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WTO Dispute Settlement: Praise and Suggestions for Reform

Published online by Cambridge University Press:  17 January 2008

Thomas J. Schoenbaum
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Extract

We have now had three years' experience with the dispute-settlement process of the World Trade Organization (WTO), which came into existence as a result of the Uruguay Round of trade negotiations on 1 January 1995. By any objective standard, this system of dispute settlement is a resounding success. Well over 100 cases have been brought to the WTO, and, as at the end of 1997, 25 cases had been settled at the consultation stage, 61 were under consultations and 36 were in or beyond the panel-appeal process. The newly created Appellate Body has decided nine cases, the quality of its opinions as well as those of the dispute-settlement panels is generally excellent. Member States of the WTO are complying with the rulings and recommendations adopted by the Dispute Settlement Body of the WTO.

Type
Shorter Articles, Comments and notes
Information
International & Comparative Law Quarterly , Volume 47 , Issue 3 , July 1998 , pp. 647 - 658
Copyright
Copyright © British Institute of International and Comparative Law 1998

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References

1. The WTO was created by the Marrakesh Declaration of 15 Apr. 1994 and the Marrakesh Agreement Establishing the World Trade Organization (hereafter referred to as the WTO Agreement) of the same date. The texts are reproduced in The Results of the Uruguay Round of Multilateral Trade Negotiations, The Legal Texts (GATT Secretariat, 1994) and in (1994) 33 I.L.M. 1145.Google Scholar

2. WTO Focus Newsletter 1 (Aug. 1997). New cases are filed at an average rate of two to three per month. WTO Focus Newsletter 3 (Dec. 1977).

3. Ibid.

4. The following Appellate Body reports have been adopted by the Dispute Settlement Body of the WTO: US—Standards for Reformulated and Conventional Gasoline, AB-199–1; Japan—Taxes on Alcoholic Beverages, AB-1996–2; US—Restrictions on Imports of Cotton and Man-Made Fibre Underwear, AB-1996–3; Brazil—Measures Affect-ing Desiccated Coconut, AB-1996–4; US—Measures Affecting Imports of Woven Wool Shirts and Blouses, AB-1997–1; Canada—Certain Measures Concerning Periodicals, AB-1997–2; EC—Regime for the Importation, Sale, and Distribution of Bananas, AB-1997–3 and EC Measures Concerning Meat and Meat Products (Hormones), AB-1997–4; Japan—Measures Affecting Consumer Photographic Film and Paper, AB-1998–1. These and other WTO reports are available on the worldwide web at http://www.wto.org.

5. In every case so far the nation on the losing side of a WTO dispute has announced its intention to implement corrective action. In the Japan—Taxes on Alcoholic Beverages case Japan and the US are still negotiating on a timetable for elimination by Japan of its discriminatory system of liquor taxation. See Inside US Trade 5 (31 Oct. 1997).

6. The WTO dispute-settlement system was created by the 1994 Dispute Settlement Understanding (hereafter the “DSU”), one of the Uruguay Round trade agreements. For the text see The Legal Teas, supra n.1, at p.404.Google Scholar

7. Idem, Art.4:3.

8. Idem, Art.4:7.

9. Idem, Arts.6–1.

10. Idem, Art.17.

11. Idem, Art.2.

12. For a scholarly summary and evaluation of this experience, see Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settlement System (1997), pp.66–91.Google Scholar

13. See Hudec, Robert E., Enforcing International Trade Law, The Evolution of the Modern CATT Legal System (1993), pp.138–150Google Scholar; and Davey, William J., “Dispute Settlement in GATT” (1987) 11 Fordham Int.L.J. 51, 67–78.Google Scholar

14. See Davey, ibid.

15. Ibid.

16. An example of a dispute that is best settled by adjudication is the Beef Hormone case, supra n.4. This case concerned primarily important questions of interpretation concerning one of the WTO “covered agreements”, the Sanitary and Phytosanitary Agreement. The Appellate Body, in deciding this case, clarified many interpretative points, including the key questions of the burden of proof and the extent of the risk-assessment process required under the agreement. Such interpretation, once settled, can serve as a basis for future cases or as a starting point for new negotiations between the parties.

17. DSU, Art.4.

18. Idem, Art.5.

19. Idem, Art.13:2.

20. Idem, Art.25.

21. Idem, Art.4:7.

22. Ibid.

23. Idem, Art.12.

24. Idem, Art.5:5.

25. A rare case in which the parties to a dispute have continued to negotiate beyond the 60-day period is United States: The Cuban Liberty and Democratic Solidarity Act. This case, which was brought by the EC, involved the issue of the validity of US legislation which adopts sanctions against foreign companies that trade with Cuba or invest in properties expropriated from American citizens. At the request of the EC, the panel suspended its work hi Apr. 1997, and negotiations continued between the US and the EC Inside US Trade 1(17 Oct 1997). On May 18, 1998, the United States and the European Community settled their dispute involving the Helms-Burton Act. The settlement involves an agreement that the United States will grant permanent waivers of the Helms-Burton Act sanctions in return for the European Community's commitment to help establish a global registry of confiscated property that will be off-limits to investors. This agreement was possible only because the Europeans voluntarily agreed to suspend their 1996 case filed at the WTO to challenge the legality of the U.S. law.

26. Since this dispute was settled, it was not the subject of a WTO panel decision. For a complete analysis of this dispute, see Eleanor, Roberts Lewis and Weiler, David J., “Will the Rubber Grip the Road? An Analysis of the US-Japan Automotive Agreement” (1996) Law & Policy in Int. Bus. 631.Google Scholar

27. Idem, pp.653–654.

28. Report of the Appellate Body, AB-1997–3. The Bananas dispute is multifaceted. Its origin was an EC Regulation which granted preferential treatment for bananas produced within certain former colonies in the African, Caribbean and Pacific regions (ACP countries) (1993) O.J. L47/1 (13 Feb.). This was successfully challenged at the GATT by several Latin American governmentsGoogle Scholar; GATT Dispute Settlement Panel Report on the EEC-Import Regime for Bananas (1995) 34 I.L.M. 177Google Scholar, not adopted by the contracting parties. However, a challenge brought by Germany in the ECJ was rejected on the grounds that the GATT is not directly applicable as such in the legal order of the EC: Case 280/93 Federal Republic of Germany v. Council of the European Union (1995) 34 I.L.M. 154 (5 Oct 1994). In 1994 the EC adopted a new Framework Agreement which included banana quotas that satisfied Colombia, Costa Rica, Nicaragua and Venezuela. On 17 Oct. 1994 the USTR initiated a s.301 investigation into the EC banana regime hi response to a petition filed by Chiquita Brands International Inc. and the Hawaiian Banana Industry Association; see Request for Public Comment, 60 Fed. Reg. 3284, 13 Jan. 1995. Based upon this investigation, it was decided to invoke the WTO dispute-resolution process. See “US Will Take Banana Dispute with EU to WTO, USTR Kantor Says” (1995) 12 Int. Trade Rptr. (BNA) 1658, 4 Oct.Google Scholar

29. Convention of Lomé, signed in Lomé, 15 Dec 1989, as revised by the Agreement signed in Mauritius. 4 Nov. 1995 (Lomé IV). The Lomé Convention is the EC's principal trade treaty to grant preferential trading status to certain developing countries.

30. The Appellate Body interpreted the WTO's Lomé waiver to exempt only preferential treatment for developing countries that is required by the Lomé Convention. Report of the Appellate Body, supra n.4, at p.72.Google Scholar

31. Invalidating the EC banana import programme will have very little economic impact on either the EC or US, but threatens to cause widespread economic dislocation hi the ACP developing countries that would be affected. See “Bananas; ‘EU Must Comply’”, financial Times, 20 10. 1997. p.5.Google Scholar

32. See GATT 1994, Art.XXIII in The Legal Texts, supra, n.1. at p.521.Google Scholar

33. DSU, Art.26

34. Ibid.

35. Non-violation and situation disputes are subject to a modified panel process ibid.

36. Idem, Art.2. The principal covered agreement is the General Agreement on Tariffs and Trade (GATT) 1994.

37. Idem, Art.1:2.

38. Ibid.

39. US: The Cuban Liberty and Democratic Solidarity Act, Publ. L. No.104–114, 110 Stat. 785 (12 Mar. 1996) (codified at 22 U.S.C §6021–91), reprinted in (1996) 35 I.L.M. 357. Upon the EC's request, the WTO panel suspended its work in Apr. 1997. WTO Focus Newsletter (Aug. 1997).Google Scholar

40. For evaluations of this issue, see Goldman, Olivia Q., “Who Defines Members' Security Interest hi the WTO?” (1996) Leiden J.I.L. 361Google Scholar; and Kees Jan, Kuilwijk, “Castro's Cuba and the US Helms Burton Act” (1997) J. World Trade 49.Google Scholar

41. See Vaughan Lowe, “US Extraterritorial Jurisdiction: The Helms-Burton and D'Amato Acts” (1997) 46 I.C.L.Q. 378.Google Scholar

42. DSU, Art.11.

43. The alternative might be for the WTO to request an advisory opinion from the ICJ but this process would be extremely cumbersome.

44. For an elaboration of this, see Kuyper, P. J., “The Law of GATT as a Special Field of International Law” (1994) Neths. Y.B.I.L. 227.Google Scholar

45. DSU, Art.3:2.

46. Supra n.4.

47. Idem, pp.73–75.

48. Idem, pp.59–61.

49. DSU, Art3:7. In contrast, a member State that wishes to join in multiple consultations must have a “substantial trade interest”: idem, Art.4:11; and, to intervene, a third party must have a “substantial interest” in the matter before a panel: idem, Art.10:2.

50. The initiation of the Bananas case under US law was a s.301 petition by these companies under the US Trade Act of 1974. See supra n.26.

51. 19 U.S.C, § §2411 et seq.

52. (1994) O.J. L349/71 (31 Dec).Google Scholar

53. 19 U.S.C. §2411(a)(1).

54. For discussion, see Sykes, Alan O., “Constructive Threats in International Commer-cial Relations: The Limited Case for Section 301” (1992) Law & Policy in Int. Bus. 263.Google Scholar

55. 19 U.S.C §2411(a).

56. 19 U.S.C §2413(a).

57. This was made explicit hi the US Statement of Administrative Action (p.366) pre-pared in connection with the Uruguay Round implementing legislation. H.R.Doc.No.316, 103rd Cong. 2nd Sess. 137 (1994).Google Scholar

58. 19 U.S.C.§2411(a).

59. DSU, Art.23 forbids unilateral retaliatory action.

60. Supra no.50 Art.4:1.

61. Idem, Art.2:1.

62. Idem, Art.12.

63. Bananas case, supra n.4, at p.8.Google Scholar

64. The Appellate Body specifically left this open for later decision.

65. For a separate but similar proposal for private-party access to the WTO dispute-settlement mechanism, see Andrea Giardina and Amcrico Beviglia Zampetti, “Settling Competition-Related Disputes: The Arbitration Alternative in the WTO Framework”, 31 J. of World Trade 5 (1997)Google Scholar. See also Schleyer, Glen T., “Power to the People: Allowing Private Parties to Raise Claims Before the WTO Dispute Resolution System” (1997) Fordham L.Rev. 2275 for a broader proposal for private-party access.Google Scholar

66. Liechtenstein v. Guatemala I.C.J. Rep. 1955, 4.Google Scholar

67. Barcelona Traction, Light and Power Company Case—Second Phase: Belgium v. Spain I.C.J. Rep. 1970, 3.Google Scholar

68. There are actually two Kodak-Fuji Film cases: Japan—Measures Affecting Consumer Photographic Film and Paper and (2) Japan—Measures Affecting Distribution Services. Both were combined into Japan—Measures Affecting Consumer Photographic Film and Paper. WTO panel established 15 Oct. 1996. In Jan. 1998 the WTO panel rendered its final decision (available at www.wto.com) ruling in favour of Japan with respect to every significant issue. The panel found that the US had failed to prove that any of the various measures it cited—distribution measures, restrictions on large stores or promotional actions—nullified or impaired negotiated trade benefits. The panel also rejected US arguments that Japan violated its national treatment and transparency obligations under the GATT. However, the panel accepted the US argument that informal government approval of restrictive trade practices could be the subject of a nullification and impairment complaint. Thus, the decision does not rule out future market-access competition complaints.

69. Both sides in this case have submitted enormous amounts of contradictory evidence, and there is growing doubt whether the WTO panel will be able to establish the facts necessary to apply legal principles or to come to a recommended solution. The adversary process does not fit this type of market-access competition case. Inside US Trade (9 May 1997).

70. E.g. the US gun manufacturer Smith and Wesson has filed a s.301 action to open the Brazilian market; members of the Telecommunications Industry Association are considering a s.301 case over opening the fibre optics market Inside US Trade, 22 Aug. 1997.

71. 575 U.N.T.S. 159. Closely related to ICSID is the dispute-settlement mechanism under the Energy CharterTreaty of 12 Dec. 1994, done at Lisbon, 17 12. 1994 (EEC) (1995) 35 I.L.M. 390. Art.26 of this treaty provides for compulsory dispute settlement between a private investor and a contracting party. If the dispute cannot be settled by negotiation, after three months the investor may choose to submit it for resolution either to a court or administrative tribunal of the State party, to a previously agreed dispute-settlement procedure or to international arbitration or conciliation.Google Scholar

72. North American Free Trade Agreement (NAFTA), 17 12. 1992, US-Can.-Mex. (1992) 32 I.L.M. 289 (containing chaps.1–9), 605 (containing chaps.10–22).Google Scholar

73. Treaty Establishing a Common Market, 26 03. 1991, Arg.-Braz.-Para.-Uru. (1991) 30 I.L.M. 1041. The MERCOSUR dispute-settlement system is contained in the Brasilia Protocol, 17 Dec. 1991, 6 Inter-Am. Legal Materials 1 (Simon Pumell, trans., 1996).Google Scholar

74. Asia-Pacific Cooperation Forum: Dispute Mediation Experts' Group Reports on a Voluntary Consultative Dispute Mediation Service (1996) 35 I.L.M. 1102.Google Scholar

75. ICSID, Art.25(1).

76. Idem, Art.42(2).

77. Dépeçage is the subjection of different issues to rules derived from different legal systems. This is authorised in idem, Art.42(1).

78. NAFTA, Art.s.1115–1124.

79. Idem, Art.1131.

80. Brasilia Protocol, Art.26(1).

81. Supra n.71.

82. Proposals are pending to negotiate a limited international code on competition policy. See Giardina, and Zampetti, , op. cit. supra n.65 and Spencer Weber Waller, “The Internationalization of Antitrust Enforcement” (1977) Boston Univ.L.Rev. 343.Google Scholar