World Trade Organisation (WTO) is a body that deals with trade rules which are applicable globally between nations. Its primary role is to ensure smooth, predictable, and free trade flow across nations. Dispute Settlement is one of the central pillars of the trading system and is an essential contribution of the WTO. WTO has one of the most efficient and active dispute settlement systems in the world. Since 1955, around 595 cases have come up and laid down over 350 rulings to date.
The Uruguay Round of Multilateral Trade Negotiations established the current dispute settlement system. WTO believes that it is essential to settle disputes timely and in a structured manner. The current dispute settlement mechanism gained importance after the enforcement of the WTO Agreement in 1955, as the members started resorting to using this system. It can be clearly said that the dispute settlement mechanism is one of the significant contributions of the Uruguay Round.
Dispute Settlement System:
The Understanding on Rules and Procedures Governing the Dispute Settlement governs the dispute settlement process, generally called the Dispute Settlement Understanding (DSU). The WTO believes that to ensure a reliable multilateral trade settlement system; all the members must respect the rules. The members have also agreed that the same shall be referred to the dispute settlement system whenever a matter arises.
The process is the duty of the Dispute Settlement Body, which consists of the WTO members. They have the authority to appoint the panels for a case and accept or reject their findings. The body also keeps a check on the proper implementation of the rules and regulations established during the process of dispute settlement.
- Consultations: Before any steps are taken forward in the case, the countries in dispute must talk and clear differences. The countries need to try and see if they can settle the disputes by themselves. The parties sit together, talk to each other, and even after that, if they are not able to settle the differences, they can either ask the WTO Director-General to mediate or help in any other way possible. The consultation period is usually up to 60 days. (Article 4 of DSU).
- The Panel: If the consultations are not successful, the accusing country can ask for a panel to be appointed. The opposing country can block the appointment of a panel for once, but when the Dispute Settlement body meets the next time, they appoint the panels (unless consensus of the members is against the same). The primary function of the panel is to help the Dispute Settlement Body in laying down rulings and regulations. Though the panel’s role is to help, overturning its decisions is hardly impossible. The consensus of the members of the Dispute Settlement Body only can reject the recommendations of the panel. The findings of the panel should be following the agreements cited. The period of appointing a panel is up to 45 days. (Article 6 of DSU).
Usually, the panel is required to submit its final report within six months to the dispute to the parties. This period reduces to three months in the case where perishable goods are the subject matter or other cases which need to be solved urgently.
The agreement clearly describes the panel’s working method. The following are the main stages of the dispute settlement mechanism:
1. Before the Hearing: Before presenting in front of the panel, each country of the dispute has to put forward its case before the panel in writing.
2. The First Hearing: The countries in dispute, the complaining country or countries, the accused country and the countries that claim to have interested the matter, present their case before the panel, at the first hearing.
3. Rebuttals (Second Hearing): At the second hearing, all the countries involved in the case submit their rebuttals in writing and present their oral arguments before the panel.
4. Expert’s Consultation: If any technical matter is brought up by any side, the panel consults experts or a group of experts. It can even appoint them and ask them to prepare an advisory report.
5. First Draft: The panel submits a few sections of its reports to both sides, which mainly consist of facts and arguments of the parties in a detailed form, after hearing to both the sides. The two sides can take two weeks to comment on the draft presented. The first draft does not include the analysis and conclusion.
6. Interim Report: After receiving the comments on the first draft, the panel submits an interim report, including the analysis and conclusion. A week is given to the parties if they want to ask for a review.
7. Review: If any of the two sides ask for a review, this stage takes place. To ensure that the review is completed within two weeks, the panel may hold additional meetings with both sides.
8. Final Report: After reviewing, the panel submits the final report to both sides. After three weeks, the same is given to all the WTO members. If in the report, the panel concludes that the trade measure in dispute breaks a WTO agreement, it recommends that the same must conform with WTO rules, and the panel might suggest some measures on how it is to be done.
9. The Report Become A Ruling: Within 60 days, the panel’s report becomes a Dispute Settlement Body’s ruling, unless rejected by a consensus. The two sides of the dispute can appeal to the panel regarding the report, and most of the time, parties do so.
The Principles of the Dispute Settlement Mechanism:
The WTO members believe that they need to maintain an equitable, effective, fast, and mutually acceptable dispute settlement mechanism, so that it is reliable. The WTO members agree that if a country has some measure which is violative of the WTO agreement, they will resort to a multilateral trade system to settle disputes rather than solving them unilaterally. It ensures that the members abide by the rules and regulations.
Earlier the system under GATT, the procedure was not structured, there were no fixed periods, and the cases would unnecessarily go on for long. After the Uruguay Round, the current dispute settlement system was introduced. This system was structured and laid down guidelines for timely and flexible solving of cases. It also clearly specified the timeline for various stages of the process and proper time limits in every stage. It was also an effective system because the losing country can no more block the ruling. Now, the ruling is as it is adopted and can be rejected only with consensus.
The whole process mostly works as a court, but the organization prefers that the countries at dispute must talk to each other and settle their differences by themselves. It is also the first stage of dispute settlement and is usually in the form of consultations.
The WTO aims at reaching acceptable solutions rather than winning or losing cases. Most of the cases with WTO have settled amicably between the parties. This way, a dispute panel is also not appointed in various cases. The existing dispute settlement process is structured, with distinct stages, and lays down the proper time of all the stages. It ensures speedy settling of disputes without extending the cases for more extended periods.
There are times when the parties can ask for help from the Director-General in any form like mediation, conciliation, or consultations. The Uruguay Round turned out to be one of the essential rounds as such vital decisions took place. The current dispute settlement mechanism is the primary outcome of this round. The members have also agreed to conform to the rules of the Dispute Settlement Understanding (DSU). This way, they ensure harmonious trade relations among the countries. The constant use of this system by various countries proves that the system is regularly working, and the members still have faith in it.
- Understanding The WTO: Settling Disputes, https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm
- WTO Dispute Settlement: Resolving Trade Disputes Between WTO Members, https://www.wto.org/english/thewto_e/20y_e/dispute_brochure20y_e.pdf
- Dispute Settlement in the World Trade Organisation, Integrated Database of Trade Disputes for Latin America and the Caribbean, https://idatd.cepal.org/soluciones/iTemplate-OMC-explicacion.pdf
- Introduction to the WTO Dispute Settlement System, https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c1s2p1_e.htm
- The Process: Stages in a Typical WTO Dispute Settlement Case, https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c6s1p1_e.htm
This Article is Authored by Priyanshi Jain, 1st Year, B.A.LLB (Hons.) Student at The West Bengal National University of Juridical Sciences, Kolkata.
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