Legal Frame Work of Procedural Aspects of International Trade Dispute Resolution Under the WTO System Issues Concerning Pakistan

8/14/2019 Legal Frame Work of Procedural Aspects of International Trade Dispute Resolution Under the WTO System Issues

1/9

Legal Framework of Procedural Aspects of International Trade Dispute

Resolution under the WTO System: Issues Concerning Pakistan.*

Abstract: The Dispute Settlement System (DSS) under World Trade Organization

(WTO) is a central element in providing security, transparency and predictability to theinternational trade. The multilateral trading disputes are administered by the Dispute

Settlement Body (DSB). There are some legal phases involved for the settlement of trade

disputes relating to trade in good, services and intellectual property rights under WTO.WTO trade regulation system is more effective, equitable, fast and exhaustive as

compared to the International Court of Justice and old GATT system. Despite all the

facts, there are some inherent weaknesses in the system, which are necessary to eliminatefor the promotion of International Trade and Sustainable Development of member

countries.

1. Introduction:

Dispute system is an integral part in the smooth working of the various multilateral tradeagreements entered into as a result of the Uruguay Round of trade negotiations because it

gives confidence to the member states of the WTO that its complaints on the Notificationand Infringement of its rights under the covered agreements will be addressed by an

impartial Tribunal.1

The WTO dispute settlement framework is set out principally in the Understanding onRules and Procedures Governing the settlement of disputes.2 The Understanding is

intended to be a comprehensive framework for conflict resolution in the field of

international trade under the auspices of the WTO and it provides for a variety ofmechanisms for the resolution of trade disputes between member States. The Dispute

Settlement Understanding establishes a single integrated legal structure for conflict

resolution in relation to the various trade agreements under the Uruguay Round relatingto trade in goods, services and intellectual property rights.It is fact that Dispute Settlement understanding has come to play an important part in the

working of the WTO becomes evident from the increase in the number of cases filed

during the working of the WTO vis--vis the cases filed under the earlier disputesettlement system of the GATT 1948.3

2. Jurisprudence of the WTO Dispute Resolution Mechanism:

1* Naeem Ullah Khan, BSc. LLB, LLMLecturer at Law University Law College,

University of the Punjab, Lahore, Pakistan.1.WTO Dispute settlement and developing countries by MB Rao and Manjula Guru at p

xiiiv22.See Arts XXII and XXIII of GATT 1994; and the Understanding. See also in conjunction with

the Understanding, rules of Conduct for the Understanding on Rules and Procedure Governing in

the Settlement of Dispute WT/DSB/RC/W/1 (November 1996); and Working Procedures for

Appellate Review , WT/AB/W/3 (February 1997).

33.WTO Dispute settlement and developing countries by MB Rao and Manjula Guru at p

xiiiv

1


2/9

The Jurisprudence of Dispute Resolution Mechanism under the Multilateral Trading

System (MTS) aims at removing the friction in the actual working of the Multilateral

Trade Agreements (MTA), which in turn aim at free flow of trade and commerce

amongst the contracting countries, raising of standards of living, ensuring fullemployment and expanding production of trade in Goods, Services and Intellectual

Property Rights. This system seeks the maximum use of the world resources with the

objectives of economic prosperity and sustainable development of the member states.4

It also provide level playing fields for developing, least developed and developed

countries. It is worthwhile to note that WTO dispute settlement machinery provides

security, predictability and transparency in the world trading system.5 It preserves the

rights and obligations of the members as stated in the WTO code. This objective isreinforced by the express condition that the recommendations and rulings arising from

the conflict resolution mechanisms cannot add or diminish the rights and obligations

agreed by the members under the code.6 It facilitates clarification of the provisions of the

WTO code in orderly fashion in accordance with the rules of interpretation underCustomary International Law.7 Last but not least, it provides that members are not to

make determinations of violations under the WTO code, except through recourse to themechanisms under the Understanding.8 This is a measure which brings the use of

unilateral measures deployed by States.

3. Historical Analysis of Dispute Resolution Framework under The GATT:

The legal mechanism for international trade resolution of disputes were centered in

Articles XXII and XXIII of GATT, although there are a number of other provisions

sprinkled throughout the GATT that relate to resolution of disputes, or renegotiation orcompensation of obligations.9

Article XXII of GATT merely provides for consultation, on any matter regarding GATT,when any contracting party requests it. It is a simple but sometimes very useful provision.It is worthwhile to note that the core provisions of GATT concerning dispute settlement

are provided in Article XXIII.10

This Article is very brief by comparison to most international organization disputesettlement provisions and has some discrepancies. The GATT dispute system in the first

decade was more legalistic while during the second phase, it resembled the consensus

negotiation model because of pressures building up from the US, the formation of

4 WTO Dispute settlement and developing countries by MB Rao and Manjula Guru at p

xix5 rt.3 of the Understanding on Rules and Procedures Governing the Settlement of Disputes in

GATT, The Result of the Uruguay Round of Multilateral Trade negotiations (1994), (hereinafter

referred to as the Understanding)

6 Ibid.

7 Ibid.

8 Ibid. Art. 23(2)(a).

9 See Jackson, world trade and law of GATT, chapter 8

10 Jackson, the world trading system, chapter 4

2


3/9

European Economic Community and the emergence of Japan as an economic force.11

The third phase saw the birth of a quasi-judicial system, giving raise to rule oriented

decisions. The old GATT dispute settlement system had discrepancies due to which thesystem was not working effectively and in smooth manners.12 Delays in processing

complaints, formation of panels, implementation of decisions mainly due to blockage of

panel reports and inability to respond to developing country interests and complaints.

4. Rationalistic Approach to Dispute Resolution Mechanism Under Multilateral

Trading (WTO) System:

The WTO unique contribution is the stability proved the global economy. Without means

of settling disputes the rules based system would be ineffective. The WTO dispute

settlement procedure promote the rule of law and it makes the international tradingsystem transparent predictable and smooth. The system is based on equitable fast

effective and mutually acceptable for the contracting parties.13

It is worthwhile to note that the causes of action going rise to the dispute settlementprocedures are based on Articles XXII and XXIII of the GATT 1994 involving the

violation of complaint, non-violation complaint and situation complaint .14

4.1 Dispute Settlement Body And Its Jurisdiction:

Article 2 of the DSU establishes the Dispute Settlement Body DSB, which is the

collectivity of WTO Members acting in their dispute settlement capacity and has a role parallel to that of GATT counsel in the pre- WTO multilateral dispute settlement

arrangements.15

It is pertinent to mention that the Dispute Settlement Body (DSB) has the sole authorityto establish panels, experts, review group and to accept or reject the panels and appellate

body reports, maintain surveillance of implementation of rulings and recommendations

under the covered agreements and has a power and authorize suspensions of concessions

and other obligations under the covered agreements.16

A Dispute Settlement Body (DSB) has been established to administer the rules and

procedures under the Understanding.17 The DSB and the General Council are essentially

coterminous, but action in different capacities. The DSB my have its own chairman, andmay have different rules of procedures. The General Council is to meet as appropriate

forum in order to discharge the functions of the DSB according to the Understanding. 18

The DSB is responsible for the administration of the dispute settlement rules and

11 See Dispute settlement and Developing countries by MB Rao and Manjula Guru at p 9

12 See generally Dispute settlement and Developing countries by MB Rao & Manjula Guru at p 9

13 See http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm, visited on December2007

14 See generally International Economic Law by Asif H.Qurashi at p 297, 298, 299.

15 The Regulation of International Trade 2nd edition by Michael J.Trebilcock and Robert Howse

at p 60

16 See DSU article 2.1

17 Article 2 of understanding

18 Articles IV (3) of the Marrakech Agreement Establishing the WTO (The MarrakechAgreement)

3
http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htmhttp://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm


4/9

procedures under the Understanding.19 The administrative charge of the DSB includes

important decision making functions. Thus, the body reports, authorize the use by

members of sanctions, and monitor the implementation of rulings and recommendations.The right of entry to dispute settlement body is available only to the member of the WTO

private parties cannot be directly involved in initiating the proceedings at the WTO the

obligations imposed under the WTO code applied to the member states however privateparties can request their respective government to initiate the complaint.20

Members can be represented by private lawyers in panel21 and appellate proceedings.22

The private lawyers can only appear as the part of members delegation. They must beresponsible to government they are representing, and respect the confidentiality of the

proceedings.23 The assistance of private council is accepted practice24 for seeking legal

advice and involvement in written proceeding. NGOs cannot bring proceedings at WTO.

They can only make written submission in disputes between member.25 It is the discretionof the dispute settlement panel to decide whether accept or reject the submissions .26

5. Constitutional Phases for International Trade Dispute Resolution under

WTO:

5.1 Phase-I

19 Articles 2 of the Understanding

20 Panel Discussion moderated by Petros C. Mavroidis published in Is the WTO DisputeSettlement Medhanism Responsive to the Needs of the Traders? Would a System of Direct Actionby Private Parties Yield a Better Result? (1998) J.W.T.

21 See Korea-Taxes on Alcoholic Beverages; Panel Report (1998) and Report of the Appellate

Body (1999).

22 See European Communities-Regime for the Importation, Sale and Distribution of Bananas;

Report of the Appellate Body (1997). See also R.S.J Martha, Representation of Parties in WTD

(1997) 31 J.W.T.

23 See Korea-Taxes on Alcoholic Beverages; Panel Report (1998) and Report of the Appellate

Body (1999).

24 See European Communities-Regime for the Importation, Sale and Distribution of Bananas;

Report of the Appellate Body (1997). See also R.S.J Martha, Representation of Parties in WTD

(1997) 31 J.W.T.25 United States-Import Prohibition of Certain Shrimp and Shrimp Product; Report of the

Appellate Body (1998). Also see International Economic Law by Asif H. Qurashi at p. 292 See

also for e.g. S. Charnovitz, Participation of Non-Governmental Organizations in the WTO

(1996) 17 (1) University of Pennsylvania Journal of International |Economic Law; and D.C Esty,

Non-Governmental Organizations in the WTO: Co-operation, Competition, or Exclusion,

(1998) 1 Journal of International Economic Law.

26 See Article 13 of the Understanding; and United States-Import Prohibition of Certain Shrimpand Shrimp Product; Report of the Appellate Body (1998)

4


5/9

Consultation Stage and Other Alternatives to Panel Dispute settlement:27

Prior to taking any other actions the countries in dispute have to negotiate to each other to

see if they can settle their differences by mutual understandings. If the negotiations havebeen failed to resolve the dispute within 60 days.28 They can also request the WTO

Director General to mediate or try to help in any other alternative way.29

However, When the parties to a dispute agree, procedures for good offices, conciliation ormediation process may continue while the panel procedes.30

At this stage the Director General may act in an ex officio capacity offer good offices

conciliation or mediation with the view to assisting members to settle a dispute.31

5.2Phase-II

Panels Formation and Working Mechanism:The request for the establishment of a panel shall be made in writing by complainingparty which shall comprises of that the consultation were held, identify the specific issues

and provide a brief summary of the legal basis of the complaint sufficient to present the

problem clearly. 32

The country in dock can block the formation of the panel once but when the DSB meetsfor a second time the appointment can no longer be blocked provided that there is a

consensus against appointing the panel.33

It is pertinent to mention that panelist shall be well qualified governmental or nor

governmental individuals including those persons who have been served on or presented

a case to a panel served as a represented of a member or of a contracted party to GATT1947 or as a representative to the council or committee of any covered agreement or its

predecessor agreement, are in the secretariat taught or published on international trade

law or policy or served as a senior trade policy official of a member states. 34 Panelist

having a sufficient diverse world trade experience and a wide spectrum of internationallaw and policy.35

Panel consists of three panelists unless the parties to the dispute agree within 10 daysfrom the establishment of the panel. The nomination of the panelists is notified by theWTO secretariat. These nominations of panelists cant be opposed unless there are

compelling reasons.36 In establishing a panel the DSB may authorize its statement to draw

up the terms of reference of the panel in consultation with the parties to the disputesubject to condition as provided in the article 7 of DSU. Terms of reference are circulated

to all member countries.37

After the formation of the panel each side in dispute presents its case in writing to the


at p 60

28 See Article 4 DSU

29 See generally DSU article 530 See DSU article 5.5


32 See generally DSU article 6

33 See DSU article 6.1 & 6.2





5


6/9

panel. The complaining country, the responding country and those that have announced

they have an interest in dispute make their case at the panels first hearing. After that the

countries involved submit written rebuttals and present oral arguments at the panelssecond meeting. An expert review group is appointed for expert opinion when there is

involvement of scientific and technical matters.38 The panelist submitted a factual and

argument report for further discussion to the both parties. After the completion of theprocess interim report is submitted by the panel based on findings and conclusions.39 And

the reasonable time of one week is given by the panel to the parties in dispute for review.

The statutory period for the process of review is not allowed more than two weeks at theend a final report is submitted to the parties in dispute and it is also circulated to all the

WTO members.40

5.3 Phase-III

Adaptation of Panel Reports:

The statutory mechanism for the adaptation of the panel reports is provided in article 16

of DSU where the panel report shall not be considered for adaptation by DSB until 20

days after the date they have been circulated to the contracting parties.

41

Where themember countries having any objections to the panels reports they submitted their

objections in appropriate manners which should be in written form.42 In DSB meeting themembers have statutory right to fully participate and record their point of view. 43 After

the completion of above mentioned procedures the report is adopted within 60 days

unless there is no appeal.44

5.4Phase-IV

Appellate Review Body:

A standing appellate body is established by DSB appellate body hears appeal from thepanel cases.45 The appellate body consists of seven members, three of whom serve on any

one case.46 These members appointed for four years term and representative of WTO

membership.47 These members having expertise in law, international trade law andsubject matter of the covered agreements particularly.48

38 See http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm

39 See DSU article 15

40 See generally DSU article 12

41 The legal texts: The results of the Uruguay Round of Multilateral Trade Negotiations

Published by the WTO secretariat edition 2002, at p 365 para 1, article 16, DSU

42 See article 16.1 DSU, The Dispute Settlement Procedure 2nd edition at p 15 Published by the

WTO secretariat

43 See article 16.3 DSU44 See article 16.4 DSU

45 The legal texts: The results of the Uruguay Round of Multilateral Trade Negotiations

Published by the WTO secretariat edition 2002, at p 366 para 1, article 17.1, DSU

46 See article 17.1 DSU, The Dispute Settlement Procedure 2nd edition at p 15 Published by the

WTO secretariat

47 Legal Problems of International Economic Relations 4th edition by John H. Jackson, William J.

Davey and Alan O. Sykes, Jr. at p 264

48 See generally article 17.3 DSU

6
http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htmhttp://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm


7/9

Appeal based on points of law such as legal interpretations developed by panel.49

Appellate body has the power to uphold modify a reversely legal findings and conclusion

of panel.50 The dispute settlement body has to accept or reject the appeals within 30days.51

6. Enforcement Process:Within 30 days of the adaptation of panel or appellate body report the loosing party must

inform the DSB of the steps it intends to take to implement the recommendations and

rulings adopted. Where immediate compliance is impracticable, a member have areasonable period of time to bring itself into conformity.52

A reasonable period of time may be determined by the DSB on the basis of proposals

from the losing party, or by agreement between the parties, or through binding arbitration.

Deviations over whether execution measures are adequate are to be referred back to theoriginal panel wherever possible, which is to circulate its report within 90 days of the

referral.53

6.1 Remedy for Non Compliance:Compensations and suspension of concession are available to the aggrieved party if the

panel or appellate body report is not implemented with a reasonable period of time.Compensation is a voluntary alternative to implementing a ruling suspension of

concessions requires authorization by the DSB, subject to a number of conditions and

criteria listed in 22.3 and related provisions of this Article.54

7. Arbitration as a Alternative Means:

Expeditious arbitration as a mean to settle the international trade dispute is provided

under the article 25 of dispute settlement understanding which can facilitate the solutionof certain disputes that concern issues are clearly defined by both parties. Arbitration

shall be subject to the mutual agreement of the parties. The arbitration award is binding

on the parties to the dispute. The arbitration award is notified to the DSB and the counselor committee of relevant agreement.55

Table*: Constitutional Time Framework to Settle a Dispute under the WTO

Time Period Stages

60 days Consultations, mediation, etc

49 See generally article 17.6 DSU

50 See article 17.13 DSU

51 See article 17.14 DSU


at p 79

53 Ibid, Also see article generally 20 DSU

54 Ibid

55 The Dispute Settlement Procedure 2nd edition at p 25 Published by the WTO secretariat

7


8/9

45 days Panel set up and panelists appointed

6 months Final panel report to parties

3 weeks Final pane report to WTO members

60 days Dispute settlement body adopts report (if no appeal)

Total = 1 years (without appeal)

60 90 days Appeals report30 days Dispute Settlement body adopts appeals report

Total = 1y 3 m (with appeal)

_________________________

* Source: http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm

8. Issues Concerning Pakistan:

The despites of all the realities, there are some issues concerning the developing worldparticularly Pakistan under the dispute settlement system.

Following are the issued face by Pakistan:

Lack of legal expertise and resources.

Cost of access to the dispute settlement process.

Implementation issues and inadequate remedies available in lieu of full

compliance.

Ineffective implementation of special and differential treatment provisions.

Lack of public-private sector dialogue.

Conclusion and Proposals:

In conclusion the World Trade Organization (WTO) Dispute Settlement System (DSS)

provide a constitutional framework for the resolution of dispute in the field of

international trade56 in goods, services and intellectual property rights.Trade disputes are complex, often involving changing economic and political interests

and are capable of arousing strong national passions WTO dispute system makes peacefulmethod of resolving trade disputes it also provide opportunity for accommodation57 and

addressing new situational and emphasis existing rules.

There has been a general improvement in the system as a whole and system is moreeffective as compared to International Court of Justice (ICJ) and any other organization.

Following are the proposals:

There is need to increase institutional capacities.

Co-ordination at multiple levels public, private levels, members with similarconcerns and development organizations etc.

There is need to restrict the consideration of amicus curie brief.

Need to provide special time frames and legal assistance for developing and

least developed countries.

56 International Economic Law by Asif H.Qureshi at p 313

57 International Dispute Settlement 3rd edition by J .G Merrills at P.219

8


9/9

Special and differential treatment (S & DT) provisions should be enforced

with their letter and spirit.

Panel proceedings should be held publicly.

Easy excess to the reports by public and NGOs.

9

Documents

Legal Frame Work of Procedural Aspects of International Trade Dispute Resolution Under the WTO System Issues Concerning Pakistan