The Gaps of the Dispute Settlement Process of WTO - Research Paper Example

The Gaps of the Dispute Settlement Process of WTO Table of Contents Introduction 3 WTO Dispute Settlement Proceedings-The Process 4 Whether To Bring The Case 7 Consultation up to 60 Days 9 Panels 10 Panelists 11 Standing and Assessments of Damage, Economic Injury or Harm 12 Burden of Proof 13 Lacuna In The WTO Law And Lack Of Legal Guidance By WTO Member 14 The Remedy Gap: Institutional Design, Retaliation And Trade Law Enforcement 18 Methods On Improving The Gaps 21 Enhancing Third Party Rights 21 Sequencing 21 Remand Authority 22 Conclusion 23 Works Cited 25 Introduction World Trade Organization (WTO) is considered as the one of the global organizations that deals with the set of laws and the regulations of business between the countries1. Its main focus is upon the WTO agreements, negotiated and signed by the trading nations of the world and approved in their parliaments. The main objective is to assist the producers of goods and services, importers and exporters for the purpose of practicing their businesses effectively. It is to be remembered that the WTO is operated by its affiliate governments. The chief decisions are generally taken by the membership as a whole, either by ministers or by their diplomats. The WTO agreements include intellectual property, goods and services2. They state the principles of liberalizations along with the legalized exceptions. They comprise of obligations of individual countries to lessen custom tariffs along with other trade obstacles and to open service markets3. The methods of settling the conflicts are also prepared by them. The agreements tend not to be static in nature, however, they are renegotiated according to the requirements and thus newer agreements can be added to the package4. It is quite significant for the government to make their trade policies quite transparent by informing the WTO regarding the laws in force along with the measures adopted as per the WTO agreements. Numerous WTO councils’ along with the committees’ main function is to check if the requirements are being followed and the WTO agreements are being executed correctly5. In order to put into effect the rules and to ensure that the trade is conducted in a smooth way, the WTO’s method for solving the trade conflicts under the Dispute Settlement Understanding is crucial6. The countries bring into notice the disputes if they feel that their rights under the agreement are being disobeyed. Judgments by specially appointed independent experts are generally based upon interpretations of the agreements along with involvement of the individuals. WTO Dispute Settlement Proceedings-The Process The members of the WTO have approved to the fact that if they feel that their fellow-members are not obeying to the trade policy then in order to settle the disputes they will make use of the bilateral system rather than taking steps unilaterally7. This implies that it is significant for them to abide by the decided methods and thus value the judgements. The WTO’s conflict settlement conformity is also referred to as the ‘Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU)’. It is the main task of the DSU to offer a primary legal medium of settling trade conflicts at the WTO. Therefore, in this sense it can be stated that settlement of the dispute is the main task of the Dispute Settlement Body8. According to the circumstances, DSU has the full rights to create ‘panels’ of experts and to accept or to reject the findings of the panel or the results of the appeal. It controls the execution of the rulings along with the suggestions, and has the authority to retaliate when a country is not following the rules and the regulations9. A dispute tends to occur when a country takes up a trade strategy measure or takes certain actions which are considered as violation of the WTO agreements by other countries. A dispute may also occur if the members perceive that because of the other country’s action, they are deprived of WTO benefits to which they are entitled10. It is quite common for the third group of countries to assert that they have a curiosity in the case and, when that is the case, they take the pleasure of certain rights as Third Parties11. A method of settling the conflict subsisted under the General Agreement on Tariffs and Trade (GATT) which existed before the WTO. However, it was noted that it did not have fixed timetables and rulings were quite easier for them to block and many instances dragged on for a long time without any conclusion. The DSU brought into notice a more structured procedure with precisely defined stages in the procedure and time limits for these stages12. The agreement focuses upon the fact that for WTO to function successfully, it is quite crucial to have timely settlement. The agreement further tries to concentrate upon setting out adequate details regarding the total time required and the methods to be followed in order to solve the conflicts. A case operating in full course must not take in excess of one year to a first ruling. In addition to these, if there is an appeal then it must not take more than 15 months. If the case is found to be quite urgent then in such circumstances, the allowed time becomes shorter. Under the DSU, the country which is being defeated cannot itself block the acceptance of the ruling13. It can be observed that under the preceding GATT method, rulings could only be taken into account by agreement which implies that a single objection was enough to block the ruling. However, under the DSU the situation is just the opposite where the rulings tend to be adopted automatically, until and unless there is agreement to reject a ruling. If any country wants to block a ruling then in such circumstances, it needs to inform all other member countries of the WTO so that it can share their views. In most of the cases, it has been noted that much of the dispute settlement method follows a court or tribunal14. It is preferable for the countries to resolve the dispute themselves without consulting the court. Prior to making a request for the creation of the dispute settlement panel by the country, it is significant for them to consult the other side for at least a period of 60 days once it first appeals for a formal discussion. It can be stated that the formal discussion invoked under the precise provisions of the DSU can be considered as the first stage of the procedure. Even if the case has moved on to different stages, mediation, consultation as well as negotiation generally remain as an option for solving the conflicts15. Whether To Bring The Case At times, the first decision of the normal litigation is considered as the final stage of the case preparation of the World Trade Organization. The trade disputes can be resolved with the help of other institutional methods. A few of the disputes can as well be resolved with the help of the mechanisms of the WTO itself16. It is expected from the parties to resolve the matter via bilateral discussions rather than making use of the WTO mechanisms initially. The point to be taken into consideration is that most of the non-DSU WTO mechanism used for the purpose of solving the dispute is found to be quite easier to use in comparison to the DSU process. One of the problem solving tools of the WTO which tends to be time consuming when compared with the DSU process is the option of bargaining newer rules of WTO, regulations or tariff concessions17. However, looking for negotiations in the context of new round of bilateral trade negotiation may consume significant amount of time. However, the negotiations related to newer rules and regulations might be the only ways that can be used in order to resolve the problems. The approaches that are used in the process of the resolving the disputes along with consultations and panels, involve certain alternatives in the process of negotiation. As a result, cautious preparations along with examination of the facts and investigations of the strengths of the legal arguments will be required to prepare18. It is because of this reason it is quite significant for the party to take into consideration as much research and analysis as possible so that it can make a brief of its panel prior to making a final decision regarding the fact whether or not to request a panel19. There are logical reasons associated with initiating a brief preparation of the work in the procedure of solving a dispute. As a consequence of the Uruguay Round, the panel’s time frame tends to be quite tight thereby preventing the party from doing any task in a short period of time, especially with the limited resources that is available with the government20. Nonetheless, restrained resources of the government would also imply that it is improbable that a full-scaled brief, which can continue to several pages or more, will be prepared completely prior to making a decision for requesting a panel21. While deciding whether to request a panel, it is quite crucial for the parties to take into consideration the fact that the process of panel enhances the profile of the conflicts and thus creates heightened media as well as public attention. It is because of such development the dispute settlement process with the help of negotiation becomes quite difficult. The WTO negotiators are quite certain of the fact that the formal conflict settlement via litigation may not all the time be successful at achieving the best result22. Consultation up to 60 Days Prior to taking any action against the disputes, it is vital for the countries having disputes to check if they can fix the differences themselves. If that does not seem to be fruitful, assistance from the Director-General of the WTO can be taken to mediate into the matter or help in certain other way23. It is via consultation that offers the state with an opportunity to evaluate the merits of the case of any particular country and to elucidate the facts. In order to assist in the process, the country that tends to complain may sometime submit written questions which need to be answered by the defeating country at the times of consultation. More than one round of consultations may be held by the countries if they feel that the process is quite enlightening and if they feel that the consultation process may assist them in reaching a settlement24. It is to be remembered that consultations may not always require a request made for a panel. As at times the danger of effect of action is more powerful in comparison to the action itself, consultation may offer information and influence for negotiation that can help in the successful resolution to the conflicts25. Occasionally, the argumentative party may learn from the procedure of consultation regarding the weaknesses in its arguments or destructive facts; either of the situations might lead to a decision pointing to the fact not to press the matter26. Panels The point to be taken into consideration is that if consultation is not capable of resolving the conflicts then in such circumstances the country that complains can ask for a panel to be chosen to resolve the matter27. Formally, the task of the panel is to assist the DSB in the creation of rulings as well as suggestions. However, since the panel’s report can only be discarded by agreement in the DSB, its conclusions are quite complex to upend. The findings of the panel need to be based upon the consensus cited. It is quite significant for the panel to prepare final report within six months and thus provide to the parties having conflicts. If there is necessity, along with those associated with perishable goods, it becomes compulsory for the panel to submit the final report within a period of three months28. In the method of dispute settlement, the main task of the WTO Secretariat is to help the panels. WTO members can take assistance from the Secretariat to prepare dispute settlement questions. The Secretariat tends to offer answer to technical questions regarding the procedure and the WTO agreements. It is because of the fact that the developing country members may want special legal advice, after making a request to the Secretariat, he may arrange for a qualified legal expert among its staff to operate with the country. Such assignments are prepared in a way thereby ensuring Secretariat’s prolonged neutrality29. Panelists Selection of the panelists in the WTO is similar to the selection of the jury and judge. In order to assist the creation of the panel, the DSU mandates the Secretariat of the WTO to have a suggestive list of both governmental as well as non-governmental people who can qualify themselves as panelists. Additionally, according to the rules of the DSU, if within 20 days there is a no consensus upon panelists after the creation of the panel then in such circumstances, the Director-General of the WTO according to the request made by either party can determine the composition of the panel30. Therefore, the party cannot block the proceeding indefinitely by rejecting the panelists. It is because of the fact that panel can alter in terms of composition, expertise and outlook, the potential panelists are examined in a close way and parties have all the rights to refuse the potential panelists in advance. Panelist may have decided prior cases in a way that may impact the existing one, they may possess quite less expertise in the related area, they may come from the countries which is known not to be impartial on the subject, or they may as well possess personality that are not inclined to neutrality. Given the role played by the WTO Secretariat staff, if the matter is something upon which the Secretariat can offer certain opinion, a party may consider that it wants a panel comprising of independent minders individuals. Notwithstanding WTO’s status as a global institution, it is rather a small community and reputations are always available as in a local court. The presenters are chosen with diligence by the parties because panel proceedings engage small numbers of people who can be comparatively familiar and personalities counts a lot31. Standing and Assessments of Damage, Economic Injury or Harm The requirement to demonstrate financial injury or harm to effective export or trade interests alter according to the circumstances in the proceeding of dispute settlement. The right to begin a complaint under the DSU is not rigorous32. The DSU offers WTO members with broad prudence in deciding if they have sufficient legal interests to bring the case. Article 3.3 related to DSU indicates that if a member regard that gains ensuing to it openly or indirectly under the WTO Agreement are being impaired by the measures of the other Members, it can make use of the DSU method. According to Article 3.7, it depends upon the member to identify if in its judgment carrying a case would be beneficial. However, under Article 4.11 in the DSU, a member who wants to join in numerous consultations needs to have a considerable interest in the matter prior to transforming into a third party in a panel proceeding. Furthermore, the ability of a complaining party to demonstrate economic damage is significant in discussing compensation or taking disciplinary measures of the country is not capable of withdrawing a WTO contradictory measure after a hostile panel ruling. The main task of Article 22.3 wants the complaining party to consider the trade involved, the significance of such trade to it and the broader economic elements or consequences33. Article 22.4 of the DSU requires that the degree of retaliation authorized by the DSB needs to be similar to the degree of WTO advantages refused by the complaining party. In the WTO, case retaliation takes the form of deferral of trade dispensation that the complaining party has offered in the past34. The role of the experts in creating economic harm or injury is vital. When the cases involve the subsidies, safeguarding measures or dumping the issues tends to be significant. Burden of Proof While preparing WTO proceedings, a party needs to identify the other parties having the burden of proof. Once the complaining party establishes that a member is disobeying a WTO Agreement, Article 8 of the DSU offers that the breach is presumed to have damaged the complaining party and have dispossessed of advantages to which it was entitled. In terms of WTO the infringement has invalidated and damaged WTO advantages. In such context, the burden of proof falls on the protecting party to disprove that presumption35. Lacuna In The WTO Law And Lack Of Legal Guidance By WTO Member The point to be considered is that there are over 340 invocations related to WTO’s DSU given in the year 1995, over 200 WTO dispute settlement results, in excess of 100 panel reports, 20 arbitration awards, 70 appellate reports and over 15 compliance panel reports and other related dispute settlement findings have stated widespread incongruity over the understanding of the WTO rules as well as deficiencies of the WTO dispute settlement related scheme37. 1. In a few of the cases, WTO conflict settlement bodies felt coerced to fill in the gaps that subsist in the WTO rules, such as in relation to burden of proof and due process of law, by choosing the general rules of international laws. Such gaps like the sequencing difficulty resulting from certain contradictions between Article 21 and Article 23 of the DSU have been agreed upon within the WTO negotiations which took place in the year 1997 for the purpose of reviewing and enhancing WTO dispute settlement process. Although the members of the WTO have submitted in excess of sixty proposals for supplementary reforms of the WTO dispute settlement system, it becomes apparent that the members of the WTO will keep creating the DSU only very carefully without racial transformations. 2. Other lacuna has been agreed with in the surmounting number of regional trade agreements and regional conflict resolution methods among the WTO members. It has as well been dealt in the 1999 Agreement among the associates of the WTO developing the ‘Advisory Center’ on WTO law for the purpose of facilitating less-developed countries in making use of the WTO disagreements related settlement process more powerfully. The WTO Dispute Settlement Body has always decided to assume a panel or Appellate Body report, despite great criticism by the members of the WTO of few dispute settlement findings. 3. The other amazing fact is that the WTO Ministerial Conference or the General Council approved authoritative discussion of the WTO rules, for illustration to correct little controversial legal understandings, such as on the admissibility of amicus curiae summary by the WTO dispute settlement body36. 4. It has also been apparent so far that the members of the WTO will reach into an agreement in intervening legal understandings that has been created by the WTO dispute settlement bodies, for instance, on the zeroing methods for the assessment of dumping margins, as a significant part of future Doha Round agreements. After the entry into the WTO Agreement in the year 1995, the members of the WTO have agreed a more all-compassing explanation and progressive growth of the WTO rules as well as regulations via WTO jurisprudence without much help by the WTO political bodies on the lessons to be generated from this jurisprudence and from its recurrent disapproval by individual WTO members. 5. The biggest barriers that may occur during the dispute settlement process are related to high costs and requirement of professional legal experts. Developing countries do not have adequate resources. In such cases, the consultation process for them seems to be more realistic, because it is a low-cost option. The Least Developed Countries (LDCs) are in an unfavorable position when they try to attain a bargaining regularity with certain influential members, since they have a few in-house experts and are less sophisticated buyers of legal advice. Most of the LDCs are not capable of maintaining a stable Geneva-based WTO delegation and have not participated in prior WTO disputes because of their lesser role in the WTO trade, comparatively undiversified export groups along with smaller market capacity. It has been noted that the LDCs tend to participate less frequently in the WTO disputes that they must because of several reasons. Therefore, it can be suggested that it is quite vital for the WTO to put more emphasis upon assisting LDCs in general and at consultation stage in particular. 6. Some of the members of the developing country delegations to the WTO state that other than any component, the WTO dispute settlement procedure offers more attention towards money and whoever has the highest wins. It might as well be the case that like that of the US litigation, the richer party in the WTO dispute might bury their adversary in the factual evidence that has been collected by it. 7. The capability to introduce or defend a case is regarding the ability to locate the facts. This is how the case tends to be generated. The entire system of the WTO is dependent upon this premise. Along with the issues related to money, the problems of law as well as politics converge on the context of the developing countries, strengthening the complexities that they face when accessing to the dispute settlement process of WTO. 8. It has been an agreed fact that the developing countries do not offer a formal petition process through which private industry can attract government to start a complaint on its behalf. 9. Without taking into consideration the cost of fact-findings specifically, the common cost related to court case in front of the WTO is already too high, and more so if the person is hired from the private law firms. The charges made by the private firms can range from US$250 to US$1000 per hour in terms of fees, leading to total fees which are between US$100000 to more than US$1000000 37 It can be analyzed that WTO dispute settlement process must not only pay attention towards the money and must try to offer a proper solution towards the settlement of the disputes. If the WTO pays attention only towards money then the decision made may be biased and proper justice to the complainant may not be received. Furthermore, the involvement of law and politics makes the judgment worse. Therefore, it is quite significant for the WTO to pay due attention upon settling the matter as soon as possible so that the developing countries can as well have access to the WTO dispute settlement process. It is also important for the developing countries to offer a formal petition process through which private industry can attract government to start a complaint on its behalf. The general cost related to litigation also needs to be lowered by the private firms so that it becomes affordable for the developing countries. If the cost tends to be higher, these countries will be discouraged to make use of the WTO dispute settlement process and will not be capable of accessing it. The reason behind this fact is that the earning of the people of the developing countries is not high and therefore it becomes difficult for the members to bear the cost related to litigations. They search for other options which may jeopardize the entire situation37. The contribution of developing country members in the proceedings of the conflict settlement will enhance significantly their comprehension of how the dispute mechanism tends to operate. It will assist in improving their acquaintance with the internal workings of the instrument so that it can be well prepared in order to prevent their interests38. The Remedy Gap: Institutional Design, Retaliation And Trade Law Enforcement One of the biggest creations of the World Trade Organization Dispute Settlement Understanding has been the rules as well as the regulations related to sanctions during the violation of the trade law. The DSU mandates the government to obtain polygonal consent prior to suspending trade allowances and restraining the degree of retaliation to prospective harms. Along with it, the DSU allows government to inflict only conditional sanctions approval for violations that persist after the process of dispute resolution is complete. This enforcement regime develops a remedy gap. Government cannot react even if there are obvious violations, until the end of the dispute resolution method. It is to be pointed out that this gap might not be significant if the dispute resolution method was small. Actually, the WTO dispute resolution procedure tends to be time consuming. Furthermore, the remedy gap also tends to have counterproductive impacts upon settlement negotiations. The system offers respondent states certain motives to settle prior to the end of dispute resolution until and unless the states are reimbursed from doing so. Ultimately, this system may assist the aggravated complaining states to undermine the DSU regime by acting outside of the legal structure39. There are few options available in order to close the remedy gap. The best option available is to make the damages retrospective as well as unrestricted. When the WTO system identifies the fact that a respondent state is not obeying the trade rules then in such circumstances the complaining government may be able to react against the respondent state for the harm that has been acquired even in cases the respondents have disconnected the offending policy. Such a remedy regime would closely estimate a contract remedy regime. However, there are two main problems associated with these solutions. At the onset, WTO member states are attached with the idea that retaliation needs to be provisional on the respondent state refusing to change the fruitfully challenged policy. An unconditional as well as retrospective remedy would allow retaliation even in cases when the WTO rulings are fulfilled by the respondent states. Secondly, unconditional as well as retrospective remedy regime can be applicable only after the litigation has been over. With the profit-maximizing firms this threat is considered to be sufficient in order to settle the disputes, however, it tends to be less effectual for the government. It is noted that the government usually has short time horizon and thus favor to push the costs related to the trade infringement onto future governments40. In case the WTO adjudication takes more than four years then the present government may consider that the penalty will be tolerated by the successor government. In a nutshell, cost is generally internalized and estimated in a different way in comparison to the firms, and therefore the danger of unconditional as well as retrospective harms may not be best in endorsing conformity with WTO rules. A substitute remedy is to implement a method through which the states may seek for initial rulings. At the beginning of the WTO dispute resolution’s panel hearing, the complaining state might want a panel to issue initial rulings against the respondent state’s policy. The panel might offer the rulings if its initial evaluation is that the complaining state is expected to be successful on the virtues of the complaint. In such circumstances, the respondent states are offered with adequate time so that they can easily remove their policies. In failing to do so, the government that is complaining would initiate retaliation against the respondent government at times of the litigation process. The panel might approve a degree of retaliation and might adapt that level depending upon the probability of the complaining party’s success on the virtues of its grievances. Initial rulings tend to possess two main benefits in comparison to contract style remedies41. Retaliation remains provisional on the complaining state that is failing to obey with the injunction of the WTO. Secondly, initial rulings inspire the respondent state’s prevailing government to conform since the retaliation might be threatened instantly, offering the government an incentive to change their policies or settle the conflicts as early as possible. Methods On Improving The Gaps There are many ways through which the gaps can be filled and significant improvements can be made. Enhancing Third Party Rights One of the significant flexibility tools in GATT and WTO dispute settlement mechanism has been the WTO dispute settlement mechanism that may be increased to a greater extent without sacrificing the goal of resolving disputes42. Sequencing The sequencing issue describes the lack of clear priority in the DSU between the compliance panel proceedings in Article 21.5 and the suspension of allowance as well as other obligations in Article 22 after a certain period of time to obey lapses. It is to be noted that the consensus between the parties can be considered as a solution to the sequencing problem. Before requesting the development of the Article 21.5 compliance panel, the parties come to a consensus on sequencing which may involve agreeing to start arbitration on the degree of suspension of concessions at the same time, but withholding the decision of the arbitrator until the completion of the compliance panel or starting Article 22 methods for retaliation only after the decision made by the compliance panel43. Remand Authority Remand authority is quite a familiar concept in most of the domestic appellate courts. As similar to appellate courts, different trial courts, generally have jurisdiction to reconsider only issues related to law but not facts, it becomes significant for the appellate courts to remand the case back to trial courts if in case the issues of fact remains unsolved44. Conclusion World Trade Organization is considered as one of the global organizations, which looks after the trade rules and regulations between two nations. The main purpose is to aid the producers of goods and services, importers and exporters in order to practice their business effectively. It is the power of the World Trade Organization to settle the world’s disputes with binding authority that tends to differentiate it from other intergovernmental institutions. The point to be taken into consideration is that the ‘Understanding on Rules and Procedures Governing the Settlement of Disputes’ is the one that offers WTO with extraordinary power to solve trade-related conflicts between two or more than two nations and charge penalties and fines to the parties involved in the matter45. It is the Dispute Settlement Body that manages the dispute settlement comprising of the WTO’s General Council. The DSB has the full power to create panels, adopt panels and Appellate Body reports, continue observation of execution of rulings and suggestions, and approve suspension of concession and other responsibilities. The dispute settlement processes’ main objective has been to solve the conflicts by illuminating the rules of the polygonal trading system46. It is not allowed to create any newer rules47. In this context the main motto of the dispute settlement body has been to endorse their members to make efforts to introduce legislation into fulfillment with the panel rulings within a stipulated period of time created by the parties to the dispute. ‘Center for International Environmental Law’ has disapproved of the dispute settlement process and states that it lacks transparency and democratic responsibility and also criticizes it on account of perceived thoughtlessness to environment and social standards. There are certain gaps in the WTO dispute settlement process which tend to hamper the overall dispute handling process. Therefore, it is quite vital for the dispute handling body to narrow the gaps as soon as possible so that conflict regarding the trade among the nations can be addressed. There are three ways through which gaps can be narrowed such as ‘enhancing third party rights’, ‘sequencing’ and ‘remand authority’48. Despite several limitations, the dispute settlement system is utilized increasingly by the developing nations which demonstrate that it is one of the indicators of institutional success. In order to create a rule-based multilateral trading system, the dispute settlement system can be considered as a vital milestone. Works Cited 3 D Three, “Objectives and Organisation of the WTO”, 2003, Chapter One, 25 February. 2012 . Alqadhafi, Saif Al-Islam. “Reforming the WTO: Toward More Democratic Governance and Decision-Making”, 1998, Introduction, 25 February. 2012 . Bown, Chad P. & Hoekman, Bernard M. “Making Trade Agreements Relevant for Poor Countries Why Dispute Settlement Is Not Enough”, 2007, Introduction, 25 February. 2012 . Brewster, Rachel. “The Remedy Gap: Institutional Design,Retaliation, and Trade Law Enforcement”. 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