Development of WTO Dispute Settlement System: How It Came Into Play?


There are a lot of ways to stare at the WTO. This is a liberalizing trade body. The negotiation of trade deals is a platform for governments. Settling trade disputes is a position for them. It maintains a system of rules regulating trade. In essence, the WTO is a place in which governments of member governments go to try to solve the trade issues they encounter. The first step is to converse. The WTO was conceived out of negotiation process and all that the WTO does is the outcome of negotiations. The majority of the present activity of the WTO comes from the talks in 1986-94 called the Uruguay Round and earlier agreements under the General Tariff and Trade Agreement (GATT). The WTO is currently hosting new negotiations, under the 2001 “Doha Development Agenda.”

The WTO agreements, ratified and signed by the majority of the trading nations of the world, are at its heart. Such documents provide the legal baselines for foreign trade. In essence, they are contracts, which attach governments to keep their trade policies within accepted parameters. Though signed and negotiated by governments, the purpose is to enable goods and services manufacturers, export markets, and importers run their business while helping governments to achieve social and environmental goals.

The overarching aim of the plan is to control trade flow as clearly as possible provided there are no unpleasant adverse effects as this is essential for economic development and very well-being.

That is a third important aspect of the work of the WTO. Trade relations are often the subject of opposing agendas. Agreements, including those negotiated painstakingly in the WTO system, often need interpretation. The most cohesive way to resolve these distinctions would be through an impartial procedure that is centered on an agreed legal basis. That is the intent behind the process of dispute settlement written into the WTO agreements.

Historic Development of WTO:

The (WTO) system of dispute settlement is often hailed as one of the Uruguay Round’s most important innovations. However, this cannot be misinterpreted to describe that the WTO dispute settlement system was an overall advancement and that there was no dispute settlement system in the previous multilateral trading system based on GATT 1947. On the other hand, under GATT 1947 there was a dispute settlement system which evolved quite exceptionally over almost 50 years on the basis of Articles XXII and XXIII of GATT 1947. Many of the principles and techniques evolving in the GATT dispute settlement mechanism have over the decades been codified in GATT 1947 Contracting Parties’ decisions and understandings. The current WTO process builds on and conforms to the principles that apply in Articles XXII and XXIII of GATT 1947 (Article 3.1 of the DSU) for the planning of conflicts. The Uruguay Round of course brought important changes and explanations to the old regime that will be described later.

Disputes during the very formative days of GATT 1947 were made the decision by the GATT Council Chairman’s rulings. They were regularly alluded to working parties comprising representatives from all the engaged contracting parties. These required to work parties determine their reports through decision making by compromise. Group published unbiased findings of guidelines and dispute resolution decisions. Those reports became legally binding on the parties only upon approval by the Gatt Council.

The contracting parties to GATT 1947 gradually codified the emerging procedural dispute settlement practices, and sometimes modified them. The most important decisions and understandings over the pre-Uruguay Round were:

  • Decision dated 5 April 1966 concerning prosecutions under Article XXIII;
  • The Notification, Consultation, Dispute Resolution and Surveillance Agreement, adopted on 28 November 19792;
  • The decision on dispute settlement, contained in the Declaration of Ministers of 29 November 19823;
  • Dispute settlement decision dated 30 November 1984.4

As the obvious flaws in the GATT dispute resolution mechanism led to version update in the 1980s, many GATT 1947 contracting parties, both developing and developed countries, found the machine needs to improve and reinforce it. Accordingly, negotiations on dispute resolution would be included and provided top priority on the Uruguay Round agenda.

By 1989, halfway through the Uruguay Round talks, the negotiating parties were prepared to enforce some tentative outcomes of the discussions on some issues and subsequently followed the Resolution of 12 April 1989 on Changes to the Rules and Procedures of the GATT Dispute Settlement. The proposal was to submit on a trial basis before the end of the Uruguay Round and already included many of the principles that were later reflected in the DSU, such as a right to a jury and specific jury time frames. However, the important matter of the process to be used in the adoption of panel reports has still not been agreed upon. At that point, no appeal review was foreseen.

Unique Contribution:

Dispute Settlement is the major component of the global trading system and the unique contribution of the WTO to the stability of the world economy. The rules-based system would be less efficient without a way of settling disputes since the laws could not be followed. The WTO procedure underlines the rule of law, and it tends to make the trading market safer and more predictable. The model is based on clear-cut rules, with timetables to complete a case. The first verdicts are decided to make by a panel and endorsed by a continued member of the WTO. Appeals can be based on points of law.

WTO disputes are basically about promises broken. WTO members have agreed to use the multilateral dispute settlement system if they believe fellow Members are in violation of trade rules. A conflict occurs when one nation adopts a trade policy measure or performs some action that one or even more fellow members of the World Trade Organization deem violating WTO agreements. The Uruguay Round agreement implemented a more organized procedure with clearly defined procedural phases. It introduced greater discipline for the amount of time a case must take to be resolved, with adaptable deadlines set at different stages of the proceedings, and more immediate settlement is needed.

Developing countries

Around two-thirds of the approximately 164 WTO members are developing countries. They are fetching more importance at the level of global economy, and they more and more look at trade as a vital tool in their development, they play an increasingly important and active role within the WTO. Developing nations are also a widely diverse community with many different issues and opinions such as-

  • The WTO negotiations include special clauses relating to developing countries.
  • The Committee on Trade and Development is the central element that focuses on the WTO’s work in this area, with others addressing specific issues such as trade and debt and transfer of technology.
  • The WTO Secretariat offers technological support to developing nations.

The WTO Secretariat does have strict legal aides to aid and give legal counsel to developing countries in any WTO dispute. The service is provided by the Institute for Training and Technical Cooperation at the WTO. It is made frequent use of by developing countries.

In addition, in 2001, 32 WTO Governments formed a WTO Law Advisory Centre. The members include countries that contribute to the grant, and those who provide legal advice. All the developing nations automatically qualify for counseling. To receive advice other developing countries and transition economies must be fee-paying members.

Issues Raised:

In the GATT-WTO scheme, the Uruguay Round witnessed a change in North-South politics. Previously, developing and developed countries tended to be in opposing classes although there were exceptions back then. The line between the two was less clear in the lead up to the Uruguay Round, and differing relationships formed based on the issues during the process. The pattern has continued ever since.

The division also remains evident in some issues like textiles and clothes, and some of the latest issues addressed in the WTO, for instance such as and developing nations have grouped themselves into alliances like the African Community and the Least Developed Countries Community. The developed countries do not have similar interests in many ways, and can find oneself on the separate ends of a negotiation. For this reason a number of different coalitions have emerged among different groups of developing countries. The differences can be observed in subjects of great significance to developing countries, for example agriculture.


While the binding existence of public international law is still a topic under discussion, the institutionalization of GATT into WTO with a powerful judicial system has certainly shown that the debate is no longer open with regard to international trade and trade law. The existence of an effective judicial mechanism in the Agreement mostly on rules and regulations regulating dispute settlement has exacerbated the pace of legalization in trade policy.

This article is authored by Praachee Pathak, Third-Year, BBA. LL.B student at JIMS, School of Law

Also Read – Alternative Dispute Resolution: An Asset India

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