Chapter 3 Dispute Settlement System and Trade Policy Review Mechanism 14/21-SEP-2006.

Chapter 3 Dispute Settlement System

and Trade Policy Review Mechanism

14/21-SEP-2006

Dispute Settlement System-1

I. Overview (New Features)

II. Rules and Procedure of Dispute Settlement

III. Case Study: The Timetable In Practice

IV. Types of complaints

Based on clearly-defined rules.Settle disputes through consultation if possiblePrinciples: equitable, fast, effective, mutually acceptable.Legal framework:

GATT, Art 22-23DSUSpecial rules and procedure of individual WTO agreement

I Overview

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提起争端解决 通过解决报告 授权贸易报复

GATT, Art 22

GATT,Art 23

争端解决谅解书（DSU）

II. Rules and Procedure of WTO DS

Applied to disputes under WTO Agreement, Multilateral Agreements on Trade in Goods, GATS, TRIPS, DSU, TPRM and Plurilateral Trade Agreements

Conflict of Rules and procedure of DSU and special or additional rules procedure of individual agreements: latter one prevail

适用于各成员根据世界贸易组织下列各协定、协议所提起的争端

当 DSU 规则和程序与有关协定所包括的争端解决的特别和附加程序发生冲突，则后者优先适用

1 、 Principle of Application ( 适用范围 )Art 1.1-1.2, Appendix I of DSU,

DSU Appendix I

II. Rules and Procedure of DS

Consultation（磋商）Panel examination（专家组审理）Appellate review（上诉机构审理）Implementation (裁决的执行）In case of non-implementation- Retaliation （授权报复）

Compensation( 补偿 )Suspend Concession( 中止减让 )

2 、 Procedures for Dispute Settlement ( 争端解决程序 )Art 4-22, Appendix III of

DSU,

How long to settle a dispute

通过 DSB 的磋商第 4 条 磋商

1 ． 各成员确认决心加强和提高各成员使用的磋商程序的有效性。2 ． 每一成员承诺对另一成员提出的有关在前者领土内采取的、影响任何适用协定运用的措施的交涉给予积极考虑，并提供充分的磋商机会。3 ． 如磋商请求是按照一适用协定提出的，则请求所针对的成员应在收到请求之日起 10天内对该请求作出答复，并应在收到请求之日起不超过 30 天的期限内真诚地进行磋商，以达成双方满意的解决办法，除非双方另有议定。如该成员未在收到请求之日起 10 天内作出答复，或未在收到请求之日起不超过 30天的期限内或双方同意的其他时间内进行磋商，则请求进行磋商的成员可直接开始请求设立专家组。4 ． 所有此类磋商请求应由请求磋商的成员通知 DSB 及有关理事会和委员会。任何磋商请求应以书面形式提交，并应说明提出请求的理由，包括确认所争论的措施，并指出起诉的法律根据。

Article 4 Consultations1. Members affirm their resolve to strengthen and improve the effectiveness of the consultation procedures employed by Members.2. Each Member undertakes to accord sympathetic consideration to and afford adequate opportunity for consultation regarding any representations made by another Member concerning measures affecting the operation of any covered agreement taken within the territory of the former.  3. If a request for consultations is made pursuant to a covered agreement, the Member to which the request is made shall, unless otherwise mutually agreed, reply to the request within 10 days after the date of its receipt and shall enter into consultations in good faith within a period of no more than 30 days after the date of receipt of the request, with a view to reaching a mutually satisfactory solution. If the Member does not respond within 10 days after the date of receipt of the request, or does not enter into consultations within a period of no more than 30 days, or a period otherwise mutually agreed, after the date of receipt of the request, then the Member that requested the holding of consultations may proceed directly to request the establishment of a panel.4. All such requests for consultations shall be notified to the DSB and the relevant Councils and Committees by the Member which requests consultations. Any request for consultations shall be submitted in writing and shall give the reasons for the request, including identification of the measures at issue and an indication of the legal basis for the complaint.

Consultation (Art. 4 of DSU)

Necessary step to solve dispute Timetable:

One makes a requestthe other one reply within 10 days after the receipt enter into ~ within 30 days after the receiptreaching a mutually satisfactory solution within 60 days after the receipt

Requirements:All such request for ~ shall be notified to the DSB, relevant Council and CommitteesSubmitted in writing, giving reasons for request, identification of measures at issue and indication of the legal basis for the complaint.

Third member(has substantial trade interest):may join If fail, the complaining party

may request the establishment panel

Process of Panel (Art 6-16)

Article 6 Establishment of Panels

1. If the complaining party so requests, a panel shall be established at the latest at the DSB meeting following that at which the request first appears as an item on the DSB's agenda, unless at that meeting the DSB decides by consensus not to establish a panel. 2. The request for the establishment of a panel shall be made in writing. It shall indicate whether consultations were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. In case the applicant requests the establishment of a panel with other than standard terms of reference, the written request shall include the proposed text of special terms of reference.

第 6 条 专家组的设立1 ．如起诉方提出请求，则专家组应最迟在此项请求首次作为一项议题列入 DSB 议程的会议之后的 DSB 会议上设立，除非在此次会上 DSB 经协商一致决定不设立专家组。2 ．设立专家组的请求应以书面形式提出。请求应指出是否已进行磋商。确认争论中的措施并提供一份足以明确陈述问题的起诉的法律根据概要。在申请方请求设立的专家组不具有标准职权范围的情况下，书面请求中应包括特殊职权范围的拟议案文。

1.Establishment of panel (Art 6)Make a request in the first DSB meeting, and establish a panel in the next DSB meeting.The request shall be in writing

2.Power of panel (Art 7)To examine the matter , make findings, and make the recommendation or rulings.

3.Composition of panel (Art 8)Be composed of Well-qualified and individualsBe independent of membersNormally 3 panalists, or 5 if requestDeveloping country

The panel （专家组审理 ） -to be continued

The panel （专家组审理）4.Procedures (Art 12 and Appendix 3)

Before the first hearing( 第一次实质性会议前提交书面陈述，说明案件的事实和论据 )Each side presents its case in writing to the panel

First hearing( 第一次实质性会议起诉方和被速方陈述案情和观点 )The complaining country,responding country and those have interest in the case make their case.

Rebuttals ( 正式辩驳在专家组第二次实质性会议上作出 )The country involved summit written rebuttals before the meeting and present oral arguments at second panel’s meeting (complained party first)

Experts ( 专家审议小组 )If scientific an d technical matters are raised

First Draft ( 向各方散发报告的描述部分 ) The descriptive (factual and argument) section of its report to two sides(for 2 weeks comment). It does not include findings and conclusions.

Interim report ( 向各方散发中期报告，包括调查结果和结论 )A report including findings and conclusions to 2 sides. Then 1 week to ask for a review

Review ( 各方审议 ) – must not exceed 2 week.Final report ( 向争端各方散发最终报告 )

Submitted to 2 sides, and 3 weeks later, circulated to all WTO members.

The report becomes a ruling

The panel Process-1

Appellate Review

1.Establishment of Appellate BodyStanding body hearing appeals from panel cases.(by DSB)Be composed of 7 persons (comprising of recognized authority with demonstrated expertise in law, international trade, and so on)

2.Power of ABJust concerned with issues of law covered in panel report and legal interpretation developed by the panel

3.Points of the appealOnly disputed parties may appeal, not third party.Not exceed 60 days (from appeal to AB circulates its report)

The Appellate Review( 上诉机构审理） (Art 17)

4. Procedures Be confidentialThe AB report shall be drafted based on the information provided and the statements made, without presence of parties ( 书面审理 )Adoption of AB report

Shall be adopted by DSB within 30 days following the circulation (unless the DSB decides by consensus not to adopt it)

The Appellate Review( 上诉机构审理） (Art 17)

The process of Appellate Body-2

DUS 第 21 条

Implementation ( 裁决的执行）

Implementation (Art 21.3)

At a DSB meeting held within 30 days of the report’s adoption, the member must state its intention to implement panel or appeals report.

Prompt implement or given a “reasonable period of time”

If non-implementation, what’s the next?

If a panel finds a complaint is justified, its report typically recommends that the offending member cease its violation of GATT rules, such as by withdrawing the offending measures. After a report is adopted, DSB will monitor whether or not its recommendations are implemented.

Compensation and suspend concession (Art 22)

Compensation (Art 22.2 of DSU)

Implementing Member does not achieve full compliance finallyEnter into negotiation with the complaining partyNot monetary payment, but offering a benefit (tariff reduction-equivalent to benefit nullified and impaired)

No mutually acceptable compensation agreed

Countermeasure by the prevailing Member

Suspend concessions ( 中止减让 ) Art 22.2 of DSU

Complaining side Asking DSB for permission to impose trade sanction

(“suspend concessions”)

Authorization granted by

DSB

Complaining party is allowed

to impose countermeasure

s

If after 20 days, no satisfactory compensation is agreed

( within 30 days of the expiry of the “reasonable period of time” unless there is a reverse consensus)

(That would be inconsistent with the WTO agreement, in response to a violation or non-violation nullification or impairment.)

Retaliation

Concessions or obligation

Commitments and obligation, such as tariff reduction or other obligations, which Member have made in multilateral trade negotiations and are bound under GATT 1994

Debate on RetaliationResulting the complainant responding to a WTO-inconsistent trade barrier with another trade barrier, which is contrary to the liberalization philosophy underlying WTO.Measures erecting trade barriers come at price, which are always economically harmful for both disputed parties.

To enforce recommendations and rulingsHas the effect of rebalancing mutual trade benefitsInducing compliance

Temporary:must be revoked once compliance achieved last resort: prefer to constructive means

Rules governing the suspend concession (Art22.4 of DSU)

The level of suspend concession

The level nullification or impairment

equivalent

Same sectorsame agreementother agreement

(Art 22.3 of DSU)

Question1A panel has found Tramontana’s internal taxes on cigarettes to be inconsistent with Article III of GATT 1994. The panel report was adopted by the DSB in February 1996. In February 1997, Patria noted that Tramontana had still not adjusted its tax system to conform to Article III. What are Patria’s options?

Patria has no options, it must wait for Tramontana to implement the DSB’s recommendations and rulings.Following the expiration of the reasonable period of time for implementation, Tramontana must enter into negotiations about compensation, and after 20 days, Patria may proceed to the suspension of obligations.Having waited a whole year, Patria can now apply unilateral countermeasures against Tramontana by impeding imports from that origin.

Question2WTO Member Y has just won a GATT dispute against WTO Member Z involving bananas. The reasonable period of time has expired without full implementation, and there is no agreement between the parties on compensation. What options for retaliation exist for Y?

Y must retaliate in the area of bananas only.

Y may retaliate in the area of other goods, but it can only resort to the suspension of GATT 1994 obligations.

Y can suspend obligations in any goods sector, and under any multilateral agreement on trade in goods. If Y considers that it is not practical or effective, and the circumstances are serious enough, it may seek retaliation under the GATS) or the TRIPS Agreement.

Y may suspend obligations in any goods sector, and under any multilateral agreement on trade in goods only.

How long to Settle a dispute?

60 days Consultations, mediation, etc

45 days Panel set up and panellists appointed

6 months Final panel report to parties

3 weeks Final panel report to WTO members

60 days Dispute Settlement Body adopts report (if no appeal)

Total = 1 year (without appeal)

60-90 days Appeals report

30 days Dispute Settlement Body adopts appeals report

Total = 1y 3m (with appeal)

III Case Study-- 以美国汽油规则案为例Time

Target/ actual period

Date Action

(0 = start of case)

-5 years 1990 US Clean Air Act amended

-4 months Sep-94 US restricts gasoline imports under Clean Air Act

0

“60 days”

23-Jan-95 Venezuela complains to Dispute Settlement Body, asks for consultation with US

+1 month 24-Feb-95 Consultations take place. Fail.

+2 months 25-Mar-95 Venezuela asks Dispute Settlement Body for a panel

+2½ months “30 days”

10-Apr-95 Dispute Settlement Body agrees to appoint panel. US does not block. (Brazil starts complaint, requests consultation with US.)

+3 months 28-Apr-95 Panel appointed. (31 May, panel assigned to

Brazilian complaint as well)

+6 months9 months

(target is 6-9)

10-12 July and 13-15 July 1995

Panel meets

+11 months

11-Dec-95 Panel gives interim report to US, Venezuela and Brazil for comment

+1 year 29-Jan-96 Panel circulates final report to Dispute Settlement

Body

III Case Study-- 以美国汽油规则案为例Time

Target/ actual period

Date Action

(0 = start of case)

+1 year, 1 month

21-Feb-96 US appeals

+1 year, 3 months “60 days”

29-Apr-96 Appellate Body submits report

+1 year, 4 months “30 days”

20-May-96 Dispute Settlement Body adopts panel and appeal reports

+1 year, 10½ months

3-Dec-96 US and Venezuela agree on what US should do (implementation period is 15 months from 20 May)

+1 year, 11½ months

9-Jan-97 US makes first of monthly reports to Dispute Settlement Body on status of implementation

美国汽油规则案

On 23 January 1995, Venezuela complained to the Dispute Settlement Body that the United States was applying rules that discriminated against gasoline imports, and formally requested consultations with the United States. Just over a year later (on 29 January 1996) the dispute panel completed its final report. (By then, Brazil had joined the case, lodging its own complaint in April 1996. The same panel considered both complaints.) The United States appealed. The Appellate Body completed its report, and the Dispute Settlement Body adopted the report on 20 May 1996, one year and four months after the complaint was first lodged. The United States and Venezuela then took six and a half months to agree on what the United States should do. The agreed period for implementing the solution was 15 months from the date the appeal was concluded (20 May 1996 to 20 August 1997). The case arose because the United States applied stricter rules on the chemical characteristics of imported gasoline than it did for domestically-refined gasoline. Venezuela (and later Brazil) said this was unfair because US gasoline did not have to meet the same standards — it violated the “national treatment” principle and could not be justified under exceptions to normal WTO rules for health and environmental conservation measures. The dispute panel agreed with Venezuela and Brazil. The appeal report upheld the panel’s conclusions (making some changes to the panel’s legal interpretation). The United States agreed with Venezuela that it would amend its regulations within 15 months and on 26 August 1997 it reported to the Dispute Settlement Body that a new regulation had been signed on 19 August.

http://www.wto.org/english/res_e/webcas_e/webcas_e.htm

Types of complaintsArticle XXIII:1 of GATT 94 --- “Nullification or Impairment 利益的丧失或损害

1. If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of

a. the failure of another contracting party to carry out its obligations under this Agreement, or b. the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or c. the existence of any other situation,   

the contracting party may, with a view to the satisfactory adjustment of the matter…

2 alternative options on which a complaint

may replyNext page

Violation complaint- Article XXIII:1(a) 违反之诉

The failure of another member to carry out its obligationresulting in “nullification or impairment of a benefit

一缔约方未履行协定的义务而致使其他缔约方利益受损或使总协定目标的达到受到防碍的情况

Non-violation complaint- Article XXIII:1(b) (c) 非违反之诉

The application of a member by a MemberThe existence of a benefit accruing under the applicable agreementThe nullification or impairment of a benefit as a result of the application of the measure.

一缔约方的措施即使不与协定相冲突或存在其他情况，只要是对另一缔约方依协定享有的利益造成“丧失或减损”，也构成提起申诉的条件

Types of complaints

As a result, the dispute settlement System can be invoked

Dispute Settlement System-2

I. Legal effect of panel and appellate body reports and DSB recommendations and rulings

II. Dispute Settlement without recourse to Panels and the Appellate Body-Good offices, Conciliation and Mediation, Arbitration

III. Legal issues arising in WTO dispute settlement proceedings

IV. Developing countries in WTO dispute settlement

V. Evaluation of the WTO dispute settlement system: results to date