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DSU scales new heights in judicial unprecedence

Geneva, 19 May (Chakravarthi Raghavan) -- The World Trade Organization (WTO) has set some new precedents for its dispute settlement process, raising some more systemic issues about its functioning and likely to strain even further its credibility and acceptance within its members and their trade establishments.

The WTO is now having before it a dispute raised by India against the European Communities over the EC’s preferential trading regime under the generalized system of preferences, and the grant of preferences to countries seen by the EC as engaged in fighting the illicit narcotic drug production and trade. The EC preferences are in favour of the members of the Andean Community, the Central American states and Pakistan.

The GSP schemes of developed countries favouring developing countries was instituted as a result of a decision/recommendation of the UN Conference on Trade and Development in 1968, and put into place in the early 1970s, as autonomous schemes by preference-giving developed countries, and covered first by a GATT waiver and then the 1979 Enabling Clause, so that developed countries could give tariff preferences for imports from developing countries without having to provide them to developed countries.

Initially, it was conceived as a ‘burden-sharing’ scheme, with the major developed ones providing the preferences (at the cost of their domestic sectors), but has now gradually become one where the burden-sharing is by other developing countries. The GSP and other preferences, like Official Development Aid, have become a way of taking away benefits of one group of developing countries and giving it to others.

The dispute involves some intricate legal questions of GATT and WTO law raised by India, and some political dimensions raised by the EU and the preference receiving countries.

While India and the EC are parties, there are some 17 third parties involved - all the Andean and Central American states and Pakistan, that receive the preferences, and the US, Paraguay, Mauritius, Sri Lanka and Brazil.

As a result of India raising a dispute and its reference to a panel (with India and the EC not agreeing on members of a panel, as is now common in disputes), the WTO Director-General named a panel to hear the dispute.

The DG named as chairman of the panel, Amb. Julio Lacarte Muro, an old GATT hand as staff member and then at UNCTAD secretariat, and former Uruguay Ambassador and negotiator. He was a member of the WTO’s Appellate Body from 1996 and retired this year as the Presiding Judge of the AB. Two other members are from the United States and Japan.

At the first hearing of the panel last week, assisting/representing some of the third parties - Bolivia, Colombia, Ecuador, Peru and Venezuela - all beneficiaries of the EC scheme under dispute, was Mr.Claus-Peter Ehlermann, who was a member of the Appellate Body and demitted office (after two terms).

While no one is questioning or challenging the trade law expertise of Amb.  Lacarte, or of Ehlermann, both Lacarte being named as chair, and the EC bringing in Ehlermann as counsel, are being widely commented upon among trade delegations, and the community of international trade lawyers and experts, for the embarrassment and problems it may create..

Such an important dispute and the legal issues involved, whatever the ruling, are bound to be taken up in Appeal by one or the other party in appeal to the Appellate Body (where those hearing it) are former colleagues of Lacarte who is the chairman of the panel, and Ehlermann is the EC counsel.

There have been other systemic issues raised over the processes of the dispute panels and the appellate body, where the WTO legal division and the substantive parts of the WTO secretariat function, not merely as servicing bodies, but guiding and providing opinions and notes for panels, before the dispute hearing begins, and after the parties have ended their arguments - all behind the backs of the disputants.

The secretariats also draft the reports of the panels, and of the appellate body.

Similarly, there are other issues of processes and procedures, including the role of the appellate body secretariat visavis the appeals and their hearing, a three-member bench of the appellate body hearing an appeal, but also consulting with the other four, before writing and delivering judgements.

Each of these would be considered in any national judicial system of law, whether Anglo-Saxon, Roman/European or other systems, as contrary to norms.  Collectively, they strain the credibility of a system of rules-based trade and its impartial settlement of disputes.

The precedents set now in the GSP panel dispute hearings is one more that over the long haul may further erode confidence in the system, adding to the problems created by the ‘revolving door’ between trade administrators and (the WTO secretariat too) and the business sectors which they join after retirement, and the panels (where government members from disputants and third parties are taboo, but not non-officials or business representatives).

Changes to the Dispute Settlement Understanding are under negotiations, with a 31 May deadline, and kept separate from the Doha single undertaking, but unlikely to be completed. There are a plethora of proposals for changes. But it is symptomatic of the system that none of the governments have decided to address this fundamental issue eroding credibility, and table proposals. – SUNS5347

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