes, the mechanism guards weaker Members against unilateral action by the strongest.Current talks about improving the systemThe Doha Ministerial Declaration mandates for negotiations on improvements and clarification of the system. The EU is fully committed to making the system even more effective, predictable and transparent. Clarification of the DSU provisions on implementation. This covers notably: 1.The sequencing issue (that is, the steps which need to be taken, and their order, before determining that the losing party has not complied correctly with the DSB recommendations and reacting accordingly) 2.The arbitration procedure on the level of suspension of concessions 3.The establishment of a procedure to lift suspension of concessions once a losing party has implemented changes Speeding up the process whenever this is feasible and justified; Greater transparency, which is needed to secure continued public support and confidence in the WTO system, while preserving its intergovernmental character.

The dispute settlement system and developing countries

The EU recognizes the difficulties that developing countries face in participating actively in the dispute settlement system. Within the framework of the negotiations on the Dispute Settlement Understanding, the EU is in favor of initiatives aimed at granting to developing countries a better access to the system and providing them with the necessary training and technical assistance.Procedures:Understanding on Rules and Procedures Governing the Settlement of Disputes back to top.The dispute settlement system of the GATT is generally considered to be one of the cornerstones of the multilateral trade order. The system has already been strengthened and streamlined as a result of reforms agreed following the Mid-Term Review Ministerial Meeting held in Montreal in December 1988. Disputes currently being dealt with by the Council are subject to these new rules, which include greater automaticity in decisions on the establishment, terms of reference and composition of panels, such that these decisions are no longer dependent upon the consent of the parties to a dispute. The Uruguay Round Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) will further strengthen the existing system significantly, extending the greater automaticity agreed in the Mid-Term Review to the adoption of the panels and a new Appellate Bodys findings. Moreover, the DSU will establish an integrated system permitting WTO Members to base their claims on any of the multilateral trade agreements included in the Annexes to the Agreement establishing the WTO. For this purpose, a Dispute Settlement Body (DSB) will exercise the authority of the General Council and the Councils and committees of the covered agreements.The DSU emphasizes the importance of consultations in securing dispute resolution, requiring a Member to enter into consultations within 30 days of a request for consultations from another Member. If after 60 days from the request for consultations there is no settlement, the complaining party may request the establishment of a panel. Where consultations are denied, the complaining party may move directly to request a panel. The parties may voluntarily agree to follow alternative means of dispute settlement, including good offices, conciliation, mediation and arbitration.Where a dispute is not settled through consultations, the DSU requires the establishment of a panel, at the latest, at the meeting of the DSB following that at which a request is made, unless the DSB decides by consensus against establishment. The DSU also sets out specific rules and deadlines for deciding the terms of reference and composition of panels. Standard terms of reference will apply unless the parties agree to special terms within 20 days of the panels establishment. And where the parties do not agree on the composition of the panel within the same 20 days, this can be decided by the Director-General. Panels normally consist of three persons of appropriate background and experience from countries not party to the dispute. The Secretariat will maintain a list of experts satisfying the criteria.Panel procedures are set out in detail in the DSU. It is envisaged that a panel will normally complete its work within six months or, in cases of urgency, within three months. Panel reports may be considered by the DSB for adoption 20 days after they are issued to Members. Within 60 days of their issuance, they will be adopted, unless the DSB decides by consensus not to adopt the report or one of the parties notifies the DSB of its intention to appeal.The concept of appellate review is an important new feature of the DSU. An Appellate Body will be established, composed of seven members, three of whom will serve on any one case. An appeal will be limited to issues of law covered in the panel report and legal interpretations developed by the panel. Appellate proceedings shall not exceed 60 days from the date a party formally notifies its decision to appeal. The resulting report shall be adopted by the DSB and unconditionally accepted by the parties within 30 days following its issuance to Members, unless the DSB decides by consensus against its adoption.Once the panel report or the Appellate Body report is adopted, the party concerned will have to notify its intentions with respect to implementation of adopted recommendations. If it is impracticable to comply immediately, the party concerned shall be given a reasonable period of time, the latter to be decided either by agreement of the parties and approval by the DSB within 45 days of adoption of the report or through arbitration within 90 days of adoption. In any event, the DSB will keep the implementation under regular surveillance until the issue is resolved.Further provisions set out rules for compensation or the suspension of concessions in the event of non-implementation. Within a specified time-frame, parties can enter into negotiations to agree on mutually acceptable compensation. Where this has not been agreed, a party to the dispute may request authorization of the DSB to suspend concessions or other obligations to the other party concerned. The DSB will grant such authorization within 30 days of the expiry of the agreed time-frame for implementation. Disagreements over the proposed level of suspension may be referred to arbitration. In principle, concessions should be suspended in the same sector as that in issue in the panel case. If this is not practicable or effective, the suspension can be made in a different sector of the same agreement. In turn, if this is not effective or practicable and if the circumstances are serious enough, the suspension of concessions may be made under another agreement.One of the central provisions of the DSU reaffirms that Members shall not themselves make determinations of violations or suspend concessions, but shall make use of the dispute settlement rules and procedures of the DSU.The DSU contains a number of provisions taking into account the specific interests of the developing and the least-developed countries. It also provides some special rules for the resolution of disputes which do not involve a violation of obligations under a covered agreement but where a Member believes nevertheless that benefits are being nullified or impaired. Special decisions to be adopted by Ministers in 1994 foresee that the Montreal Dispute Settlement Rules which would otherwise have expired at the time of the April 1994 meeting are extended until the entry into force of the WTO. Another decision foresees that the new rules and procedures will be reviewed within four years after the entry into force of the WTO.

OVERVIEW OF THE DISPUTE SETTLEMENT UNDERSTANDING

The Dispute Settlement Understanding (DSU), formally known as the Understanding on Rules and Procedures Governing the Settlement of Disputes, establishes rules and procedures that manage various disputes arising under the Covered Agreements of the Final Act of the Uruguay Round.(5) All WTO member nation-states are subject to it and are the only legal entities that may bring and file cases to the WTO. The DSU created the Dispute Settlement Body (DSB), consisting of all WTO members, which administers dispute settlement procedures.(6) It provides strict time frames for the dispute settlement process(7) and establishes an appeals system to standardize the interpretation of specific clauses of the agreements.(8) It also provides for the automatic establishment of a panel and automatic adoption of a panel report to prevent nations from stopping action by simply ignoring complaints.(9) Strengthened rules and procedures with strict time limits for the dispute settlement process aim at providing "security and predictability to the multilateral trading system"(10) and achieving "[a] solution mutually acceptable to the parties to a dispute and consistent with the covered agreements."(11) The basic stages of dispute resolution covered in the understanding include consultation, good offices, conciliation and mediation, a panel phase, Appellate Body review, and remedies.

3.CHAPTER

The WTO Agreements: The WTOs rules the agreements are the result of negotiations between the members. The current set were the outcome of the 198694 Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT). The WTO oversees about 60 different agreements which have the status of international legal texts. Member countries must sign and ratify all WTO agreements on accession. A discussion of some of the most important agreements follows. The Agreement on Agriculture came into effect with the establishment of the WTO at the beginning of 1995. The AoA has three central concepts, or "pillars": domestic support, market access and export subsidies. The General Agreement on Trade in Services was created to extend the multilateral trading system to service sector, in the same way as the General Agreement on Tariffs and Trade (GATT) provided such a system for merchandise trade. The agreement entered into force in January 1995. The Agreement on Trade-Related Aspects of Intellectual Property Rights sets down minimum standards for many forms of intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.The Agreement on the Application of Sanitary and Phytosanitary Measuresalso known as the SPS Agreementwas negotiated during the Uruguay Round of GATT, and entered into force with the establishment of the WTO at the beginning of 1995. Under the SPS agreement, the WTO sets constraints on members' policies relating to food safety (bacterial contaminants, pesticides, inspection and labelling) as well as animal and plant health (imported pests and diseases). The Agreement on Technical Barriers to Trade is an international treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO at the end of 1994. The object ensures that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade".[64] The Agreement on Customs Valuation, formally known as the Agreement on Implementation of Article VII of GATT, prescribes methods of customs valuation that Members are to follow. Chiefly, it adopts the "transaction value" approach.Through these agreements, WTO members operate a non-discriminatory trading system that spells out their rights and their obligations. Each country receives guarantees that its exports will be treated fairly and consistently in other countries markets. Each promises to do the same for imports into its own market. The system also gives developing countries some flexibility in implementing their commitments. (1) Goods It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower customs duty rates and other trade barriers; the text of the General Agreement spelt out important rules, particularly non-discrimination. Since 1995, the updated GATT has become the WTOs umbrella agreement for trade in goods. It has annexes dealing with specific sectors such as agriculture and textiles, and with specific issues such as state trading, product standards, subsidies and actions taken against dumping.(2) Services Banks, insurance firms, telecommunications companies, tour operators, hotel chains and transport companies looking to do business abroad can now enjoy the same principles of freer and fairer trade that originally only applied to trade in goods. These principles appear in the new General Agreement on Trade in Services (GATS). WTO members have also made individual commitments under GATS stating which of their services sectors they are willing to open to foreign competition, and how open those markets are.(3) Intellectual property The WTOs intellectual property agreement amounts to rules for trade and investment in ideas and creativity. The rules state how copyrights, patents, trademarks, geographical names used to identify products, industrial designs, integrated circuit layout-designs and undisclosed information such as trade secrets intellectual property should be protected when trade is involved. (4) Dispute settlement The WTOs procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgements by specially-appointed independent experts are based on interpretations of the agreements and individual countries commitments. The system encourages countries to settle their differences through consultation. Failing that, they can follow a carefully mapped out, stage-by-stage procedure that includes the possibility of a ruling by a panel of experts, and the chance to appeal the ruling on legal grounds. Confidence in the system is borne out by the number of cases brought to the WTO around 300 cases in eight years compared to the 300 disputes dealt with during the entire life of GATT (194794). (5) Policy review The Trade Policy Review Mechanisms purpose is to improve transparency, to create a greater understanding of the policies that countries are adopting, and to assess their impact. Many members also see the reviews as constructive feedback on their policies. All WTO members must undergo periodic scrutiny, each review containing reports by the country concerned and the WTO Secretariat.

WTO Secretariat and Budget:WTO activities are supported by a Secretariat of some 700 staff, led by the WTO Director- General. The Secretariat is located in Geneva, Switzerland, and has an annual budget of approximately CHF 200 million ($ 180 million, 160 million swiss francs) with individual contributions calculated on the basis of shares in the total trade conducted by WTO members. The three official language of the WTO are English, French and Spanish. Decisions in the WTO are generally taken by consensus of the entire membership. The highest institutional body is the Ministerial Conference, which meets roughly every two years. A General Council conducts the organization's business in the intervals between Ministerial Conferences. Both of these bodies comprise all members. Specialized subsidiary bodies (Councils, Committees, Sub-committees), also comprising all members, administer and monitor the implementation by members of the various WTO agreements. Its responsibilities include: Administrative and technical support for WTO delegate bodies (councils, committees, working parties, negotiating groups) for negotiations and the implementation of agreements. Technical support for developing countries, and especially the least-developed. Trade performance and trade policy analysis by WTO economists and statisticians. Assistance from legal staff in the resolution of trade disputes involving the interpretation of WTO rules and precedents. Dealing with accession negotiations for new members and providing advice to governments considering membership.FUNCTIONSAmong the various functions of the WTO, these are regarded by analysts as the most important: It oversees the implementation, administration and operation of the covered agreements. It provides a forum for negotiations and for settling disputes. Additionally, it is the WTO's duty to review the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training. The WTO is also a center of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization. Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank.

FORMAL STRUCTUREAccording to WTO rules, all WTO members may participate in all councils, committees, etc., except Appellate Body, Dispute Settlement panels, and plurilateral committees.Highest level: Ministerial ConferenceThe topmost decision-making body of the WTO is the Ministerial Conference, which has to meet at least every two years. It brings together all members of the WTO, all of which are countries or separate customs territories. The Ministerial Conference can make decisions on all matters under any of the multilateral trade agreements.Second level: General CouncilThe daily work of the ministerial conference is handled by three groups: the General Council, the Dispute Settlement Body, and the Trade Policy Review Body. All three consist of the same membership - representatives of all WTO members - but each meets under different rules.1. The General Council, the WTOs highest-level decision-making body in Geneva, meets regularly to carry out the functions of the WTO. It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years. The council acts on behalf on the Ministerial Council on the entire WTO affairs. The current chairman is Amb. Muhamad Noor Yacob (Malaysia).2. The Dispute Settlement Body is made up of all member governments, usually represented by ambassadors or equivalent. The current chairperson is H.E. Mr. Mr. Bruce Gosper (Australia).3. The WTO General Council meets as the Trade Policy Review Body (TPRB) to undertake trade policy reviews of Members under the TRPM. The TPRB is thus open to all WTO Members. The current chairperson is H.E. Ms. Claudia Uribe (Colombia).Third level: Councils for TradeThe Councils for Trade work under the General Council. There are three councils - Council for Trade in Goods, Council for Trade-Related Aspects of Intellectual Property Rights, and Council for Trade in Services - each council works in different fields. Apart from these three councils, six other bodies report to the General Council reporting on issues such as trade and development, the environment, regional trading arrangements and administrative issues.1. Council for Trade in Goods- The workings of the General Agreement on Tariffs and Trade (GATT) which covers international trade in goods, are the responsibility of the Council for Trade in Goods. It is made up of representatives from all WTO member countries. The current chairperson is Amb. Yonov Frederick Agah (Nigeria).2. Council for Trade-Related Aspects of Intellectual Property Rights- Information on intellectual property in the WTO, news and official records of the activities of the TRIPS Council, and details of the WTOs work with other international organizations in the field.3. Council for Trade in Services- The Council for Trade in Services operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services (GATS). Its open to all WTO members, and can create subsidiary bodies as required.Fourth level: Subsidiary BodiesThere are subsidiary bodies under each of the three councils.1. The Goods Council- subsidiary under the Council for Trade in Goods. It has 11 committees consisting of all member countries, dealing with specific subjects such as agriculture, market access, subsidies, anti-dumping measures and so on. Committees include the following:1.Information Technology Agreement (ITA) Committee 2.State Trading Enterprises 3.Textiles Monitoring Body - Consists of a chairman and 10 members acting under it. 4.Groups dealing with notifications - process by which governments inform the WTO about new policies and measures in their country.

2. The Services Council- subsidiary under the Council for Trade in Services which deals with financial services, domestic regulations and other specific commitments. 3. Dispute Settlement panels and Appellate Body- subsidiary under the Dispute Settlement Body to resolve disputes and the Appellate Body to deal with appeals.The WTO operates on a one country, one vote system, but actual votes have never been taken. Decision making is generally by consensus, and relative market size is the primary source of bargaining power. The advantage of consensus decision-making is that it encourages efforts to find the most widely acceptable decision. Main disadvantages include large time requirements and many rounds of negotiation to develop a consensus decision, and the tendency for final agreements to use ambiguous language on contentious points that makes future interpretation of treaties difficult.

4. CHAPTER

FINDINGS

1) The party bears the responsibility of ultimately convincing the panel of the truth of a fact (burden of proof).

2)What quantum of proof is necessary to convince the panel (standard of proof).

3)The role of the panel, disputing parties, and non-disputing parties (e.g. experts, international organizations, private parties) in the development of the evidentiary record on which the panel bases its decision.

4)The consequences of a party's failure to cooperate in the process of fact-finding; how the parties can access the information which is necessary to prove their allegations.

5)The treatment of confidential business and governmental information.

In assessing and making suggestions to improve the answers provided by panels to these questions, the book draws on the approaches followed in the two major legal systems of the world, the common law and the civil law, and to the extent possible the approaches adopted by other international courts and tribunals

CONCLUSION

There are consequences for the member whose measure or trade practice is found to violate the Covered Agreements by a panel or Appellate Body. The dispute panel issues recommendations with suggestions of how a nation is to come into compliance with the trade agreements. If the member fails to do so within the determined "reasonable period of time," the complainant may request negotiations for compensation. Within twenty days after the expiration of the reasonable period of time, if satisfactory compensation is not agreed, the complaining party "may request authorization from the DSB to suspend the application to the member concerned of concessions or other obligations under the Covered Agreements."Retaliation shall be first limited to the same sector(s). If the complaining party considers the retaliation insufficient, it may seek retaliation across sectors. The DSB "shall grant authorization to suspend concessions or other obligations within thirty days of the expiry of the reasonable time unless the DSB decides by consensus to reject the request." The defendant may object to the level of suspension proposed. "The original panel, if members are available, or an arbitrator appointed by the director-general" may conduct arbitration.Members may seek arbitration within the WTO as an alternative means of dispute settlement "to facilitate the solution of certain disputes that concern issues that are clearly defined by both parties." Those parties must reach mutual agreement to arbitration and the procedures to be followed. Agreed arbitration must be notified to all members prior to the beginning of the arbitration process. Third parties may become party to the arbitration "only upon the agreement of the parties that have agreed to have recourse to arbitration." The parties to the proceeding must agree to abide by the arbitration award. "Arbitration awards shall be notified to the DSB and the Council or Committee of any relevant agreement where any member may raise any point relating thereto."

REFRENCES:

BIBLIOGRAPHY

EPW (Economic & political Weekly). Yojana-monthly magagine govt of maharastra. Indian economy-Rudra dutta & K.P.M Sundaram.

WIBLOGRAPHY

www.wto.org.com. www.wikipedia.com. www.google.com.

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