DSB special session discusses EC proposals for review

The mandated review of the WTO’s Dispute Settlement Understanding formally got under way at a special session of the Dispute Settlement Body which deliberated mainly on a list of procedural review proposals but did not address substantive questions arising from the flawed operation of the trade adjudicatory mechanism.

by Chakravarthi  Raghavan

GENEVA: A special session of the WTO’s Dispute Settlement Body (DSB) in the week of 15 April formally kicked off the review of the Dispute Settlement Understanding (DSU) mandated by the 4th Ministerial Conference at Doha to be completed by May 2003.

The original DSU review process, which had been scheduled for completion by end-1998, remained stalled and could not be completed in time.

The Doha Ministerial Conference provided a renewed mandate (paragraph 30) for the review to be taken up and completed by May 2003, detached from the single undertaking of the work programme and negotiations launched at Doha.

The DSB formal session was devoted mostly to comments on proposals from the European Communities, ranging from “sequencing” (the need to get a compliance panel ruling before resorting to retaliation for non-compliance) and outlawing the US “carousel” approach (which changes from time to time the hitlist of products targeted for retaliation), through trade compensation (in preference to retaliation) to having permanent panellists and allowing amicus curiae briefs from NGOs.

The DSB special sessions are chaired by Amb. Peter Balas of Hungary.

Hong Kong China (HKC), Switzerland, Thailand, Chile, Japan, Norway, Malaysia, Ecuador, Hungary, India, Singapore, Indonesia and the United States were among those which made comments, with India presenting some 38 questions in writing and asking the EC to provide detailed comments.

India’s detailed questions related to the EC proposals for more permanent panellists, suggestions for trade compensation, the so-called transparency proposals (for opening the panel/Appellate Body proceedings to the public) and for amicus curiae submissions. The EC did not provide any responses to the questions but promised to do so.

Though one of the members, Norway, viewed the comments as indicating no opposition, and perhaps even some convergence of views on some proposals, the comments showed that there were differing perceptions and lack of convergence on details.

Ironically, while the US and the EC are locked in a major dispute over US steel safeguards and issues of compensation, some of the comments on the EC proposal in the DSB for compensation rather than retaliation (when a party to a dispute is unable to comply with the dispute settlement ruling) brought forth the suggestion that some proposals as in the Safeguards Agreement may be considered.

Flaws in dispute settlement

None of the proposals or comments seemed, though, to deal with substantive questions arising from the way the workings of the dispute settlement panels and Appellate Body and their interpretations of WTO Members’ rights and obligations have made compliance even more difficult.

Trade diplomats and trade establishments inside countries may be loath to raise these questions, but the public at large, and even legislative bodies, are.

The panel/Appellate Body rulings and the way they are whittling away sovereign domestic policy-making space in a range of areas only remotely connected with international trade, and the inability of developing countries against whom actions are taken to get any quick relief to ensure observance of rules by the major trading countries, have spawned growing scepticism and questions over the WTO dispute settlement process - questions on the role of the WTO secretariat, the judicial impartiality of the process, or the failure of the majors to implement rulings which run against the mercantilist interests of  powerful domestic lobbies.

A recent academic study by Marc L. Busch and Eric Reinhardt examining the record of the GATT/WTO dispute settlement system in addressing transatlantic disputes has challenged the conventional wisdom that the WTO-DSU is an improvement on the old GATT system of dispute settlement and has increased the WTO’s capacity to resolve disputes.

The new system, the two academics (respectively at Queens University, Ontario and Emory University at Georgia, USA) say, while having some apparent success in US-EC disputes in new areas, has failed to induce the US or the EC “to liberalize where it counts most, namely, in the ‘highest-stake’ cases”, or to make the policy changes (to comply). The system has fared no better than its predecessor when GATT-era cases have recurred under the WTO.

The two authors conclude: “... procedural legal reforms per se have not improved the outcomes of US-EC disputes ... If, as we speculate, the more legalistic WTO process may hinder pre-ruling bargaining, then the efficacy of the US-EC dispute settlement may be at greater risk now than in the GATT era, given that the institution depends more than ever on early settlement for the vast majority of its successful outcomes.”

On the proposal that the DSU, in particular Article 22, should be clarified to ensure that there should invariably be recourse to a compliance panel (where a dispute has arisen as to whether a particular ruling has been complied with) before the winning party in the ruling can seek authority (automatic) to retaliate, there was a fair amount of general support, though a number of Members including Japan and others (which had done some work and informally tabled proposals in the run-up to Seattle) said they would come up with their own proposals.

Hong Kong China agreed that the compensation route was preferable to retaliation or withdrawal of concessions, particularly from the viewpoint of developing countries, but the question remained as to how it was to be enforced. HKC suggested the approach of Article VIII of the Safeguards Agreement, with the non-complying party offering compensation. Switzerland saw it as a more realistic alternative to retaliation.

A few others like Thailand, while welcoming the possibility of trade compensation being offered, said this could encourage non-compliance with rulings. Japan viewed the compensation approach as “trade-creating”, while Korea saw it as better than retaliation, which often would hit “innocent” parties (exporters of other goods and services from the non-complying country).

India pointed out that the compensation alternative ran the risk of becoming an incentive to prolong an inconsistent measure and militating against the interests of Members which are not parties to the particular dispute. It might also militate against a key objective of the DSU, namely, to secure the withdrawal of WTO-inconsistent measures.

Several Members supported the EC view against the “carousel” approach. The EC has said the DSU should be changed to preclude a Member from unilaterally modifying the list of concessions for the withdrawal of which sanction has been given. The carousel approach was unveiled by the US in its disputes with the EC, the banana ruling in particular, where the US published a large list of products that could be hit and said it would from time to time vary the products to be hit with an eye to exerting maximum pressure on the EC for compliance.

A number of Members said the carousel approach was illegal, but thought the rules could be clarified to remove any doubts.


The suggestions for opening the panel/Appellate Body proceedings to the public and to enable NGOs to present amicus curiae briefs received some support from some industrialized nations, but were strongly resisted and opposed by others, including by several leading developing countries which insisted that the WTO and DSU was an intergovernmental process and should remain so.

A section of NGOs have been agitating and pressing for this right, under the plea of transparency. However, a large number of civil society groups from the South and the North insist that the starting point for transparency is internal transparency, where every Member is enabled to fully participate in decision-making without any small groups of Members first reaching conclusions that are forced on the rest, and call for opening the deliberative and decision-making processes (the WTO General Council and its subsidiary bodies) to civil society organizations, enabling them to place their views in writing or orally before the WTO bodies before the latter reach a decision.

Many of the developing countries said that allowing NGO petitions in the dispute settlement process would increase the disadvantages faced by developing countries and would give non-Members (NGOs and others) better rights than Members which are not third parties in a dispute. India said that governments generally consulted their business lobbies before taking up a case or defending it, and if the opportunity was opened for such lobbies to present petitions and viewpoints, there would be less willingness to consult.

On the suggestion of the EC for permanent panellists, the element of costs was a common theme. The idea was also seen as raising so many complex issues that, as HKC put it, this will come in the way of an early consensus. A number of other Members, like Japan, said that even though the  present system envisaged panellists being chosen ad hoc from an approved list of panellists, in practice it was becoming permanent in that some individuals were more frequently chosen.

Referring to the EC argument that a permanent standing body of panellists would move the system towards faster proceedings and more consistent rulings, India, in its detailed questions and comments, cited the examples of three disputes - the dispute against Guatemala over cement anti-dumping measures, the case against the EC over asbestos use and the case against the EC relating to computers - where virtually every panel finding was overturned by the Appellate Body. In all the cases, the panellists had previous GATT/WTO experience, and they were repeated in subsequent disputes.

In the run-up to Seattle, during the informal DSU review process, the fact that more and more panels were being chosen by the WTO secretariat (since the disputants themselves could not agree on the composition of the panel) and some personalities seemed to be repeatedly named to panels, had come up and the secretariat was asked to provide some data on the choices of panellists.

Trade officials were unable to shed light on whether the secretariat did in fact provide such information. (SUNS5104)                                        

From Third World Economics No. 278 (1-15 April 2002)