The Controversies over the WTO Dispute Settlement System

Abstract

The World Trade Organization (WTO) has two roles. The first is legislative, where the WTO is an international organization in which agreements are signed. The other is judiciary, where the WTO is an international adjudicator deciding trade disputes. The first one is limited to the conduct of trade relations among Members. The second one is to conduct [litigation] brought pursuant to the consultation and dispute settlement provisions of WTO covered agreements. Forced compliance via binding dispute settlement should, theoretically, ensure that each member of an international organization receives all the benefits to which it is entitled, and that no country is required to make concessions to which it has not agreed and which have not been paid for. Dispute Settlement Understanding (DSU) of the WTO, arising from the Uruguay Round negotiations, is generally considered to be the crown jewel of the WTO trading system. Much has been written about its functioning, also a few studies in Polish literature. Since 1995, almost 400 complaints have been filled through the WTO dispute settlement system. The parties often reach a mutually satisfactory solution through consultations in accordance with the WTO Agreements without needing recourse to the panel and Appellate Body review. However, if that fails, the panels, the Appellate Body and the Dispute Settlement Body (DSB) are supposed to resolve the conflict. Only a Member that believes that its benefits have been nullified or impaired by the available measures is entitled to bring a matter before the dispute settlement system. Furthermore, the DSB makes recommendations only when the benefits are found to be nullified or impaired by the measures. This structure indicates the bilateral nature of the WTO dispute settlement system. However, the WTO DSU should not only be seen as a court. In every case, where the agreements cannot be clarified through negotiations, the dispute settlement system serves as their surrogate. The WTO DSU system is better than its GATT predecessor. In general, the system is good and successful. However, it is not free of errors, which I will try to point out. This will be a legal analysis only, without political judgment. Before I proceed with the analysis, the notion of dispute should be clarified. In international law the term dispute means a specific disagreement relating to a question of rights or interests in which the parties proceed by the way of claims, counter-claims, denials and so on. In another definition, dispute in international law is a situation when one entity of international law demands from another one specific action or behavior and such a demand is based on the rules of international law binding for both parties and this other entity resists this action or behaviour. The term dispute is therefore different from the notion of conflict, which means a general state of hostility between the parties. The distinction is important, since opposite to the conflicts, disputes are not entirely undesirable and may have certain valuable characteristics such as an effect of law clarification. In the context of the WTO Dispute Settlement system, the term dispute stands for a situation in which one WTO Member State adopts a trade policy or measure or takes some action, that one or more concerned WTO Members consider to be a breach of the WTO Agreements or a failure to meet obligations under such agreements. In such situation those countries undertake steps with accordance to the Dispute Settlement Understanding. This definition is broad, because the dispute does not arise when a Member State demands ruling of a panel, but already when parties take other available steps (e.g. negotiations) to solve the disagreement between them.