TWN Info Service on WTO and Trade Issues (Oct11/01)
24 October 2011
Third World Network

More than meets the eye in panel's preliminary ruling
Published in SUNS #7235 dated 10 October 2011

Geneva, 7 Oct (Chakravarthi Raghavan*) - A World Trade Organization (WTO) dispute panel hearing a dispute by the US against China's violation of GATS commitments on "electronic payment services for payment card transactions" has ruled against China over its request that the US complaint be thrown out on procedural grounds of US non-compliance with Dispute Settlement Understanding (DSU) requirements.

The panel not only handed down its ruling on the preliminary procedural points to the parties but, with the consent of both China and the US, has taken the unusual step of circulating its report (WT/DS413/4) to the WTO membership, by submitting it to the Dispute Settlement Body (DSB), even though there are no recommendations in the report that the DSB can be called upon to adopt.

The procedural ruling itself can be considered to be final, only when the final report is issued (expected sometime in 2012). That report will inevitably be taken to the Appellate Body.

The US complaint is about the restrictions imposed by China on "electronic payment services for payment card transactions", in violation of Chinese commitments under the GATS on financial services in terms of Art. XVI (market access), and Art. XVII (national treatment), and perhaps China's protocol of accession in 2001.

The parties to a dispute before a panel indulge routinely in manoeuvres, procedural and substantive.

It is now more or less routine that in disputes referred to a panel, the defendant raises preliminary procedural objections over the complaint, and seeks a ruling first. The panel in turn, more often than not, hears the parties (and third parties) on the preliminary issues raised, reserves its ruling, asks the parties and third parties to present their facts and arguments, and responses to each other and to questions from the panel on the substance of the dispute.

This practice is for understandable reasons: the preliminary ruling of the panel is appealable as a point of law; and if upturned by the Appellate Body, and the panel has not assessed the facts and sets them out, it would mean an unsettled dispute.

At the end, the panel hands down a ruling, dealing with the preliminary issues as well as its findings on the substance of the dispute, and recommendations for resolving the dispute - first in a preliminary form to the two parties, hears objections, if any, and takes note of them, and then hands down its report, first to the parties, and after a month or two, to the membership of the DSB.

In this dispute, not only has the panel handed down the preliminary ruling, but with the consent of the two parties, has submitted it to the DSB and circulated to the members, and making public, its rulings on the preliminary procedural issues.

The preliminary ruling involves legal issues of interpretation of the DSU, and hence, appealable. The dispute itself involves interpretations of GATS Art. XVI and XVII and the modes of supply (in this case, modes one and three), and may be of some consequence to other members.

The publication of the preliminary ruling comes at a time of rising trade tensions between the US and China, and the US Senate on the eve of voting sanctions against imports from China on grounds of alleged manipulation by China of its currency value vis-a-vis the dollar and other currencies.

It raises questions in the public mind whether the WTO, and the two parties, are engaging in more than the normal manipulations that parties routinely indulge in such disputes, and whether any short-term benefits may have some long-term negative impact on the DSU process and its claims to quasi-judiciality and public confidence.

(* Chakravarthi Raghavan, Editor Emeritus of the SUNS, contributed this comment.)