Date post: | 28-Mar-2018 |
Category: |
Documents |
Upload: | phungthien |
View: | 271 times |
Download: | 21 times |
WTO DISPUTE SETTLEMENT MECHANISM
SYLLABUS AND COURSE MATERIALS
DRAFT WORKING MATERIALS FOR UNIVERSITY COURSES
January, 2016
This publication was produced by International Development Group LLC, for review by the United States Agency for
International Development.
1
This WTO Dispute Settlement Mechanism Syllabus and Course Materials was prepared
for utilizing either as separate University course or as a part of curricula with support of
the USAID Trade Policy Project in Ukraine. This Syllabus was prepared by the Team of
Authors: Mr. Gary Horlick, International Lawyer, Mr. Marius Bordalba, Resident
Attorney Advisor, Ms. Anna Gladshtein, Legal Advisor, Mr. Viktor Dovhan, Legal
Advisor, Ms. Ayna Bagirova, Junior Associate, Ms. Mariya Usatenko, Junior Associate,
Ms. Oksana Kornieva, Junior Associate, and Mr. Andrii Savitski, Junior Associate.
Disclaimer
The author’s views expressed in this publication do not necessarily reflect the views of
the U.S. Agency for International Development or the United States Government.
2
The WTO Dispute Settlement Mechanism
Syllabus and Course Materials
Contents The WTO Dispute Settlement Mechanism ............................................................................................... 2
1. SYLLABUS GENERALITIES ............................................................................................................ 6
1.1 Program Title ...................................................................................................................................... 6
Certificate Program on the Dispute Settlement Mechanism of the WTO ................................................ 6
2. PROGRAM ADMINISTRATION ....................................................................................................... 7
2.1 Projected student numbers –Private: ............................................................................................... 7
Projected student numbers –Private: ..................................................................................................... 7
2.2 General Description and Venue(s) .................................................................................................. 7
3. PROGRAM DESCRIPTION ................................................................................................................ 7
3.1 Program Rationale .......................................................................................................................... 7
3.2 Teaching partnership approach ....................................................................................................... 9
3.3 Student Recruitment ........................................................................................................................ 9
3.4 Credit Count .................................................................................................................................. 10
4. SYLLABUS FOR LECTURES ................................................................................................... 11
4.1 Lecture One: Introduction to the WTO dispute settlement: the past and present .................... 11
4.1.1 Objectives ...................................................................................................................................... 11
4.1.2. Lecture Topics .............................................................................................................................. 11
4.1.3. Overview ....................................................................................................................................... 11
4.1.4. Discussion Topics ......................................................................................................................... 12
4.1.5. References and Background Information ..................................................................................... 20
4.1.6. Supporting Materials ..................................................................................................................... 21
4.1.7. Glossary ........................................................................................................................................ 21
4.2. Lecture Two - Jurisdiction of the Dispute Settlement Body(DSB); interpretation; review the
standards and methods of dispute settlement ...................................................................................... 23
4.2.1 Objectives ...................................................................................................................................... 23
4.2.2. Lecture Topics .............................................................................................................................. 23
4.2.3. Overview ....................................................................................................................................... 23
4.2.4. Discussion Topics ......................................................................................................................... 24
4.2.5. References and Background Information ..................................................................................... 35
3
4.2.6. Supporting Materials ..................................................................................................................... 35
4.2.7. Glossary ........................................................................................................................................ 35
4.3. Lecture Three – Settlement of disputes by consultations ............................................................ 37
4.3.1 Objectives ...................................................................................................................................... 37
4.3.2. Lecture Topics .............................................................................................................................. 37
4.3.3. Overview ....................................................................................................................................... 37
4.3.4. Discussion Topics ......................................................................................................................... 38
4.3.5. References and Background Information ..................................................................................... 46
4.3.6. Supporting Materials ..................................................................................................................... 46
4.3.7. Glossary ........................................................................................................................................ 46
4.4. Lecture Four – Establishment and composition of the expert group ........................................... 48
4.4.1 Objectives ...................................................................................................................................... 48
4.4.2. Lecture Topics .............................................................................................................................. 48
4.4.3. Overview ....................................................................................................................................... 48
4.4.4. Discussion Topics ......................................................................................................................... 49
4.4.5. References and Background Information ................................................................................. 58
4.4.6. Supporting Materials ..................................................................................................................... 58
4.4.7. Glossary ........................................................................................................................................ 59
4.5. Lecture Five - The Panel proceedings ......................................................................................... 60
4.5.1 Objectives ...................................................................................................................................... 60
4.5.2. Lecture Topics .............................................................................................................................. 60
4.5.3. Overview ....................................................................................................................................... 60
4.5.4. Discussion Topics ......................................................................................................................... 61
4.5.5. References and Background Information ..................................................................................... 74
4.5.6. Supporting Materials ..................................................................................................................... 75
4.5.7. Glossary ........................................................................................................................................ 75
4.6. Lecture Six – The composition and structure of the Appellate Body(AB) .................................. 76
4.6.1. Objectives ..................................................................................................................................... 76
4.6.2. Lecture Topics .............................................................................................................................. 76
4.6.3. Overview ....................................................................................................................................... 76
4.6.4. Discussion Topics ......................................................................................................................... 77
4.6.5. References and Background Information ..................................................................................... 85
4.6.6. Supporting Materials ..................................................................................................................... 85
4.6.7. Glossary ........................................................................................................................................ 86
4.7. Lecture Seven – Functions and competence of the Appellate Body(AB) ................................... 87
4
4.7.1. Objectives ..................................................................................................................................... 87
4.7.2. Lecture Topics .............................................................................................................................. 87
4.7.3. Overview ....................................................................................................................................... 87
4.7.4. Discussion Topics ......................................................................................................................... 88
4.7.5. References and Background Information ..................................................................................... 91
4.7.6. Supporting Materials ..................................................................................................................... 91
4.7.7. Glossary ........................................................................................................................................ 91
4.8. Lecture Eight – The Appellate Body(AB) proceedings ............................................................... 93
4.8.1. Objectives ..................................................................................................................................... 93
4.8.2. Lecture Topics .............................................................................................................................. 93
4.8.3. Overview ....................................................................................................................................... 93
4.8.4. Discussion Topics ......................................................................................................................... 94
4.8.5. References and Background Information ................................................................................... 102
4.8.6. Supporting Materials ................................................................................................................... 102
4.8.7. Glossary ...................................................................................................................................... 102
4.9. Lecture Nine – Supervision, and prompt implementation of the recommendations and rulings of
the Dispute Settlement Body ............................................................................................................ 104
4.9.1. Objectives ................................................................................................................................... 104
4.9.2. Lecture Topics ............................................................................................................................ 104
4.9.3. Overview ..................................................................................................................................... 104
4.9.4. Discussion Topics ....................................................................................................................... 104
4.9.5. References and Background Information ................................................................................... 119
4.9.6. Supporting Materials ................................................................................................................... 119
4.9.7. Glossary ...................................................................................................................................... 120
4.10. Lecture Ten – Ukraine’s participation in the WTO dispute settlement ................................... 121
4.10.1. Objectives ................................................................................................................................. 121
4.10.2. Lecture Topics .......................................................................................................................... 121
4.10.3. Overview ................................................................................................................................... 121
4.10.4. Discussion Topics ..................................................................................................................... 122
4.10.5. References and Background Information ................................................................................. 131
4.10.6. Supporting Materials ................................................................................................................. 132
4.10.7. Glossary .................................................................................................................................... 132
4.11. Lecture Eleven – Reform of the WTO Dispute Settlement Mechanism ................................. 133
4.11.1. Objectives ................................................................................................................................. 133
4.11.2. Lecture Topics .......................................................................................................................... 133
5
4.11.3. Overview ................................................................................................................................... 133
4.11.4. Discussion Topics ..................................................................................................................... 134
4.11.5. References and Background Information ................................................................................. 137
4.11.6. Supporting Materials ................................................................................................................. 137
4.11.7. Glossary .............................................................................................................................. 137
5. LEARNING OUTCOMES ............................................................................................................... 138
5.1. Knowledge and Understanding .................................................................................................. 138
5.2. Cognitive/Intellectual skills/Application of Knowledge ........................................................... 138
5.3. General transferable skills .......................................................................................................... 138
5.4. Indicative Content ...................................................................................................................... 138
5.5. Learning and Teaching Strategy ................................................................................................ 139
5.6. Assessment Strategy .................................................................................................................. 139
5.7. Assessment Pattern .................................................................................................................... 141
5.8. Indicative Resources Core Text materials: ................................................................................ 141
6. FINAL TESTS .................................................................................................................................. 142
Variant 1 ............................................................................................................................................ 142
Variant 2 ............................................................................................................................................ 149
Answers ............................................................................................................................................. 156
6
1. SYLLABUS GENERALITIES
1.1 Program Title Certificate Program on the Dispute Settlement Mechanism
of the WTO
1.2 Attendee Awards a) Credit
1.3 Modes of
Attendance
Full-time
afternoon
x
Distance
Learning
Other
-
-
1.4 Resource Group:
The teaching
staff will include
(i) International
Private Law
Department of
Institute of
International
Relations of
Kyiv Taras
Shevchenko
University
(ii) USAID Trade
Policy Project
Special guests from the
private sector on specific themes.
1.5 Program Length Eleven lectures To be determined
7
2. PROGRAM ADMINISTRATION
2.1 Projected student numbers –Private:
Projected student numbers –Private:
YEA
R
YEAR
2016
YEAR
2017
YEAR
2018
YEAR
2019
M F M F M F M F
YEAR
2016
20 10
2.2 General Description and Venue(s)
Class rooms: During the first year, the program could organize the teaching at
Institute for International Relations of Kyiv Taras Shevchenko University.
Classroom needs: The program will need high speed internet access and
accessibility to on-line literature (e-journals) and communications capacity. A projector
and screen will be needed also.
3. PROGRAM DESCRIPTION
3.1 Program Rationale
This course deals with understanding of the Dispute Settlement Mechanism of
WTO and the analysis of all trade related issues and cases relating to Ukraine. Nowadays,
WTO is one of the most powerful and influential international organization in the world,
and the only one which deals with trade issues. Ukraine became a 152nd WTO member
on May 16, 2008, and since that time the Dispute Settlement Mechanism became of the
main interest for Ukraine.
Dispute Settlement Mechanism plays and integral role in any legal system as it
establishes the prescriptive rules of regulation for its members to resolve the disputes
which may arise between its contracting parties. The main idea of DSM is to ensure the
8
conscientiously and mandatory implementation of contracting party’s obligations.
Todays’ trends are to determine the economic growth degree on the world area by
evaluating of the well-being of its citizens and trade relations with the other countries.
WTO system was established to ensure the economic growth through providing by its
rules of the “best” legal mechanism, including the DSM which aims to be the best design
of the system of dispute resolution. This mechanism was created for the one main purpose
so that the WTO members (164 member states as of January 1, 2016) were able to
effectively protect their state trade interest. However, todays’ DSM could not be called as
an “ideal” system, there are still some disadvantages and problems to be resolved, but
DSM makes its steps in that way.
The objectives of this course include the evaluation and analysis of the WTO
Dispute Settlement Mechanism. The DSM is the main pillar and main achievement of the
WTO. The development of the DSM was quiet long and difficult, it began from the
General Agreement on Tariffs and Trade (GATT) and now it is known to be the most
developed and most progressive system of formal dispute settlement regimes involving
not only judicial but also political mean of dispute settlement. DSM provides a well-
crafted forum for negotiations and consultations between the contracting parties as the
main objective of WTO DSM is not to render the “judgement” but mostly to settle the
dispute in the way it would be mutually beneficial for all the parties of the dispute. The
WTO DSM has been effective since 1995 and has, during the period of its existence,
settled more than 500 disputes.
The topic is relevant due to the fact the role of WTO DSM not only in economic
but also in legal relations increases exponentially, as well as the tendency of globalization
of legal systems and WTO is a great example. The DSM of WTO can’t be called as new
but it’s modern look is gained not so long ago, and that is why it can be considered as a
very effective.
9
The goal is to help students to better realize the proceedings of the DSM of the
WTO, to prepare them for their future participating in the capacity of state representatives.
These students are expected to play leadership roles in understanding and using the DSM
tool in favour of Ukraine.
3.2 Teaching partnership approach
The objective program is to strengthen the capacity of universities to train students,
government and private sector personnel on the fundamental principles of dispute
settlement in the WTO DSM. The course is based on providing the best guideline based
upon the international guidelines. These new requirements will have a significant impact
on DSM understanding in Ukraine.
The lecturer will support a coordinated partnership model to provide information
on the features of the DSM and its proceedings to students. Local instructors will be
trained by co-delivering this content to the first cohort of students thereby acquiring access
to developed materials, articles, papers, exercises and experiences developed by the
consultant to be used with future cohorts.
Qualified Master and PhD level professors are available to teach all the contents of
the program. Cooperation with USAID Trade Policy Project will greatly improve the
efficiency of the program.
3.3 Student Recruitment
The program will target men and women with potential for leadership among the
students of the universities of Ukraine. First, the program will be launched in Kyiv Taras
Shevchenko University in Institute of International Relations on English-speaking master
program “International Trade Regulation” and then in the other universities of Ukraine.
10
3.4 Credit Count
This course is designed as credit.
11
4. SYLLABUS FOR LECTURES
4.1 Lecture One: Introduction to the WTO dispute settlement: the past and
present
4.1.1 Objectives
This lecture explains the importance of the WTO Dispute Settlement Mechanism,
its applicability and long history of establishment to better understand the current trends
of the WTO DSM, brief reviews of the levels and the aims of the WTO DSM.
4.1.2. Lecture Topics
1. The nature of WTO dispute settlement mechanism
2. The historical development of DSMs
3. The levels of DSM
4. The aim of DSM
4.1.3. Overview
Dispute settlement is the central pillar of the multilateral trading system, and the
WTO’s unique contribution to the stability of the global economy. Without a means of
settling disputes, the rules-based system would be less effective because the rules could
not be enforced. The WTO’s procedure underscores the rule of law, and it makes the
trading system more secure and predictable. The system is based on clearly-defined rules,
with timetables for completing a case. First rulings are made by a panel and endorsed (or
rejected) by the WTO’s full membership. Appeals based on points of law are possible.
However, the point is not to pass judgement. The priority is to settle disputes,
through consultations if possible. By January 2016, only about 360 of the nearly 500 cases
12
had reached the full panel process. Most of the rest have either been notified as settled
“out of court” or remain in a prolonged consultation phase — some since 1995.
4.1.4. Discussion Topics
1. The nature of WTO dispute settlement mechanism
Article 3.2 of the DSU states:
The dispute settlement system of the WTO is a central element in providing
security and predictability to the multilateral trading system. The Members
recognize that it serves to preserve the rights and obligations of Members under the
covered agreements, and to clarify the existing provisions of those agreements in
accordance with customary rules of interpretation of public international law.
Recommendations and rulings of the DSB cannot add to or diminish the rights and
obligations provided in the covered agreements.
WTO Members have explicitly recognized that the prompt settlement of disputes
arising under the covered agreements “is essential to the effective functioning of the WTO
and the maintenance of a proper balance between the rights and obligations of Members.”
The declared object and purpose of the WTO dispute settlement system is to achieve “a
satisfactory settlement” of disputes in accordance with the rights and obligations
established by the covered agreements. Furthermore, the object and purpose of the dispute
settlement system is for Members to seek redress for a violation of obligations or other
nullification or impairment of benefits through the multilateral procedures of the DSU,
rather than through unilateral action. Article 23.1 of the DSU states:
When Members seek the redress of a violation of obligations or other
nullification or impairment of benefits under the covered agreements or an
13
impediment to the attainment of any objective of the covered agreement, they shall
have recourse to, and abide by, the rules and procedures of this Understanding.
The DSU expresses a clear preference for solutions mutually acceptable to the
parties reached through negotiations, rather than solutions resulting from adjudication.
Article 3.7, quoted above, states in relevant part that a solution mutually acceptable to the
parties to a dispute is “clearly to be preferred”. Accordingly, each dispute settlement
proceeding must start with consultations between the parties to the dispute with a view to
reaching a mutually agreed solution. To resolve disputes through consultations is
obviously cheaper and more satisfactory for the long-term trade relations with the other
party to the dispute than adjudication by a panel.
2. The historical development of DSMs
• Dispute Settlement Mechanisms (DSMs) in international public law
There were not a lot of institutions which decided disputes between States. It is the
International Court of Justice is regarded to be the principal one to hear cases related to
the international public law. There are several institutions as International Criminal Court,
UNCLOS DSM or ICSID which also decide cases concerning the violation of the
international law. However, at the end of the day these mechanisms aren’t considered
effective and enforceable enough.
There is also a dispute settlement mechanism related to the international trade law
based on the FTAs. However, there have been brought few cases under this procedure/ In
this context, a question arises on usefulness of dispute settlement mechanisms prescribed
under the TPP and TTIP., Actually nobody can say whether this mechanism works, mostly
it doesn’t.
14
Prior to negotiations on the “mega-regional” FTAs, States had preferred WTO
DSM to one set forth in the referential trade deals in order to preserve stability of its trade
interests. Currently, FTAs, such as the TPP and TTIP report considerable progress of the
trade commitments evolution including disciplines that beyond the WTO regulation.
Therefore, provided that the WTO law does not develop much in the result of the Doha
Round, the DSMs provided under “mega-regional” PTAs will become crucial to resolve
trade disputes.
DCFTA and CIS procedure of dispute settlement are also not effective. The only
one mechanism which really works now is the WTO system.
• DSMs in the area of international trade: from diplomatic to judicialized
systems
The WTO dispute settlement system, as it has been operating since 1 January 1995,
did not fall out of the blue. It is not a novel system. On the contrary, this system is based
on, and has absorbed, almost fifty years of experience with the resolution of trade disputes
in the context of the GATT 1947. Article 3.1 of the DSU states:
Members affirm their adherence to the principles for the management
of disputes heretofore applied under Articles XXII and XXIII of GATT 1947,
and the rules and procedures as further elaborated and modified herein.
GATT didn’t have institution and the law on the dispute settlement developed from
zero. the GATT 1947 was not conceived as an international organization for trade. The
GATT 1947 therefore did not provide for an elaborate dispute settlement system. In fact,
the GATT 1947 contained only two brief provisions relating to dispute settlement:
Articles XXII and XXIII. Under the GATT 1947, a dispute, which parties failed to resolve
through consultations, was in the early years of the GATT “handled” by working parties
set up pursuant to Article XXIII:2. These working parties consisted of representatives of
15
all interested Contracting Parties, including the parties to the dispute, and made decisions
on the basis of consensus. Panels appeared by the 1960s. From the 1960s a dispute was
usually first heard by a so-called “panel” of three to five independent experts from GATT
Contracting Parties not involved in the dispute. This panel then reported to the GATT
Council, consisting of all Contracting Parties, which would have to adopt by consensus
the recommendations and rulings of the panel before they would become legally binding
on the parties to the dispute. The dispute settlement procedures and practices, which were
developed over the years in a pragmatic ad hoc manner, were progressively codified and
supplemented by decisions and understandings on dispute settlement adopted by the
Contracting Parties. There was a huge ideological dispute whether the WTO court should
be judicial or diplomatic which lasted during 1960s-1980s. Is it biding or not?
Governments on the whole didn’t want the judicial type dispute settlement in GATT
because they needed lawyers and trade people were never lawyers in the government.
Trade policy people usually decided matters by themselves without involving the lawyers.
We can still see the diplomatic side in requesting panels twice, parties can start the
consultation. It is interesting to compare the WTO procedure to the normal courts, usually
you don’t need to consult the other party before you follow your complaint.
By the 1980 there were already panels that presented reports which were not as long
as now and held hearings. In 1983, a GATT Legal Office was established within the
GATT Secretariat, to help panels, often composed of trade diplomats without legal
training, with the drafting of panel reports. As a result, the legal quality of panel reports
improved and the confidence of the Contracting Parties in the panel system increased.
During the 1980s, previous panel reports were increasingly used as a sort of “precedent”
and the panels started using customary rules of interpretation of public international law.
But there were a lot of restrictions, for example, members could block the formation of
the panel, members could block the establishment of the panel, members could block the
16
composition of the panel, members could block the decision of the panel and also some
members could have the pressure on the panellists because most of them were delegates.
GATT had bad reputation because 6 or 7 decisions were blocked, mostly by the EU.
In 1989 during the negotiations it was agreed that members can no longer block the
establishment but they could still block the final. Some decisions of the WTO were
considered as not legally correct and as political. The settlements of the disputes in the
WTO were more usual for the European countries and US, there were almost no cases
between Asia countries, but now there are a range of cases between Asian countries, so
that shows the great development of the WTO court as internationally effective institution.
The GATT dispute settlement system evolved from a power-based system of dispute
settlement through diplomatic negotiations into a system that had many features of a rules-
based system of dispute settlement through adjudication.
While the GATT dispute settlement has generally been considered as quite
successful in fully or partially resolving disputes to the satisfaction of the complaining
party, the system had some serious shortcomings, which became ever more acute in the
1980s and the early 1990s. Governments started to give their preference to the WTO
dispute settlement. But still there are some countries which prefer the diplomatic dispute
settlement, for example, Kazakhstan which doesn’t do much to improve the system of
dispute settlement. The fact that the losing party could prevent the adoption of the panel
report meant that panels were often tempted to arrive at a conclusion that would be
acceptable to all parties. Whether that conclusion was legally sound and convincing was
not a prime concern. Furthermore, the Contracting Parties regarded the dispute settlement
process as unable to handle many of the politically sensitive trade disputes since the
assumption was that the respondent would refuse to agree to the establishment of a panel
or the losing party would prevent the adoption of the panel report. As a result, some
Contracting Parties, and, in particular, the United States, resorted increasingly to unilateral
17
action against measures they considered in breach of GATT law. There is the question
which system is more effective: FTA mechanism or WTO? But as we can see most
countries prefer to bring cases to the WTO. Even members of such organizations as
MERCOSUR also turn to the WTO. But there are some agreements like the TPP or TTIP
which don’t deal with the WTO, so there is the huge question mark if the DSM will work
there.
Interesting example can be the Tuna Dolphin Save Seal case, according to the
NAFTA (ART.2005) cases on the environmental issues shall not be decided by the WTO,
but Mexico applied to the WTO instead of the NAFTA because US sabotaged the NAFTA
dispute settlement system. Now the WTO system is the one which really works and which
is transparent and considered as the most fair.
The improvement of the GATT dispute settlement system was high on the agenda
of the Uruguay Round negotiations. The 1986 Punta del Este Ministerial Declaration on
the Uruguay Round stated with regard to dispute settlement:
In order to ensure prompt and effective resolution of disputes to the benefit of
all contracting parties, negotiations shall aim to improve and strengthen the rules
and the procedures of the dispute settlement process, while recognizing the
contribution that would be made by more effective and enforceable GATT rules and
disciplines. Negotiations shall include the development of adequate arrangements for
overseeing and monitoring of the procedures that would facilitate compliance with
adopted recommendations.
Already in 1989, the negotiators were able to reach agreement on a number of
improvements to the GATT dispute settlement system. These improvements included the
recognition of the right to a panel and strict timeframes for panel proceedings. No
agreement was reached, however, on the most difficult issue of the adoption of panel
18
reports by consensus. This issue was only resolved in the final stages of the Round and
was linked to the introduction of appellate review of panel reports.
The Understanding on Rules and Procedures Governing the Settlement of Disputes,
commonly referred to as the Dispute Settlement Understanding or DSU, is attached to the
WTO Agreement as Annex 2 and constitutes an integral part of that Agreement. The DSU
provides for an elaborate dispute settlement system and is often referred to as one of the
most important achievements of the Uruguay Round negotiations. The most significant
innovations to the GATT dispute settlement system concern:
a. the quasi-automatic adoption of requests for the establishment
of a panel, of dispute settlement reports and of requests for the authorization
to suspend concessions;
b. the strict timeframes for various stages of the dispute settlement
process; and
c. the possibility of appellate review of panel reports.
The latter innovation is closely linked to the quasi-automatic adoption of panel
reports and reflects the concern of Members to ensure high-quality panel reports.
During the existence of WTO Dispute settlement mechanism nearly 500 disputes
have already been brought to the DSB.
3. The levels of DSM
The DSM is implemented on both multilateral and regional (bilateral) levels. The
main one should be considered the multilateral level, it consist of:
GATT 1994 – Articles XXII-XXIII
Dispute Settlement Understanding (DSU)
19
Other agreements, e.g. Articles 4, 7, 24 and 30 of the Agreement on
Subsidies and Countervailing Measures, Article 17 (establish the cases which can
be brought to the WTO) of the Anti-dumping Agreement etc.
The regional, or sometimes called bilateral level, is also represented:
There are provisions on dispute settlement in each regional/bilateral
trade agreements in which Ukraine is also part. (examples: Article 19 of the
Agreement on Free Trade Zone or Article 14 of the FTA between Russia and
Ukraine.
The dispute settlement on the regional level is not usually used. The cases Ukraine
ever brought to the WTO mostly were against the countries with which Ukraine had FTA.
NAFTA cases also usually were brought to the WTO. That shows us that WTO dispute
settlement system is considered as the most fair and neutral for the both parties, so no
party can sabotage the system.
4. The aim of DSM
The main aim of WTO Dispute settlement mechanism is “To secure a “positive
solution” of a dispute. A solution mutually acceptable to the parties to a dispute and
consistent with the covered agreements is clearly to be preferred. to the dispute”. That is
prescribed in Article 3.7 of Dispute Settlement Understanding.
The referred outcome of any dispute is :
- To reach a mutually agreed solution
If the mutual solution is not found that there are other effective instruments to solve
the dispute, prescribed by the Dispute settlement Mechanism:
- Panel Proceeding ….
20
- [….and AB review.]
- [Or Article 25 DSU Arbitration]
The request for consultation is the way to get the answer for parties whether they
should litigate or not. Also request for consultations makes the other parties to take the
dispute seriously it raises its visibility. Some cases may be settled on the consultation
stage (around 40 percent). The last updated data says that 500 disputes have been brought
to the WTO, of which:
110 disputes have been resolved bilaterally or withdrawn
282 disputes have proceeded to the litigation phase
For the remainder, no outcome has been notified to the WTO.
A total of 102 members have participated in a dispute either as a complainant or a
respondent or as a third party. That means 63% of the membership has used the system.
The authorization for a member to retaliate once another member has been found to be in
violation of its WTO obligations has been given 18 times, which means only 10% of the
disputes have reached this outcome of last resort. The compliance rate with dispute
settlement rulings is very high, at around 90%
4.1.5. References and Background Information
1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the World
Trade Organization
2) The History and Future of the World Trade Organization Craig Van
Grasstek, World Trade Organization 2013
3) Understanding the WTO 2011
4) United Nations Conference on trade and development – DSB overview
5) Andrew D. Mitchell, The Legal Basis for Using Principles in WTO Disputes
6) World Trade Organization; https://www.wto.org/
21
4.1.6. Supporting Materials
(Slides)
4.1.7. Glossary
Accession - becoming a member of the WTO, signing on to its agreements. New
members have to negotiate terms:
— bilaterally with individual WTO members
— multilaterally, (1) to convert the results of the bilateral negotiations so that they
apply to all WTO members, and (2) on required legislation and institutional reforms that
are need to meet WTO obligations.
DSU - Dispute Settlement Understanding, the WTO agreement that covers dispute
settlement — in full, the Understanding on Rules and Procedures Governing the
Settlement of Disputes.
FTA – (free trade area) trade within the group is duty free but members set their
own tariffs on imports from non-members (e.g. NAFTA).
Countervailing measures - action taken by the importing country, usually in the
form of increased duties to offset subsidies given to producers or exporters in the
exporting country.
MERCOSUR – a free trade area between Argentina, Brazil, Paraguay and
Uruguay.
Multilateral - in the WTO, involving all members.
NAFTA – (North American Free Trade Agreement) is a free trade agreement
comprising Canada, Mexico and the US.
22
TTIP – (the Transatlantic Trade and Investment Partnership) is a proposed free
trade agreement between the European Union and the United States, with the aim of
promoting multilateral economic growth.
Uruguay round - Multilateral trade negotiations launched at Punta del Este,
Uruguay in September 1986 and concluded in Geneva in December 1993. Signed by
Ministers in Marrakesh, Morocco, in April 1994.
Working party - group of WTO members negotiating multilaterally with a country
applying to join with the WTO.
WTO – The World Trade Organization deals with the global rules of trade between
nations. Its main function is to ensure that trade flows as smoothly, predictably and freely
as possible.
23
4.2. Lecture Two - Jurisdiction of the Dispute Settlement Body(DSB);
interpretation; review the standards and methods of dispute settlement
4.2.1 Objectives
This lecture explains the scope of jurisdiction of the Dispute Settlement Body and
the review of the standards and methods of dispute settlement. This lecture aims to
disclose the main functions of the DSM of the WTO, the participants and types of legal
complaints that may be brought before the DSB.
4.2.2. Lecture Topics
1. The scope of jurisdiction
2. The Functions of the WTO DSM
3. The participants of the WTO DSM
4. Main types of legal complaints
5. Challengeable measures
6. Precedent value
4.2.3. Overview
There are several basic things to be disclosed about the Dispute Settlement
Mechanism. First of all, we realize the importance of the scope of jurisdiction of the
Dispute Settlement Body and its role in settling disputes. Jurisdiction is the main point of
the DSM at all as the main question that stands before us is “What can be subject for
dispute and how should DSB act?”. It is also important to realize the main participants of
the DSM and their role in the process of settling disputes, and how is all the mechanism
incorporated on practice.
24
The types of legal complaints is a rather delicate question, as here we should take
into account that not all things can be challenged under the WTO DSM. As the WTO
system seems rather complicated the precedent value is still a good point for discussion
in the context of the huge amount of disputes brought under the DSM of the WTO.
4.2.4. Discussion Topics
1. The scope of jurisdiction
The WTO dispute settlement system has jurisdiction over any dispute between
WTO Members arising under what are called the covered agreements. The covered
agreements are the WTO agreements listed in Appendix 1 to the DSU, including the WTO
Agreement, the GATT 1994 and all other Multilateral Agreements on Trade in Goods, the
GATS, the TRIPS Agreement and the DSU. Article 1.1 of the DSU establishes “an
integrated dispute settlement system” which applies to all of the covered agreements. The
DSU provides for a single, coherent system of rules and procedures for dispute settlement
applicable to disputes arising under any of the covered agreements.
However, some of the covered agreements provide for a few special and additional
rules and procedures “designed to deal with the particularities of dispute settlement
relating to obligations arising under a specific covered agreement”. Pursuant to Article
1.2 of the DSU, these special or additional rules and procedures prevail over the DSU
rules and procedures to the extent that there is a “difference”, i.e., a conflict, between the
DSU rules and procedures and the special and additional rules and procedures.
The jurisdiction of the WTO dispute settlement system is compulsory in nature.
Pursuant to Article 23.1 of the DSU, quoted above, a complaining Member is obliged to
bring any dispute arising under the covered agreements to the WTO dispute settlement
system.
25
As a matter of law a responding Member, on the other hand, has no choice but to
accept the jurisdiction of the WTO dispute settlement system. With regard to the latter,
we note that Article 6.1 of the DSU states:
If the complaining party so requests, a panel shall be established at the latest
at the DSB meeting following that at which the request first appears as an item on the
DSB’s agenda, unless at that meeting the DSB decides by consensus not to establish
a panel.
Unlike in other international dispute settlement systems, there is no need for the
parties to a dispute arising under the covered agreements to accept in a separate
declaration or separate agreement the jurisdiction of the WTO dispute settlement system
to adjudicate that dispute. Accession to the WTO constitutes consent to and acceptance of
the compulsory jurisdiction of the WTO dispute settlement system.
With regard the jurisdiction of the WTO dispute settlement system, it should also
be noted that the system has only contentious, and no advisory, jurisdiction.
2. The Functions of the WTO DSM
The main functions of the WTO DSM can be specified as:
Providing security and predictability to the multilateral trading
system;
Preserving the rights and obligations of Members under the Covered
Agreements;
Clarification of rights and obligations through interpretation;
Prompt settlement of disputes;
26
The WTO agreement is pretty long and detailed. The Appellate Body does the great
job to observe the security and predictability. The AB was established because members
couldn’t block the final decisions. In the Spain-Soybean oil case where the Spain won and
everybody agreed that the panel was wrong, there was consensus not to adopt the panel
decision. And that case had a big influence, the necessity to establish some sort of
appellate body appeared. The AB was completely new for the existing WTO dispute
settlement system.
Appellate body can change many rights and obligations, the extreme case is the US-
Softwood Lumber, where CVDs on Canada where imposed, Article 14 (d )says: you look
at benchmarks within the country, the AB removed those words. There are any examples
of such actions taken by the AB. The AB has a lot of legitimacy.
Comparing to the 1990s now the speed of the procedure within the WTO is
extremely slow. The translation of the panel reports can take more than 3 months. There
are many issues within the DSM which should be changed. The settlement of the dispute
may take around 4-5 years. The last statistic report on how cases become more and more
complicated says that in 1995 there were on average 4 claims per case and in 2014 there
are 118 claims on average. This changes mostly took place due to the lawyers. It happened
that a lot of the claims are not serious but the panel should consider cases carefully because
of the AB and that takes a lot of time. But the other institutions don’t usually decide the
disputes faster. The fastest courts now are the US courts.
Additional features
The DSM as a tool that dissuades Members to act
inconsistently;
If a violation is proven, the complainant does not need to show
separately that it causes nullification or impairment;
Unilateral actions are prohibited (Article 23.2 DSU);
27
WTO DSM: Compulsory and exclusive jurisdiction for
violations of WTO obligations;
Prospective effect of WTO rulings ;
DSM dissuades the members not usually, but most of the time. The unilateral
actions (sanctions) are prohibited and this mechanism works, the US which often took
unilateral actions before now doesn’t. The issue on the jurisdiction may be based on the
public opinion or the opinion of the AB in cases related to the environmental agreements.
For example, in the EU-Seals case the WTO AB turned to the European public opinion.
3. The participants of the WTO DSM
That is a general confusion for people to think that DSB does things independently.
There is also an Appellate Body that makes decisions and the conduct of the whole work
of the panel and the Appellate Body is helped by the WTO Secretariat. After all they
report to the General Council the part of which is the DSB. Then, the important instance
28
is the Ministerial Council which can change things but it practically doesn’t work. In every
country after the issuance of the court decision you can go off and change the meaning of
a statute or a law, but it is not possible to change things through Ministerial Conference.
So, the most important issues here to understand is that the panel and the Appellate Body
are not independently and solely provide their work as they are the part of the DSB which,
in its part is a part of the General Council. And the second that it is impossible to legislate
changes due to the blockage on the Ministerial Conference level and that is becoming a
real problem nowadays. So whether someone asks what DSB finally decides in the current
case you may say: Nothing! That is the common sense that should be understood behind
although the DSB decisions are purely legal.
Other participants
The Parties (complainant, respondent & third parties): WTO
Members only
In every particular case you have parties and the important thing is that they can
be only governments which is a defining subjective characteristic. The governments
are the only who can decide what kind of limits of the cases that may be brought. That is
why there are too few cases brought against subsidies and countervailing duties– 3,
arguably 4 (including Indonesia-Autos). So they are: Indonesia- Autos, Brazil –Cotton,
US-Cotton and US-Large Commercial Aircraft. Only they are against normal subsidies,
we should not take into account the export subsidies cases which would be too easy.
Although that under Article 25 there were reported a lot subsidies which cover more than
2000 pages, it is clear that governments are not going to challenge each other subsidies.
That is an indicative example. Nobody also challenges Article XXI of the GATT in a fact.
Panel
29
The usual amount of panelists is 3 although there can be 5 but this never was in
practice.
Expert
In order to compose the Panel there should be defined the experts. Every party to
the case usually fights for the expert, which questions they can ask them, etc.
Mostly these experts are from the specialized UN agencies like World Health
Organization, FAO but sometimes the parties can invite the outside expert.
Appellate Body (7 members)
The most part of the Appellate Body are lawyers but not all.
WTO secretariat
The important role plays the Secretariat which is much stronger which is much
stronger than the ECJ assistants of the US court clerks. They make a great contribution to
the quality as part-time panelists and part-time Appellate Body’s officials cannot do a lot
of work. Secretariat in the case works like a separate body.
Non –governmental actors
Non-governmental actors are not very important as they sometimes believed to be.
The only significant example of invocation of NGO to the dispute settlement was in the
EU-Sardines where Peru attached their statement to the written submission and it was
accepted by the Panel as a part of it. This NGO was the British Consumer Association
which was during its whole existence litigation over the issue of labels. Peru got them to
agree with Peru’s position and invited to make some impact on the Panel.
Third parties
30
Third parties actually can have the impact on the Panel if they have really good
arguments. They are not focused on the particular issues of interpretation and application
of agreements, third parties somehow provide a some kind of layer of credibility to the
submissions of the main parties to the dispute. The third parties submissions also often
provide transparency as usually main parties restrict their submissions for their population
at first periods. The most ‘transparent’ in providing the access to their submissions are the
USA and the EU. The opposite example is Russian Federation. For Ukraine its vital to get
the support of Third parties. But the best Third parties written submissions come from the
US.
4. Main types of legal complaints
There are two types of complaints – violation complaint and non-violation
complaint.
The violation complaint is a traditional complaint brought regarding the rule that
someone has violated. The main problem as was mentioned before is that the broken rule
cannot be modified according to the modernity like any national legislative act. The only
way how the WTO law was formally amended was the waiver on Kimberley “conflict
diamonds”.
Non–violation complaint. This is the matter of logic. The example is the very first
GATT case. Chili and Australia made an agreement between each other to low tariffs on
fertilizers for $10 per tone. Australia immediately established a subsidy in amount of $10
per every tone of fertilizers to offset the tariff reduction. Chili goes to the WTO (GATT
at that time) and the response was that there had not been any violation by Australia but,
however, according to Article 23 Australia undermined the bargain made with Chili.
There were a lot of cases where the non-violation complaint was involved. But after the
WTO establishment neither of them were successful. In Japan-Films there were provided
31
a lot of explanations why was not the non-violation complaint successful enough.
Nevertheless, the DSB frequently gets into expectations of the parties.
The importance of this is practically displayed with respect to the IP Agreement
(TRIPS) regarding constantly renewed moratorium on NV/NNI (non violation
nullification & impairment) cases in TRIPS because otherwise USA would bring a case
against anyone who sets maximum prices on pharmaceuticals as it arguably undermines
the value of the pattern. This pattern expired in 2005 but currently it is being renewed.
5. Challengeable measures
• Actions and inactions
That is an important issue to understand against what measures can the dispute be
initiated. These should be the actions which the government did or sort of ‘did’. The cases
when states did not react when the are not subject to the WTO dispute settlement. The
only WTO agreement which obliges the state to do private staff is TRIPS. There was a
case initiated by the USA against Korea where USA claimed that Korea did not enforce
its IP legislation and did not establish fines high enough. In this particular case only failure
to legislate was recognized in violation of WTO rulings.
There was also an arguable issue whether the state’s suggestion to the private
parties to do or to avoid some actions can be considered as an order (decree). The positive
view was provided in the Japan –Semi-Conductors case.
So, there are two types of governmental inactions: governmental informal
suggestion and governmental failure to exercise some actions. These situations have
different effects in the WTO dispute settlement.
32
• Mandatory vs. discretionary legislation
Later there was a dominative doctrine which is no longer valid that WTO dealt only
with mandatory legislative issues. The USA when implementing the Uruguay round wrote
a lot of things, especially in dumping cases about what the Department of Commerce was
always to do which was not specifically mandatory but everyone knew that they are going
to do it. For example in section 3.3.7 “The intellectual property protection on the border”,
the Congress suggested that they would do all the cases during 18 months. Later the USA
have lost the case filed by the EU where the latter challenged that although this provision
was discretionary, the government made the people to believe that they would do so. The
USA wrote a lot of things that was considered by the Appellate Body as an attempt to
evade WTO control. Finally they all were found really mandatory.
• Sub-central government acts
Sub-central governments have different status in every state according to the model
accepted there but mostly their authorities are limited to several ones. The states in the
USA for some weird historical reasons control all issues regarding alcoholic beverages
except labelling which is under the control of states’ administration. So whether there is
imposed a tax on Canadian beer, for example, the central government cannot change it
and that can become a WTO DSB case.
According to the modern doctrine only central government is considered to be a
subject of public international law which holds the commitments undertook. Therefore,
they cannot claim for the lack of power on sub-central governments to justify the
violations.
33
• Legislation not yet in force
This paragraph covers both types of cases which are yet in force and already not in
force. The main criterion is whether the legislative act is enforced at the time of
establishment of the panel.
The staff which is not yet in force in the period indicated cannot be argues in the
WTO DSB (according to the US-Large Commercial Aircraft). Another bright example is
the safeguard case Argentina –Footwear.
• Effect of other agreements (e.g. FTAs)
In the Doha round there were ongoing negotiations regarding the issue of FTAs
regulation mechanisms which is prescribed by Article 24 of the GATT. The specific
committee should be notified of the provision of such agreement and have authorities not
to grant these FTAs the access to the WTO DSB whether they are not WTO-consistent.
6. Precedent value
• Panels and the AB produce reports, not judgements
There exist certain rules regarding communication of members with the WTO
Secretariat. Majorly, the members are not allowed to speak to the secretariat without the
specific permission and that distinguishes it with the UN, OECD and other organizations.
The only instance which can be freely communicated with is the Budget Committee.
So, the concept that the panels and the AB produce reports not judgments is, of
course, only the formal one. Of course they are judgments because by their nature. But
technically they are not legally binding until the DSB considers them and adopts in
general.
34
• Adopted reports do not create binding precedents
Only parties can adopt authoritative interpretations but they did not factually do so.
Nevertheless panels and AB usually follow their prior decisions as the AB never
admits their mistake. The examples of these are the US –Tuna and the EU-COOL cases.
In EU-Beef Hormones there were not objectively found any evidence of the harm from
the hormones and that was envisaged by the EU trial. However, the Appellate Body stated
that “you need a bit of more evidence” to ensure your position. They said that in order to
sustain a regulation they have to invite at least two scientists (without existence of
majority science) which may not work as a rule as there are always some scientists to be
found. Without any admitting they were wrong. The situation repeated in Japan –Apples
where the AB said ‘you have to do a perfect risk assessment’ without nothing to do with
the majority science which is not true exactly. But the most famous examples regarding
the precedent nature are the zeroing cases. In these cases the AB has seven times reported
the impossibility to zero following the prior DSB decisions. But the most interesting
example is the Mexico- Stainless where the panel decides that government can zero
although the circumstances were the same as in six previous cases. The AB further
‘smacked them down’ saying that only they can change the precedents and panels have
just to follow them.
So, the WTO DSB decisions have no precedent value, no binding character, this is
not a common law system. But frankly speaking, it is very familiar with the common law
system.
35
4.2.5. References and Background Information
1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the World
Trade Organization
2) The History and Future of the World Trade Organization Craig Van
Grasstek, World Trade Organization 2013
3) Understanding the WTO 2011
4) United Nations Conference on trade and development – DSB overview
5) Andrew D. Mitchell, The Legal Basis for Using Principles in WTO Disputes
4.2.6. Supporting Materials
(Slides)
4.2.7. Glossary
Appellate Body – An independent seven-person body that considers appeals in
WTO disputes. When one or more parties to the dispute appeals, the Appellate Body
reviews the findings in panel reports.
Ministerial Conference – the top decision-making WTO body
Nullification and impairment – Damage to a country’s benefits and expectations
from its WTO membership through another country’s change in its trade regime or failure
to carry out its WTO obligations.
Panel – In the WTO dispute settlement procedure, an independent body is
established by the Dispute Settlement body, consisting of three experts, to examine and
issue recommendations on a particular dispute in the light of WTO provisions.
36
Precedent – is a principle or rule established in a previous legal case that is either
binding on or persuasive for a court or other tribunal when deciding subsequent cases with
similar issues or facts.
Predictability – is the degree to which a correct prediction or forecast of a system's
state can be made either qualitatively or quantitatively.
37
4.3. Lecture Three – Settlement of disputes by consultations
4.3.1 Objectives
This lecture explains the existence of 2 methods to settle the disputes under the
WTO. The first, and the most important one is consultations. The main aim of this lecture
is to disclose the proceedings prior to the initiation of adjudication proceedings.
4.3.2. Lecture Topics
1. Consultations as a mean to settle dispute
2. The form of the request
3. An obligation to respond the request for consultations
4. Other features of consultations
4.3.3. Overview
Consultations are considered as the oldest method to settle the dispute. Moreover,
the consultations under the WTO are the diplomatic way to settle the dispute but with
legal consequences. That differs the WTO DSM from other Dispute Settlement
Mechanism within the other organizations and legal systems.
Consultations should be initiated through the Secretariat and from that time the
WTO DSM begin. Consultations helped to settle the 1/3 of all the disputes, bought before
the DSB. It has a lot of different features, that should be taken into account.
38
4.3.4. Discussion Topics
1. Consultations as a mean to settle dispute
The WTO dispute settlement system provides for more than one dispute settlement
method. The DSU allows for the settlement of disputes through consultations (Article 4
of the DSU); through good offices, conciliation and mediation (Article 5 of the DSU);
through adjudication by ad hoc panels and the Appellate Body (Articles 6 to 20 of the
DSU) or through arbitration (Article 25 of the DSU). the DSU expresses a clear preference
for solutions mutually acceptable to the parties to the dispute, rather than solutions
resulting from adjudication. Therefore, resort to adjudication by a panel must be preceded
by consultations between the complaining and responding parties to the dispute with a
view to reaching a mutually agreed solution.
There are two or even three key points in a dispute. One of them is consultation.
When a dispute arises parties should request for consultations. The aim of the WTO
dispute settlement system is to secure a positive solution to a dispute. The DSU expresses
a clear preference for solutions mutually acceptable to the parties to the dispute, rather
than solutions resulting from adjudication by a panel. All the idea of the consultations is
to come to a mutually agreed to solutions and to obtain a satisfactory adjustment so if you
obtain it would be mutually beneficiary for both of you and there is no need to move
further. The DSU is based on its diplomacy view that you just resolving a dispute any way
you like which is what a commercial arbitration does. The only point here is that the
parties should be satisfied with the outcome.
Therefore, each panel process must be preceded by consultations between the
complaining and responding parties to the dispute with a view to reaching a mutually
agreed solution. The DSU provides that in the course of consultations and before resorting
to further action, Members should attempt to obtain satisfactory adjustment of the matter.
The DSU requires that Members engage in consultations in good faith in an effort to
39
resolve the dispute amicably before the dispute can be referred to a panel. The key word
here should be that the party must enter in consultations in “good faith”.
When you see any word “in good faith” on any WTO document you keep laugh
as you understand that nothing is done here in a good faith.
A majority of disputes so far in the (WTO) have not proceeded beyond
consultations, either because a satisfactory settlement was found, or because the
complainant decided for other reasons not to pursue the matter further. This shows that
consultations are often an effective means of dispute resolution in the WTO and that the
instruments of adjudication and enforcement in the dispute settlement system are by no
means always necessary.
Request should be made by one or more Members to another Member. Until you
made such request another party won’t take it seriously. WTO is usurped by traditional
diplomacy and the other side if the dispute would take it seriously only after you file a
request. It is an essential process among the parties. Parties can make a request to be
included but not rights to be included. The most important bullock here is the attempt to
obtain a satisfactory adjustment of the matter. As we look to a history there are 110
disputes settled in this way and 350 that got that far to be settled by the Panel. That is a
positive evidence of the efficiency of diplomatic peaceful settlement of disputes under
WTO by consultations.
But the problem here concerns the lack of transparency, as only few of them were
notified to WTO Secretariat in a due form or even just informed. There are a lot of such
disputes the only reason you know that they have been settled on this stage is that no
further steps were taken, so if you go thought the each case you see nothing except the
request for consultations. The parties are required to submit the notification that they have
resolved the dispute but normally they don’t. This is one of the tensions in the dispute
settlement mechanism.
40
Together with good offices, conciliation and mediation, consultations are the key
non-judicial/diplomatic feature of the dispute settlement system of the WTO.
Consultations also allow the parties to clarify the facts of the matter and the claims of the
complainant, possibly dispelling misunderstandings as to the actual nature of the measure
at issue. In this sense, consultations serve either to lay the foundation for a settlement or
for further proceedings under the DSU.
2. The form of the request
Any WTO Member that considers that a benefit accruing to it under the WTO
Agreement is being impaired or nullified by measures taken by another WTO Member
may request consultations with that other Member. WTO Members are required to accord
“sympathetic consideration” to and afford adequate opportunity for consultation regarding
any representations made by another Member concerning measures affecting the
operation of any covered agreement taken within the territory of the former.
As concerns the request it must be presented in writing. In request you should
clearly indicate the reasons for the request (the identification of the measures and legal
basis for complaint). It should be very detailed or otherwise the other party will challenge
your request for consultations as not having been sufficient grounded. There is a case law
on how detailed should the request for consultation be, and Appellate body is clear at this
point that it should definitely be less detailed as a request for a Panel. Some practitioners
consider that it should be the same as a request for Panel so it could not be later challenged
but generally it is considered that it should be less detailed as consultations serves as a
platform of communication where you become more acknowledged with all the details of
the matter, and better understanding of the dispute. But the one is definitely established –
you should report a very detailed report on negotiations as another party may suffer the
same matter and it would be easier for it to get better acknowledged with all the details if
41
it could found the results of the consultation. The Secretariat circulates what they get from
the parties.
The request for consultations formally initiates a dispute in the WTO and triggers
the application of the DSU. Very often, informal discussions on the matter between
capital-based officials or between the Geneva delegations of the Members involved
precede the formal WTO consultations. However, even where prior consultations
occurred, it remains necessary for the complainant to go through the consultation
procedure set forth in the DSU as a prerequisite for further proceedings in the WTO.
The complaining Member addresses the request for consultations to the responding
Member, but must also notify the request to the DSB and to relevant Councils and
Committees overseeing the agreement(s) in question (Article 4.4 of the DSU). Members
only have to send one single text of their notification to the Secretariat, specifying the
other relevant Councils or Committees. The Secretariat then distributes it to the specified
relevant bodies.4 The request for consultations informs the entire Membership of the
WTO and the public at large of the initiation of a WTO dispute. The complainant has to
make the request pursuant to one or more of the covered agreements (Articles 4.3 and 1.1
of the DSU), specifically under the respective provision on consultations of the covered
agreement(s) in question. Consultations are thus subject to the provisions of Article 4 of
the DSU and the respective individual WTO Agreement.
Under GATT 1994 and those covered agreements that refer to the consultations and
dispute settlement provisions of GATT 1994, two legal bases are available for launching
a dispute with a request for consultations, that is, either Articles XXII:1 or XXIII:1 of
GATT 1994. Similarly, under GATS), consultations can be initiated under either Articles
XXII:1 or XXIII:1.
For practical purposes, the main difference between these two legal bases relates to
the ability of other WTO Members to join as third parties, which is possible only when
42
consultations are held pursuant to Article XXII of GATT 1994, Article XXII:1 of GATS,
or the corresponding provisions in other covered agreements (Article 4.11 of the DSU).
Hence, the choice between Articles XXII:1 and XXIII:1 of GATT 1994 is a strategic one,
depending on whether the complainant wants to make it possible for other Members to
participate. If the complainant invokes Article XXII:1, the admission of interested third
parties depends on the respondent, who may or may not accept them. By choosing Article
XXIII:1, the complainant is able to prevent the involvement in the consultations of third
parties. This option may be attractive for a complainant who intends to work towards a
mutually agreed solution with the respondent without interference from other Members.
A request for consultations must give the reasons for the request. This includes
identifying the measures at issue and indicating the legal basis for the complaint (Article
4.4 of the DSU). In practice, such requests for consultations are very brief; often they are
no more than one or two pages long, yet they must be sufficiently precise. Because
requests for consultations are always the first official WTO document emerging in a
specific dispute and each dispute has its own WT/DS number, requests for consultations
carry the document symbol WT/DS###/1 (except in the case of issues falling under the
Agreement on Textiles and Clothing where different procedures apply).
3. An obligation to respond the request for consultations
The party is obliged to respond the request for consultation within 10 days. The
enforcement mechanism is, if you not respond within 10 days a party may request for the
establishment of Panel without waiting another 15 days. The respond to the request should
be made in written form, usually by e-mail.
The 10 days are considered to be not “working” but “calendar” days. As concerns
the period for holding the consultation it is 30 calendar days but of course taking into
account the practice it can take more longer in time, the main point here is that the parties
43
must by themselves to take such a decision, and they are not required to notify the
Secretariat about it.
If consultations succeed the resulting should be notified but again the parties
regularly do not do so.
Malaysia had 10 cases according to WTO but the Ministry had just 5 in
written.
That is a huge transparency breach. The problem here is that the parties refuse to
publish the public versions of the documents.
Mexico against Guatemala. Guatemala failed to notify Mexico for the
initiation of investigation so it was a violation of procedural rules.
Of course if you fail with a procedural plot, it is the violation, and the case should
start from the beginning. If the consultation failed, you can after 60 days request for the
establishment of the Panel.
If consultations between the parties fail to settle the dispute within 60 days of the
receipt of the request for consultations, the complaining party may request the DSB to
44
establish a panel to adjudicate the dispute. The complaining party may request a panel
during the 60-day period if the consulting parties jointly consider that consultations have
failed to settle the dispute. In many cases, however, the complaining party will not,
immediately upon the expiration of the 60-day period, request the establishment of a
panel, but will allow for considerably more time to settle the dispute through
consultations. For consultations involving a measure taken by a developing country
Member, the DSU explicitly provides that the parties may agree to extend the 60-day
period. If after the 60-day period has elapsed, the consulting parties cannot agree that the
consultations have concluded, the Chairman of the DSB shall decide, after consultation
with the parties, whether to extend this period and, if so, for how long. To date the
Chairman of the DSB has never been called upon to exercise this authority. Consultations
between the parties with the aim of settling the dispute can, and do, continue during the
panel process. The DSU provides that panels should consult regularly with the parties to
the dispute and give them adequate opportunity to develop a mutually satisfactory
solution. There have been a number of disputes in which a mutually agreed solution was
reached while the dispute was already before a panel.
European Communities - Trade Description of Scallops, complaints by
Canada, Peru and Chile, WT/DS7, WT/DS12 and WT/DS14 and European
Communities - Measures Affecting Butter Products, complaint by New Zealand,
WT/DS72.
In dispute settlement cases involving a least-developed country Member, where a
satisfactory solution has not been found in the course of consultations, the Director-
General of the WTO or the Chairman of the DSB shall, upon request by a least-developed
country Member, offer their good offices, conciliation and mediation with a view to
assisting the parties to settle the dispute, before a request for a panel is made. The Director-
General or the Chairman of the DSB, in providing this assistance, may consult any source,
45
which either deems appropriate. Since, to date no least-developed country Member has
been involved in a dispute as either a complainant or respondent, no use has yet been made
of this possibility.
4. Other features of consultations
The model of the consultation is not clearly established. While the request for
consultations is notified to the DSB, the consultations themselves are confidential. There
is some practice that it should be conducted in Geneva (and involve Geneva-based
diplomats as well as capital-based trade officials of the parties to the dispute), but actually
most of parties prefer to do in more convenient way (by phone or by Skype) as it is not
obligatory to have negotiations in Geneva. The WTO Secretariat is not present at, and is
in no other way involved with, the consultations. Any country may consider whom to send
to represent it on negotiations; it is up to the state to decide. In theory you should notify
the facts of the solution detailed but in practice just a notification that you have achieved
a mutual solution is enough.
There are several urgent procedures according to WTO:
1. For developing countries. Such practice appeared in 1960th but it was
never used. In theory developing countries could limit time of the consultation in
half times.
2. Subsidies agreement. For prohibited subsidies you could also reduce
the time in half but it was never used also.
3. Perishable goods. There were some attempts to do so, but actually we
lack the clearly stated definition of perishable goods in WTO law. DSU Article 4.8
provides that the member shall enter into consultations within 10 days of the receipt
of the request for consultations, and the complaining Member may request a panel
46
20 days after the request, if consultations have not resolved the matter. However,
Article 4.8 provides no mechanism for dealing with disagreement between the
parties as to the question of perishable goods and urgency. Here the most conflicting
situation is with the understanding of the products being perishable. But you can
reserve a right to run such a procedure on some types of products (for example
tomatoes).
4.3.5. References and Background Information
1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the World
Trade Organization
2) The History and Future of the World Trade Organization Craig Van
Grasstek, World Trade Organization 2013
3) Understanding the WTO 2011
4) United Nations Conference on trade and development – DSB overview
5) Andrew D. Mitchell, The Legal Basis for Using Principles in WTO Disputes
4.3.6. Supporting Materials
(Slides)
4.3.7. Glossary
Adjudication – is the legal process by which an arbiter or judge reviews evidence
and argumentation, including legal reasoning set forth by opposing parties or litigants to
come to a decision which determines rights and obligations between the parties involved.
Breach – an infraction or violation, as of a law.
47
Chairman – is the highest officer of an organized group such as a board, a
committee, or a deliberative assembly.
Consultations – a deliberation between physicians on a case or its treatment.
Director-General – is a title given to the highest executive officer within a
governmental, statutory, NGO.
Negotiations – is a dialogue between two or more people or parties intended to
reach a mutually beneficial outcome, resolve points of difference, to gain advantage for
an individual or collective, or to craft outcomes to satisfy various interests.
Notification – A transparency obligation requiring member governments to report
trade measures to the relevant WTO body if the measures might have an effect on other
members.
Transparency – Degree to which trade policies and practices, and the process by
which they are established, are open and predictable.
48
4.4. Lecture Four – Establishment and composition of the expert group
4.4.1 Objectives
This lecture explains how should the Panel be composed, who can be the panelists
and what is the general procedure to nominate the member of the Panel and how should
it be established at and the role of the third party in the WTO DSM.
4.4.2. Lecture Topics
1. Request for the establishment of the Panel
2. Composition of the Panel
3. Third parties
4.4.3. Overview
One of the most important stage of the DSM under the WTO is the process of the
establishment of the Panel, a body, that should act as the adjudication commission. The
functions of the Panel are to evaluate all findings in fact and law and to deliver its opinion
in a report. That is why the normal conditions should be created for the Panel in order to
fulfill its main function.
The composition of the Panel is also very important as the party to a potential
dispute should know all the peculiarities of this procedure in order to choose the “right”
person to be appointed as a panelist and to know what risks can appear if they won’t come
to a mutually agree concerning the nominated persons.
The issue of a third party is to be known in order to realize the positions of the states
deciding to join the dispute as a third party, or when they still have some doubts whether
to become a party to dispute or only as a third party.
49
4.4.4. Discussion Topics
1. Request for the establishment of the Panel
If the consultations have failed to settle the dispute, the complaining party may
request the establishment of a panel to adjudicate the dispute. As mentioned earlier, the
complainant may do so any time 60 days after the date of receipt by the respondent of the
request for consultations, but also earlier if the respondent either did not respect the
deadlines for responding to the request for consultations or if the consulting parties jointly
consider that consultations have failed to settle the dispute (Article 4.7 of the DSU).
Where consultations do not yield a satisfactory result for the complainant, the procedure
starting with the panel stage offers the complainant the possibility to uphold its rights or
protect its benefits under the WTO Agreement. This procedure is equally important for
the respondent as an opportunity to defend itself because it may disagree with the
complainant on either the facts or the correct interpretation of obligations or benefits under
the WTO Agreement. The adjudicative stage of dispute settlement is intended to resolve
a legal dispute, and both parties must accept any rulings as binding (although they are
always able to try to settle the dispute amicably at any time).
The request for the establishment of the Panel must be submitted in writing and
indicate whether the consultations were held. The request must content:
- the identification of the specific measures at issue
- present a brief summary of the legal basis (claims)
- it should be more specific than the request for consultations and sets
boundary on the case going forward. Sometimes you may drop some claims after the
consultation, and legally there is a possibility in some cases to add some claims if after
the consultations some issues have arisen. But sometimes you are to withdraw you request
and start from the beginning.
50
You must be very specific submitting your claims.
You don’t say Article 11, you must say Article 11.3 etc
In EC - Bananas III, the Appellate Body found that:
… It is important that a panel request be sufficiently precise for two reasons:
first, it often forms the basis for the terms of reference of the panel pursuant to Article
7 of the DSU; and, second, it informs the defending party and the third parties of the
legal basis of the complaint.
Whether the “specific measures at issue” are sufficiently identified in the panel
request relates to the ability of the responding party to defend itself given the actual
reference to the measure complained about. With regard to the requirement that the
request for a panel must “provide a brief summary of the legal basis of the complaint
sufficient to present the problem clearly”, the Appellate Body noted that the DSU
demands only a brief summary of the legal basis of the complaint. The summary must,
however, be one “sufficient to present the problem clearly”. The claims, but not the
arguments, must all be specified sufficiently in the request for the establishment of a panel.
In EC – Bananas III, the Appellate Body found that in view of the particular circumstances
of that case, the listing of the articles of the agreements alleged to have been breached
satisfied the minimum requirements of the DSU. Whether the mere listing of the articles
claimed to have been violated actually meets the standard must, however, be examined on
a case-by-case basis.
The establishment of the Panel is also a difficult issue, as it should be made by the
reverse consensus of the parties at second DSB meeting. A term of reference is also an
important issue here. According to GATT the parties must negotiate the term of reference
of the Panel. Huge amount of time is usually wasted debating on the terms of reference
51
but in the end all the parties should come to the mutual agreement on the terms of
references. There are standard ToRs.
Unless the parties agree otherwise within 20 days from the establishment of the
panel, a panel is given the following standard terms of reference:
To examine in the light of the relevant provisions in (name of the covered
agreement(s) cited by the parties to the dispute), the matter referred to the DSB by
(name of party) in document … and make such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in that/those
agreement.
The document referred to in these standard terms of reference is usually the request
for the establishment of a panel. Hence, a claim falls within the panel’s terms of reference
only if that claim is identified in the request for the establishment of a panel. As the
Appellate Body stated in Brazil – Desiccated Coconut, the terms of reference of the panel
are important for two reasons:
First, terms of reference fulfil an important due process objective — they give
the parties and third parties sufficient information concerning the claims at issue in
the dispute in order to allow them an opportunity to respond to the complainant’s
case. Second, they establish the jurisdiction of the panel by defining the precise
claims at issue in the dispute.
A panel may consider only those claims that it has authority to consider under its
terms of reference. A panel is bound by its terms of reference. It is, therefore, important
that a request for the establishment of a panel be sufficiently precise. In case of a “broadly
phrased” request for the establishment of a panel, it may be necessary to examine closely
the complainant’s submissions to the panel to determine precisely which claims have been
made and fall under the terms of reference of the panel.
52
Within 20 days of the establishment of the panel, the parties to the dispute can agree
on special terms of reference for the panel. This occurs rarely. In establishing a panel, the
DSB may authorize its Chairman to draw up the terms of reference of the panel in
consultation with the parties to the dispute. However, if no agreement on special terms of
reference is reached within 20 days of the establishment of the panel, the panel shall have
standard terms of reference.
The DSB establishes the panel at the latest at the DSB meeting following the
meeting at which the request for the establishment first appears as an item on the agenda,
unless at that meeting the DSB decides by consensus not to establish a panel (reverse
consensus). It is clear that the latter is not likely to happen and that, therefore, the
establishment of a panel by the DSB is “quasiautomatic”. If the responding party does not
object, a panel can be established at the DSB meeting at which the request for the
establishment first appears on the agenda. Usually, however, the responding party objects
to the establishment of the panel at the first DSB meeting. A practice has evolved whereby
immediately after the DSB’s decision to establish the panel (or within 10 days of this
decision) other Members notify their interest in the dispute and reserve their third party
rights. Where more than one Member requests the establishment of a panel related to the
same matter, a single panel may be established to examine these complaints taking into
account the rights of all Members concerned. Whenever feasible, a single panel should be
established to examine such complaints.
2. Composition of the Panel
Even after a panel has been established by the DSB, it still must be composed
because there are no permanent panels nor permanent panelists in the WTO. Instead,
panels must be composed ad hoc for each individual dispute, with the selection of three
or five members, pursuant to procedures laid down in Article 8 of the DSU. Panels are
53
composed of three persons unless the parties to the dispute agree, within ten days from
the establishment of the panel, to a panel composed of five panelists.
The general rule here states that the Panel should compose of “well-qualified
government and/or non-governmental individuals.
The first thing to know here that basically no nationals of parties or third parties
should sit upon the bench. That makes some kind of a political sense. It would look bad
to lose a case for a party if upon the bench there is a national of an opposite party. It makes
sense because of objective reason, it is clear that the representative of the nationality of
one of the parties will surely support the position of his country. That is why such rule
exists. But the exclusion of the representatives of the nationality of one of the third parties
actually makes no sense as they have actually no rights but again here you can see some
kind of a political logic (for example if EU is a third party no national of one of the EU
parties should not be in expert group along with Switzerland or Norway, the same as
Canada or Mexico in case when the US is the third party). New Zeeland avoids being a
third party and for that reason there are a lot of panelists from New Zeeland. There are
some situations when all the countries decide to become a third party. A great example of
it is the case on interpretation of Customs evaluation agreement as it contained as it was
of a great importance. Also a great example can be an interpretation of FTA’s provisions
as each member of WTO has at least one FTA. Then no national rule can be applied, for
that purpose it is prescribed that “no national’ rule shall be applied except the parties so
… persons who have served on or presented a case to a panel, served as a
representative of a Member or of a contracting party to GATT 1947 or as a
representative to the Council or Committee of any covered agreement or its
predecessor agreement, or in the Secretariat, taught or published on international
trade law or policy, or served as a senior trade policy official of a Member.
54
agree. The second point here is “rules of conduct” and it is rather amazing that having
more than 300 disputes there were no scandals.
The Secretariat proposes an indicative list of panelists and each country has a right
to nominate in it their own proposed skilled representatives. The list is on WTO web site,
but each country has its own list. The WTO Secretariat maintains this list and periodically
revises it according to any modifications or additions submitted by WTO Members. As
noted, it is not necessary to be on the indicative list in order to be proposed as a potential
panel member in a specific dispute.
When the Secretariat proposes qualified individuals nominations as panelists, the
parties must not oppose these nominations except for compelling reasons. There are some
“compelling reasons” for the rejection of a proposed candidates. In practice, many
Members make quite extensive use of this clause and oppose nominations very frequently.
In such cases, there is no review regarding whether the reasons given are truly compelling.
Usually 6 persons are proposed and only two of them satisfy the parties (sometimes no
one). That can be because the parties consider that the proposed person has previously
wrote some articles which are in conflict with their arguments and position. However,
they parties have 20 days to come to mutual agreement on the candidates for Panel. If no
agreement is reached within 120 days of request, one of the party may upon a request ask
DG for mandatory nomination of the members of Panel. The availability of this procedure
is important because it prevents a respondent from blocking the entire panel proceeding
by delaying (forever) the composition of the panel, which is what sometimes happens in
other systems of international dispute resolution. Of course, the parties are always free to
devote more than 20 days attempting to agree on the composition of the panel as long as
none of them requests the Director-General to intervene. But there are sometimes
situations when neither party after having failed to nominate the candidates did not request
the DG to nominate them (the examples of such cases are: EU – cost adjustment
55
methodology and Argentina – biodiesel). Such cases are nowadays frozen without any
further action.
The selected panelists must fulfil their task in full independence and not as
representatives of a government or other organization for which they might happen to
work. Members are prohibited from giving panelists instructions or seeking to influence
them with regard to matters before the panel.
In the case of multiple complainants, i.e. more than one Member requesting the
establishment of a panel related to the same matter, Article 9.1 of the DSU applies and
calls for the DSB, whenever feasible, to establish a single panel to examine these
complaints taking into account the rights of all Members concerned. For example, in US
— Shrimp, the DSB decided to establish one single panel, despite a separate request made
by India after the establishment of a panel at the joint request of Malaysia and Thailand
and a separate request of Pakistan. The “feasibility” of establishing a single panel
obviously depends on factors such as the timing of the various disputes being more or less
similar. If there is a long period of time between the different requests for establishment
of a panel, establishing a single panel may be unfeasible, for instance if the panel that has
been established first has already held its substantive meetings. When the time lag
between the two disputes is less, establishing a single panel can be feasible if the parties,
for instance, agree on a shorter time-period for consultations.
If it is not feasible to establish a single panel and more than one panel is established,
the same persons should, if possible, serve as panelists on each of the separate panels and
the timetables should be harmonized (Article 9.3of the DSU). In EC — Hormones, for
instance, the complaint of Canada (WT/DS48) and that of the United States (WT/DS26)
were reviewed by two separate panels composed of the same individuals.
These two solutions serve to ensure that there is a consistent legal approach on the
different complaints. With various panels composed of different panelists, who would
56
work separately and not know each other’s reasoning and decision (panel procedures are
confidential until the circulation of the report), there is a risk that the different panel
reports could depart one from another and even be contradictory.
3. Third parties
The WTO prescribes that members having a substantial interest in dispute may
participate in a dispute. A WTO Member that is neither the complainant nor the
respondent may be interested in the matters the parties to a dispute are discussing in their
consultations. There are various reasons for such an interest: for example, that other
Member may have a trade interest and so feels similarly aggrieved by the challenged
measure; it may, on the contrary, benefit from that measure; or it may be concerned about
the challenge because it maintains a measure similar to that of the respondent. The
Member in question may also have an interest in being present at discussions on any
mutually agreeable solution because such a solution may affect its interests. Such other
Member may request to join consultations if it has a substantial trade interest in the matter
being discussed and if consultations were requested pursuant to Article XXII:1 of
GATT1994, Article XXII:1 of GATS or the corresponding provisions of the other
covered agreements. The request must be addressed to the consulting Members and
the DSB within ten days after the date of the circulation of the original request for
consultations. The responding Member must also agree that the claim of substantial trade
interest is well founded. If the respondent disagrees, there is no recourse through which
the interested Member can impose its presence at the consultations, no matter how
legitimate the invoked substantial trade interest may be. However, the interested Member
can always request consultations directly with the respondent (Article 4.11 of the DSU),
which would open a new, separate dispute settlement proceeding. But the general practice
shows that most of the countries prefer to reserve their right to be the third party to obtain
57
some knowledge and practice so actually even if you have no substantial interest in case
you may participate in it as a third party as in general no one is rejected being a third party
to dispute. The only thing here is that you need to have a substantial interest to participate
in consultations as a third party but you can freely participate in the panel proceedings as
a third party for the purpose of education. Third parties have the right to receive the first
written submissions of the parties, to make a written submission and to participate in the
first hearing. Sometimes additional rights may be conferred to them, but it happens very
rarely. Third parties are rarely asked questions. The reason for it is that the Panel
understands that the most part of third parties participates just to get some experience, but
if the Panel realizes that the third party is deeply participating in the dispute it may ask
some questions.
The complaining and the responding Members are the parties to the disputes. Other
Members have an opportunity to be heard by panels and to make written submissions as
third parties, even if they have not participated in the consultations. In order to participate
in the panel procedure, these Members must have a substantial interest in the matter before
the panel and they must notify their interest to the DSB (Article 10.2of the DSU).
In practice, the DSB applies a ten-day deadline from the establishment of the panel
for Members to reserve their rights as third parties. At the meeting at which the panel is
established, it is sufficient to do so orally. During the following ten days, the substantial
interest and the desire of Members to participate as third parties must be notified to the
DSB in writing through the WTO Secretariat.
There is a difference between “substantial trade interest” which is required for third
parties in consultations and “substantial interest” before the panel. Most significant is the
fact that it is possible to join consultations only with the respondent’s acceptance (and in
the case of non-acceptance, there is no recourse to enforce participation). On the other
58
hand, any Member who invokes a systemic interest, in practice, is admitted to a panel
procedure as a third party without any scrutiny whether the interest truly is “substantial”.
Third parties receive the parties’ first written submissions to the panel and present
their views orally to the panel during the first substantive meeting (Article 10.3 of the
DSU). Third parties have no rights beyond these although a panel can, and often does,
extend the rights of participation of third parties in individual cases.
US- Cotton showed that being a third party is inconvenient when you have a
substantial interest in dispute. From this we can make a conclusion that if you want to get
some practice and to gain experience you can participate as a third party, but if you have
a substantial interest – DON’T BE A THIRD PARTY, as you won’t receive any retaliation
in such a case.
Ukraine has reserved third party rights, among others, in 4 cases concerning the
Tobacco Plain Packaging Act of Australia; in 3 trade defense cases (anti-dumping and
safeguards); and in 2 cases concerning general GATT, investment measures and customs
valuation matters.
4.4.5. References and Background Information
1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the World
Trade Organization
2) Understanding the WTO 2011
3) United Nations Conference on trade and development – Panel DSB
4) Andrew D. Mitchell, The Legal Basis for Using Principles in WTO Disputes
4.4.6. Supporting Materials
(slides)
59
4.4.7. Glossary
Complainant – a person who files a formal accusation or brings a formal charge.
Obligations –a person binds himself or herself to undertake or refrain from doing
a particular act.
Respondent – the defending party in certain legal proceedings, as in a case brought
by petition.
Satisfactory result – a result, which is mutually accepted for the all parties to
dispute.
Substantial – considerable in importance, value, degree, amount, or extent.
Third party – a person who is involved by chance in a legal proceeding, but not as
a respondent or complainant, having some particular interests in case.
60
4.5. Lecture Five - The Panel proceedings
4.5.1 Objectives
This lecture explains the Panel proceedings stages, and the main features of it. The
lecture aims to explore the duration of each stage and to deliver some current trends of the
Panel proceedings.
4.5.2. Lecture Topics
1. The functions of the Panel
2. Panel’s work
3. Timeframe
4. Steps of Panel proceedings
4.5.3. Overview
The Panel proceedings is a quite complicated issues as this procedure comprises
from a lot of stages, and each of it has its own peculiarities and features to be understand.
The proceedings last certain period of time, but here we should take into account the
individual peculiarities of a certain case, the will of the parties to promt settle of the
dispute and the other things that may arise during the procedure.
Oral and written submissions constitute an integral part of the Panel’s proceedings.
This part is dedicated to the parties’ obligation to provide facts and arguments in their
favour to help to settle the dispute. Each parties should be acknowledged with the
procedural part of the proceedings to provide adequate and reasonable information for the
Panel.
61
4.5.4. Discussion Topics
1. The functions of the Panel
Once established and composed, the panel now exists as a collegial body and can
start its work. One of the first tasks for the Panel is to draw up a calendar for the panel’s
work. This procedure offers a certain degree of flexibility. The main function of a Panel
is to make an objective assessment of the matter before it, including and objective
assessment of:
- the facts of the case
- the applicability of the relevant covered agreements
- conformity with the relevant covered agreements
AD Agreement Article 17 has special
rules. First, you cannot file a challenge until
the
provisional measures. In general you
can’t challenge the measure until it is
enacted. Second, you can’t provide a new
material which was not involved in
investigation. The information to be
acceptable should be provided during the
investigations. Third, which is called a
controversial one is Article 17.6.
17.6In examining the matter
referred to in paragraph 5:
(ii)the panel shall interpret the
relevant provisions of the Agreement in
accordance with customary rules of
interpretation of public international
law. Where the panel finds that a relevant
provision of the Agreement admits of
more than one permissible
interpretation, the panel shall find the
authorities’ measure to be in conformity
with the Agreement if it rests upon one of
those permissible interpretations.
62
2. Panel’s work
A panel is called upon to review the consistency with WTO law of a challenged
measure. Both the measure at issue and the relevant provisions of WTO law allegedly
violated are determined by the terms of reference of the panel. But what is the standard of
review a panel has to apply in reviewing the WTO consistency of the challenged measure?
Article 11 of the DSU stipulates:
The function of panels is to assist the DSB in discharging its responsibilities
under this Understanding and the covered agreements. Accordingly, a panel should
make an objective assessment of the matter before it, including an objective
assessment of the facts of the case and the applicability of and conformity with the
relevant covered agreements, and make such other findings as will assist the DSB in
making the recommendations or in giving the rulings
provided for in the covered agreements.
In EC – Hormones, the Appellate Body noted that Article 11 of the DSU:
… articulates with great succinctness but with sufficient clarity the appropriate
standard of review for panels in respect of both the ascertainment of facts and the
legal characterization of such facts under the relevant agreements.
As far as fact-finding is concerned, the appropriate standard is neither a de novo
review of the facts nor “total deference” to the factual findings of national authorities.
Pursuant to Article 11 of the DSU, panels have rather “to make an objective assessment
of the facts”. With regard to legal questions, i.e., the consistency or inconsistency of a
Member’s measure with the specified provisions of the relevant agreement, Article 11
imposes the same standard on panels, i.e., “to make an objective assessment of … the
applicability of and conformity with the relevant covered agreement”. In a number of
appeals of panel reports, the Appellate Body addressed the question when a panel may be
regarded as having failed to discharge its duty under Article 11 of the DSU to make an
objective assessment of the facts before it. According to the Appellate Body, “not every
63
error in the appreciation of the evidence … may be characterized as a failure to make an
objective assessment of the facts.” The Appellate Body stated in EC-Hormones:
The duty to make an objective assessment of the facts is, among other things,
an obligation to consider the evidence presented to a panel and to make factual
findings on the basis of that evidence. The deliberate disregard of, or refusal to
consider, the evidence submitted to a panel is incompatible with a panel’s duty to
make an objective assessment of the facts. The wilful distortion or misrepresentation
of the evidence put before a panel is similarly inconsistent with an objective
assessment of the facts. “Disregard” and “distortion” and “misrepresentation” of
the evidence, in their ordinary signification in judicial and quasi-judicial processes,
imply not simply an error of judgement in the appreciation of evidence but rather an
egregious error that calls into question the good faith of a panel.
An allegation that a panel has failed to conduct an objective assessment of the
matter before it as required by Article 11 of the DSU is a very serious allegation. Such an
allegation goes to “the very core of the integrity of the WTO dispute settlement process
itself.” So far, in only a few cases the Appellate Body found that a panel violated its
obligation under Article 11 of the DSU. In US – Lamb Safeguard, for example, the
Appellate Body found that the Panel had not applied the appropriate standard of review,
under Article 11 of the DSU, in examining whether the United States International Trade
Commission had provided a reasoned and adequate explanation of how the facts support
a determination of “threat of serious injury” under Article 4.2(a) of the Agreement on
Safeguards. In reaching this conclusion the Appellate Body noted:
We wish to emphasize that, although panels are not entitled to conduct a de
novo review of the evidence, nor to substitute their own conclusions for those of the
competent authorities, this does not mean that panels must simply accept the
conclusions of the competent authorities. To the contrary, in our view, in examining
a claim under Article 4.2(a), a panel can assess whether the
64
competent authorities’ explanation for its determination is reasoned and
adequate only if the panel critically examines that explanation, in depth, and in the
light of the facts before the panel. Panels must, therefore, review whether the
competent authorities’ explanation fully addresses the nature, and, especially, the
complexities, of the data, and responds to other plausible interpretations of that data.
A panel must find, in particular, that an explanation is not reasoned, or is not
adequate, if some alternative explanation of the facts is plausible, and if the
competent authorities’ explanation does not seem adequate in the light of that
alternative explanation. Thus, in making an “objective assessment” of a claim under
Article 4.2(a), panels must be open to the possibility that the explanation given by
the competent authorities is not reasoned or adequate.
Article 11 of the DSU sets forth the appropriate standard of review for panels for
all but one of the covered agreements. The only exception is the Anti-Dumping
Agreement21 in which a specific provision, Article 17.6, sets out a special standard of
review for disputes arising under that Agreement.
Panel holds the meetings with parties according to the calendar. The calendar of
work thus adopted on the basis of the suggested timetable in Appendix 3 to the DSU sets
dates and deadlines for the key stages of the panel proceeding, (e.g. the dates by which
submissions have to be filed, the oral hearings (called “first” or “second substantive
meeting”) take place, when the interim and the final panel report are to be issued, etc.).
When there are no such preliminary issues, the parties start by exchanging a first
set of written submissions. The complainant normally is the first to file its submission, to
which the respondent replies in its first submission. The third parties usually file their
submissions after the parties have filed theirs. The third parties, who are entitled to receive
the parties’ first written submissions, often side with the positions taken by one of the
parties.
65
After the exchange of the first written submissions, the panel convenes a first oral
hearing. Like all meetings, this meeting takes place at the WTO headquarters in Geneva,
and is similar to an oral hearing before a court, but the setting is more informal. Contrary
to practice in many domestic judiciaries, this oral hearing is not public. Only the parties
and third parties to the dispute, the panelists, the Secretariat staff supporting the panel,
and the interpreters are entitled to attend this meeting.
At this meeting the parties present their views orally, mostly on the basis of a
prepared statement also distributed in writing to the panel and the other parties. After
hearing the complainant and the respondent, the panel accords the third parties an
opportunity to present their views orally during a special session dedicated to the third
parties’ presentations.
After the oral statements, the parties (and third parties) are invited to respond to
questions from the panel and from the other parties in order to clarify all the legal and
factual issues (called rebuttal). After the conclusion of the first substantive meeting, the
parties are usually requested, within several days, to submit written answers to the panel’s
and the other parties’ questions.
Approximately four weeks after the first panel meeting, the parties simultaneously
exchange written rebuttals, also called the second written submissions. In these
submissions, which are not provided to the third parties, the parties respond to each other’s
first written submissions and oral statements made at the first substantive meeting.
Thereafter, the panel holds a second substantive meeting with the parties. The parties once
again orally present factual and legal arguments at this second oral hearing and respond
to further questions from the panel and the other party, first orally, then in writing.
After the oral hearings are concluded, the panel goes into internal deliberations to
review the matter and to reach conclusions as to the outcome of the dispute and the
reasoning in support of such outcome and make a report. The panel report is divided into
66
two main parts: the so-called “descriptive part” and the “findings”. The descriptive part is
usually the longer part, and is typically composed of an introduction, the factual aspects,
the claims of the parties, and, most importantly, a summary of the factual and legal
arguments of the parties and third parties. The panel first issues a draft descriptive part to
the parties for written comments, parties are invited to make comments on the draft
descriptive part within two weeks. This gives the parties an opportunity to ensure that all
their key arguments are reflected in the descriptive part and to rectify errors and perceived
imprecisions.
The panel issues its report to the parties in an “interim” form and as a confidential
document containing all the above elements, ideally two to four weeks after the receipt of
comments on the descriptive part. The interim report contains the revised descriptive part,
the findings, the conclusions and the recommendations, and, as the case may be,
suggestions for implementation. It is thus a complete report, although it is not yet final.
Parties are again entitled to make comments and may also request a meeting of the panel
to further argue specific points raised with respect to the interim report. This is the interim
review stage. A party may request that the panel review precise aspects of the interim
decision.
The panel should submit its final report to the parties to the dispute within two
weeks following conclusion of the interim review. Once the report is translated into the
other official WTO languages, it is circulated to all WTO Members and becomes a public
document.
A panel submits its findings in the form of a written report to the DSB. This report
typically consists of an introductory section on the procedural aspects of the dispute, a
section on factual aspects of the dispute (in which the measure at issue is discussed); a
section setting out the claims of parties; sections summarizing the arguments of the parties
and third parties, a section on the interim review, the section containing the panel’s
67
findings and, finally, the panel’s conclusions. As of recently, a number of panels have
opted not to include in their report sections summarizing the arguments of the parties and
third parties but rather to attach all submissions of parties and third parties to the report.
However, panels have only taken this approach when parties agreed to it.
A panel report must, at a minimum, set out the findings of fact, the applicability of
relevant provisions and the basic rationale behind any findings and recommendations that
it makes. In a few cases to date, parties have challenged a panel report before the Appellate
Body for lack of a basic rationale behind the panel’s findings and recommendations. In
Argentina – Footwear Safeguard (EC), the Appellate Body found as follows:
In this case, the Panel conducted extensive factual and legal analyses of the
competing claims made by the parties, set out numerous factual findings based on
detailed consideration of the evidence before the Argentine authorities as well as
other evidence presented to the Panel, and provided extensive explanations of how
and why it reached its factual and legal conclusions. Although Argentina may not
agree with the rationale provided by the Panel, and we do not ourselves agree with
all of its reasoning, we have no doubt that the Panel set out, in its Report, a “basic
rationale” consistent with the requirements of Article 12.7 of the DSU.
Where one or more of the parties to the dispute is a developing country Member,
the panel’s report shall explicitly indicate the form in which account has been taken of
relevant provisions on differential and more-favorable treatment for developing country
Members that form part of the covered agreements and which have been raised by the
developing country Member in the course of the dispute settlement procedures. In India
– Quantitative Restrictions, for example, the Panel specifically referred to this
requirement and noted:
68
In this instance, we have noted that Article XVIII:B as a whole, on which our
analysis throughout this section is based, embodies the principle of special and
differential treatment in relation to measures taken for balance-of payments
purposes. This entire part G therefore reflects our consideration of relevant
provisions on special and differential treatment, as does Section VII of our report
(suggestions for implementation).
3. Timeframe
The period in which a panel shall conduct its examination, from the date that the
composition of the panel has been agreed upon until the date the final report is issued to
the parties to the dispute. In cases of urgency, including those relating to perishable goods,
the panel shall aim to issue its report to the parties to the dispute within three months and
shall make every effort to accelerate the proceedings to the greatest extent possible.
As a general rule, a panel is required to issue the final report to the parties within
six months from the date when it was composed. In cases of urgency, the panel attempts
to issue its report to the parties within three months from the date of its composition
(Article 12.8 of the DSU). When the panel considers that it cannot issue its report within
six months, it must inform the DSB in writing of the reasons for the delay and provide an
estimate of the period within which it will issue its report. The period from the
establishment of the panel to the circulation of the report to the Members “should” in no
case exceed nine months. In practice, however, panel proceedings take an average of 12
months. That is connected also with the translation problems etc.
In order to make the procedures more efficient, the period in which the panel
shall conduct its examination, from the date that the composition and terms of
reference of the panel have been agreed upon until the date the final report is issued
69
to the parties to the dispute, shall, as a general rule, not exceed six months. In cases
of urgency, including those relating to perishable goods, the panel shall aim to issue
its report to the parties to the dispute within three months.
The period from the date of establishment of the panel by the DSB until the date
the DSB considers the panel report for adoption shall as a general rule not exceed nine
months where the panel report is not appealed or 12 months where the report is appealed.
Where the panel has acted, pursuant to Article 12.9 of the DSU to extend the time for
providing its report, the additional time taken shall be added to the above periods. It should
be noted that panels often find it impossible to complete their examination of the case
within these nine months. They frequently go beyond this deadline. The reasons for delay
vary but are often related to the complexity of the case and the need to consult experts,
the availability of panelists, problems with scheduling meetings and the time taken up by
the translation of the report.
At the request of the complaining party, the panel may at any time during the panel
proceedings suspend its work for a maximum period of 12 months. If the work of the
panel has been suspended for more than 12 months, the authority of the panel lapses.
Accelerated procedures with shorter time periods (generally half) apply with respect to
disputes regarding prohibited subsidies under the SCM Agreement. Also disputes
regarding actionable subsidies under the SCM Agreement are subject to some specific
deadlines.
70
4. Steps of Panel proceedings
The following flow-chart indicates the major steps in the panel’s proceedings:
Shortly after its composition, a panel will call a “organizational” meeting with the
parties to consult with them on the timetable for the panel process and the working
procedures. Subsequently, the panel will fix the timetable, and adopt, where necessary, ad
hoc working procedures. Whenever possible, this should be done within one week after
the panel is composed. As already mentioned, the Working Procedures set out in
Appendix 3 of the DSU provide for a proposed timetable for panel work. In determining
A Handbook on the WTO Dispute Settlement System
decided for other reasons not to pursue the matter further. This shows that consul-
tations are often an effective means of dispute resolution in the WTO and that the
instruments of adjudication and enforcement in the dispute settlement system are
by no means always necessary.
Together with good offices, conciliation and mediation,3 consultations are the
key non-judicial/diplomatic feature of the dispute settlement system of the WTO.
Consultations also allow the parties to clarify the facts of the matter and the claims
of the complainant, possibly dispelling misunderstandings as to the actual nature of
3 These forms of “alternative” dispute settlement are voluntary and provided for under Article 5 DSU. See
further below the section on Mediation, conciliation and good offices on page 93.
44
71
the timetable for the panel process, the panel shall provide sufficient time for the parties
to the dispute to prepare their submissions. The DSU explicitly stipulates that in
examining a complaint against a developing country Member, the panel shall accord
sufficient time for the developing country Member to prepare and present its
argumentation. When a single panel examines complaints of multiple complainants, the
panel must organize its examination in such a manner that the rights which the parties to
the dispute would have enjoyed had separate panels examined the complaints are in no
way impaired.
As a rule, the parties to the dispute make two written submissions to the panel and
the panel meets twice with the parties on the substance of this dispute. Exceptionally,
panels convene additional meetings with the parties. The timetable for the panel process
will set out precisely when the written submissions are due and when the panel meetings
will take place. The parties are bound to respect the deadlines for their written
submissions.
Generally, parties will be required to file within five to nine weeks from the
composition of the panel, their first written submissions. Usually the complainant makes
its first submission in advance of the respondent’s first submission. In their first written
submissions, the parties present the facts of the case and their arguments.
After the filing of these first submissions of the parties, the panel holds, generally
within one to two weeks of the filing of the written submission of the respondent, a first
“substantive” (as opposed to “organizational”) meeting with the parties. At this meeting,
the panel asks the complainant to present its case. At the same meeting, the respondent is
asked to present its own point of view. Third parties are invited to present their views
during a special session of the first substantive meeting set aside for this purpose. As
discussed above, the panel always meets with the parties in closed session. Panel meetings
are not open to the general public.
72
Within two to three weeks of the first substantive meeting, the parties file
simultaneously their rebuttal submissions. These submissions, in which each party replies
to the arguments and evidence submitted by the other parties, are submitted
simultaneously. However, it is not uncommon for novel arguments to be made in these
submissions.
Generally, one to two weeks after the filing of the rebuttal submissions, the panel
will have a second “substantive” meeting with the parties. The respondent shall have the
right to take the floor first to be followed by the complaining party. The panel may at any
time put questions to the parties and ask them for explanations either in the course of a
meeting or in writing. However, in the interest of due process and full transparency, the
panel (or individual panelists) may not have any ex parte communications with any of the
parties concerning matters under consideration by the panel. The panel may not meet with
one of the parties without the other party or parties being present. All parties have the
right to be present whenever another party presents its views to the panel.
All written communications to and from the panel will always be copied, or
otherwise made available, to all parties. Pursuant to the DSU each party to the dispute
shall deposit its written submissions with the WTO Secretariat for immediate transmission
to the panel and to the other party or parties. In practice, however, it is often agreed, and
stipulated in the ad hoc working procedures for the panel, that each party shall serve its
submissions directly on all other parties and confirm that it has done so at the time it
provides its submission to the Secretariat.
As discussed above, any WTO Member having a substantial interest in a matter
before a panel and having notified its interest to the DSB shall have an opportunity to be
heard by the panel and to make written submissions to the panel. These third parties to the
dispute are invited by the panel to present their views during a special session of the first
73
substantive meeting and the written submissions of third parties are given to the parties to
the dispute.
These submissions are also reflected in, or attached to, the panel report. Third
parties only receive the first written submissions of the parties. Overall, the rights of third
parties are very limited. In some cases, however, third parties have sought and obtained
expanded third-party rights. In EC – Bananas III, for example, third party developing
country Members that had a major interest in the outcome of this case, were allowed to
attend all of the first and the second substantive meetings of the panel with the parties as
well as make statements at both meetings. The panel may request parties to provide the
Secretariat with an executive summary of the claims and arguments contained in their
written submissions. These summaries shall only serve the purpose of assisting the
Secretariat in drafting a concise arguments section of the panel report. Panels that opt for
attaching the written submissions to the panel report have of course no need for such
executive summaries.
The deliberations of panels are confidential. Panel reports are drafted without the
presence of the parties to the dispute in the light of the information provided and the
statements made. Generally, the panelists will meet one or more times in Geneva to
discuss the subsequent drafts of the report. Officials of the WTO Secretariat assist the
panelists in the drafting of the report. The extent of the involvement of the WTO
Secretariat may be significant but tends to vary considerably depending on panelists.
Once the panel has completed a draft of the descriptive (i.e., the factual and
arguments) sections of its report, the panel issues this draft to the parties for their
comments within two weeks. Two to four weeks after the expiration of the time period
for receipt of comments on the descriptive part, the panel subsequently issues to the parties
an interim report, including both the descriptive sections and the panel’s findings and
conclusions. The parties are again invited to comment on the report, usually within one
74
week. A party may submit a written request to the panel to review particular aspects of
the interim report. At the request of a party, the panel may hold a further meeting with the
parties on the issues identified in the written comments. Such interim review meetings
are, however, rather exceptional.
The findings of the final panel report shall include a discussion of the arguments
made at the interim review stage. The comments made by parties at the interim review
frequently give rise to corrections by the panel of technical errors or unclear drafting.
However, panels have seldom changed the conclusions reached in their report in any
substantive way as a result of the comments made by parties. Parties will sometimes also
prefer to comment during the interim review stage only on minor factual issues, saving
their legal arguments for a later appeal to the Appellate Body. This interim review is an
unusual feature in judicial or quasijudicial dispute settlement procedures. It is a clear left-
over from bye-gone times when trade dispute settlement was still more diplomatic in
nature and the agreement of both parties was required for the panel report to become
binding.
4.5.5. References and Background Information
1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the
World Trade Organization
2) Understanding the WTO 2011
3) United Nations Conference on trade and development – Panel DSB
4) Andrew D. Mitchell, The Legal Basis for Using Principles in WTO
Disputes
75
4.5.6. Supporting Materials
(slides)
4.5.7. Glossary
Confidential – containing information, the unauthorized disclosure of which poses
a threat to national security.
DSU – Dispute Settlement Understanding, the WTO agreement that covers dispute
settlement — in full, the Understanding on Rules and Procedures Governing the
Settlement of Disputes.
Facts – is something that has really occurred or is actually the matter of the dispute.
Findings – a piece of information that is discovered during a legal examination of
a situation, or facts.
Rebuttal – a pleading by the respondent in reply to a complainant's surrejoinder.
Restriction – something that restricts; a restrictive measure, law, etc.
Submission – the instrument referring a disputed matter to arbitration.
Timeframe – the period of time within which certain proceedings are scheduled to
be performed.
76
4.6. Lecture Six – The composition and structure of the Appellate Body(AB)
4.6.1. Objectives
This lecture explains the legal nature of the Appellate Body(AB), its composition
and structure. This lecture aims to acknowledge with the peculiarities of the composition
of the Appellate Body(AB).
4.6.2. Lecture Topics
1. The nature of AB
2. Composition of AB
3. Structure of AB
4.6.3. Overview
The Appellate Body was established in February 1995 by the WTO Dispute
Settlement Body (the “DSB”) as a standing international tribunal to hear appeals from
WTO panel reports.1 The establishment of the Appellate Body was provided for in Article
17.1 of the Understanding on Rules and Procedures Governing the Settlement of Disputes
(the “DSU”), which is an integral part of the 1994 Marrakesh Agreement Establishing the
World Trade Organization. The establishment of the Appellate Body, and with it the
introduction of the possibility of appellate review of panel reports, is one of the main
innovations to the old GATT dispute settlement system brought about by the Uruguay
Round of Multilateral Trade Negotiations.
77
4.6.4. Discussion Topics
1. The nature of AB
If the panel report is appealed, the dispute is referred to the Appellate Body and,
for the time being, the panel report cannot be adopted by the DSB. Article 16.4 of the
DSU implies that the panel report must be appealed before it is adopted by the DSB. The
article does not specify a clear deadline for the filing of an appeal. Rather the appellant
must notify the DSB of its decision to appeal before the adoption of the panel report. This
adoption may take place, at the earliest, on the 20th day after the circulation of the panel
report and it must (in the absence of an appeal and of a negative consensus against
adoption) occur within 60 days after the circulation. For any day between those limits, the
adoption of the panel report can, according to Article 16.4 of the DSU, be placed on the
agenda of the DSB (with ten days’ notice required for requesting items to be put on the
agenda). Since the appeal must be filed before adoption actually occurs3, the effective
deadline for filing an appeal is variable and could be as short as 20 days, but it can also
be longer, e.g. 60 days. Thus, if the party which emerged from the panel proceeding as
the “winner” wants to shorten the deadline for the other party to file an appeal, it can do
so by placing the panel report on the agenda for a DSB meeting to occur on the 20th day
after the panel report has been circulated.
Article 16.4 of the DSU makes clear that only the parties to the dispute, not the
third parties, can appeal the panel report. Both the “winning” and the “losing” party (i.e.
more than one party) can appeal a panel report. The reason is that either party in the
dispute may disagree with the panel’s conclusions: the respondent, whose challenged
measure has been found to be inconsistent with the WTO Agreement or to nullify or
impair a benefit, or the complainant, whose claims of violation or nullification or
impairment have been rejected. In addition, a complainant, even though it may have
“won” at the panel stage, may nevertheless not have been successful with all its claims,
for example, if the panel only upheld two out of six claims of violation.
78
In addition, parties have in the past also appealed isolated panel findings they
disagreed with (i.e. a legal interpretation developed by the panel), even though these
findings were part of a reasoning which ultimately upheld that party’s position. For
example, in the second appeal under the (WTO), in Japan — Alcoholic Beverages II, the
United States appealed the panel report, even though it had been successful with its claim
of a Japanese violation of Article III:2 of GATT 1994, because it disagreed with the
panel’s interpretation of Article III. The United States was not aggrieved as such by the
panel’s conclusion on the claim, but it had a systemic interest, reaching beyond the
individual dispute, as to how Article III should be interpreted. In such a case, there could
be more than one appeal on the same issue, one coming from the party having lost at the
panel stage, and one from the winning party which disagrees with the reasoning.
The Working Procedures refer to two options of how multiple appeals can be filed.
One option is that of one party initiating the appeal pursuant to Article 16.4 of the DSU,
and, once that appellant has filed its notice of appeal and its appellant’s submission,
another party, knowing the extent of, and the reasons for the challenge, joins in with its
own appeal. Such an appeal would expand the overall scope of the appellate review to
cover other alleged errors in the panel report (Rule 23(1) of the Working Procedures). In
the Working Procedures and in Appellate Body reports, this form of appeal is called “other
appeal” and informally sometimes “cross-appeal”.
The second option is that of more than one party using its right of appeal
under Article 16.4 of the DSU. In that case, the Appellate Body deals with the various
appeals jointly (Rules 23(4) and (5) of the Working Procedures).
If both of the two parties to a dispute challenge the panel report on appeal, each of
them is, at the same time, appellant and appellee, but usually with regard to different
portions of the panel report, i.e. they address different issues of law or legal interpretations
covered in the panel report. The generic term for parties participating in the appeal as
appellant or appellee is “participants”.
79
Appeals are limited to legal questions. They may only address issues of law covered
in the panel report and legal interpretations developed by the panel (Article 17.6 of the
DSU). An appeal cannot address the facts on which the panel report is based, for example,
by requesting the examination of new factual evidence or by re-examining existing
evidence. Evaluating the evidence and establishing the facts is the task of panels in the
dispute settlement system. The distinction between legal and factual questions is therefore
important in defining the scope of appellate review. In the abstract, it seems easy to
distinguish between law and facts: e.g. whether or not a national authority has charged a
30% tariff rather than a 20% tariff on the importation of a certain shipment of goods and
whether or not vodka and shochu are being produced through the distillation of fermented
starch-containing products are clearly facts. More generally speaking, a fact is the
occurrence of a certain event in time and space.
In contrast, how the expression of “like products” in Article III:2 of GATT 1994 is
to be interpreted is clearly a question of law. However, many of the more complex
questions that regularly arise in disputes are mixed questions of law and facts, or, in other
words, questions that can be answered only on the basis of both a factual and a legal
assessment. For example, the question of whether shochu and vodka are “like products”
in the sense of Article III:2 of GATT 1994 is such a mixed legal and factual question. In
such cases, the identification of the legal issue that can be subject to appeal hinges upon
a more detailed and differentiated analysis of the question involved. The Appellate Body
jurisprudence to date gives some guidance in that regard.
For instance, the legal appreciation of facts, or, in other words, a panel’s application
of a legal rule to specific facts, is a legal question and subject to appellate review. As the
Appellate Body has stated, “the consistency or inconsistency of a given fact or set of facts
with the requirements of a given treaty provision is, however, a legal characterization
issue. It is a legal question”.
80
In contrast, the panel’s examination and weighing of the submitted evidence, and
its establishment of the facts, fall within the panel’s discretion as the trier of facts and are
normally not subject to appeal. However, there are limits to the panel’s discretion, to the
extent that the panel’s factual examination is subject to legal requirements, the compliance
with which is a legal question that can be raised on appeal. Such a legal rule is contained
in Article 11 of the DSU which obliges panels to “make an objective assessment of the
matter before it, including an objective assessment of the facts of the case”. The question
of “whether or not a panel has made an objective assessment of the facts before it, as
required by Article 11 of the DSU, is a legal question which, if properly raised on appeal,
would fall within the scope of appellate review.” Thus, the Appellate Body can review
the panel’s appreciation of the evidence where the panel has exceeded the bounds of its
discretion. Where exactly those bounds lie remains to be fully explored. The Appellate
Body has already had the opportunity to give several examples, which do not exhaust the
universe of possible legal errors in the establishment of facts. The Appellate Body has
ruled that for a panel to “disregard”, “distort” or “misrepresent” evidence, or a panel’s
“egregious errors” that would call into question the good faith of a panel, are issues that
can be appealed.
Article 11 of the DSU is also relevant where the issue is whether the panel applied
the correct standard of review. This, however, is clearly a legal question and not one of
establishing facts, since it relates to determining what legal standard panels must apply.
This in turn determines which facts pertaining to which period of time are relevant to the
legal examination.
According to Article 16.4 of the DSU, the appeal process begins when “a party to
the dispute formally notifies the DSB of its decision to appeal” within the time-frame
discussed above (i.e. before the DSB adopts the panel report). Rule 20(1) of the Working
Procedures requires a simultaneous filing of a notice of appeal with the Appellate Body
Secretariat. Rule 20(2)(d) of the Working Procedures requires that a notice of appeal
81
include a brief statement of the nature of the appeal, including the allegations of errors in
the issues of law covered in the panel report and legal interpretations developed by the
panel. The notice of appeal also becomes an official WT/DS document.
2. Composition of AB
The Appellate Body is appointed by the DSB and is supported by a Secretariat.
Article 17.1 of the DSU provides that the Appellate Body shall be composed of seven
unaffiliated with any government persons. These persons are commonly referred to as
Members of the Appellate Body. The decision to appoint persons to the Appellate Body
is taken by consensus among all WTO Members. These members are appointed for 4
years, and can be renewable for 4 years once. Technically it is a part-time ‘on 'call’ job
— so many members have other jobs [with attendant possibility of conflict of interest] but
recent workload makes it hard to have two jobs at once
All Members are appointed by though increasingly political process. US has always
has 1 member, EU 1, remainder increasingly ‘regional’ [last one ‘had to be from Africa’]
but without the somewhat formalized procedures of ICJ.
Normally it composes from relatively few former judges or practicing litigators but
the last years it become more political issue.
Article 17.1 of the DSU provides that three of the seven Appellate Body members
are to serve on each appeal and that the seven Members are to serve in rotation as further
specified in the Working Procedures. Rule 6 of the Working Procedures calls this body of
three Appellate Body members a “division”.
With regard to the qualifications of the Members of the Appellate Body, Article
17.3 of the DSU provides:
82
The Appellate Body shall comprise persons of recognized authority, with
demonstrated expertise in law, international trade and the subject matter of the
covered agreements generally.
The DSU does not specifically state that Appellate Body Members must be trained
as lawyers. They can be from any professional background as long as they have
demonstrated expertise in law, international trade and/or the subject matter of the covered
agreements generally. To date, most Appellate Body Members have been senior
government officials, university professors, practicing lawyers or senior judges before
joining the Appellate Body. All but two Members thus far had a professional and
academic background in law.
Although candidates for positions on the Appellate Body are nominated by their
respective governments, Appellate Body Members serve in an individual capacity and do
not represent any WTO Member or geographical entity. Article 17.3 of the DSU requires
of Appellate Body Members that they shall be unaffiliated with any government.
Appellate Body Members are prohibited from accepting or seeking instructions from third
sources in the exercise of their office. They are equally prohibited from accepting any
employment or undertaking any professional activity that is inconsistent with their duties
and responsibilities.
Article 17.3 of the DSU furthermore requires that:
Members shall not participate in the consideration of any disputes that would
create a direct or indirect conflict of interest.
Like panelists, Members of the Appellate Body are subject to the Rules of Conduct
for the Understanding on Rules and Procedures Governing the Settlement of Disputes (the
“Rules of Conduct”)apply to panelists. Rule II, paragraph 1 of the Rules of Conduct states:
83
Each person covered by these Rules (as defined in paragraph 1 of Section IV
below and hereinafter called “covered person”) shall be independent and impartial,
shall avoid direct or indirect conflicts of interest and shall respect the confidentiality
of proceedings of bodies pursuant to the dispute settlement mechanism, so that
through the observance of such standards of conduct the integrity and impartiality of
that mechanism are preserved. These Rules shall in no way modify the rights and
obligations of Members under the DSU nor the rules and procedures therein.
To ensure compliance with these principles, an Appellate Body Member must
disclose the existence or the development of any interest, relationship or matter that he/she
could reasonably be expected to know and that is likely to affect, or give rise to justifiable
doubts as to his/her independence or impartiality. This disclosure obligation includes
information on financial, professional and other active interests as well as considered
statements of public opinion and employment or family interests.
3. Structure of AB
Article 17.1 of the DSU provides that the Appellate Body:
… shall be composed of seven persons, three of whom shall serve on any one
case. Persons serving on the Appellate Body shall serve in rotation. Such rotation
shall be determined in the working procedures of the Appellate Body.
Rule 6(1) of the Working Procedures for Appellate Review (“Working Procedures”
or “WP”) further provides:
In accordance with paragraph 1 of Article 17 of the DSU, a division
consisting of three Members shall be established to hear and decide an appeal.
84
The Appellate Body does not hear and decide appeals from panel reports in plenum
but in divisions of three Members. With respect to the composition of divisions, Rule 6(2)
of the Working Procedures provides that the Members constituting a division are to be
selected
… on the basis of rotation, while taking into account the principles of random
selection, unpredictability and opportunity for all Members to serve regardless of
their national origin.
Unlike for panels, national origin therefore does not play a role in composing an
Appellate Body division. The Members of a division select their Presiding Member.
Pursuant to Rule 7(2) of the Working Procedures, the responsibilities of the Presiding
Member shall include:
a. coordinating the overall conduct of the appeal proceeding;
b. chairing all oral hearings and meetings related to that appeal;
and
c. coordinating the drafting of the appellate report.
Decisions relating to an appeal are taken solely by the division assigned to that
appeal. However, to ensure consistency and coherence in its case law, and to draw on the
individual and collective expertise of all seven Members, the division responsible for
deciding an appeal exchanges views with the other Members on the issues raised by the
appeal. This exchange of views, which usually takes up two to three days, is held before
the division has come to any definitive views on the issues arising in the appeal. A division
shall make every effort to take its decision on the appeal by consensus. During the course
of appellate proceedings, a division will meet frequently to deliberate on the issues raised
in an appeal. However, if a decision cannot be reached by consensus, the Working
Procedures provide that the matter at issue shall be decided by a majority vote. Members
of the division may express individual opinions in the Appellate Body report but they
85
must do so anonymously. To date, only once - in EC – Asbestos- did an Appellate Body
Member express an individual opinion in an Appellate Body report.
Chairman of the Appellate Body
At the beginning of each year, the Members of the Appellate Body elect one of their
number to be the Chairman of the Appellate Body for the coming year. The Chairman is
responsible for the overall direction of the business of the Appellate Body, including the
supervision of the internal functioning of the Appellate Body.
Appellate Body Secretariat
Article 17.7 of the DSU states:
The Appellate Body shall be provided with appropriate administrative and
legal support as it requires.
The Appellate Body has its own Secretariat, which is separate and independent
from the WTO Secretariat and made up of lawyers and a full complement of
administrative and secretarial staff. In addition, as will be seen subsequently, whenever
an oral hearing is held, professional court reporters are hired to produce a full transcript
of the oral hearing. The Appellate Body Secretariat has its offices in the Centre William
Rappard, rue de Lausanne 154, Geneva, where also all meetings of the Appellate Body
and its divisions and oral hearings in appeals are also held.
4.6.5. References and Background Information
1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the
World Trade Organization
2) Understanding the WTO 2011
4.6.6. Supporting Materials
(Slides)
86
4.6.7. Glossary
Appellant – means any party to the dispute that has filed a Notice of Appeal.
Appellee – means any party to the dispute that has filed a submission.
Cross-appeal – Where both parties to a judgment appeal therefrom, the appeal of
each is called a “cross-appeal”.
Division – means the three Members who are selected to serve on any one appeal.
Like-product – are a subset of directly competitive or substitutable products.
Unaffiliated – not officially connected or associated with an organization.
Working-procedures – rules applied for appellate review.
87
4.7. Lecture Seven – Functions and competence of the Appellate Body(AB)
4.7.1. Objectives
This lecture explains the functions and the competence of the Appellate Body(AB).
This lecture aims to provide the information about the main issues of the scope of work
of the AB.
4.7.2. Lecture Topics
1. The functions of AB
2. The competence of AB
4.7.3. Overview
The AB is the most prominent element in the extensive legalization of the
management of international trade represented by the package of agreements which
established the WTO. The WTO agreements place extensive obligations on states to
ensure that their national economic regulations comply with WTO standards. To ensure
compliance with this broad sweep of commitments, the WTO agreements give its DS
system very extensive powers to decide whether national regulation complies with a wide
variety of international standards, ranging from product technical and safety requirements
to intellectual property rights, aids to industry and treatment of foreign investors, and
corporate taxation.
The content of it is also very significant, in that it confers a power to review any
national laws and regulations which another party complains are not compatible with the
very extensive regulatory requirements of the WTO agreements. An adverse ruling by the
AB means that the state must rewrite its domestic regulations. This raises important issues
of both legitimacy and accountability. The AB’s power to review the validity of national
88
regulations allows it in effect to overrule even laws enacted by legislatures. This in turn
raises the issue of accountability.
4.7.4. Discussion Topics
1. The functions of AB
The three Appellate Body members who have been selected to serve on a particular
appeal elect one of them to be presiding member of that division. The presiding member
coordinates the overall conduct of the appellate proceeding, chairs the oral hearing and
meetings related to that appeal and coordinates the drafting of the Appellate Body report.
Basically the AB hears appeals from panel decisions in panels of 3 AB members,
but all 7 AB members discuss each case internally, reviews questions of law not fact —
but some Parties claim the two cannot be separated
The AB is very text oriented, following Vienna Convention and lots of dictionaries
[and all 3 texts] — but willing to invent text [Canada Autos] and delete text [US CVD on
Softwood Lumber] where disagrees with the panel and the negotiators.
With regard to the content of an Appellate Body report, the DSU prescribes that the
Appellate Body must address each of the legal issues and panel interpretations that have
been appealed (Articles 17.6 and 17.12 of the DSU). The Appellate Body may uphold,
modify or reverse the legal findings and conclusions of the panel (Article 17.13 of the
DSU). However, where certain legal findings of the panel are no longer relevant because
they are related to or based on a legal interpretation reversed or modified by the division,
the Appellate Body sometimes declares such panel findings as “moot and having no legal
effect”.
In many cases, the Appellate Body will partly modify the panel’s legal findings and
conclusions because it agrees with the panel’s final conclusion but not necessarily with
89
the panel’s reasoning. If the Appellate Body agrees with both, it upholds the panel’s
findings and conclusions. Where the Appellate Body disagrees with the panel’s
conclusion, it reverses it.
Especially in this latter case, the function of the appellate proceeding must not only
be seen in the review of panel reports. There is also a dispute to resolve (Articles
3.3 and 3.2 of the DSU). Where, for instance, the Appellate Body has reversed the panel’s
conclusion of a violation of a certain provision, the respondent’s measure might instead
be inconsistent with another WTO provision. Often, the complainant has also claimed an
inconsistency with this other provision, either in the alternative, or cumulatively.
However, often the panel, given its finding of a violation of the former provision, did not
address this other alternative claim or it chose not to address the other cumulative claim
for reasons of judicial economy. In such a case, if the Appellate Body has limited itself to
reversing the panel’s erroneous findings and conclusion, the dispute would not be fully
resolved. The complainant would then have to start all over again by initiating a new
dispute settlement proceeding.
Two approaches are common in the procedures of many appellate tribunals whose
mandate is limited to questions of law. One is to decide the outstanding issue at the
appellate level. Indeed, many appellate tribunals have this authority (often without
obligation) where the case is “ripe” for such a decision (i.e. no further facts must be
explored). The other approach (the only one where a factual question remains open) is to
send the case back to the trier of facts. In this situation, the panel is the trier of facts. The
authority to send a case back to the lower level is called remand authority but does not
exist in the (WTO) system.
Given this absence of remand authority in the WTO, the first approach, that is,
having the Appellate Body decide the outstanding issue, becomes more compelling.
Indeed, the Appellate Body has on a number of occasions “completed the legal analysis”
90
in order to resolve a dispute. This has been possible only where there were sufficient
factual findings in the panel report or undisputed facts in the panel record to enable the
Appellate Body to address and decide on the outstanding issue. Where this has not been
the case, the Appellate Body has been unable to complete the legal analysis because it is
not entitled to make new factual findings. Moreover, an insufficiency of the facts is not
the only reason for the Appellate Body has declined to complete the legal analysis. In one
instance, in EC — Asbestos, the Appellate Body declined to address a “novel” issue
because it had not been argued in sufficient detail at the panel level, either in the case in
question or in previous disputes.
2. The competence of AB
Article 17.13 of the DSU states:
The Appellate Body may uphold, modify or reverse the legal findings and
conclusions of the panel.
When the Appellate Body agrees with both the panel’s reasoning and the
conclusion regarding the existence of a violation or non-violation of a provision of the
covered agreements, it upholds. If the Appellate Body agrees with the conclusion but not
with the reasoning leading to that conclusion, it modifies. If the Appellate Body disagrees
with the conclusion regarding the existence of a violation or non-violation, it reverses.
The Appellate Body has found that not every statement made by a panel when it
addresses a legal issue can necessarily be characterized as a “legal finding or conclusion”
which the Appellate Body may uphold, modify or reverse. When parties have challenged
comments made by panels that cannot be characterized as either a “legal finding or a
conclusion”, the Appellate Body has found that such comments cannot be addressed on
91
appeal. In US – Wool Shirts and Blouses, the Appellate Body observed with respect to
one particular “finding” of the Panel that was appealed by India that:
…this statement by the Panel is purely a descriptive and gratuitous comment
providing background concerning the Panel’s understanding of how the TMB
functions. We do not consider this comment by the Panel to be “a legal finding or
conclusion” which the Appellate Body “may uphold, modify or reverse”.
Whether a statement by the panel amounts to a legal finding or conclusion which
can be upheld, modified or reversed will have to be determined by the Appellate Body on
a case by case basis considering the statement and the context in which it is made.
4.7.5. References and Background Information
1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the World
Trade Organization
2) Understanding the WTO 2011
3) United Nations Conference on trade and development – Appellate Body DSB
4.7.6. Supporting Materials
(slides)
4.7.7. Glossary
Hearing – A legal proceeding in which evidence is taken and arguments are given
as the basis for a decision to be issued, either on some preliminary matter or on the merits
of the case.
92
Judicial economy – occurs when a panel decides not to rule on certain legal
arguments raised by the complainant and is significant because it limits the scope of a
ruling.
93
4.8. Lecture Eight – The Appellate Body(AB) proceedings
4.8.1. Objectives
This lecture explains the Appellate Body(AB) proceedings stages, and the main
features of it. The lecture aims to explore the duration of each stage and to deliver some
current trends of the AB proceedings.
4.8.2. Lecture Topics
1. The process of appeal
2. The outcome of appeal
3. Adoption of the decision
4.8.3. Overview
Do you appeal? If you look at the statistics, the average percentage of appeals is
60% as one say 50% and the others – 70%. Sometimes if you win you don’t want an
appeal. If you lose you may not want an appeal as well, by reason of the fact that it can
lead to worse decision. Visibly the Appellate Body always changes something. This is the
immature stage of the AB as it is only 20 years old. And, eventually, most Appellate
Courts usually just don’t do anything but lower the decision. Usually both parties appeal
as good people think that they are looking for a balance. The thing is that the winning
party may appeal because the Appellate Body can make it win better. The AB usually is
much more political than the Panel.
94
4.8.4. Discussion Topics
1. Process of appeal
The appeal must be filed in 60 days after panel decision transmitted to the Members
[but by then the 2 Parties have had first the interim decision of the panel and the panel
decision for nearly 6 months during the translation plus the 60 days]. Decision is due in
60 days from appeal, but it is impossible; extendable to 90 days – barely possible, and in
some cases totally impossible. So the statistics doesn’t look good, as the AB usually
misses the 90 day deadline. The deadlines are based on US – Canada FTA, which was a
different kind of appeal. So it is clear that we have to give them more time, namely 4-5
months. In general the AB has done a good job of meeting deadlines given the caseload
but often long delays for translation in 3 official languages. So that generally the Appellate
Body misses 90 days as more time is needed.
The next step is 1 hearing, with briefs before and after. But here it is important to
mention that hearings are closed to public unless both parties agree to open them, in which
case the hearing is transmitted to a TV in a separate room — with no recording made
public later! So if public wants to see a public hearing, they have to fly to Geneva. The
reason for transparency herein is to reassure the public, because if the hearing were public
– no one would care. As only bad things happen in secret. Although the arguments are
boring to the public. And the other fact is that there could be 3d parties participation. Both
parties could agree the hearings to be public but the other parties refuse it. The WTO
members totally refuse to make available a recording of what they just broadcast to a TV
just because someone may take the recording and temper with it. So they do have these
public hearings with people sitting in the room watching TV in Geneva, which is a very
expensive city.
95
2. Outcome of appeal
The AB can uphold, modify or reverse findings and conclusions of panels. So the
AB can do everything it wants.
No remand authority, but may “complete the legal analysis”, so that it can but are
not required to complete it. As it doesn’t come up in the most cases. Sometimes they
explain what the correct answer is and sometimes they don’t. So they will quite frequently
issue opinion saying: ‘what you did is wrong, we’re not going to tell you what is right’.
And even worse is that they let stand their legal decision or they say: ‘you can do this, but
only if you do a), b), c) etc’. US – Lumber is a good example herein.
Recommendations
If a violation: Member must bring its measures into conformity. And it’s left to the
Losing Member to decide how to do it. The Appellate Body and the Panel refuse to tell
the Member what to do. So that is a very high degree of non-compliance. So a Member
does something and than it has to go back and check whether it complied or not. It can
last for a couple of years, i.e. China imposed AD duties on US chicken meat in 2010, the
US challenged it in 2011 and China lost in 2012 and they still have a compliance.
Many national appellate courts, and some international tribunals, are
authorized, in defined circumstances, to send a case back to a court of lower
instance for reconsideration. The DSU does not, however, authorize the Appellate
Body to remand a case to a panel. Rather, Article 17.13 of the DSU empowers the
Appellate Body only to “uphold, modify or reverse the legal findings and
conclusions of the panel “.
96
Special situations (e.g. Art. 4 ASCM, in which it is clearly stated that you have to
withdraw the subsidy and Art. 7 ASCM says that you have to do something but not quite
as strong). A lot of these provisions in the Subsidies Agreement were negotiated before
the DSU was finished. So the people negotiating the Subsidies Agreement didn’t know
there would be a dispute settlement mechanism. Notwithstanding the fact that ASCM is
meaningless, subsidies are really good lands for examining the problems of compliance.
(The case Australia – Leather). Actually, many problems started before the WTO was
signed. A lot of the 10-years cases are cases against measures which predate the WTO.
So it would be rather strange if they complied with something that hadn’t been negotiated.
The other question which arises is if the country has to force companies to give back
money. In the European law you have to do so (i.e. Renault was forced to give back a $ 1
billion). Meanwhile, if we take Australia which is a quite empty country and if there a
factory closes 100 jobs it would be a big deal and this will become political. So that the
front page will look like: ‘WTO is closing factories!’ That is why the government rather
than require the company give the money back negotiated the end of the loan and gave it
a new one which didn’t require exports. To be technically correct you have to go back and
examine it to see if it was a subsidy. In the abovementioned case neither the US applicant,
nor Canada respondent think that you have to pay back the subsidy, even if the Panel
forces to do so, it doesn’t matter because the 2 parties have agreed otherwise. So finally
the Panel said to pay it back, then the issue became if you had to pay it back with interest.
And both parties said: ‘No’. By means of this fact, the Panel approved long-tidy exports
with no interest and, eventually, it approved a prohibited subsidy.
Let’s imagine another kind of situation in which a person gives you $ 1 mln. every
year and it loses at the WTO and of course stop giving the money, facing retaliation – that
is the FSC case. But no one asks for the money to be given back, - that’s one of the WTO’s
rules. The special situation with withdrawing the subsidy is interpreted by the Members
in the following manner: you give money, than you stop doing this but still the company
97
keeps it. Basically, it means that ASCM means nothing. But the thing is that you’re not
going to stop future subsidies, you’ll just stop the current ones by bringing the case. For
example, you can’t bring your money back but what you can do is stop more money and
that will affect planting decisions, so it really makes sense as if you can cut off the money
which hasn’t happened yet in order to change the planting decision, so that if the planting
is lower – world prices would go up. All in all, if you never have your money back, still
you can achieve a goal. There are not so many examples of such cases as it is difficult to
show harm, but still there are some (US – rice, Brazil – Soy beans). The main thing is that
ASCM works for big countries with big industries (Europe, the US and China). The US
steel industry really does not export, 90% is sold domestically, and only if you’re
competitive than you need a support worldwide. (That’s why most of the countervailing
duties are on steel).
Herein Chile is the best example: you can impose a countervailing duty on
European wine for your home market, but it’s less than 5% of your sales. And most of
sales are in Europe and you can’t do anything about that with a countervailing case, - so,
yes, you can do it only if your home market is big enough for your industry. Trade cases
tend to be brought by companies’ industries that don’t export because they are
uncompetitive. If you were competitive worldwide than anti-dumping cases would help
you as you needed someone’s protection.
Talking about export subsidies, they tend to be withdrawn because within this club
which is the WTO, every would sign a piece of paper saying they are prohibited.
And going back to the FSC case, in 1971 Nixon took the US of the gold standard
(so called Nixon shock), imposed a 10% import so charge which might have been legal
under GATT. That made the US not more competitive on export market, but it had to be
accompanied by an export subsidy, a strange one called DISC. Soon the tax measures
were exempted from the WTO (and the US being a part of Tokyo round agreed to get rid
98
of DISC), nevertheless 4 years later it brought it back and just gave another name: the
FSC – and if trying to explain, basically, it means that you get a tax benefit from exporting,
you are not selling domestically. Retaliation in the US means that you have to move the
US Congress, namely the things Members of Congress care about in their districts.
The matter is that retaliation doesn’t work against the EU or US unless you do that
because you are too big. The EU said: we were going to put 7% of duties on the following
items instead of 100% but we’d raise 1% a month. It was 15% when the US Congress
gave up. So it means that you advertise to companies that it is going to be 7% tomorrow,
and some time is needed for the Congress to react so that every month it becomes worse
and worse. The companies start pushing the Congress and it abolishes the import
substitution requirement. So, again, this is a special situation with subsidies – you can’t
take away someone’s money: once you give them money, you never can take it away.
There has been no successful case on nullification or impairment under the
WTO.
You are supposed to reach mutually satisfactory adjustment in case if the subsidies
are legal and there is no factual violation, so herein you negotiate subject to retaliation.
3. Adoption of the decision
The final panel report is first issued to the parties to the dispute and some weeks
later, once the report is available in the three working languages of the WTO, circulated
to the general WTO Membership. Once circulated to WTO Members, the panel report is
an unrestricted document available to the public. On the day of its circulation, a panel
report is posted on the WTO website (www.wto.org). Panel reports are also included in
the official WTO Dispute Settlement Reports, published by Cambridge University Press.
99
Within 60 days after the date of circulation of the panel report to WTO Members,
the report is adopted at a DSB meeting unless a party to the dispute formally notifies the
DSB of its decision to appeal, or the DSB decides by consensus not to adopt the report.
In order to provide sufficient time for the Members to consider panel reports, the reports
shall not be considered for adoption by the DSB until 20 days after they have been
circulated.
Since 1995 about three out of four panel reports have been appealed. During the
first years of the WTO dispute settlement system the “appeals rate” was 100 per cent. In
fact, all panel reports circulated before the end of March 1998 were appealed. If a panel
report is appealed, it usually is not discussed in the DSB until the time the Appellate Body
report is discussed. The panel report will then be adopted by the DSB, as upheld, modified
or reversed by the Appellate Body.
If a panel report is not appealed, the DSB will consider and adopt the report within
the period between day 20 and day 60 after the circulation of the report. The DSB adopts
the report by reverse consensus. The adoption is therefore quasi-automatic. The adoption
of the report will be put on the agenda of DSB meeting scheduled within the period
between day 20 and day 60 after the circulation of the report. If no DSB meeting is
scheduled in that period, a meeting of the DSB is held specifically to consider and adopt
the report. Only WTO Members, and not the WTO Secretariat, may put the adoption of a
panel report on the agenda of a DSB meeting. If no Member puts the adoption of a report
on the agenda, the report will not be adopted and will therefore not become legally
binding. To date, this only happened once.
Where a panel concludes that a Member’s measure is inconsistent with a covered
agreement, it shall recommend that the Member concerned bring that measure into
conformity with that agreement. The recommendations and rulings of the panel are not
legally binding by themselves. They become legally binding only when they are adopted
100
by the DSB and thus have become the recommendations and rulings of the DSB. The DSB
adopts the panel report, and its recommendations and rulings, by reverse consensus, i.e.,
the DSB adopts the report unless it decides by consensus not to adopt the report. It is clear
that the latter is not likely to happen since the “winning” party will have a strong interest
in the adoption of the report. Therefore, the adoption of panel reports by the DSB is
“quasi-automatic”.
In addition to making recommendations, the panel may suggest ways in which the
Member concerned could implement those recommendations. These suggestions are not
legally binding on the Member concerned but because the panel making the suggestions
might later be called upon to assess the sufficiency of the implementation of the
recommendations, such suggestions are likely to have a certain impact. To date, few
panels have made use of this authority to make suggestions regarding implementation of
their recommendations.
As already pointed out above, panels cannot in their findings and recommendations
add to or diminish to the rights and obligations of Members provided for in the covered
agreements. They are explicitly proscribed from doing so.
Panelists can express in the panel report a separate opinion, be it dissenting or
concurring. However, if they do, they must do so anonymously. To date, there have been
very few panel reports setting out a separate opinion of one of the panelists.
When a single panel examines complaints of multiple complainants, the panel must
present its findings in such a manner that the rights which the parties to the dispute would
have enjoyed had separate panels examined the complaints are in no way impaired. If one
of the parties to the dispute so requests, the panel shall submit separate reports on the
dispute concerned. This happened in EC – Bananas III in which the panel issued four
separate, be it in substance largely identical, reports.
101
Occasionally parties have reached a mutually agreed solution to the dispute while
a panel was already examining the matter. Where parties settle the dispute before the panel
circulates a report to the WTO Members, the report of the panel shall be confined to a
brief description of the case and to reporting that a solution has been reached.
Panel reports are always circulated to the WTO Members and made available to the
public in English, French and Spanish. No report is circulated until all three language
versions are available. Most reports are written in English and then translated into French
and Spanish, but in recent years there have been a few panel reports that were written in
Spanish and at least one that was written in French.
The DSB must adopt, and the parties must unconditionally accept, the Appellate
Body report unless the DSB decides by consensus not to adopt the Appellate Body report
within 30 days following its circulation to Members. This adoption procedure is without
prejudice to the right of Members to express their views on an Appellate Body report
(Article 17.14 of the DSU).
Regarding the automaticity of adoption (except where there is a “reverse”
consensus), the expression of Members’ opinions and the practical requirement that the
Appellate Body report be placed on the DSB agenda, the process is the same as for a panel
report, as explained above. However, the deadline for adoption of an Appellate Body
report is only 30 days, possibly because no party needs to make up its mind whether to
appeal. Article 17.14 also specifically provides that the parties to the dispute must accept
the Appellate Body report “unconditionally”, i.e. accept it as resolution of their dispute
without further appeal.
Although Article 17.14 does not mention the panel report, it is understood that the
Appellate Body report must be adopted together with the panel report because one can
understand the overall ruling only by reading both reports together. The DSU also
provides in Article 16.4 that the DSB will only consider the panel report for adoption after
102
completion of the appeal. Thus, both reports are placed on the DSB agenda for adoption,
and the DSB adopts the Appellate Body report together with the panel report, as upheld,
modified or reversed by the Appellate Body report. To the extent that the panel’s
conclusions have not been reversed or modified, or have not been appealed, they are
binding on the parties.
The SCM Agreement again provides for a shorter adoption deadline of 20 days in
disputes on prohibited and actionable subsidies (Articles 4.9 and7.7).
4.8.5. References and Background Information
Peter Van den Bossche, Werner Zdouc. The Law and Policy of the World Trade
Organization
United Nations Conference on trade and development – Appellate Body DSB
Andrew D. Mitchell, The Legal Basis for Using Principles in WTO Disputes
4.8.6. Supporting Materials
(slides)
4.8.7. Glossary
Circulated – To spread widely among states, members of WTO through the WTO
Secretary; disseminate
DISC – domestic international sales corporation is a provision unique to tax
law in the United States. In 1971, the U.S. Congress voted to subsidize exports of U.S.
made goods through the income tax law. The initial mechanism was through a Domestic
International Sales Corporation (DISC), an entity with no substance which received tax
103
benefits. Today, shareholders of a DISC continue to receive reduced income tax rates on
qualifying income from exports of U.S. made goods.
Modify or reverse legal findings – the Appellate Body can on its initiative revise
some legal findings made by the Panel.
Outcome – a conclusion reached through a process of logical and legal thinking
and delivered in a form of written report.
104
4.9. Lecture Nine – Supervision, and prompt implementation of the
recommendations and rulings of the Dispute Settlement Body
4.9.1. Objectives
This lecture explains the supervision and implementation of the recommendations
and rulings of the Dispute Settlement Body. The lecture aims to explore the circumstances
when states refuse to implement the decisions and what are the remedies in case of such
miss implementation.
4.9.2. Lecture Topics
1. Implementation of the recommendations and rulings
2. Non-implementation: compensation
3. Non-implementation: retaliation
4.9.3. Overview
Implementation stage is very important in any dispute resolution mechanism,
because the companies have the following question: what will happen the day that we
have the report adopted? There is an assurance of prompt settlement, prompt
implementation of the rulings and recommendations of the DSB.
4.9.4. Discussion Topics
1. Implementation of the recommendations and rulings
The main articles are arts. 21 and 22, provisions of which are dealing with this
implementation.
105
It is clearly stated in the first paragraph of art. 21 – Prompt compliance is essential
in order to ensure effective resolution of disputes to the benefit of all Members. That is
the first idea transmitted by negotiators, and after it becomes obvious who is right and
who is wrong, the process should move quickly. At the same time we also have to
understand the realities of each possible case as it always deals with different situations
and its own Members involved. Relatively short time frames for certain things to happen
are established by first paragraph of art. 21. It is interesting to mention that if you have
lost in good faith than you amend, withdrawn a measure – and that’s it.
From the positive perspective of view, usually the implementation occurs fairly
quickly, not even involving art. 21.5 or retaliation.
Statistics of the overview report from the legal division (last year edition) shows
that there are not so many cases which deal with art. 22.6/retaliation situations.
There are 40 cases out of 156 Panel reports dealing with art. 21.5. (less than 30%).
Two thirds of the cases have quick implementation and prompt compliance after
the AB report have been adopted by the Dispute Settlement Body. This proves that for the
large part of disputes after passing many stages (including the AB), relatively quickly the
decision could be taken. Nevertheless, there is also not so positive experience (Bed Linen
case). Especially, for the important cases. And it differs by country as well. All in all,
compliance – as a system of law is not that great. Besides, small countries comply much
more that big ones.
It’s interesting that mostly the EU has never complied as it immediately and secretly
started doing targeted dumping not even admitting the violation.
The US first case complied within 18 months period because they wanted to make
the point of compliance. After that usually they don’t comply. As they had deliberated
attempt to drag out the protection.
106
So it should be understood that there is a restrictive market, where the EU industry
steels something (merely concerning Bed Linen case).
There are no duties for a long time, in the end it is a hardship, or actually it is
continuum where you have to check time-limits (when did you start the case, how much
time has passed so far etc). In some cases the defendant knows that he is going to lose, -
and that is the key point.
The other important line is connected not with time but with the size of the country,
which is predictable from the political science. The bigger country – the more complicated
the process of compliance is, as the US and China don’t comply. So we should adjust by
time and country; Ukraine will comply quickly.
In a situation with Dominican Republic, a particular case (Guatemala, Salvador,
Costa Rica and Honduras against Dominican Republic), had a highly positive result for
both parties. Arts. 21.5 and 22.6 are not applied in such type of cases, where we deal with
small and regional industries of the countries with the same status. As they are in the
“reasonable period of time”.
Member concerned informs the DSB of its intentions in respect of implementation
of the recommendations and rulings within 30 days of adoption of report.
Immediate compliance is preferable.
“Reasonable period of time” for implementation is very important as to the nature
of the measure, especially the fact, who is involved in amending and reviewing this
measure to bring it in compliance. Obviously, we still have some US cases on legislative
measures, which remain undone. If look at the US, it usually requires retaliation, either
imminent or actual (i.e. SFC, Irish music etc). It is difficult for the Congress to pass normal
legislation, not even talking about such kind of cases. It depends on exactly what the
measure is.
107
The much more interesting one is the non-legislated. And there you start looking
at the size of a country, time to comply etc. Herein small countries are faster. Also as we
know the recalculation of dumping doesn’t take so long (1-2 days), so than why do the
countries need a few months? And the more experienced a country is, the more time it
needs. Unfortunately, it is nowadays reality, with significant impact of political aspects.
The good thing – is a possibility to go to the arbitrators (former Appellate Body members),
as they resort to the fair judgement. But generally, many things could have been done
faster. Moreover, we still need to check then whether the amendment is in compliance or
not.
But let’s go back to art. 21.5, where it is stated that the country has to do something
in order to comply and where there is disagreement as to the existence or consistency with
a covered agreement of measures taken to comply with the recommendations and rulings
such dispute shall be decided through recourse to these dispute settlement procedures.
Due to the existing practice, normally countries do something because if they do there is
a debate wheatear this ‘something’ is consistent or not. Quite frequently, at least 50% of
these cases go to appeal.
Jurisprudence has developed over time and now the scope of art. 21.5 is interpreted
in a not too restrictive manner, so that, basically, you can review new measures but firstly
there is a need to build a breach between the measure and the EC regulation regarding the
Antidumping investigation on Bed Linen, for example. Along with the measures that were
examined in the original case. So this is an important element.
The other thing is that new and different claims can be brought. Resorting to the
abovementioned case (Bed Linen) again, a huge number of claims were brought against
the reassessment, conducted by the European Commission, with the main one –
eliminating zeroing.
108
Art. 3.2 deals with the volume of dumped imports. The question was as to the
companies that have been determined after non-applying zeroing, not to be exporting
goods at dumping prices. So to be in compliance with art. 3.2. Another claim related to
art. 3.5 as to the other factors affecting the situation in the domestic industry. All in all, in
theory it looks rather comprehensive what you can challenge in terms of measures and
legal basis claims, but at the same time you shouldn’t be mislead by these headlines.
But we should remember that some claims may not get you anywhere because you
will never get compliance. For instance, historically the US complied when there was
retaliation period. Still there is a need in some claims you can win on.
For sure, we can say that the bigger country is, the more experience it has and the
less it cares about its reputation. It is even more size that experience.
The current tendency is that now people hold on measures, so they resort to art.
21.5 (Antidumping or CVD). It picked up after 2006.
This article says about 90 days within which the Panel circulates the report after the
date of referral of the matter to it. But these 90 days have become years. They go beyond
the original time the report needs to be produced. The retaliation is nothing to do with the
subject matter; those are Members of Congress in the US who cares about it. The EU has
the same problem, because retaliating against it is also difficult. Nowadays the situation
looks like the US agrees to retaliate against a certain list of products one from each country
and reserves the right to change it every 6 months. And that leads the EU to do something.
In China it is much easier as only one person takes the decision.
In some instances art. 21.5 is a beautiful instrument to solve big issues in a relatively
quick time-frame. So with one shot – one appeal – art. 21.5 has to decide a huge issue
with the same panel usually.
109
The other thing which is worth considering is using zeroing in transaction-to-
transaction.
So transaction-by-transaction is the original way to do antidumping, because AD
was done by Customs officials. And when the entry comes in and you find out the normal
value. By selling the product every week, we are comparing one transaction to another
transaction. And a signing of duty based on their product. So far, so good the important
thing here is zeroing because you are charging a duty where the export price is lower than
normal value. In general, almost everyone switched to doing transaction-to-average,
because you can get thousands of sales in both markers. But every so often there was a
case you only had like once 3 sales. For instance, 3 turbines have been sold to Ukraine
with a separate duty for each and a separate calculation accordingly – that means
transaction-by-transaction.
X1 and X2 are dumping margins, which are compared to transaction.
X1 is 5 and X2 is – 5, so = averaged.
So you can do transaction-to-transaction but in a very limited range of cases.
2. Non-implementation: compensation
If the losing Member fails to bring its measure into conformity with its (WTO)
obligations within the reasonable period of time, the prevailing complainant is entitled to
resort to temporary measures, which can be either compensation or the suspension of
WTO obligations, as discussed below. Neither of these temporary measures is preferred
to full implementation of DSB recommendations and rulings (Articles 3.7 and 22.1of
the DSU).
110
If the implementing Member does not achieve full compliance by the end of the
reasonable period of time, it has to enter into negotiations with the complaining party with
a view to agreeing a mutually acceptable compensation (Article 22.2 of the DSU). This
compensation does not mean monetary payment; rather, the respondent is supposed to
offer a benefit, for example a tariff reduction, which is equivalent to the benefit which the
respondent has nullified or impaired by applying its measure.
The parties to the dispute must agree upon the compensation, which must also be
consistent with the covered agreements (Article 22.1 of the DSU).This latter requirement
is probably one of the reasons why (WTO) Members have hardly ever been able to work
out compensation in cases reaching this stage. Conformity with the covered agreements
implies, notably, consistency with the most-favoured-nation obligations (Article I of
GATT 1994, among others). Therefore, WTO Members other than the complainant(s)
would also benefit, if compensation is offered e.g. in the form of a tariff reduction. This
makes compensation less attractive to both the respondent, for whom this raises the
“price”, and the complainant, who does not get an exclusive benefit. These obstacles could
to some extent be overcome, however, if the parties were to select a trade benefit (e.g.
tariff reduction) in a sector of particular export interest to the complainant and other
Members had little export interest in that sector or product.
Everything through arts. 16 and 17 was based on GATT practice, but after article
20 and further was new. Nothing has been done to bring the measure into compliance.
Every government thinks there would a plaintiff and a defendant, so the US and the EU
put a little diversion here in an extremely controversial case – Bananas.
Keeping high tariffs is good for development (in the WTO understanding). In Brazil
it led to non-competitive industrial machine. But it didn’t work in Argentina, Bangladesh
and Pakistan, so if you go anywhere in the world, except Geneva, and say: ‘The way to
develop is high tariffs’ nobody would understand this because it doesn’t work.
111
Developing countries have special and differential treatment which means that they
don’t have to put their high tariffs on the negotiation table, but they get MFN access to
the low tariffs that the other countries negotiate between (i.e. the UK, France).
There is a quite interesting situation in the US. 80% of US tariffs are collected from
developing countries. It looks like this: there are poor people, – Democrats party
represents them and stands for high tariffs.
So retaliation puts out of business. It creates a wasted interest in keeping a tariff.
But the thing is that the importing country chooses which exporting country lower tariffs.
3. Non-implementation: retaliation
In which sectors and under which agreements one could suspend concessions?
Article 22.3 sets a clear order. A party requesting the DSB to authorize the suspension of
concessions or other obligations has to respect that. If this party does not comply with that
order then later on one will see Article 21.7 and the arbitrator will have to tell this country
that this is not acceptable because it did not respect the order of Article 22.3. So the order
concerned has to be accepted and complied with and there is no other way.
There may be situations when one could not be able to suspend concessions in the
specific sector, in accordance with letter (a) “the complaining party should first seek to
suspend concessions or other obligations with respect to the same sector(s)”.
If one cannot suspend in the given sector because it is too small or that sector does
not exist then one have to go to the letter (b) which states that “if that party considers that
it is not practicable or effective to suspend concessions or other obligations with respect
to the same sector(s), it may seek to suspend concessions or other obligations in other
sectors under the same agreement”.
112
One may go further to letter (c) “if that party considers that it is not practicable or
effective to suspend concessions or other obligations with respect to other sectors under
the same agreement, and that the circumstances are serious enough, it may seek to suspend
concessions or other obligations under another covered agreement”. Both sector and
covered agreement are terms that are defined so there is no room for interpretation. Article
22.3 contains letters (f) and (g) that define what is “sector” and “agreement”. So that sets
very clear rules both for the country as well as for the arbitrator later on to assess the
request formulated by complaining or a winning party.
The whole logic of allowing different options: letters (a), (b), (c) is because we
know the case of Ecuador and Antigua and Barbuda – economies are different, the level
of every country is different so therefore one needs to give different options and it will
depend very much on the fact who is on the both sides of the dispute table, who is a
winning and who is a losing party and that will dictate in rather objective way whether
one can stay at letter (a) or can go to letter (b) or one will go to the letter (c).
In accordance with Article 22.7 “if the matter referred to arbitration includes a claim
that the principles and procedures set forth in paragraph 3 have not been followed, the
arbitrator shall examine that claim” and “in the event the arbitrator determines that those
principles and procedures have not been followed, the complaining party shall apply them
consistent with paragraph 3”. The Article concerned provides a very little room for the
arbitrators to depart from the very straight instructions of Article 22.3. Article 22.6 and
22.7 address the assessment of annual request for the suspension of concessions so these
are the basic rules that not only the winning party but in the end the arbitrators will need
to apply and make sure that they are applied correctly when assessing any dispute with
respect to the level of concessions or other obligations.
One thing which is very important is definitely the paragraph 4 that states that: “the
level of the suspension of concessions or other obligations authorized by the DSB shall
113
be equivalent to the level of the nullification or impairment”. Rules division usually does
everything until 21.5 and when 21.5 is over that is not the problem of the department
concerned anymore.
There is usually one person in the legal affairs department that mainly works with
arbitrators when performing the assessment of Articles 22.6 and 22.7. In the previous
disputes economic research division was also involved. The assessment on whether the
request was formulated in accordance with Article 22.3 is the legal part that is usually
very small. The assessment of Article 22.4 whether the level of suspension is equivalent
to the level of the nullification or impairment – is not a legal but mainly economic issue.
The parties in disputes shall take the approach that is consistent with a paragraph 4. It
becomes extremely technical and extremely complex from that point of view. Legal
affairs division, Rules division and most people in Secretariat – legal staff that is not able
to cope with this. That’s why the economic research comes in and helps arbitrators, some
of them may be economists as well as panelist. So it’s sometimes useful to have a panelist
because the arbitrators will not normally be original team of panelist that has seen the
original case. So that is why it’s good to have among them economists. Otherwise the
panel is a bit helpless because one has to come up with his own view and need to have
solid economic knowledge. Economic research division is usually responsible for such
issues. They are assisting legal affairs division in “22.6 cases”. So economists are usually
involved only at this stage. But there is usually at least one economist as a panelist in most
cases.
When you are in a little room discussing the case with panelists there is an economic
discussion but in the end everyone is to come back to the agreement and read the commas
and full stops and it becomes more legal assessment. Normally, the economist sits back
and tells the lawyers, panelists with legal background what he thinks. The Secretariat is
usually deeply involved in a case discussion and it has to do so. In cases where there is a
114
window for opportunity to go into economics there is a discussion on that. In the last case
there was a discussion on that and it was reflected in the panel report in the context of
causality and non-attribution. In EC – DRAMs the panel said it believed that at least in
some cases there is no way to do a proper 3.5 assessment without an economic assessment.
The Appellate Body said that they wanted to hear about specific methodology and this is
up to the members to do it. Implicitly, it’s impossible to come up with this separation and
distinguishing without economics. And that are economic discussions between the
panelists. And, finally, without a lot of explanations as well as developments not to create
some problems, perhaps, they put it in just one little sentence despite the fact that there
was a huge discussion on it. But this sentence is there. So if we talk about trade remedies
this is one example where economics have made it into panel report. But otherwise
economists tend to go down to the discussion at the legal level.
The final approach that arbitrators will take in order to determine the appropriate
level of suspension is different because every case is different and there is no single
approach. For instance, in Byrd amendment the complainant moved to the stage of
suspension of concessions and complainants asked that the level of suspension of
concessions should be equivalent to the disbursements made by the United States. If the
United States gave companies concerned 10 million (money that they have collected for
imports of smth.) this sum of money will be the level of the suspension of concessions.
The United States disagreed. The arbitrator based on Article 22.4 developed an economic
model aimed at assessing the fact of the disbursements (one needs to determine a trade
effect – this is important; the limit that is a decisive factor in determining what is the actual
level of suspension that you can apply). So from the given 10 million one needs to find
how it affects trade. Assessing the facts of disbursement under the Byrd amendment of
the European Union, Japan, Mexico exports to the United States the arbitrator came up
with the coefficient/ratio: each dollar of money given to the complainants has so much
impact on trade. As to the export from the three countries concerned he came up with the
115
coefficient which multiplied by the amounts of disbursement of the United States under
the Byrd amendment in relation to antidumping and countervailing duties collected on
imports of each of those members. The coefficient was 0.72. The explanation on how they
reached this conclusion is provided in the award. So they came with a single figure – 0.72.
But this changes over time because there are new results of investigations, new products
subject to measures etc.
Peculiarity of Byrd amendment is that the import duties collected change over time
so one issue that had to be decided that the factor is the same (0.72) and it does not change
over time. But what changes – the numbers of duties collected. Obviously, they have to
articulate some way to adapt the level of suspension to the duties collected and distributed.
So every year the level will change. Every year you will see the notification to the WTO.
14 May, 2015 there was a communication to the DSB on the specific suspension of
concessions applying from 1 May, 2015 until 30 April, 2016 indicating the current level
of suspension of concessions. The suspension that applies as from 1 May, 2015 covers
over 1 year a total value of trade that does not exit 3.2 million. This is a maximum level
of suspension. The amount of 3.2 million is the European Union’s current level of
authorization established through arbitration under Article 22.6. It represents 72% of USD
4.5 million.
The United States during the fiscal year of 2014 collected USD 4.5 million
countervailing and antidumping duties and distributed them under the Byrd amendment.
Consequently, 0.7 gives 3.2 million. The next year they will notify another figure. And
this is the only value for the European Union. The European Union usually takes
information from the Byrd amendment annual report published by the US Customs and
Border Protection. The question is how much the increase of import duties should be
applied so you don’t go above this 3.2 million which is the maximum level. The
recalculation will be made on the basis of the Byrd amendment annual report.
116
What is the relationship of the retaliation to the harm done? And what was the harm
done? Most countries didn’t argue that was a subsidy. And it was quite specific. So what
was the harm and what did the Byrd amendment do? It gave you money that was collected.
So it becomes an incentive to file cases and that is really a problem. But the strong
argument is that the Byrd amendment is not illegal. You cannot find anything in the WTO
that says: “it’s illegal”. They just feel it’s “wrong”. It upsets the balance, so that’s really
the reason why people didn’t like it. This was not a serious decision. There is a normal
legislative process in the Unites States and it didn’t go through it and in fact was rejected
3 times. But there is nothing wrong in the text. However, one good way of predicting
WTO cases is if a country does something that no one else does - “If you are an oddball
– you gonna loose”. So if you are the only one doing this – it will be strange for the panel.
There is an odd peace in the US – Canada FTA extended in the NAFTA - changes
in AD laws don’t apply to the other two countries unless the change specifically identifies
those two countries. So if you pass a change in the AD law we’re going to double do this.
And it doesn’t say for Mexico and Canada – it is not applied to them. Article 24 says that
you have to eliminate all other restrictive regulations with some exceptions. If you read
the text of the GATT all the FTAs have to eliminate antidumping and countervailing
duties and safeguards but no one does that. But if you read the text it is clear.
How is compensation in any way related to the original case? You find an industry
no one in the United States makes and then you make one – you file an antidumping case.
By definition import is so huge because the United Stated does not make this stuff – you
are the entire industry. You get all of the Byrd amendment payments.
So let’s go through the other examples of compensation and answer what the
relationship is to the actual problem. Retaliation should not be necessary made in the same
sector. Normally retaliation is focused on other sectors, but some countries make it in the
117
same sector (Japan – whether for ideological reasons or revenge – impose duties on
American ball bearings but that’s not normal).
Money does not go to the companies. They don't go, but on the market they will
have some advantage.
It says in the Agreement that it is normal, but in practice that is abnormal. And
indeed you would expect it to be abnormal, because typically the people bringing dumping
cases are not competitive and do not export.
The retaliation was on mustard and biscuits, so if you produce beef in the US, and
you like Dijon mustard, but you insist on authentic French Dijon mustard, you are loosing
your sales in Europe and paying more for your mustard. This is because of WTO and
Members' refusal to adopt a rational system which would be retroactive, which would be
public international law (Chorzow factory making the injured party happy: you stole one's
property, give me sufficient amount of money).
Here it's different. The person injured almost never gets the benefit. So the
compensation is the final step in entirely illogical system.
Your suggestion is to make the remedies retroactive?
You pay the money back, you can't explain the businesses that a country can impose
illegal duty and keep the money. There are some problems, since it's done through a
system of nation states, the violating party should pay money which should go to the
injured party. That would solve your problem.
The poor African countries, not only they do not get any compensation, the
Brazilian competitors are now getting subsidies from the US, as well as the American
competitors. So the poorest guys get hurt the most.
118
That takes you back to the irrationality of the system based on raising duties
essentially and then buying a way out. Not a good system.
One other thing about Byrd amendment. The leading recipients of Bird-amendment
money are three industries in the USA:
1) ball bearings (they got more Bird-amendment money than profits,
meaning it made money by filing cases and lost money making ball bearings). There
are 20 000 types of ball bearings, and in the proceedings you can't consider them
all. So you have to simplify the classification, in order to administer the law. Of 20
000 types they form 5 groups and consider whether the group was injured (and they
look at the prices of only 20 of ball bearings) – and based on that they apply duties
with respect to 20 000 of them. The design of imposition of such duties (which are
very high), is that people should shift to the domestic producer. The purpose of the
duties is not to collect revenue, it’s to shift production to protected industry. But,
given the special nature of ball bearings (once the whole product is certified, you
cannot switch to another ball bearing unless you want to go through the whole
certification procedure once more), you cannot switch to domestic producer. You
simply pay the duties and buy foreign ball bearings you need. And US producers
get huge benefit from that. And that's the problem, since dumping duties shall bring
protection, not revenue.
2) The US makers of Pasta. Why Pasta? Why would not people just
buy American pasta? Because it has to be Italian.
3) Candles. In Candles case there were Chinese candles that were sold
in the US. Four candles for a Dollar. They were of terrible quality, but they were
cheap. The US candle which costs 4 times more, burned for 4 times longer. There
are a lot of types of candles (same as ball bearings). There are also holiday candles
– and they were excluded. So if it is a holiday candle, it is not subject to the duties.
119
For instance, if there is a candle made in a shape of the heart you have to pay duties,
but if it is written "Happy Valentine's Day", there is no duty. Moreover, the goods
with a candle inside are also subject to the duty. Candle-makers also made much
more money by initiating cases than they did by producing candles.
The people that get Byrd amendment money are not really hurt by retaliation. Japan
is imposing USD 2 million duty on ball bearings producer – for a company that gets USD
1 billion of Byrd amendment money it's nothing.
That's the reason why major part of business-community lost interest in WTO suits
– they don't solve their problems.
4.9.5. References and Background Information
1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the World
Trade Organization
2) United Nations Conference on trade and development – Appellate Body DSB
3) United Nations Conference on trade and development – Panel DSB
4) Andrew D. Mitchell, The Legal Basis for Using Principles in WTO Disputes
4.9.6. Supporting Materials
(slides)
120
4.9.7. Glossary
Byrd amendment – is also known as the Continued Dumping and Subsidy
Offset Act of 2000 (CDSOA).
Compensation – something (such as money) given or received as payment or
reparation (as for a service or loss or injury).
Implementation – the act of accomplishing some aim or executing some order.
Non-compliance – failure or refusal to comply, as with a law, regulation.
Reasonable period of time – is that amount of time which is fairly necessary,
conveniently, to do whatever is required to be done, as soon as circumstances permit.
Recommendation – a formal suggestion about what should be done.
Retaliation – To do something in response to an action done to oneself or an
associate as a response to a hurtful action.
Zeroing – An investigating authority usually calculates the dumping margin by
getting the average of the differences between the export prices and the home market
prices of the product in question. When it chooses to disregard or put a value of zero on
instances when the export price is higher than the home market price, the practice is called
“zeroing”. Critics claim this practice artificially inflates dumping margins.
121
4.10. Lecture Ten – Ukraine’s participation in the WTO dispute settlement
4.10.1. Objectives
This lecture explains the role of Ukraine in the WTO. The lecture aims to explore
the participation of Ukraine in the WTO Dispute Settlement and in disputes relating to
Ukraine.
4.10.2. Lecture Topics
1. Ukraine as active participant of DSM
2. Cases Ukraine is involved in
4.10.3. Overview
Ukraine has been a member of the WTO since 16 May 2008. Ukraine's accession
to the WTO opened new perspectives for the development of the national economy.
Ukraine on absolutely equal conditions and rights is one of other members directly
involved in the formation of new rules of trade in the global market under the current
round of multilateral trade negotiations in order to maximize the national interests of our
country in the trade and economic sphere.
As a WTO member, Ukraine got the right to use the dispute settlement mechanism
of the WTO, contributing to a just resolution of any disputes regarding the provisions of
the WTO agreements that may arise in the country with its trading partners. In the
framework of the mechanism was positively resolved a number of important issues, such
as discriminatory taxation, licensing certain types of Ukrainian products. Ukraine
continues to use the mechanism of the WTO, as it is part of systematic efforts to support
and expand the presence of Ukrainian goods to other markets.
122
4.10.4. Discussion Topics
1. Ukraine as active participant of DSM
Ukraine's accession to the WTO has created the necessary prerequisites for the
signing in June 2010 of the FTA with the European Free Trade Association (Norway,
Switzerland, Iceland and Liechtenstein), which entered into force on 1 June 2012; was a
powerful stimulus for the start of negotiations with the EU on free trade zone. The political
part of the Association Agreement with the European Union, Ukraine was signed March
21, 2014. The economic part of this agreement was signed on 27 June 2014.
The Government of Ukraine carries out an active foreign trade policy through the
participation of our country in multilateral trade negotiations and carry out effective work
to achieve the benefits of Ukraine's WTO membership to expand export opportunities of
domestic producers and protection of economic interests in foreign markets.
Responsible for cooperation with the WTO Ukraine central executive authority set
by the Ministry of Economic Development and Trade of Ukraine.
The Ministry of Economic Development and Trade (MEDT) is the main institution
in charge of defending the interests of Ukraine and its exporters in the context of
international trade dispute mechanisms. In so doing, the MEDT may seek assistance from
other governmental institutions. Finally, the private sector should play a key role when
challenging foreign-trade practices.
In sum, during the recent past Ukraine has been an active user of the WTO dispute
settlement mechanism to defend its interests. Where its trade interests have been affected,
Ukraine has not hesitated to attack measures perceived to be inconsistent with WTO
obligations. Ukraine will continue to assert its rights whenever they are not respected by
its main trading partners. By contrast, as the dispute on passenger cars shows, trade
measures adopted by Ukraine must also conform to Ukraine’s international obligations
because any Member can attack them in the WTO.
123
Ukraine is one of the States party to the Agreement on the Free Trade Zone (also
ratified by Belarus, Russia, Kazakhstan, Kyrgyzstan, Armenia, Tajikistan and Moldova).
According to Article 19 of this Agreement, if one of the Parties considers that another
Party does not comply with its obligations and that such behaviour damages, or threatens
to damage, the economic interests of the former Party, then both Parties must enter into
consultations in order to find a mutually agreed solution.
Where Parties cannot resolve the difference, the complaining Party may bring a
case before the Economic Court of the CIS or request the establishment of a panel in
accordance with the detailed rules set forth in Appendices 4 and 5 to the Agreement. These
rules generally resemble to those contained in the WTO Dispute Settlement
Understanding. There is so far no practical experience in the use of this instrument.
Generally, the bilateral trade agreements ratified by Ukraine also contain dispute
settlement provisions. These agreements often provide for diplomatic means to resolve
disputes. An example is Article 14 of the Free Trade Agreement between Ukraine and the
Russian Federation. By contrast, recently negotiated Free Trade Agreements (FTA), see
e.g. the Ukraine-Montenegro FTA, contemplate also the establishment of arbitration
panels in case that Parties cannot resolve disputes through consultations or other quasi-
diplomatic means. As is the case for other trade agreements, access to the dispute
settlement mechanisms in FTAs is also limited to the Governments of the Parties to the
agreement at stake. As is the case for Agreement on the Free Trade Zone there is so far
no practical experience in the use of this instrument.
Finally, Ukraine may use dispute settlement mechanisms in international
agreements in which it is not party. An example is presented below.
Box 5: Challenge of trade-related measures in the European Union
The Government of Ukraine or Ukrainian companies can, in certain
cases, bring trade-related disputes to the EU Court of Justice. Based on this
124
right, the Ukrainian company Interpipe challenged certain aspects of the
EU Regulation imposing anti-dumping measures on imports of seamless
tubes. The General Court issued a judgement in 2009, later confirmed by
the Court of Justice, which obliged the Commission to recalculate the
margin of dumping for the exporter at stake. As a result, the anti-dumping
measure decreased from 25.1 to 17.7%.
Since 2012, the volume of exports from Ukraine to the EU under
Combined Nomenclature code 7304 – which includes seamless pipes and
tubes covered by the anti-dumping measures – has increased from 56,467
(2012) to 86,326MT (2014). In comparison, a large exporter and
competitor – Russia – barely exported 15,000MT in 2014.
Outside the trade-related area, Ukraine is part of the Convention on the Settlement
of Investment Disputes between States and Nationals of Other States that set up the
International Centre on the Settlement of Investment Disputes. A number of cases have
been brought by international investors against Ukraine.
2. Cases Ukraine is involved in
Ukraine has been involved in various WTO disputes.
• In 4 cases Ukraine has acted as complainant; in 1 case, Ukraine has
requested the establishment of a panel
• In 3 cases Ukraine has been complained against; in 1 case a panel has
been established to examine a safeguard measure; the panel report was published
in 2015
125
• In 11 cases, Ukraine has reserved third party rights; in a few cases it
has intervened
• In at least 1 case, a satisfactory solution was reached through the
consultations
The panel report in Ukraine – Passenger Cars has been published (26 June 2015).
The panel concluded that the determination in the safeguard investigation concerning
passenger cars was inconsistent with several provisions of the WTO Agreement on
Safeguards and the GATT 1994. The box on the right presents some information about
this dispute. If Ukraine does not appeal the findings, the dispute will move on to the
implementation stage. The period for implementation may be agreed between Ukraine
and Japan, or by an arbitration panel, if the two countries do not reach an agreement.
Ukraine may fully withdraw the challenged measure – by simply repealing it – or review
it in order to correct the inconsistencies.
The second dispute in which Ukraine has been actively engaged during the past
months is Australia – Tobacco Plain Packaging. In May 2015 Ukraine asked the panel to
suspend its work in order to try to find a mutually agreed solution with Australia. Disputes
are frequently coming to an end as a result of these suspensions.
126
Ukraine is also actively involved in responding to the request for consultations of
Russia against the result of the sunset review concerning ammonium nitrate. This anti-
dumping measure is being vigorously defended by the Ministry.
In parallel, as a third party in a number of other disputes, Ukraine is presenting its
views in regard issues which may directly or indirectly affect its interest. This includes
for instance the use of trade remedies by the US, various SPS measures imposed by
Russia, etc.
The following table summarises information relevant to each of these cases:
Table 1: WTO disputes involving Ukraine
Dispute Status and main issues Role played by
Ukraine
Australia
— Certain
Measures
Concerning
Trademarks,
Geographical
Indications and
Other Plain
Packaging
Requirements
Applicable to
Tobacco
Products and
Suspended (vis-à-vis
Ukraine only)
Issue: Certain
requirements regarding the
appearance and form of the
retail packaging of tobacco
products, as well as the tobacco
products themselves
Products concerned
by the measures: Tobacco
products (cigarettes, cigars etc.)
Legal instruments
involved: Tobacco Plain
Ukraine is one of
the co-complainants
As a party,
Ukraine has the opportunity
to submit its positions
through various written
submissions and hearings.
Private parties could submit
amicus curiae briefs
As a third party in
DS435, 441, 458 and 467,
Ukraine supports the views
of the other complainants,
127
Packaging
(DS434)
Packaging Act and its
Regulations; Trade Mark
Amendment
and its views, on the
inconsistency of the
Australian measures
Who may have an
interest in this dispute? The
Government of Ukraine and
the Ukrainian tobacco
producers affected by the
measure
Ukraine
— Definitive
Safeguard
Measures on
Certain
Passenger Cars
(DS468)
Panel stage
completed (panel report was
published in June 2015)
Issue: Japan has
argued that Ukraine violated
various provisions of the WTO
Safeguards Agreement in its
safeguard investigation
Products concerned
by the measure: Certain
passenger vehicles
Legal instrument
involved: Inter-Departmental
Commission for International
Trade decision No. SP-
275/2012/4423-08
As a party,
Ukraine has the opportunity
to submit its positions
through various written
submissions and hearings.
Private parties could have
submitted amicus curiae
briefs
Who may have an
interest in this dispute? The
Government of Ukraine, the
Ukrainian producers of the
goods subject to the
safeguard measures as well
as producers of inputs used
in the production of such
goods, and finally,
consumers
128
Russia —
Tariff Treatment
of Certain
Agricultural and
Manufacturing
Products
(DS485)
Active (request for
panel establishment
formulated)
Issue: Russia applies
customs duties that are in
excess of those set forth and
provided for in its Goods
Schedule as regards the goods
concerned
Products concerned
by the measures: paper and
paperboard products, palm oil
and its fractions, refrigerators
and combined refrigerator –
freezers
Legal instruments
involved: various Decisions of
the Eurasian Economic
Commission
Ukraine has
reserved third party rights
Ukraine may
submit its position during
the second half of 2015
Who may have an
interest in this dispute?
Ukrainian exporters to
Russia which may similarly
be affected by the measure
(or similar measures) and the
Government of Ukraine
Russia —
Anti-Dumping
Duties on Light
Commercial
Vehicles from
Germany and
Italy
(DS 479)
Active (panel
composed and examining the
issues)
Issue: Various
procedural violations and
violations in the injury
determination
Ukraine has
reserved third party rights
Ukraine may
submit its position during
the first half of 2015
Who may have an
interest in this dispute?
129
Products concerned
by the measures: Certain light
commercial vehicles
Legal instruments
involved: Decision of the
Eurasian Economic
Commission imposing the anti-
dumping duties
Ukrainian exporters of light
commercial vehicles and the
Government of Ukraine
European
Union — Cost
Adjustment
Methodologies
and Certain
Anti-Dumping
Measures on
Imports from
Russia (DS 474)
Active (panel
established but not composed)
Issue: Russia opposes
the rejection of actual cost data
submitted by the exporters
(mainly energy inputs) and the
alternative valuation made by
the Commission
Products concerned
by the measures: Steel and
fertilisers
Legal instruments
involved: Certain provisions of
the EC AD basic regulation,
“administrative procedures,
methodologies and practices”
and regulations imposing anti-
Ukraine has
reserved third party rights
Ukraine may
submit its position if panel is
composed
Who may have an
interest in this dispute? The
Government of Ukraine,
primarily, and the Ukrainian
exporters of similar goods
130
dumping measures on Russian
products
United
States —
Certain
Methodologies
and their
Application to
Anti-Dumping
Proceedings
Involving China
(DS417)
Active (the panel is
composed and should issue the
report by mid 2016)
Issue: Use of the
exceptional methodology in the
calculation of the margin of
dumping; single rate
presumption for non-market
economy countries;
methodology for calculating
the non-market economy rate;
use of adverse facts available
Products concerned
by the measures: Wide variety
of products
Legal instruments
involved: sections of the Tariff
Act and Regulations and
multiple case-specific
determinations
Ukraine has
reserved third party rights
Ukraine may
submit its position in 2016
Who may have an
interest in this dispute? The
Government of Ukraine,
primarily
Russian
Federation —
Recycling Fee
on Motor
Active (panel
established but not composed)
Issue: A recycling fee
is applied to imported products.
Ukraine has
reserved third party rights
131
Vehicles
(DS462)
Vehicles manufactured locally
or in another Customs Union
member are exempted under
certain circumstances –
including inter alia local
content requirements – that
favour the purchase and/or use
of parts and components
produced in Russia, Belarus or
Kazakhstan over parts and
components produced and
imported from other WTO
Members, including the
European Union
Products concerned
by the measures: Vehicles
Legal instruments
involved: Federal Law No 89-
FZ, as amended, in related
Resolution and Rules
Ukraine may
submit its position if the
panel is reactivated
Who may have an
interest in this dispute? The
Government of Ukraine,
primarily, as well as the
Ukrainian producers
affected by this measure
4.10.5. References and Background Information
1) WTO: Ukraine, available at:
https://www.wto.org/english/thewto_e/countries_e/ukraine_e.htm
2) MEDT website: http://me.gov.ua/?lang=en-GB http://new.me.gov.ua/
132
4.10.6. Supporting Materials
(slides) (brochure)
4.10.7. Glossary
Non-market economy – an economy that is not a market economy.
Safeguard measure – is a restraint on international trade or economic development
to protect communities from development aggression or home industries from foreign
competition.
Anti-dumping measure – is a measure to rectify the situation arising out of the
dumping of goods and its trade distortive effect.
133
4.11. Lecture Eleven – Reform of the WTO Dispute Settlement Mechanism
4.11.1. Objectives
This lecture explains the need of reform of the Dispute Settlement Body. The
lecture aims to explore the issues that need reformation and current trends.
4.11.2. Lecture Topics
1. Reform of the WTO DSM
2. A panelist’s perspective
3. A government litigator’s perspective
4. A private litigator’s perspective
4.11.3. Overview
The WTO dispute settlement system seems a permanent part of the international
economic law landscape and it is difficult to conceive of the multilateral trading system
without it. But is its future secured? The adoption of binding dispute settlement by the
WTO was not inevitable; it resulted from a particular congruence of circumstances. Why,
then, should the continuation of the WTO dispute settlement be taken for granted?
Why ask such a question? After all, the dispute settlement system has been one of
the success stories of the WTO. Of course, there are criticisms and there are many
proposals in the context of the DSU reform and the Doha Round for changes. But no
government is currently calling for the abolition of WTO dispute settlement. Indeed, many
proposals for reform are calling for quicker, more effective dispute settlement.
Modifications may be on the horizon, but surely the future of WTO dispute settlement is
assured.
134
4.11.4. Discussion Topics
1. Reform of the WTO DSM
Design was good in 1994 but some obvious needs for change which can only be
done through a full negotiation among all parties
Obvious needs:
Remedies which encourage both compliance and — more important — deter
violation. Present system of prospective relief does neither and is inconsistent with
customary international law [Chorzow Factory case at ICJ]
Better transparency [streaming of hearings, availability of non-confidential briefs]
Every case in the WTO is like going to the Supreme Court that produces multipage
reports with in-depth analysis. Procedural particularities and time framing provided for
by the DSU have resulted to be inadequate to a degree of complexity of some cases. There
is a need for a quasi-judicial institution below the Panel and the Appellate Body – a kind
of a court for small claims or ad hoc arbitration. In this respect, the DSM set forth in the
WTO Agreement on Pre-shipment Inspection may serve as a benchmark. On the other
hand, the MERCOSUR, for instance, the whole procedure takes 3 months, there is no
appeal stage.
In any case, the Member States are reluctant to change the WTO DSM. There ideas
some ideas however, related to slightly more formal procedures (appointment of hearing
officer instead of the Director General)
Moreover, decisions the Panel and Secretariat may produce joint decisions: the
Secretariat staff predominantly prepares the decision and the Panelists mark them up.
Finally, there is no answer yet on what would be the criteria for such simplified
procedure? For being too radical, the proposal is beyond the Doha Agenda. The absence
135
of the small claims court is the main drawback of dispute settlement system. This is not
impossible however.
2. A panelist’s perspective
• Panelists and the Secretariat take the work of the panel very seriously.
Four or five Secretariat professional staff work on each case, sometimes more
• Parties should pay a great deal of attention to questions posed by the
panel — each question reflects an underlying interest of at least one of the panel
members
• Panelists should expect to spend a lot of time on the case. There is an
enormous amount of reading, thinking, discussing, and endless reviewing and
redrafting of the Panel Report
• Secretariat staff are incredibly dedicated to helping the panelists come
up with the right answers. For interns, this is an incredible opportunity to learn both
WTO in depth and standards of professionalism
3. A government litigator’s perspective
In most cases government brings the case with the help of private sector, because
the government itself does not have enough resources. The key problem and primary
task for private sector is to make the Ministry file the Request for Consultation. For
this purpose, a lawyer representing his/her client has to consider the whole matter from
the perspective of Government. The following has to be taken into account:
Every government tends to breach some WTO rules, hence it be wares
to initiate a trade dispute on other Member States’ violations lest claims raise
136
claims in reply. A minister would not like to bring a case that would be lost –
because his task is to get re-elected.
. Private stakeholder needs to shape the claim in the way the
government would like it. In some cases the lawyer may make a perfect claim, but
the government won't file it. It is up to the government to decide whether to appeal
or not. The stakeholder may want to appeal, but the government will absent due to
politics reasons. Some cases are brought not because a company wants to get its
money back, but rather get back to the market. Sometimes request for consultations
is enough instead of initiating the case.
In sum, the WTO dispute initiation is a serious matter with sensitive political and
diplomatic implications for the Government. In the context, the small claims courts would
provide a solution for private sector seeking support of the Ministry.
4. A private litigator’s perspective
• WTO litigation is very compressed, with a lot of work in short time
periods once the panel is composed. Since the schedule does not vary much once it
is set, private counsel need to plan to fit in everything else around it
• Private counsel advising government parties need to think like
government lawyers, as described above
• Quite often private counsel are advising private parties helping their
government [for example, in a challenge to antidumping duties, the challenging
government could not have been as deeply involved in the antidumping proceeding
being challenged — because of the amount of commercially sensitive information
involved in the original case — so help from the exporter and its counsel is needed].
These cases require close collaboration between the government’s lawyers and the
137
exporter’s lawyers. The exporter’s lawyers must realize that the government will
make the decision in the case [even if that means dropping potentially winning
claims and arguments] and be as helpful as possible in that context
• Quite frequently, the government lawyers will insist on making the
oral arguments to the panel and AB
4.11.5. References and Background Information
1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the World
Trade Organization
2) Donald McRae “What is the future of WTO Dispute Settlement?”
4.11.6. Supporting Materials
(slides)
4.11.7. Glossary
Doha Round – is the latest round of trade negotiations among the WTO
membership.
Drawback – an undesirable or objectionable feature; disadvantage.
MERCOSUR – Argentina, Brazil, Paraguay and Uruguay.
138
5. LEARNING OUTCOMES
5.1. Knowledge and Understanding
Having successfully completed this course, learners should be able to demonstrate
a basic understanding of the importance of Dispute Settlement Mechanism, the
proceedings under dispute settlement in WTO, the role of private sector. Additionally they
will understand the types of challengeable issues and how should such issues be
challenged under the WTO DSM.
5.2. Cognitive/Intellectual skills/Application of Knowledge
Having successfully completed this course, learners should be able to participate in
WTO cases as a representative of the state, be able to prepare all necessary for that staff
and a request for consultations and for the establishment of the Panel, to simulate moot
court.
5.3. General transferable skills
Having successfully completed this course, learners should be able to explain the
basic concepts of Dispute Settlement Mechanism of the WTO to their family, friends and
colleagues.
5.4. Indicative Content
The importance of the DSM
Types of food challengeable issues
History of development of the DSM
Panel and AB proceedings
139
Implementation and non-implementation
Current trends in DSM in Ukraine
Possible reformation of the WTO DSM
5.5. Learning and Teaching Strategy
The learning strategy will rely on lectures and reading outside of class and
discussions and presentations during class time. Students will be tested on their level of
understanding of the materials covered in class and will be requested to make different
kinds of request, submissions and moot court simulation and to write a legal memo on one
of the current legal problems in WTO DSM.
5.6. Assessment Strategy
Content examination on the course topics based on readings out of class and
presentations covered during class meetings.
The course is divided into 2 modules:
Module 1 Module 2
Seminars 20 15
Module paper
work
10 15
The first module includes such topics, as:
Introduction to the WTO dispute settlement: the past and
present
140
Jurisdiction of the DSB; interpretation; review the standards and
methods of dispute settlement
Settlement of disputes by consultations
Establishment and composition of the expert group
The panel proceedings
The composition and structure of the AB
Functions and competence of the AB
The second module includes such topics, as:
The Appellate Body proceedings
Supervision, and promt implementation of the
recommendations and rulings of the Dispute Settlement Body
Ukraine’s participation in the WTO dispute settlement
Reform of the WTO Dispute Settlement Mechanism
The 1st module paperwork is dedicated to the procedural part of the DSM. The
student is to write “the request for the establishment of a Panel”. The criteria for evaluation
are the accuracy and legal skills.
The 2nd module work is dedicated to the simulation of the procedure of the DSM.
The students, divided into several groups are to follow the instructions and to plead on a
basis of one of the elsa model moot case.
Credit is divided into 2 parts:
Legal memo 20
Test 20
141
To the end of the course you are to make a legal memo on one of the relevant topics
of the DSM. Prior to start the legal memo student should bring his topic to the lecturer
and lecturer should approve it.
At the last lesson all students should write a simple text consisting from 20
questions on the topics of lectures. (see attached variants)
5.7. Assessment Pattern
Seminar assignments and modules, along with the legal memo constitute 60% of
the course grade which will be tested on the final test.
System of assessment
In order to pass the course, you are obligate to earn at least 60 points. To earn points,
you are to participate in seminars discussions, and to pass the module paperwork’s and to
pass the final test. In case you have 60 points but missed the legal memo or the final test
you are considered as not passed irrespectively to the points you have earned.
5.8. Indicative Resources Core Text materials:
- General
- Dispute Settlement Understanding
- Presentations and materials produced by lecturers
Excellent 90-100
Good 75-89
Satisfactory 60-74
Not passed 0-59
142
6. FINAL TESTS
Variant 1
1. A panel has been requested to examine a dispute about an alleged violation of Article 3 of the SCM
Agreement. All three panel members believe it is not obvious that the challenged measure violates
Article 3, however, the question of the existence or absence of a violation depends on the correct
interpretation of Article 3. What should the panel do?
A) The panel is not permitted to interpret Article 3 and must dismiss the complaint, as the
exclusive authority to adopt interpretations of the WTO Agreement rests with the
Ministerial Conference and the General Council (Article IX:2 of the WTO Agreement).
B) The panel may proceed to an interpretation of Article 3, but it must consult the chairperson
of the Committee on Subsidies and Countervailing Measures.
C) The panel may proceed to an interpretation of Article 3 and, in that process, it must always
give decisive weight to the negotiating history of Article 3.
D) The panel is entitled and obliged to clarify the meaning of Article 3 by interpreting that
provision in accordance with the customary rules of interpretation of public international
law.
2. WTO Member A has lost the case it brought against Member B because the panel and the Appellate
Body have not accepted A’s legal interpretation of the agreement concerned and have concluded
that B’s measure did not violate the WTO Agreement. A insists on its reading and recalls that panels
and the Appellate Body must not diminish the rights of WTO Members. May A now impose
unilateral sanctions against B despite the adoption of the reports?
A) Panel and Appellate Body reports change the rights and obligations of Members under
the WTO Agreement. If the reports have concluded that no violation has occurred, then
this is the law from now on, and unilateral sanctions are illegal.
B) Panel and Appellate Body reports are not able to add to or diminish rights and obligations
under the WTO Agreement. Therefore, if A’s legal interpretation is correct, it may
suspend obligations vis-à-vis B. If B objects it can have a different panel and the Appellate
Body clarify the correct interpretation of the provisions at issue.
C) Panel and Appellate Body reports must not add to or diminish the Members’ rights and
obligations. However, the extent of the rights and obligations is to be clarified in the
dispute settlement system. Therefore, A may not make any unilateral determination that
a violation has occurred. It also may not suspend obligations unilaterally.
D) A must not apply unilateral sanctions, but it has a second chance: it can request a
compliance panel to examine, pursuant to Article 21.5 of the DSU, whether B’s measure
truly complies with WTO law.
3. WTO Members A and B conclude a compromise, according to which a specific WTO dispute
between A and B is to be resolved by the International Court of Justice in the Hague and according
to the procedures set out in its Statute. Are A and B permitted to do so?
A) For disputes under the covered agreements, Article 23.1 of the DSU mandates recourse
to the WTO dispute settlement system and therefore does not permit the use of other
procedures for resolving WTO disputes.
B) The Statute of the International Court of Justice does not permit States to decide that the
Court is competent.
143
C) The priority of the WTO dispute settlement system is to secure a positive solution, if
possible through a negotiated agreement. The negotiated agreement can also provide for
any particular form of adjudication of the dispute.
D) A and B may take their dispute to the International Court of Justice, but they need the
approval of the DSB who would decide by consensus.
4. Two WTO Members that are also signatories to a regional integration agreement with a dispute
settlement system have a controversy about a technical standard. The technical standards falls
simultaneously under both the regional trade agreement and the WTO Agreement (in particular, the
TBT Agreement and Article III of GATT 1994). Is it possible to initiate WTO dispute settlement
proceedings right away?
A) No. The dispute settlement system of the regional trade agreement has priority. The DSB
will reject any request for the establishment of a panel until the regional procedure is
completed.
B) Yes. Dispute settlement systems under regional trade agreements are available only after
the completion of the WTO procedure. The complainant must thus always start by
bringing its complaint to the WTO.
C) Yes. The complainant can start with either forum for initiating the dispute, but it can only
use one of the two and it must choose. This is to avoid contradictory outcomes in two
separate disputes.
D) Yes. As far as dispute settlement is concerned, the two systems are separate and
independent one from another. Under each dispute settlement system the adjudicatory
body would decide according to the rules governing that system.
5. What does special and differential treatment mean and where does it exist in the dispute settlement
system?
A) Special and differential treatment refers to additional rules on dispute settlement applying
to specific disputes under specific covered agreements.
B) Special and differential treatment in dispute settlement means that, for the first ten years
of the operation of the dispute settlement system, no WTO Member may bring a dispute
against a least-developed country Member.
C) Special and differential treatment refers to rules applying only to developing country
Members, but they only exist in the other covered agreements, not in the DSU.
D) Special and differential treatment refers to rules applying only to developing country
Members. Such rules exist at all stages of dispute settlement, from consultations to
implementation.
6. The WTO Member Protectio has enacted legislation according to which its customs services are
authorized (but not obliged) to apply tariffs up to triple the level bound in Protectio’s schedule of
commitments. Can Tramontana challenge this law in a violation complaint based on Article II of
GATT 1994?
A) It is not possible to challenge laws as such in the WTO dispute settlement system. What
matters is the treatment actually accorded to goods as they arrive at the border of another
WTO Member.
B) Yes, Article XVI:4 of the WTO Agreement obliges Members to put all their laws into
conformity with the WTO Agreement. This law is not in conformity with the WTO
Agreement.
144
C) The legislation grants discretion to the executive branch to act inconsistently with the
WTO Agreement. Such a law cannot be challenged successfully as such, independently
of the actual application of the law. Tramontana has to wait until tariffs in excess of the
bound levels are actually imposed.
D) Normally, only mandatory laws can be challenged as such in a violation complaint. The
present law has a chilling effect on international trade, although it is discretionary. In all
such cases, discretionary laws may be challenged as such.
7. Patria requests Tramontana to hold consultations under Article XXII of the GATT 1994 and Article
4.2 of the DSU regarding a governmental directive obliging television stations to broadcast national
films during at least one half of the viewing time. May Tramontana refuse to accept that request on
the basis of the argument that services, such as broadcasting, are not regulated by the GATT 1994?
A) If the parties cannot agree on whether the matter falls under the covered agreement
invoked, any of the parties may refer the matter to the DSB where a decision will be made
as to whether Tramontana must engage into consultations.
B) WTO Members have a duty to consult under Article 4.2 of the DSU with any WTO
Member that claims that the operation of any covered agreement is affected or that
benefits under that agreement are nullified. The very purpose of the dispute settlement
proceedings is to determine whether these claims are justified.
C) Patria is entitled to invoke the dispute settlement provisions of GATT 1994 only in
relation to matters that relate to goods. If there is no goods dimension, the request for
consultation that invokes exclusively GATT 1994 is invalid and Tramontana may ignore
it.
D) When parties cannot agree on whether the dispute settlement system has been properly
invoked, they must have recourse to the Director-General of the WTO who will offer his
good offices, conciliation or mediation.
8. The United Counties is a federally structured State and a Member of the WTO, whose sub-federal
level of government - the counties - enjoy far-reaching autonomy from the central government. In
one of the counties, an administrative county tribunal has ordered the payment of a tax which the
WTO Member Florania considers discriminatory and WTO-inconsistent. The central government
of the United Counties affirms that it cannot intervene because, first, it cannot interfere with the any
act taken by a county and, second, it cannot intervene against the act of the independent judiciary.
Can Florania challenge the order of the county tribunal in the WTO dispute settlement system?
A) Florania cannot challenge the tribunals order, as the judiciary is independent. Therefore
the United Counties is not responsible for the WTO violation.
B) Florania cannot challenge the tribunals order, because the tribunal belongs to a branch of
the county government and the central government has no possibility to intervene in order
to remedy the WTO violation.
C) A WTO Member is, in principle, responsible for all the subdivisions of governmental
power on its territory. Florania can also bring a WTO dispute, but if it wins, the United
Counties only owes reasonable measures as may be available to it to ensure observance
of WTO law. The rules on compensation and the suspension of obligations apply fully.
D) A WTO Member is fully responsible for all the subdivisions of governmental power on
its territory, the internal structure of a State is an internal matter without any effect on the
rights and obligations under the WTO Agreement, which is an international agreement.
145
Florania can therefore challenge the measure under exactly the same conditions as if any
other branch of government had acted.
9. At the request of Patria, the DSB established a panel at its meeting in September 1996. At the DSB
meeting in November 1996, Xenia indicates that it is an interested third party and that it wishes to
be heard by the panel. Has the request come too late?
A) The DSU does mandates that the request to be heard as an interested third party must be
made orally when the DSB establishes the panel or in writing within ten days of the
establishment of the panel.
B) Third party requests must be made during the consultations. Only parties having
requested to be joined in consultations can later request third party participation before
the panel.
C) There is no deadline for filing the third party request, Patria therefore has a right to be
heard, as long as the panel proceeding is not completed.
D) The DSU does not state by when the request to be heard as an interested third party must
be made. However, in practice, such requests are made orally when the DSB establishes
the panel or, pursuant to the DSB’s agreed practice, in writing within ten days of the
establishment of the panel.
10. A panel was established to examine a complaint by Patria against Tramontana. The WTO
Secretariat proposed successively 21 different persons as panelists but Tramontana refused to accept
any of them. What can Patria do?
A) After 20 days from the establishment of the panel, Patria may request the Director-
General to appoint the panelists after consulting both parties.
B) After 30 days from the establishment of the panel, Patria may request the Director-
General to appoint the panelists after consulting both parties.
C) After 30 days from the establishment of the panel, Patria can request the chairperson of
the DSB to compose the panel.
D) After 20 days from the establishment of the panel, Patria may request the Director-
General to appoint the panelists with the agreement of both parties.
11. Patria brought a complaint concerning import restrictions maintained by Tramontana on apples
which Patria claims to be inconsistent with Article XI of the GATT 1994. Xenia intervenes as an
interested third party and claims that Tramontana’s import regime for apples is also inconsistent
with Article II of GATT 1994. Should the panel examine the issue raised only by Xenia?
A) A panel has to deal only with the claims raised by the complainant in its request for the
establishment of the panel, but it is always free to deal with any other issue. The decision
is thus up to the panel.
B) Only WTO Members with a substantive interest in a dispute may become third parties.
Consequently, third parties are entitled to make claims of their own, and the panel must
examine them.
C) Only the complainant and the respondent determine the terms of reference of a dispute.
The panel will, therefore, examine the issue if either the complainant or the respondent
responds to Xenia’s point.
D) A panel’s terms of reference are determined by the request for the establishment of the
panel. Unless the parties agreed otherwise, only the claims of violation raised by the
complainant in that request form the basis for the panel’s decision.
146
12. A panel has submitted its report to the parties on 14 November advising them that, in the absence
of a mutually agreed settlement, the report would be circulated to WTO Members on 28 November.
On 27 November the party complained against asks the panel to postpone the circulation to 31
December in order to make it possible to reach a bilateral settlement. How should the panel react?
A) Any party can request the suspension at any time of the proceeding, and the panel must
always accede to the request.
B) A panel may suspend its work at any time at the request of the complainant. The panel
should check whether not only the respondent, but also the complainant requests a
suspension.
C) The suspension of panel proceedings is no longer possible after the issuance of the interim
report because the parties already know who is going to win the dispute.
D) The panel may always suspend its procedure if it so desires. It does not matter whether
there is a request to that effect.
13. Xenia, a third party in a panel proceeding between Patria and Tramontana, notifies the DSB of its
intention to appeal the panel report and files a notice of appeal. How should the DSB react?
A) Given the initiation of an appellate review procedure, the DSB cannot consider the panel
report for adoption until the completion of the appeal.
B) The DSB should ask the parties to the dispute whether they agree with the appeal, and if
that is the case, refer the matter to the Appellate Body.
C) The DSB must decide by negative consensus whether Xenia’s appeal is admissible.
D) A third party cannot appeal a panel report. If neither the complainant or respondent
notifies the DSB of its intention to file an appeal, the DSB must consider the report for
adoption.
14. Canada has not been successful at the panel stage with its complaint against the European
Communities, challenging the French asbestos ban. The Panel found that there was a violation of
Article III:4, but considered the ban to be justified under Article XX:(b) of the GATT 1994. Can
the European Communities file an appeal if it disagrees with the Panel’s result on Article III?
A) Yes, either party has the right to appeal any legal findings by the panel.
B) Yes, the European Communities can file an appeal because the panel has found a
violation of Article III.
C) No, only the losing party can file an appeal.
D) The European Communities can file another appeal, if Canada appeals from the panel
report.
15. In a dispute between the WTO Members Ethylia and Methania regarding the internal taxation of
alcoholic beverages in Methania, the panel has ruled that the two main drinks at issue are like
products, given, among other things, the similar raw materials used in the production process.
Methania disagrees with the ruling and would like to know whether it can file an appeal and
challenge the panel’s finding of likeness.
A) Appeals can be only on legal issues. Whether two products are like in the sense of Article
III of GATT 1994 is a legal question, insofar as the interpretation of that legal term is
concerned. However, this question also depends on facts established by the panel (e.g.
which raw materials are used), which, as such, would not be subject to appeal unless there
147
is a disregarding, distortion and misrepresentation of the evidence or egregious errors that
calls into question the good faith of the panel.
B) Methania can file an appeal on this issue because, by definition, appeals can be on points
of law as well as on points of fact.
C) Methania cannot file an appeal on this issue because the likeness of two products is a
factual question that is not subject to appeal. Two products are either like or they are not.
D) The right of appeal is limited to legal questions. However, Methania can also challenge
the facts established by the panel and the Appellate Body would then determine whether
it wishes to address the factual question in order to be able to properly decide the legal
question.
16. The WTO Member Nimmeia has lost a dispute about the taxation of alcoholic beverages. In order
to prevent the adoption of the reports of the panel and the Appellate Body, Nimmeia objects against
the adoption of the agenda at the beginning of the DSB meeting. What is the legal situation?
A) As no special rule on negative consensus exists for the adoption of the agenda, positive
consensus is necessary to approve it. Nimmeia’s objection would prevent the adoption of
the agenda and, as a consequence, prevent the adoption of the reports.
B) Agendas are always adopted by formal majority vote. The DSB chairman would thus
proceed to the distribution of ballots.
C) The DSU does not require positive consensus for the adoption of the reports (rather,
negative consensus will do). This quasi-automatic decision-making procedure cannot be
undermined by blocking the agenda.
D) The agenda for a meeting does not require any approval. The chairperson can simply
proceed according to the agenda and ignore Nimmeia’s objection.
17. A panel has found Tramontana’s internal taxes on cigarettes to be inconsistent with Article III of
GATT 1994. The panel report was adopted by the DSB in February 1996. In February 1997, Patria
noted that Tramontana had still not adjusted its tax system to conform to Article III. What are
Patria’s options?
A) Patria has no options, it must wait for Tramontana to implement the DSB’s
recommendations and rulings.
B) Following the expiration of the reasonable period of time for implementation,
Tramontana must enter into negotiations about compensation, and after 20 days, Patria
may proceed to the suspension of obligations.
C) Having waited a whole year, Patria can now apply unilateral countermeasures against
Tramontana by impeding imports from that origin.
D) Patria can resort to an arbitration procedure in which collective sanctions by all WTO
Members would be imposed against Tramontana.
18. In the DSB meeting after the adoption of the reports of the panel and the Appellate Body in a
dispute, the respondent states its intention to implement the DSB’s recommendations and rulings,
but affirms that it needs a reasonable period of time for that purpose. How will the duration of this
period be determined?
A) For 20 days, the parties to the dispute negotiate the length of the period. If they cannot
agree, either party can request the Director-General of the WTO to determine the duration
of the reasonable period of time.
148
B) The reasonable period of time to comply with the DSB’s recommendations and rulings
is always 15 months. It need not be determined in a specific case.
C) The reasonable period of time to comply with the DSB’s recommendations and rulings
has already been determined by the panel in the final conclusions in its report.
D) The reasonable period of time can be: (a) proposed by the Member concerned and
approved by the DSB (b) mutually agreed by the parties to the dispute within 45 days
after adoption of the report(s) or (c) determined by an arbitrator.
19. After the adoption of the reports of the panel and the Appellate Body in a dispute, the parties cannot
agree on the duration of the reasonable period of time and refer the matter to arbitration. What
reasonable period of time does the arbitrator have to award?
A) The guideline for the arbitrator is that the reasonable period of time should not exceed 15
months. It should be the shortest period possible within the legal system of the Member
to implement the recommendations and rulings of the DSB, but the Member need not
make use of any flexibility that it has in order to speed up the process of implementation.
B) The guideline for the arbitrator is that this period should be 15 months, but it can be
shorter or longer, depending on the economic power of the losing Member.
C) The guideline for the arbitrator is that the reasonable period of time should be 15 months,
unless there is an extreme circumstance which justifies a longer or a shorter period.
D) The guideline for the arbitrator is that the reasonable period of time should normally not
exceed 15 months. The main criterion is that it should be the shortest period possible
within the legal system of the Member to implement the recommendations and rulings of
the DSB.
20. WTO Member Pecunia has lost a WTO dispute against Fiducia. Because Pecunia sees itself unable
to implement the ruling immediately, the parties are interested in exploring the option of
compensation. How would this work?
A) Pecunia must provide monetary compensation for the past damage that its WTO-
inconsistent measure has caused to Fiducia. For the future, Pecunia can provide
alternative trade benefits as compensation.
B) Pecunia would have to make a monetary payment to Fiducia, the level of which is to be
determined by arbitration if the parties cannot agree on the amount.
C) Pecunia and Fiducia have to agree on the form of compensation, which would be
alternative trade benefits and which is temporary pending the withdrawal of the WTO-
inconsistent measure.
D) An auction takes place in the DSB, and the parties can agree on a specific form of
compensation only if no other WTO Member offers a higher price for securing Pecunia’s
withdrawal of the WTO-inconsistent measure.
149
Variant 2
1. WTO Member A believes that WTO Member B has violated WTO law. A and B are also signatories
to a bilateral international agreement on student exchange. A therefore suspends - in proportionate
amount - entry visas allocated to students from B. What can B do?
A) If A has truly violated WTO law, it will have to accept the suspension of entry visas
because this suspension is justified under international law as a countermeasure against
A’s breach.
B) B cannot have recourse to the WTO dispute settlement system, as this system is applicable
only to disputes brought pursuant to the consultations and dispute settlement provisions
of one of the covered agreements.
C) B can only have recourse to the forum of dispute resolution provided for in the agreement
on student exchange.
D) B can bring a WTO dispute against A on the basis of Article 23 of the DSU. A has made
a unilateral determination on the question of a WTO violation.
2. The rubber industry of the WTO Member Elastia faces a trade barrier in Hardia, where the ministry
of the economy has just introduced new safety standards for products made of natural rubber. The
rubber industry believes that these standards are incompatible with WTO law and would like to
know what it can undertake?
A) The rubber industry may bring a complaint in the WTO dispute settlement system by
requesting consultations with the government of Hardia, after which a panel may be
established to review the matter.
B) The rubber industry cannot bring a complaint in the WTO dispute settlement system in
its own name, but it can initiate judicial proceedings before the domestic courts of Hardia,
which must refer the matter to the Appellate Body of the WTO for a preliminary ruling
on the question of WTO law. In that Appellate Body proceeding, the rubber industry
would be a formal participant.
C) The rubber industry may lobby its own government to bring a dispute before the WTO. If
this happens, the rubber industry can become a third party in the panel and Appellate
Body proceedings.
D) The rubber industry may lobby its own government to bring a dispute before the WTO. If
a WTO dispute gets under way, the government may be ready to coordinate the legal
submissions with the rubber industry and might even allow representatives of the rubber
industry to attend the panel and Appellate Body hearings as part of its delegation. The
rubber industry may also file an amicus curiae submission.
3. A non-governmental organization that is concerned with environmental issues has a strong interest
in an ongoing WTO dispute. Is there any way it can participate in the dispute settlement
proceedings?
A) The non-governmental organization cannot be a party in the dispute settlement
proceedings, but it can become a third party by notifying the DSB of its substantial
interest.
B) The non-governmental organization can file a so-called amicus curiae brief to the panel
or Appellate Body, which is obliged to consider the content of that submission in its
decision-making.
150
C) Under the current (controversial) practice, the non-governmental organization can file an
amicus curiae submission, which the panels or the Appellate Body may consider, without
any obligation to do so.
D) The proceedings are confidential, so the non-governmental organization cannot attend the
panel or Appellate Body hearings, nor is there any other form of contribution it can make
to the dispute under the current practice.
4. In a dispute about services, the panel is about to finalize its findings and believes that the respondent
has violated its obligations under GATS. In its submissions and oral statements, the respondent has
argued, among other things, that its measure, even if it were found inconsistent with GATS, does
not nullify or impair any benefits. The complainant has not put forward any arguments in this
regard. What should the panel do?
A) The panel should dismiss the complaint, as the complainant has failed to argue and prove
that, in addition to infringing GATS obligations, the measure also nullifies or impairs
benefits.
B) According to Article 3.8 of the DSU, there is a presumption of nullification or impairment
where the panel establishes a violation. The question is, therefore, whether the respondent
has rebutted this presumption. This is not the case if it has merely asserted the lack of
nullification or impairment.
C) For a violation complaint to succeed under GATS, there is no requirement of nullification
or impairment. The panel, therefore does not have to inquire into the question of
nullification or impairment, nor is there any need to apply Article 3.8 of the DSU.
D) Although Article 3.8 of the DSU appears to allow the respondent to rebut the presumption
of nullification or impairment, the jurisprudence under of GATT 1947 and the WTO has
made clear that a rebuttal is not possible under any circumstances whatsoever.
5. The WTO Member Lamentio has enacted legislation stipulating that, as of January of the following
year, imports are only permitted up to the value for which the importer exports products. Can the
WTO Member Liberta challenge the law in the WTO dispute settlement system?
A) Given the link to the value of exports, the law is not mandatory and, therefore, can only
be challenged once it is actually applied inconsistently with WTO obligations.
B) The law is not yet in effect, it therefore so far cannot be said to exist. There is simply no
object that can be challenged.
C) The law already exists, but prior to its coming into effect, it does not have any impact on
trade. No nullification or impairment can result from the measure until it is actually
effective. Lamentio must therefore wait until January of the following year before
initiating dispute settlement proceedings, lest it should lose the case.
D) The entry into force is automatic at a future date and does not depend on further legislative
action. The law already has an impact on trade because it affects decisions on future
transactions.
6. Patria held bilateral consultations with Tramontana on seasonal apple import restrictions without
notifying the DSB. These consultations failed to produce a satisfactory result. After two months,
Patria requests the DSB to establish a panel. Tramontana opposes the request arguing that the
consultations were held informally and not under Article 4 of the DSU. Should the DSB establish
the panel?
151
A) The DSB may refer a matter to a panel only if consultations were sought and notified to
the DSB in accordance with Article 4 of the DSU.
B) Since consultations are bilateral and confidential, it does not make any difference whether
they were held informally or formally within the framework of the DSU.
C) Article 4 of the DSU requires a formal notification of a request for consultations to the
DSB, but it is sufficient if Patria now notifies the DSB orally, after which the DSB can
immediately proceed to the establishment of the panel.
D) The DSB should establish the panel according to the normal procedures and leave it to
the panel to decide whether the prerequisite of prior consultations was met.
7. Patria asks for the establishment of a panel to examine Tramontana’s policy of not permitting any
foreign investments. Tramontana claims that its investment policies fall outside the framework of
any of the covered agreements and that the panel should not be established. How should the DSB
react?
A) The DSB can ask the Appellate Body for an advisory opinion about the question whether
the matter falls under the covered agreements.
B) The DSB must establish the panel at the latest at the second meeting at which the request
was made, unless it decides by consensus not to do so. If the panel is established, it will
examine whether the matter falls within the framework of the covered agreement invoked.
C) If the applicability of the WTO Agreement is in dispute, the DSB establishes panels by
positive consensus to make sure that there is broad support for the ongoing dispute
settlement process.
D) Pursuant to Article 1.1 of the DSU, the dispute settlement system only applies to matters
falling under one or more of the covered agreements. If the investment measure at issue
does not fall under the WTO Agreement, the dispute settlement system does not apply
and the DSB has no authority to act.
8. Liberta initiates dispute settlement proceedings against Protectio in relation to a ban on agricultural
products produced with fertilizers. Protectio considers that a WTO dispute would make the issue
between Liberta and Protectio harder to resolve, not easier. Can Protectio invoke Article 3.7 of the
DSU in the DSB or before the panel and argue that the complaint is inadmissible? Both Liberta and
Protectio are WTO Members.
A) Before establishing a panel, the DSB will review the question of whether bringing the
case is fruitful. If the DSB comes to a negative result it will refrain from establishing a
panel.
B) Given the negative consensus rule, the DSB cannot but establish the panel. The panel,
however, will dismiss the complaint if it considers the case not to be fruitful.
C) Article 3.7 of the DSU entrusts the complainant with the responsibility of deciding
whether it considers the case to be fruitful. Under normal circumstance, neither the DSB
nor the panel will review this question.
D) Because the aim of the dispute settlement system is to secure a positive solution, the
parties are obliged to make use of the Director-General’s conciliation services, where the
respondent invokes Article 3.7 of the DSU, before proceeding to a panel.
9. Called to compose a panel pursuant to Article 8.7 of the DSU, the Director-General of the WTO
intends to appoint two panel members who have previously been rejected by one of the parties to
152
the dispute. These two individuals are the persons with the most extensive expertise in the subject-
matter of the dispute. Can the Director-General appoint them?
A) According to the DSU, the Director-General must not appoint any individual who has
been rejected previously by one of the parties to the dispute.
B) In principle, yes, because the Director-General is required to appoint the panelists whom
he/she considers most appropriate, after consulting with the parties. There is however a
practice that the Director-General does not appoint any of the rejected candidates.
C) The Director-General may appoint whomever he/she wishes.
D) There is a practice of not appointing any of the rejected candidates. This practice legally
binds the Director-General.
10. Patria requests the DSB to establish a panel to examine a prohibition on importing meat produced
with hormones imposed by Tramontana. Xenia requests a panel on the same subject matter. How
should the DSB react?
A) The DSB should establish two panels and make sure that different persons serve on both
panels in order to ensure the confidentiality of the two proceedings.
B) The DSB should establish two separate panels because the parties are not the same in the
two disputes.
C) The DSB should establish two panels and make sure that the chairperson of both panels
is the same person in order to ensure decisions that are consistent one with another.
D) The DSB should, whenever feasible, establish one panel to examine several complaints
on the same matter.
11. Xenia is an interested third party in a panel proceeding initiated by Patria against Tramontana. Xenia
asks Patria to give it a copy of its submission to the panel. Should Patria accede to that request?
A) Third parties have the right to receive the submissions of the parties to the dispute to the
first meeting of the panel.
B) Third parties formally participate in the panel proceeding and, therefore, receive all the
submissions filed by the parties.
C) Because the proceedings are confidential, third parties do not receive any of the parties’
submissions.
D) Third parties are entitled to attend the first substantive meeting of the panel with the
parties, but they do not get the parties’ first written submission. At the second meeting,
it is the other way round: they do not attend the meeting, but they receive the second
written submission.
12. During the course of a panel proceeding, both parties request the panel to interrupt its proceedings
for nine months because the parliament of the party complained against is considering legislative
changes that would eliminate the cause of the complaint. How should the panel react to this request?
A) The panel is obliged to accede to the request because both parties have requested the
suspension.
B) The panel may suspend its work at the request of the complaining party. The panel will
probably feel quite inclined to accede to the request, given the DSU’s preference for
mutually agreed solutions.
C) The panel cannot suspend its work for any period exceeding six months.
153
D) The suspension of a panel proceeding is possible only if the parties use the time for
negotiations on a mutually agreed solution. They cannot just wait for action in the
respondent’s parliament.
13. A panel report on a complaint by Patria against Tramontana is to be considered by the DSB for
adoption. Tramontana objects to the adoption of the report because the import restrictions at issue
have been maintained for 25 years and their removal would cause social unrest. How should the
DSB react?
A) The DSB has to adopt the panel report according to the normal decision-making
procedures set out in Article IX:1 of the WTO Agreement. That is, it will first try to
achieve consensus on the question of adoption, but if consensus is impossible, the DSB
will decide by majority vote.
B) Panel reports must be adopted by the DSB unless there is an appeal or a consensus against
the adoption. If Partia insists on the adoption, it will occur despite Tramontana’s
objection.
C) The DSB is always required to take into consideration the possible socio-economic
impact of its recommendations and rulings. If a measure was in place for 25 years, it can
be maintained for another 25 years before it must be withdrawn.
D) Panel reports are to be adopted by consensus. Even acting alone, Tramontana can prevent
the adoption through its objection.
14. In the dispute between the WTO Members Ethylia and Methania, where the panel had found that
the two main drinks at issue in the dispute about the taxation of alcoholic beverages are like
products, the Appellate Body reverses the interpretation made by the panel of like product and
comes to the conclusion that the products are not like. It however considers that the products are
directly competitive or substitutable. How should the Appellate Body rule?
A) The Appellate Body would reverse the panel’s finding on likeness, but would not be able
to pronounce itself on the question of directly competitive or substitutable, as this is a
new issue that has not been covered in the panel report.
B) The Appellate Body would reverse the panel’s finding on likeness, and rule on the
question of the directly competitive or substitutable relationship of the two drinks. If
necessary, the Appellate Body will establish new facts to be able to rule on this question.
C) The Appellate Body would reverse the panel’s finding on likeness, and complete the legal
analysis by ruling on the question of directly competitive or substitutable products to the
extent that the facts established by the panel and undisputed facts in the panel record
permit.
D) The Appellate Body would reverse the panel’s finding on likeness, and, as it cannot touch
on new issues, remand the dispute to the panel for further examination regarding the
question of directly competitive or substitutable products.
15. The WTO Member Deutomia files an appeal in a WTO dispute and is a bit imprecise in pointing to
the specific passages of the panel report that it wishes to appeal. Tractania, which had won against
Deutomia before the panel, considers Deutomia’s appeal to be insufficient and therefore
inadmissible. Deutomia reacts by withdrawing its appeal under the condition of being able to file a
new appeal and immediately submits its new, more detailed appeal. Is this possible?
A) The withdrawal of an appeal is possible at any time. Deutomia also has the right to file a
new appeal as long as this takes place within the deadline for filing an appeal.
154
B) The withdrawal is invalid because it has been subjected to an invalid condition. The
Appellate Body must therefore take the first appeal as the basis of its decision.
C) No, as there is only one right to appeal. No party can file two appeals.
D) The condition attached to the withdrawal is impermissible. Thus, the withdrawal is valid,
and the new appeal can become the basis of the Appellate Body’s decision only if
Tractania agrees.
16. WTO Member Y has just won a GATT dispute against WTO Member Z involving bananas. The
reasonable period of time has expired without full implementation, and there is no agreement
between the parties on compensation. What options for retaliation exist for Y?
A) Y must retaliate in the area of bananas only.
B) Y may retaliate in the area of other goods, but it can only resort to the suspension of
GATT 1994 obligations.
C) Y can suspend obligations in any goods sector, and under any multilateral agreement on
trade in goods. If Y considers that it is not practical or effective, and the circumstances
are serious enough, it may seek retaliation under the GATS) or the TRIPS Agreement.
D) Y may suspend obligations in any goods sector, and under any multilateral agreement on
trade in goods only.
17. WTO Member A is a developing country and also a small economy. It has just won a WTO dispute
against a big trading nation in the area of goods. The reasonable period of time has expired without
full implementation, and there is no agreement between the parties on compensation. What are A’s
options?
A) With the small trade volumes involved, A is unable to apply any sanctions that would
generate economic effects that the respondent would even notice.
B) The suspension of obligations must always occur in the same sector as the violation. A
must retaliate in the goods sector.
C) The suspension of obligations under the TRIPS Agreement is never possible because the
trade sanctions must always take the form of trade barriers.
D) If the suspension of obligations in the area of goods is considered impracticable or
ineffective, A can suspend obligations under GATS or the TRIPS Agreement.
18. After the expiry of the reasonable period of time, the original complainant claims that the
respondent has not used the time in order to fully implement the DSB’s recommendations and
rulings. The respondent insists that the new law it has passed brings its measure into compliance
with WTO law. The complainant, however, believes that the new measure, in addition to not
constituting full implementation, infringes WTO obligations, which the original measure had not
contravened. What recourse is available to the complainant and what will be reviewed in that
procedure?
A) The complainant can only start an entirely new dispute settlement procedure and have a
panel examine the consistency of the new measure with the covered agreements. The
panel will review the new measure in relation to all claims made by the complainant.
B) The parties can have recourse to an accelerated compliance review procedure, in which
a panel makes a ruling regarding the question of compliance within 90 days. No appeal
is available in this procedure in order to ensure its speediness.
C) The parties can have recourse to an accelerated compliance review procedure, during
which, however, only the consistency of the new measure with the DSB’s
155
recommendations and rulings will be examined. If the complainant claims other, new
violations of WTO law, it must initiate a totally new dispute.
D) Both parties can have recourse to an accelerated compliance review procedure, during
which the complainant can request an examination of the new measure by a panel and
possibly the Appellate Body as to its consistency with the DSB’s recommendations and
rulings and with WTO law more generally.
19. WTO Member Notorio has lost a WTO case two years ago. It has still not implemented the
recommendations and rulings of the DSB. As a consequence, it faces the suspension of obligations
by other WTO Members. In the regular DSB meetings, several other WTO Members criticize
Notorio for failing to implement. Notorio counters that it is only making use of its right to pursue a
different avenue than implementation and that it is happy to pay for not implementing. Who is right?
A) The DSB keeps the situation under surveillance as long as there is no implementation.
The DSU stipulates that the other options (providing compensation and facing
countermeasures) are only temporary alternatives falling short of resolving the dispute
(Articles 3.7 and 21.6 of the DSU).
B) When the DSB adopted the report(s) of the panel (and the Appellate Body), it adopted
their recommendation to bring the inconsistent measures into conformity with the WTO
Agreement. Notorio is free to follow this recommendation or not to do so, as the word
recommendation already suggests.
C) There is a preference in the DSU for the withdrawal of the WTO-inconsistent measure,
but if the complainant opts for the suspension of obligations, it foregoes the right to have
the respondent withdraw the measure that has been found inconsistent with the WTO
Agreement.
D) The DSU offers the respondent who has lost a dispute the possibility of facing
countermeasures (or of providing compensation) as an alternative to implementation.
Given the suspension of obligations by other Members, the overall balance of
concessions is retained, which is all that matters under the WTO Agreement.
20. A WTO panel is required to interpret an article of a covered agreement that has been interpreted in
a previous panel report under GATT 1947. The contracting parties to GATT 1947 had not adopted
that panel report. Can the panel borrow from the reasoning of the previous GATT 1947 panel report
and interpret the legal provision in the same manner?
A) The non-adoption of that panel report means that the GATT contracting parties have
rejected that panel’s reasoning. The WTO panel is, therefore, under an obligation to adopt
a different line of reasoning.
B) An unadopted GATT panel report has no formal legal status as such in the WTO dispute
settlement system, but if the WTO panel is convinced by the reasoning of the GATT
panel, it can adopt this reasoning as its own.
C) The GATT panel report is completely irrelevant because it has not been adopted. The
WTO panel should ignore it entirely.
D) It makes no difference whether a report has been adopted or not. Panel reports of previous
disputes are never relevant in any sense whatsoever.
156
Answers
Variant 1
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
D C A D D C B C D A D B D A A C B D D C
Variant 2
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
D D C C D A B C B D A B B C A C D D A B