October 27, 2003	Monday	Sha’aban 30, 1424

A central feature of the World Trade Organization (WTO) is its dispute settlement mechanism (DSM). It has had an enormous impact on the world trade system and trade diplomacy.

The DSM builds upon the general agreement on tariffs and trade (GATT) dispute settlement procedures, a mechanism inherently flawed in part because GATT was intended to be part of an ‘international trade organization’ that never came into being. It’s draft charter called for a rigorous dispute settlement procedure that contemplated the use of voluntary arbitration, while providing for appeal to the World Court in some circumstances.

In general, a WTO dispute settlement procedure was launched at the request of one or more member governments for a consultation regarding complaints against defending members. This process is entirely government-to-government and available only to WTO members in procedures against other members. The dispute settlement understanding (DSU) provides that all members will settle their differences regarding the covered agreements by referring those disputes to the procedures of the WTO as elaborated in the DSU. When such a request is made and transmitted to the secretariat, a DS number is assigned to the dispute and all documents relating to that particular process will bear that DS number.

On some occasions, other complaints will be combined for a proceeding and in such a case, there may be more than one DS number to a particular set of issues involving complaints against different WTO members. If more than one country brings a complaint against the same measure, the complaints are consolidated and reviewed by a single panel.

The first step in dispute settlement is a consultation between the complaining party (or parties) and the responding party (or parties). This consultation is designed to explore the nature of the complaint and is sometimes used by the respondents to ascertain the details of the complaint or by the complainants to discover the responding party’s potential defences. If the parties have failed to settle the dispute by the end of 60 days, then the complaining party may ask the Dispute Settlement Body (DSB) to establish a dispute panel. Any WTO member can belong to the DSB, and its membership is essentially the same as that of the general council, which is the WTO’s overall supervising body and acts between the biannual ministerial meetings.

Under the new procedures of the DSU, the DSB must automatically approve the request for a panel procedure, although there are some provisions for short delays to that approval. When the DSB approves the establishment of the panel (normally composed of three members), the secretariat begins sometimes prolonged process of designating the panelists for the particular procedure, ideally by means of consensus between the parties. If the parties cannot agree within 20 days, the matter is referred to the WTO’s director-general, who has the authority to impose a panel on the parties.

Recourse to the director-general’s decision has become increasingly necessary, and it has proved difficult to find persons who are appropriate and willing to serve as panelists. The panelists can be from member governments, either officials on mission to the WTO or from their capitals. They can also be from other professions and occupations, such as retired members of the secretariat or ambassadors, academics, or other knowledgeable persons. Citizens of one of the parties to the dispute are normally not designated as panelists in such disputes absent a waiver of objection by all parties.

The panel operates under terms of reference, which may also be negotiated. If the negotiation for this fails, standard terms of reference are used. The panel then receives oral and written arguments from the parties to the dispute and from third parties. Any WTO member can become a third party in a dispute, usually by simply indicating that it has an interest in the subject matter. This interest may not involve a direct effect of a potential decision on the government; it may be a broader notion of the third-party government’s interest in the direction of the jurisprudence concerning the interpretation of the treaty clauses relevant to the case.

The parties must file their submittals within time limits set by the panel. Oral arguments are presented in hearings, which are closed to the public and, indeed, to WTO members not participating as complainants, respondents, or third parties. The first hearing before the panel is between the disputing parties (excluding third parties). A hearing of the third parties generally follows the first hearing on a separate day, but the disputing parties are also present and can actively participate in the discussion.

Following the initial hearings and submittals, the parties have the opportunity for reply submittals and a reply hearing, normally limited to the disputing parties. After this, the panel drafts an interim report, which is given to each of the parties, who have the opportunity to comment on it (normally within 30 days) or reach a settlement, keeping in mind the likely report of the panel. The interim report is confidential, although often it is leaked to the press.

After the comment period on the interim report has expired, the panel decides whether to revise its report or whether further proceedings (including oral or written submissions by the parties) are necessary. In the absence of further proceedings, the panel completes a final report that goes to the DSB for adoption.

The adoption of the report is a critical step and a significant change from procedures under GATT. Since negative consensus can be broken by parties who feel that the report should be adopted, the DSB is automatically to have adopted the report of the first-level panel unless the report is appealed or there is a consensus of the DSB against adoption. The adopted report becomes binding on disputing parties as a matter of international law.

The parties may appeal the report to the appellate body, a new institution with broad competence and high visibility. The Appellate Body consists of seven individuals who have been selected by the DSB through a consensus process. These individuals are retained part time for their services, depending on the caseload. (In the last year or two, the work load has been such that the appellate body members have been on the WTO duty for more than half of their annual time, and it is projected that this work load will increase substantially)

The appellate members each hold terms of four years, renewable once. (The original seven members determined that three members would be limited to two-year terms. Those who received two-year terms were automatically renewed for another four years, and thus are serving for six years.) A specifically constituted division, composed of three members of the Appellate Body hears appeals. The procedures for this selection are purposely kept highly secret, so that no government will be able to predict which Appellate Body members will be on its appeal.

The body then goes through a process similar to that of the first-level panel: oral and written submissions, a hearing with discussion and questioning by the division members, and then the preparation of a report. This is supposed to be accomplished within 60 days, and in exceptional cases within 90 days, but more frequently the latter is the case. Indeed, occasionally even that time limit proves inadequate for the Appellate Body to complete its work on an appeal.

A practice, sometimes labelled collegiality, has developed within the body, under which at some point in the course of the deliberations concerning an appealed case the other four members (who are kept informed with documentation) will convene with the acting division members in Geneva for a general discussion of the case. The practice promotes consistency in decisions, and it offers the acting division members the benefit of their colleagues’ expertise. Once the body has completed its report, it sends the report to the DSB, which adopts the report virtually automatically, through the “reverse consensus” process. At the 4th ministerial conference of the WTO, held in Doha in November 2001, it was agreed that to further improve the DSU and the deadline for reaching the improved agreement in May 2003.

One notable ongoing development in the WTO dispute settlement is the participation of private attorneys retained by governments. Small governments in particular often do not have in-house expertise adequate to handle some of the complex cases (or even some of the simple cases) that are finding their way into the WTO dispute settlement arena. Such states are put at a substantial disadvantage against large entities such as the United States or the European Community.

Consequently, these smaller states have in some circumstances been eager to retain the services of private attorneys, usually Europeans or Americans. In some cases, when governments sought to have such private counsel present in the hearing room and sometimes even to speak on their behalf, the opposing party (most often the United States) has objected to the practice. During the course of the last several years, developments seem to have moved substantially in the direction of permitting the use of private attorneys, albeit with certain limitations. In its 1997 Banana case report, the Appellate Body division indicated that there were few valid grounds for refusing the participation of government-retained private counsel in the appellate proceeding.

Several first-level panels as well seem to have accepted the practice. This is a welcome move, but it will require careful thinking about the role and relationship of the private attorneys vis-a-vis their government clients and vis-‘-vis the WTO system. It would be wise for the DSB or other appropriate bodies to develop standards and rules of ethics governing conflicts of interest and confidentiality (among other subjects) that governments could incorporate in their contracts with private attorneys.

Note: At all stages, countries in dispute are encouraged to consult each other in order to settle “out of court.” At all stages, the WTO director-general is available to offer his good offices, to mediate, or to help achieve conciliation.