WTO as a Dispute Settlement Body - Assignment Example

Dispute settlement body - WTO Introduction The development of trade worldwide led to the need for the establishment of a mechanism, which would resolve the disputes appear in the particular sector. The World Trade Organization Dispute Settlement system is such a mechanism; the methods used by the above system have been aligned with the principles of WTO in order to guarantee the credibility of the procedure. One of the key characteristics of the above system is its partially dependency on political interests – referring to the power of certain states to impose their view mostly because of their position in the international community. In order for any potential doubt in regard to the System’s credibility to be eliminated, an appeal level has been introduced; in this way, the parties can ask for the re-examination of their cases, in case that objections exist on the decision taken at first level. The research on the System’s operational characteristics and scope has led to the assumption that the existing processes for the resolution of disputes are carefully planned and monitored; moreover, the introduction of the appeal level further increased their credibility and effectiveness; however, in the long term the independency of the System from political interests should be pursued; the political control on the specific Body cannot support its performance; on the contrary, it could cause negative impressions regarding the credibility of its decisions. 2. WTO dispute settlement system - overview The WTO dispute settlement system (alternatively mentioned from now on as the ‘System’) has a rather short history; its operation started about 15 years before and shortly it has become one of the most important features in the resolution of disputes related to the international trade. Initially, the System’s ability to replace the pre-existed similar mechanism, the GATT (General Agreement on Tariffs and Trade) was strongly doubted; however, through the years it was made clear that the new System was more appropriate for the specific role. In fact, since its introduction, the System has helped to resolve ‘more than 300 complaints – certain of these disputes were settled while others went to a full panel process’ (Yang et al., 2005, p.9). The above System is based on the Dispute Settlement Procedure of 1994; the previous schemes of this form, i.e. the 1947 Dispute Settlement Procedure – which was the first on the specific field, the 1979 and the 1989 Dispute Settlement Procedures were partially used in developing the DSP of 1994 – on which the current System is based (Hartigan, 2009, p.193). A board, the members of which are ambassadors of WTO countries worldwide, administers the WTO Dispute Settlement System (Hartigan et al., 2009, p.194); this board examines the claims of countries in regard to disputes on issues related to the international trade. The beginning of the Dispute Settlement Process requires that a country bring a claim before the System’s board asking for consultation in regard to a dispute this country has with another country – member of WTO (Hartigan et al., 2009, p.194). One of the most significant advantages of the System is the elimination of the blocking problem, which was common in the previous Dispute Resolution Process, i.e. the GATT system. Under the new System, ‘a complaining country is granting an automated right to have a panel created’ (Hartigan et al., 2009, p.95); in this way, it is not possible for a complaint to be blocked at this stage, i.e. in its beginning. Another important advantage of the new System is the right given to the parties to appeal a panel report; this right is recognized only to the parties of the dispute; however, third parties can alternatively ‘give written submissions and to be given the opportunity to be heard by the Appellate Body’ (article 17 par.4, WTO Dispute Resolution Understanding, in Yang et al., 2005, p.193). Moreover, the terms of a hearing of a case before the panels and before the Appellate Body further guarantee the credibility of the procedure. More specifically, during the examination of a case other by the panels or the Appellate Body, the international law is used – along with the rules of WTO (as included in agreements developed by WTO) – in order to reach a solution that would be fairer for the parties (Pauwelyn, 2003, p.470); in any case, the legal provisions on which the panel reports and the reports of the Appellate Body are based cannot be only those included in the WTO agreements (Pauwelyn, 2003, p.470); such a practice would lead to the increase of doubts in regard to the credibility of the DSB processes. On the other hand, the adopted reports of the Appellate Body should be taken into consideration by the panels on cases with similar characteristics; the view of the members of the Appellate Body are valuable – having the role of precedent on a series of cases. If the panels do not align their reports with the Appellate Body’s adopted reports then a problem of inconsistency would appear in DSB (Horn et al., 2010, p.123). The WTO dispute settlement system is characterized by its increased independency towards other organizations or countries within the international community; of course, its dependency on its members’ interests cannot be avoided; however, in general, the new System has established a series of processes that guarantee the independency of the System from other organizations of similar forms. An indicative example of this trend is provided by Bown (2009); in accordance with the above researcher, since the introduction of the new system, the European Union lose its right to intervene and block panel reports – or even claims that were submitted in DSB in order for a fair solution to be given. The new system guarantees to the WTO members that the other countries – or Unions of states, like the European Union – will respect the decisions of WTO; in fact, if a country in the international community refuses to accept a decision of WTO, then the country (WTO member) which suffers the damage from this refusal can ask ‘WTO for authorization to retaliate as compensation’ (Bown, 2009, p.56). 3. Why was an appeal level introduced in the WTO dispute settlement system? The introduction of an appeal level in the WTO dispute settlement system has been decided because of the following reasons: a) certain cases brought before the WTO have been extremely complex; there would be a high possibility that certain of their aspects were not adequately explored; the potential repeat of the process has been considered as necessary in order to cover any gaps left at the first level, b) in certain cases, there is no ability of gathering all necessary material (referring to the material used for supporting a party’s claims) up to the discussion of the case at its first level; the existence of another level ensures that all material required will be available when a final decision is going to be developed, c) the conditions of a case may be differentiated – referring especially to the period after the completion of the process at the first level; the existence of the second level (appeal level) offers to the parties the ability to refer to the specific events and seek for an appropriate alteration of the decision taken in the first place, d) as mentioned above, the WTO Dispute Settlement System has been influenced by political interests; although it would be too difficult for a total independency of the System to be achieved – referring to interests of various forms, still there is a need for ensuring the credibility of its decisions; through the appeal level, parties are given the chance for their case to be heard again; any doubts regarding the credibility of the relevant decision are eliminated, e) in any such process, there is always the possibility for failures regarding the evaluation of the evidence ; with the introduction of the appeal level it is ensured that even if a procedural mistake took place at the first level, this mistake can be corrected at the appeal level. The importance of the appeal level is proved by the fact that when the specific system was established in practice, the percentage of the cases that were brought before the Appellate Body reached the 100% - referring to the years 1996 and 1997 (Georgiev et al., 2006, p.394). In a relevant study, it is noted that for the period from 1996 up to 2004, 68% of the panel decisions have been brought before the Appellate Body (Georgiev et al., 2006, p.395); this is quite high percentage if taking into consideration the complexity of the process and the time required for its completion; it seems that for most parties the careful examination of their evidence is more important than the limitation of time required for the completion of the procedure; the fact that the economic interests related to the specific cases are extremely high, can explain this trend. 4. When does a panel or Appellate Body report become legally binding? The terms under which a panel report becomes legally binding are described in the article 16 of the WTO Dispute Settlement Understanding 1994; in accordance with this article a panel report is made legally binding after its adoption by the DSB; the requirements for the adoption are the following: a) it is necessary that the report has been circulated among the Members (in fact, the adoption of the report cannot take place for 20 days after its circulation among the members); at this point (and after the circulation of the report), the parties have the right to intervene and state their objections in regard to the circulation of the report – this action can be taken only if there are at least 10 days left up to the discussion of the report before the DSB, b) after its circulation among the Members, the report can be adopted by the DSB but it is required that the adoption is completed with – the maximum – of 60 days after the circulation of the report; in other words, there is a minimum period of 20 days and a maximum period of 60 days for the adoption of the report; of course, the report is first considered for adoption (after the 20 days of its circulation) and then the adoption is completed (within 60 days). During this period, from the discussion on adoption up to the adoption through a meeting of DSB, one of the parties can notifies his willingness to appeal the decision on adoption. In this case, the process of the adoption is not taken place up to the completion of the appeal process. Another reason that a panel report is not adopted by the DSB may be the refusal of the DSB to adopt the panel report. Once adopted in a meeting of the DSB, the panel report becomes legally binding (article 16, WTO Dispute Resolution Understanding, in Yang et al., 2005, p.189). Under these terms, the criterion for a panel or an Appellate report to become legally binding is their adoption by the DSB – as this procedure is analytically explained in the articles 16 and 17 of the WTO Dispute Resolution Understanding 1994 – on which the new System is based. At this point, it should be noted that the report of the Appellate Body is not binding for the DSB, in terms that the latter is not obliged to accept the Appellate Body’s report; in fact, it can be decided by DSB in consensus that the report of the Appellate Body will not be accepted. If the above report is accepted (adopted) by the DSB, then the report of the Appellate Body becomes legally binding (article 17, par. 14, WTO Dispute Resolution Understanding, in Yang et al., 2005, p.195). The term ‘legally binding’ means that the panel report or the Appellate Body report are enforceable; the implementation of the adopted reports in practice is monitored by DSB under the terms described in the article 21 of the Dispute Resolution Understanding (Waincymer, 2002, p.716). 5. Can a WTO Member exercise a veto against a panel or Appellate Body report? In accordance with the existing Dispute Settlement System, ‘disputing parties lose their veto power over the panel report’ (Hartigan, 2009, p.99); however, they keep their right to ask for an appeal. The right of disputing parties to ask for Appeal has been included in the Uruguay Round Agreements and is clearly mentioned in ‘the article 17(1) of the WTO Dispute Resolution Understanding which notes that the Appellate Body ‘shall hear appeals from panel cases’’ (Georgiev et al., 2006, p.394). In the above rule it is also clearly noted that the relevant right belongs exclusively to the parties and that only the legal issues examined in the first place can be examined by the Appellate Body – there is no power of the Appellate body to examine additional legal issues apart to those which were set during the examination of the case at the previous level - the control panel. It should be noted that in the past the parties of a relevant dispute were given the power to exercise a veto against any point of the process; the above practice led to severe delays in the completion of the specific process; for this reason, this practice was abandoned (Waincymer, 2002, p.74). On the other hand, WTO Members have the right to exercise a veto against an Appellate Body’s report – even if this report has been adopted by the DSB (article 17 par.14, WTO Dispute Resolution Understanding, in Yang et al., 2005, p.195). 6. Why is the WTO dispute settlement system sometimes called the jewel in the crown? The current WTO dispute settlement system is based on GATT, a quite successful mechanism for the resolution of disputes in the context of international trade; however, GATT had a series of controversies; through the new system, the negative elements of GATT – referring to this system’s procedural failures – have been almost eliminated; it is for this reason that the WTO dispute settlement system is characterized as ‘the jewel in the crown’ (Yang et al., 2005, p.6). 7. Is more or less political control over the dispute settlement system needed? As already noted above, the members of WTO are the ambassadors of WTO countries; in this way, a relationship between the WTO and the political interests of specific countries – the members of the organization – cannot be avoided. Moreover, it has been also noted that DSB has a critical role in the development of decisions on the cases brought before the organization’s board; the power of the members of DSB is absolute – even if the Appellate Body has developed a specific decision, the members of DSB can refuse to accept it and they can decide to adopt the panel report instead (Mitchell, 2005, p.32-33). In other words, the decision on a case brought before the DSB is depended entirely on the perceptions of the members of the Body who can choose to adopt a specific approach even if the evidence brought by one of the parties proves the credibility of the claims submitted to the DSB. In this way, the increased role of political control on the DSB’s procedures is made clear. Measures should be taken so that the political control on the Body’s decisions to be decreased – a target difficult to be achieved especially since the members of the DSB are ambassadors of the WTO countries. The promotion of specific political interests through the WTO and the DSB is unavoidable; a reform of the Body’s structure would be necessary in order for the specific organization to become independent from political and economic interests. 8. Conclusion The establishment of the WTO dispute settlement system has helped towards the improvement of the existing methods of dispute resolution in the context of international trade – referring mostly to GATT which is one of the most widely used mechanisms in the specific field. Most important, the new System has offered independency in regard to the relevant decisions of other organizations and states; more specifically, the members of WTO can ask from the countries that are non-members to respect the decisions of the organization; otherwise, the countries – WTO member can exercise their right ‘to retaliate as compensation’ (Bown, 2009, p.56). On the other hand, the new System has been remained depended on the political interests of its countries-members; the reform of the System would be the only way for its survival – referring especially to the long term. Currently, the performance of the System shows signs of continuous improvement – being more effective from the previous mechanism of this form, the GATT; the fact that the new System is characterized as ‘jewel in the crown’ (Yang et al., 2005, p.6) indicates its power to intervene in crucial – in financial and political terms – disputes and enforce its decisions – even indirectly – within the international community. References Andersen, H. (2009) EU dumping determinations and WTO law. Kluwer Law International Bown, C. (2009) Self-enforcing trade: developing countries and WTO dispute settlement. Brookings Institution Press Georgiev, D., van der Borght, K. (2006) Reform and development of the WTO dispute settlement system. Cameron May Hartigan, J. 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Key issues in WTO dispute settlement: the first ten years. Cambridge University Press, 2005 Read More