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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.

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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.

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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



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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




4.3.7. 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


4.4.5. References and Background Information ................................................................................. 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




4.5.7. 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




4.6.7. Glossary ........................................................................................................................................ 86

4.7. Lecture Seven – Functions and competence of the Appellate Body(AB) ................................... 87

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4.7.1. Objectives ..................................................................................................................................... 87

4.7.2. Lecture Topics .............................................................................................................................. 87

4.7.3. Overview ....................................................................................................................................... 87




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


4.8.5. 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


4.10.6. 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

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4.11.3. Overview ................................................................................................................................... 133

4.11.4. Discussion Topics ..................................................................................................................... 134


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

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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

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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.

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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.

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3.4 Credit Count

This course is designed as credit.

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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

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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

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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.

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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/

http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=490428

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.


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.


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;

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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);

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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

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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

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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.

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• 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.

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• 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.

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• 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



Trade Organization







(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.

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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.


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.

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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).



Trade Organization







(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.


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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.

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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.


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.

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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.

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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

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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.

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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

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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.

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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

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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

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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

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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.



Trade Organization


3) United Nations Conference on trade and development – Panel DSB



(slides)

https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c6s3p3_e.htm


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.

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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.


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.

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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.

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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

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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

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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.

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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

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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

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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:

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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

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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.

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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

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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.

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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

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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

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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.


1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the

World Trade Organization



4) Andrew D. Mitchell, The Legal Basis for Using Principles in WTO

Disputes

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(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.

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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).


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.

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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.

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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”.

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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”.

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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

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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:

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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:

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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.

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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

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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


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.


1) Peter Van den Bossche, Werner Zdouc. The Law and Policy of the

World Trade Organization



(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.

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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.


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.


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

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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”


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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


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

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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.



Trade Organization


3) United Nations Conference on trade and development – Appellate Body DSB


(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.

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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.

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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.


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.

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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.

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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 “.

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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

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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

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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.

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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

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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.

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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



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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).


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


(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

https://en.wikipedia.org/wiki/Tax_law

https://en.wikipedia.org/wiki/Tax_law

https://en.wikipedia.org/wiki/United_States

https://en.wikipedia.org/wiki/United_States_Congress

https://en.wikipedia.org/wiki/Income_tax

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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.

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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.


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.


1. Implementation of the recommendations and rulings

The main articles are arts. 21 and 22, provisions of which are dealing with this

implementation.

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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.

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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.

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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.

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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.

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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).

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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.

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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”.

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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

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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

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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

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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.

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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

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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.

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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.

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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.



Trade Organization

2) United Nations Conference on trade and development – Appellate Body DSB




(slides)

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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.

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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.


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.

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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.

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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

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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

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• 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.

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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,

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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


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

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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


Ukraine may

submit its position during

the first half of 2015

Who may have an

interest in this dispute?

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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


Ukraine may

submit its position if panel is

composed

Who may have an


Government of Ukraine,

primarily, and the Ukrainian

exporters of similar goods

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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


Ukraine may

submit its position in 2016

Who may have an



primarily

Russian

Federation —

Recycling Fee

on Motor

Active (panel

established but not composed)

Issue: A recycling fee

is applied to imported products.

Ukraine has


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



primarily, as well as the

Ukrainian producers

affected by this measure


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/

https://www.wto.org/english/thewto_e/countries_e/ukraine_e.htm

http://me.gov.ua/?lang=en-GB

http://new.me.gov.ua/

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(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.

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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.


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.

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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

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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



Trade Organization

2) Donald McRae “What is the future of WTO Dispute Settlement?”


(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

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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

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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


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


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.

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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.

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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?

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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.

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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.

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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.

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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

Documents

SYLLABUS WTO DISPUTE SETTLEMENT MECHANISM …pdf.usaid.gov/pdf_docs/PA00M2X4.pdf · This WTO Dispute Settlement Mechanism Syllabus and Course Materials ... the U.S. Agency for International