How the WTO resolves Trade Disputes

[Note: If you wish to get more information about World Trade Organization, just click WTO. Its URL is: As WTO updates its site periodically, some of these documents are not readily accessible. To assist students, however, some items are copied below. These documents originated in the WTO websites, and Kwan Choi is NOT the author.]

"The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system", states the Understanding on Rules and Procedures Governing the Settlement of Disputes.

WTO members commit themselves not to take unilateral action against perceived violations of the trade rules but to seek recourse in the multilateral dispute settlement system and to abide by its rules and findings.

The WTO General Council convenes as the Dispute Settlement Body (DSB) to deal with disputes arising from any agreement contained in the Final Act of the Uruguay Round. Thus, the DSB has the sole authority to establish panels, adopt panel and appellate reports, maintain surveillance of implementation of rulings and recommendations, and authorize retaliatory measures in cases of non-implementation of recommendations.

The Understanding emphasizes that prompt settlement of disputes is essential to the effective functioning of the WTO. Thus, it sets out in considerable detail the procedures and the timetable to be followed in resolving disputes.

The aim of the WTO dispute settlement mechanism is "to secure a positive solution to a dispute". Thus, finding a mutually-acceptable solution to a problem between members consistent with WTO provisions is encouraged. This may be possible through bilateral consultations between the governments concerned.

Thus, the first stage of settling disputes requires such consultations. Should they fail, and if both parties agree, the case at this stage can be brought to the WTO Director-General, who, acting in an ex officio capacity, will offer good offices, conciliation or mediation to settle the dispute.

The panel process

If consultations fail to arrive at a solution after 60 days, the complainant can ask the DSB to establish a panel to examine the case. The establishment of a panel is almost automatic. Procedures r equire the DSB to establish a panel no later than the second time it considers the panel request, unless there is a consensus against the decision.

The determination of the panel's terms of reference as well as its composition i s also straightforward. The Understanding provides for standard terms of reference that mandate the panel to examine the complaint in the light of the agreement cited, and to make findings that will assist the DSB in making recommendations or in giving rulings provided for in that agreement. The panel may operate under different te rms of reference, if the parties concerned so agree.

The panel must be constituted within 30 days of its establishment. The WTO Secr etariat will suggest the names of three potential panelists to the parties to the dispute, drawing as necessary on a list of qualified persons. If there is real difficulty in the choice, the Director-General can appoint the panelists. T he panelists serve in their individual capacities and are not subject to government instructions.

The panel's final report should normally be given to the parties to the dispute within six months. In cases of urgency, including those related to perishable goods, the timeframe is shortened to three months.

Panels have detailed working procedures set out in the Understanding. The main s tages are:

- Each party to the dispute transmits to the panel its submission on the f acts and arguments in the case, in advance of the first substantive meeting.

- At that first meeting, the complainant presents its case and the respond ing party its defence. Third parties which notified their interest in the dispute may also present views. Formal rebu ttals are made at the second substantive meeting.

- In cases where a party raises scientific or other technical matters, the panel may appoint an expert review group to provide an advisory report.

- The panel submits descriptive (factual and argument) sections of its rep ort to the parties, giving them two weeks to comment. The panel then submits an interim report, including its findin gs and conclusions, to the parties, giving them one week to request a review. The period of review is not to exceed two weeks, during which the panel may hold additional meetings with the parties.

- A final report is submitted to the parties and three weeks later, it is circulated to all WTO members.

- Should the panel decide that the measure in question is inconsistent wit h the terms of the relevant WTO agreement, the panel recommends that the member concerned bring the measure into conformity with that agreement. It may also suggest ways in which the member could implement the reco mmendation.

- Panel reports are adopted by the DSB within 60 days of issuance, unless one party notifies its decision to appeal or a consensus emerges against the adoption of the report.

The opportunity for appeal

The WTO dispute settlement mechanism gives the possibility of appeal to either party in a panel proceeding. However, any such appeal must be limited to issues of law covered in the panel r eport and the legal interpretation developed by the panel.

Appeals are heard by a standing Appellate Body established by the DSB. This Appe llate Body is composed of seven persons - broadly representative of WTO membership - who will serve four-year te rms. They are required to be persons of recognized standing in the field of law and international trade, and not affiliated with any government.

Three members of the Appellate Body sit at any one time to hear appeals. They ca n uphold, modify or reverse the legal findings and conclusions of the panel. As a general rule, the appeal proce edings are not to exceed 60 days but in no case shall they exceed 90 days.

Thirty days after it is issued, the DSB adopts the report of the Appellate Body which is unconditionally accepted by the parties to the dispute - unless there is a consensus against its adoption.

Implementing dispute decisions

The Understanding stresses that "prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members&q uot;.

At a DSB meeting held within 30 days of the adoption of the panel or appellate r eport, the party concerned must state its intentions in respect of the implementation of the recommendations. If it is impractical to comply immediately, the member will be given a "reasonable period of time" - to be set by the DSB - to do so. If it fails to act within this period, it is obliged to enter into negotiations with the compla inant in order to determine a mutually-acceptable compensation - for instance, tariff reductions in areas of p articular interest to the complainant.

If after 20 days, no satisfactory compensation is agreed, the complainant may re quest authorization from the DSB to suspend concessions or obligations against the other party. The DSB should grant this authorization within 30 days of the expiry of the "reasonable period of time" unless there is a con sensus against the request.

In principle, concessions should be suspended in the same sector as that in issu e in the panel case. If this is not practicable or effective, the suspension can be made in a different sector of th e same agreement. In turn, if this is not effective or practicable and if the circumstances are serious enough, the suspen sion of concessions may be made under another agreement.

In any case, the DSB will keep under surveillance the implementation of adopted recommendations or rulings, and any outstanding case will remain on its agenda until the issue is resolved.