DSB Special Session takes up dispute settlement review

The WTO membership have, as mandated by the Doha Ministerial Conference, initiated a review of the organization’s mechanism for adjudicating on trade conflicts. A special session of the WTO Dispute Settlement Body convened on 14 March to begin the review process, which is slated to decide on improvements and clarifications of the Dispute Settlement Understanding.

by Chakravarthi Raghavan

GENEVA: The review of the WTO’s Dispute Settlement Understanding (DSU), mandated by the work programme adopted by the 4th Ministerial Conference at Doha, was kicked off at a Special Session of the Dispute Settlement Body (DSB), which held informal consultations on 14 March.

Trade officials said the DSB agreed to the suggestion of its Chairman, Ambassador Peter Balas of Hungary, to hold much of the talks and negotiations in the informal mode, with formal meetings to hear and record statements of delegations. The DSB also agreed on a timetable of formal and informal meetings till December. Chairman Balas is hoping to evolve a negotiating text by the end of the year.

Paragraph 30 of the Doha Ministerial Declaration has mandated “negotiations on improvements and clarifications” of the DSU, based on the work done thus far and proposals by Members, and to be concluded by no later than May 2003. Under para 47, the DSU negotiations are not to be a part of the “single undertaking” of negotiations set by the Ministerial Declaration.

Besides agreeing on the timetable of formal and informal meetings till December, the DSB heard some general comments from delegations and initial comments on a comprehensive set of proposals from the European Communities (see below).

Under the timetable agreed upon, DSB special sessions are set tentatively for 16 April (formal), 21 May (informal), 11-16 July (formal), 10-11 September (formal), 14 October (informal), 13-15 November (formal) and 16-18 December (formal).

Though no intergovernmental organization seems to have so far sought observership in the DSU talks (the secretariat and the chair confirmed this in response to a specific question), the Chairman seems to have sounded the membership on providing observership for the IMF and the World Bank!

Several delegations, however, said that the issue of observers from intergovernmental bodies should be dealt with at the Trade Negotiations Committee (TNC) rather than in individual bodies.

Prioritization of proposals

In general comments on the work, a number of delegations underscored the limited time-frame and said there was a need to prioritize the proposals, and negotiations should  be confined to priority areas where consensus seemed likely, leaving other questions raised on broader issues to be dealt with by the next Ministerial Conference and negotiations, if warranted, being made part of the single undertaking.

Chile mooted this suggestion, saying the prioritized issues could be “sequencing” (a compliance panel ruling, under Art. 21.5 of the DSU, on the conformity of a Member’s actions with the recommendations of an earlier panel before the complaining Member seeks authority for trade retaliation for non-compliance under Art. 22.6) and the status of Appellate Body members (part-time or full-time). Other issues could be part of a broader review and made a part of the single undertaking.

Venezuela noted that the WTO Committee on Trade and Development had asked to be kept informed by the DSB if there were any discussions on the special-and-differential-treatment issue.

Australia identified three specific areas needing improvements and clarifications: rights of non-parties to a dispute, particularly in relation to compensation arrangements; DSB surveillance of retaliation authorized under Art. 22; and anomalies in dispute settlement procedures across WTO agreements, particularly time-frames for DSU actions on safeguards under various agreements - safeguards under GATT 1994 and the Safeguards Agreement, safeguards under the Agreement on Textiles and Clothing and agricultural safeguards.

On the question of compensation and rights of non-parties, Australia noted that compensation was envisaged in the DSU only as a temporary measure when implementation of a ruling is not achieved within a reasonable period of time. Compensation arrangements are to be consistent with the covered agreements, and are thus to be on a most-favoured-nation (MFN) basis. Australia was concerned over recent trends towards bilateral compensation deals agreed without a timetable for implementation and not offered to other Members whose rights and obligations were nullified and impaired.

Though Australia did not cite any specific case, in the DSB itself, it has voiced complaints and concerns over the US-EC deal on compensation over US copyright breaches. There are also reports that the US is trying to strike a deal with the EC over the export subsidies involved in the US Foreign Sales Corporation law.

If each Member was forced to initiate its own complaint procedure to acquire compensation rights when it had been proved that another Member was in breach of obligations, it would place an enormous pressure on the dispute settlement system. There ought to be a clarification of the DSU that all compensation arrangements must be available to all Members on a non-discriminatory basis and that arbitration may be used to determine the appropriate level of nullification or impairment.

There should also be a DSB surveillance of retaliation authorized (under Art. 22.8) so that procedures could be introduced for lifting any retaliation once compliance had been completed, or for subsequent arbitration on the level of retaliation in the event of partial compliance. The actual level of retaliation imposed should be consistent with the authorized level. There could be procedures for DSB approval of the actual list of goods and services to be hit under retaliation.

In terms of dispute settlement procedures, Australia identified anomalies: some subsidies, under the Subsidies Agreement, have accelerated procedures, but there are no special procedures for trade remedies under safeguards, both standard and on textiles. This was an anomaly given that safeguards themselves are time-bound.

[This anomaly is facing those seeking to challenge the latest US steel safeguards, given that the measures ordered by President Bush are for 3 years, while a WTO dispute settlement (panel-Appellate Body) process, including reasonable period of time for implementation of the ruling if the safeguards are found to be illegal, would easily stretch beyond the 3 years, trade diplomats and observers note.]

The DSU review on this would need to be coordinated with the negotiations on WTO rules, said Australia. In the interim, Members could agree on a shorter time-frame for consultations, expedite establishment of a panel (at the time of first request) and agree on expedited working procedures.

Clarifying the rules to enable panels to be established at the first request itself and to require complainants to lodge their first submission at the time of the request, would save time. It would not disadvantage complainants since they would get all the time needed to prepare their submission before seeking a panel. However, the time-saving should not be at the expense of due process.

As for sequencing, as it is Members have been responding to the problem through bilateral accords on a case-by-case basis. These could be consolidated, and a practice established for parties to seek consultations before seeking a compliance-panel process. There should also be an appeal against compliance-panel rulings.

While in a majority of cases the approach of panels and the Appellate Body has been consistent with the DSU, there have been cases where questions have arisen of panels exceeding their mandate or failing to deal adequately with matters raised by disputants. There was also a need to reaffirm “the institutional role” of the WTO membership on interpretations and amendments of the covered agreements, and following the procedures of Articles IX and X of the WTO Agreement.

Sufficient consideration should be given to these important systemic matters during the DSU review, Australia said. It also suggested a consolidation of agreed practices to be adopted by a DSB decision, rather than following a route of negotiating formal amendments that may need ratifications and might result in time delays.

Japan noted that it had co-sponsored with other delegations a set of proposals (in the run-up to and after the 1999 Seattle Ministerial Conference) and these should get the same status as formal proposals. Japan and the other co-sponsors would be formally tabling them.

Costa Rica underscored third-party rights in disputes. Pakistan referred to the Chilean proposal for a limited scope for the DSU review, with other issues being put on a separate track as part of a single undertaking. Ecuador agreed that the shorter time span limited the scope of the work.

The need to enhance surveillance in implementation and compliance, exploring ways of compensation as an alternative to implementation, reporting procedures on retaliation, as also a solution to the sequencing issue were issues raised by Canada. On the EC proposal for a standing body of panellists (with panels chosen by lottery), Canada said the costs of such a system should be considered. The number of Appellate Body members could be increased to enable three benches (of three each) to sit simultaneously (with seven members, only two benches could function).

Brazil called for a target date of 15 July for a complete set of proposals. It supported Chile on the need to prioritize and limit the scope of the review to areas where consensus seemed likely.

Other points raised by Members included the need for a solution to the “carousel” approach to retaliation (i.e., the US approach of notifying a wide range of products and services to be hit and changing them over time to apply pressure), the exploring of compensation and the provisions on special and differential treatment.

Malaysia was insistent on ensuring the dispute settlement process remains an intergovernmental process. The negotiations should not lead to a two-tier membership with different obligations. The idea of enabling panels and the Appellate Body to receive amicus curiae petitions from non-governmental organizations was “entirely unacceptable” to Malaysia. Unless everyone was willing to be pragmatic and realistic, there would be a repetition of the pre-Seattle DSU review, where there was no consensus. Understanding was needed on the sequencing issue, third-party rights and ways to ensure internal transparency.

Korea supported a tight time schedule, calling for issues not capable of being resolved by consensus to be referred to the 5th Ministerial Conference. Indonesia laid focus on compliance, exploring compensation rather than retaliation, third-party rights and special and differential treatment. New Zealand said everyone had to be realistic because of the limited time-frame.

The United States supported streamlining of procedures, ensuring transparency (internal and external), and maintaining the flexibility of the system.

Bulgaria insisted that the pre-Doha proposals should not have any privileged status - there had been no consensus on them and they should be removed from the table. In its view, the independence of panels and panellists was more important than sequencing.

EC proposals

In a comprehensive set of proposals, the EC suggested the following:

*  moving from the current system of ad hoc panels to the establishment of a permanent standing body of 15 to 24 permanent panellists, to be chosen for particular dispute panels by lottery.

*  the DSU should be clarified to provide for sequencing Art. 21.5 compliance panel proceedings before recourse to retaliation, with a requirement for prior consultations before going to the compliance panel.

*  exploring trade compensation as a more realistic alternative to retaliation.

*  exempting goods en route from the scope of retaliation.

*  addressing the carousel issue - a Member should not have the unilateral ability to modify the list of concessions or other obligations of which a DSB authorization for withdrawal (retaliation) has been given.

*  termination of suspension (retaliation) after a Member has implemented a ruling, with an expedited compliance procedure and/or specific arbitration on recalculation of compensation in cases where the compliance panel has found partial compliance.

*  transparency of panel and Appellate Body proceedings, in line with public access to dispute settlement mechanisms under international public law processes, with sufficient flexibility for parties to decide whether or not parts of the proceedings could be open to the public.

*  the Appellate Body has now interpreted the DSU as enabling amicus curiae submissions on a case-by-case basis. There should be a better framework on this.

*  there is also a need for clarifying or modifying the DSU on a number of technical matters, among others, for enabling a Member to formally withdraw a request for consultations, with consultations deemed withdrawn if there is no request for a panel within an 18-month time-frame.

Hong Kong China said it had an open mind on the EC proposal for permanent panellists but a number of details should be considered in such an event: the costs of such a system, reconsideration of full-time Appellate Body members, support to a permanent panel by a system of dedicated lawyers. Selection of panellists should be by a more transparent process. HKC supported the removal of the ambiguity on sequencing. Trade compensation could be a better method than retaliation. As in the Safeguards Agreement, the non-complying party should be compelled to offer compensation. HKC supported the EC on the carousel issue, which in its view was illegal under the DSU.

As for transparency, HKC said that the current dispute settlement process was already transparent in that panel and Appellate Body rulings were available online and amicus curiae  submissions were allowed under certain conditions. The membership was however widely divided on opening the proceedings to the public and there were fears that allowing NGO observers would politicize the process. It was also linked to the issue of whether some of the WTO Council and Committee meetings should be open to the public.

There was however much scope for enhancing internal transparency, for example, by allowing dispute proceedings to be open at all stages to third parties. HKC supported the EC idea of enabling the Appellate Body to remand cases back to the panel, as when the Appellate Body was faced with issues not addressed by the panel. (SUNS5081)                         

From TWE No. 276 (1-15 March 2002)