Managing disputes before the World Trade Organisation

Jul 27, 2020

By: Thomas Williams, Partner
Mohammad Ahmad, Associate

The legitimacy and success of the World Trade Organisation (“WTO”) is owed in significant part to its effective dispute resolution system. This article explores the structure of that system and how it works in practice.

With the exception of the Dispute Settlement Understanding (“DSU”), all WTO agreements set out the substantive rights of WTO members as well as the remedies for breach of the corresponding obligations. The DSU, on the other hand, prescribes the various stages of the multi-tiered dispute resolution process, and precludes the members concerned from availing remedies outside the WTO’s institutional framework.

The task of administering the rules and procedures of the DSU has been delegated to the Dispute Settlement Body (“DSB”) – the WTO’s enforcement arm. The dispute resolution process has two mandatory stages: (i) consultations; and (ii) adjudication of the dispute by an ad hoc panel and, in appeal, by the appellate body.

First, the complaining and responding members must enter into consultations in good faith. The aim of the consultation process is to facilitate an amicable settlement. Consultations are therefore held on a without prejudice basis.

If consultations fail, the dispute is brought before an ad hoc body – called a panel – at the request of the complaining member. The panel assesses the dispute in light of the relevant WTO agreement, and reports its findings and conclusions to the DSB. The panel’s report is adopted by the DSB unless it is vetoed by all WTO members or appealed by the members who are parties to the dispute.

A permanent establishment – called the appellate body – hears the appeal against a panel’s report. The appeal is limited to points of law, and the appellate body can uphold, modify or reverse the panel’s findings and conclusions. The DSB has to adopt the appellate body’s report unless all WTO members veto it.

The parties to the dispute are entitled to invoke the procedures of “good offices” (i.e., logistical and organisational support from the WTO), conciliation and mediation on a voluntary basis at any time. This remedy is discretionary, and may be availed by the complaining member, if the responding member concurs, before or in parallel to the consultation and adjudication stages. From a practical perspective, it makes more sense that recourse is had to the consensual modes of dispute resolution during the consultation process.

In the alternative, the parties may opt out of the DSU’s standard stages of dispute resolution outlined above, if they mutually agree to refer the dispute to arbitration. These arbitration proceedings are considered to be held under the auspices of the DSU, although the parties are free to agree on the procedures to be followed.

Where the responding member fails to implement the DSB’s ruling – based on the report of the panel or the appellate body – or the award handed down in arbitration, it must enter into negotiations with the complaining member to agree compensation. If the parties fail to reach agreement, the complaining member is entitled to request the DSB to authorise retaliatory measures against the responding member. Such measures generally take the form of suspension of the responding member’s concessions under the relevant WTO agreements.

If the responding member is aggrieved by the retaliatory measures, it may bring arbitration proceedings to challenge them. In such circumstances, the DSB grants retaliatory measures in accordance with the arbitral award. These measures continue in force until such time that the responding member implements the DSB’s ruling or reaches a settlement with the complaining member.

By providing a secure and predictable regime for the settlement of multilateral trade disputes, the DSU has played, and continues to play, a key role in the WTO’s institutional framework.

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