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WTO Dispute Settlement Mechanism



Under the Dispute Settlement Understanding, the WTO procedure is a framework for resolving trade disputes. When a member government believes that some other member government is breaking a WTO agreement, a dispute occurs.These agreements, on the other hand, are the result of talks between member states, and so they are the authors of such agreements. If a dispute emerges, it is ultimately up to the member government to resolve it through the Dispute Settlement Body.This system has already accomplished a lot, including delivering some of the necessary security and predictability features that traders and other market players want, as stated in Article 3 of the Dispute Settlement Understanding.

The Dispute Settlement Understanding (DSU) of the World Trade Organization (WTO) arose from the GATT’s inefficient means of resolving member issues. Procedures for resolving problems under the GATT were ineffective and time consuming because a single country, particularly the one whose acts were being criticized, could effectively obstruct or postpone every stage of the dispute settlement process.It remains to be seen if countries will adhere to the new WTO dispute settlement structure, but the process has been relatively successful thus far.

Understanding the WTO dispute settlement mechanism

The Dispute Settlement Understanding (DSU), also known as the Rules and Procedures Governing the Settlement of Disputes, defines rules and procedures for dealing with various disputes that arise under the Covered Agreements of the Uruguay Round’s Final Act. There were a total of 314 complaints filed by WTO members.It applies to all WTO member nation-states and is the sole legal entity that can bring and file lawsuits with the WTO. The DSU established the Dispute Settlement Body (DSB), which is made up of all WTO members and is in charge of dispute resolution procedures.

It establishes a system of appeals to standardize the interpretation of certain terms of the agreements and sets rigorous time limits for the resolution of disputes. It also enables for the instantaneous formation of a panel and the automatic adoption of a panel report to prohibit countries from simply disregarding complaints and halting action.The goal of strengthened rules and procedures for the dispute resolution process, which include strict time limits, is to provide “security and predictability to the multilateral trading system” and to achieve “a solution mutually acceptable to the parties to a dispute and consistent with the covered agreements.”

Consultation, good offices, conciliation and mediation, a panel phase, Appellate Body review, and remedies are among the main steps of dispute settlement covered by the accord.

The first stage: Consultation

It is governed by Article 4 of the DSU. A WTO Member may confer with another WTO Member about “actions affecting the operation of any covered agreement conducted within the territory” of the latter. A WTO member who has been asked for consultation shall respond within 30 days regarding the same to the WTO member who has asked for the same.The complaining party may request a panel if the disagreement is not settled within 60 days.

The second stage: To establish a Dispute panel

If a suitable solution cannot be achieved through dialogue among member countries, the complaining member may request the formation of panels in writing to the Dispute Settlement Body, together with a synopsis of the case and problems involved. The panel is formed at the DSB’s second meeting, when the request is on the agenda.

The Panel’s role is to assist the Dispute Settlement Body in settling the issue at hand. The panel considers whether the entire dispute, including the facts of the case and the problems concerned, is in compliance with the covered agreement between the member countries. The Panel must deliver its final report to the parties within six months of the start of panel procedures.

The third stage: to select the panelists

A panel request must “identify the precise measures at issue and offer a concise summary of the legal grounds for the complaint sufficient to explain the problem clearly” and must be submitted in writing (Art. 6.2). A Member may challenge a measure of another Member “as such,” “as applied,” or both under GATT and now WTO dispute settlement practice.

The WTO Secretariat aids the parties in selecting panelists by compiling a list of all governmental and non-governmental individuals who meet specific standards from which the parties can select panelists.

If panelists are not chosen within 20 days of the panel’s formation, the Director-General, in conjunction with the Chairman of the Dispute Settlement Body and the Chairman of the relevant Council or Committee, appoints panelists who are deemed appropriate. After then, within 10 days, the chairman of the Dispute Settlement Body informs the members of the panel’s composition.

The fourth stage: Procedure of Panel

Within one week of the panel’s composition, the panelists must set a timetable for the panel process. Following that, the panel sets a date for each party to submit a written submission. Each party must make its submissions to the secretariat, which will forward each submission to the panel, and each side’s submission will be forwarded to the other.

There are usually three people in the panel. The WTO Secretariat proposes panelists to disputing parties, who may not object unless there are “compelling reasons” to do so (Art. 8.6). If no agreement on panelists is reached within 20 days of the panel’s formation, either contesting party may request that the WTO Director-General designate the members of the panel.

The fifth stage: Panel proceedings

The panel issues the descriptive part of its report (facts and argument) to the disputing parties after reviewing written and oral arguments. The panel delivers this section, along with its findings and conclusions, to the disputants as an interim report after considering any comments.

After an evaluation period, the disputing parties are sent a final report, which is then circulated to all WTO members. A panel’s final report must be delivered to disputing parties within six months of the panel’s formation, although it may take longer if necessary; extensions are common in complex situations.

The sixth stage: The Appellate board

If either party is dissatisfied with the panel report’s ruling, they can appeal to the Dispute Settlement Body’s Standing Appellate Body. A panel report can only be appealed by the parties to the dispute, not by third parties.Third parties can only be heard if they have notified the Dispute Settlement Body in writing that they have a major interest in the dispute.

This is significant because, unlike judges in the United States, appeal panel members do not serve for life. This means that if their verdicts were made public, individuals would face personal retaliation from nations who disagreed with them, tarnishing the process’ fairness.

The seventh stage: To accept the report by dispute settlement board

Within 30 days of receiving the Appellate Body’s findings, the Dispute Settlement Body must accept or reject it. Only a unanimous rejection of the report is possible.

Contributed by:– Nidhi Jha, Legal intern at LLL

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