Transcript From the GATT to the WTO
The WTO Dispute Settlement
Dr. Valentina Vadi Maastricht University University of Rome III 22 November 2012
Synopsis
From the GATT years to the WTO DS Characteristics of the WTO DS Principles of WTO DS Institutions Proceedings The Challenges Ahead
From the GATT to the WTO
GATT (1947-1995)=political, consensus, power-based system of dispute settlement, Art. XXII and XXIII GATT 1947
WTO
rule-based architecture final and legally enforceable decisions.
Quasi-judicial = shift in legal philosophy, closer to the characteristics of ordinary systems of litigation
Dispute Settlement in the GATT 1947
Diplomatic Consultations After 1955, Panels of neutral GATT experts recommendations adopted by the Contracting Parties (GATT Council, after 1960) by consensus Remedies: GATT Council makes recommendations to withdraw a measure (restoration); may authorize suspension of concessions. Retaliation is disfavoured, no punishment or damages
Critical Assessment
Successful Decisions implemented and observed
Shortcomings : - Delays in the process - Blocking of the adoption of panel reports - Delays in implementation
The WTO Dispute Settlement Mechanism
Continuation of the GATT regime - Multilateral procedures rather than unilateral action (E.g. Section 301 of the US Trade Act 1974) A Court of International Trade?
- compulsory jurisdiction - short timeframes (9 months panels; 90 days AB) - no backlog - rules of law - binding decisions - sanctions may be imposed - Appellate Body
Nature of Disputes
Disputes on technical trade issues Zeroing Methodology (Complainant: European Communities) Disputes on politically sensitive issues: 1) Trade & environment China — Measures concerning wind power equipment China — Raw Materials US – Shrimp/turtles case 2) Trade & Public health European Union and a Member State — Seizure of Generic Drugs in Transit (Complainant: Brazil) Brazil – Retreaded Tyres EC – Hormones; EC – Asbestos 3) Trade and Public Morals US – Gambling
Object and Purpose
Securing prompt settlement to a dispute - Mutually acceptable preserving rights & obligations Security & predictability Clarification in accordance with customary rules of interpretation of public international law It cannot add or diminish rights and obligations!!! No judicial activism Genuine intention to see the dispute resolved.
something more than mere violation of substantive provision = failure to act in good faith
Methods of Dispute Settlement
Consultations/negotiation (Art. 4 DSU) Good offices, mediation and conciliation (Art. 5 DSU) - 25% of the disputes are settled!
Adjudication (Art. 6 – 19 DSU) - Repeated players: US, EU (US is also the most active respondent!) Arbitration (Art. 25 DSU) as an alternative; only one case so far.
Steps in Dispute Settlement
1) 2) 3) 4)
consultation (Article 4) Panel proceedings (Art. 6-16) Appellate review proceedings Implementation and enforcement
Jurisdiction
Disputes arising out of any of the WTO ’covered agreements’ Annex I -Some agreements include special or additional rules which prevail in case of conflict with DSU rules. (complementary; if conflict=lex specialis) -Customary rules of treaty interpretation- Vienna Convention on the Law of Treaties compulsory jurisdiction exclusive jurisdiction vis-à-vis other int’l for a or unilateral conduct Only contentious jurisdiction (no abstract ruling on hypothetical future measures)
Access
Government-to-government Members of the WTO can be parties or third parties to a dispute NO Non-Members, IOs, NGOs, companies or individuals BUT: indirect access for private parties, lobbying, ‘behind the scenes’ role US: section 301 (1974) Trade Act EC Trade Barriers regulation Chinese Law
Amicus Curiae Briefs
Persons that are not parties to the disputes No right to be heard, no right to have the brief considered Shrimp/Turtle panel panels have the power to seek information from any individual or body; no amicus curiae; AB Discretion of the AB or Panels EC Asbestos AB accepted additional procedure setting requirements for admission no amicus was Developing countries’ Criticism: WTO = Contract NGOs are unfriendly; Fair prompt and effective resolution of trade disputes Undue burden on other participants (lack of legal resources) WTO member can also file amicus curiae briefs.
Causes of Action
When do Members have access?
1) Violation complaints (presumption that the benefits are impaired or nullified- doubtful whether it may rebutted) most common type of complaint 2) Nullification or impairment of benefits (the aggrieved party needs to show impairment of benefits) none successful so far 3) Situation complaints. No cases.
Standing to Bring Claims
EC-Bananas EC questions the legal interest of the US to bring a dispute about bananas because US bananas production is minimal; no export of bananas AB: Members have broad discretion in deciding whether to bring a case Actio popularis
Third parties:
a) Opportunity to be heard b) No right of appeal c) Original complaints => Parties
Number of Disputes
424 disputes as of 20 April 2011
11%
Success Rate
At least one violation No violation
This disparity transcends case type, country identity, income level and other litigant specific characteristics.
89%
Atypical Measures subject to WTO DSM
1) Private actions attributable to a government (Korea beef) case by case assessment 2) Measures no longer in force can be the subject of examination if they currently affect the operation of a covered agreement.
3) Legislation as such: only legislation that mandates a violation of GATT obligations can be found in violation of these obligations.
-GATT panels: legislation which gives discretion to executive authorities to act inconsistently with GATT cannot be challenged (only the application inconsistent with GATT of such discretionary measures can be challenged).
-WTO panel: legislation with discretion can violate WTO law too, as it ‘constitute an ongoing threat and can produce a chilling effect’ on the individual economic operators and WTO Members
Rules of Interpretation
3.2 DSU = goal of the DSS is to clarify provisions in accordance with customary rules of treaty interpretation Article 31 and 32 of the Vienna Convention Law of Treaties (VCLT)= customary international law Textual, systemic and teleological interpretation= one holistic rule of interpretation rather than a sequence of separate tests to be applied in a hierarchical order.
Principle of effectiveness (ut res magis valeat quam pereat) Article 31(3) (c) =WTO law is not to be read in clinical isolation from public international law - Evolutionary interpretation - only those rules of international law applicable in the relations between all WTO members ( EC biotech- award criticized)
Rules of Interpretation
Article 31 VCLT
1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
: General rule of interpretation 2. The context for the purpose of the interpretation of a treaty shall comprise…its preamble and annexes… 3. There shall be taken into account, together with the context: […] (c) any relevant rules of international law applicable in the relations between the parties. […]
Article 32 VCLT
supplementary means of interpretation (preparatory works- historical background- negotiating history) if the interpretation according to Article 31 leaves the meaning obscure or leads to absurd results.
Burden of Proof
The party who asserts a fact bears the burden of proof (needs to provide proof).
- Sufficient evidence is produced= the burden shifts to the other party. Actori incumbit probatio complaining party to establish a inconsistency with WTO law - prima facie case = evidence and legal argument - rebuttal - the panel balances all evidence on record; not bound by the arguments of the parties -if uncertainty remains benefit of doubt to the defending party = the burden of proof is on the prima facie case Jura novit curia of Legal responsibility of the defendant to raise a defence
The WTO DSM: Institutions
Dispute Settlement Body (political body)
Establishes panels; appoints Members of AB Adopts panel and AB reports Supervises the implementation Authorizes sanctions Panels (3 or 5 persons) (quasi-judicial) - Well qualified individuals Selected from a roster of persons suggested by Members Serve in their individual capacities (independence) Appellate Body (7 persons -4 years mandate) Reviews panel rulings Standing institution Demonstrated expertise in int’l trade law Not affiliated with any government
Legal Effect
Reports are binding on the parties to the dispute once the DSB adopts them.
No legal effect on other WTO members No precedents!
Article 3.2 DSU "[r]ecommendations and rulings of the DSB and obligations provided in covered agreements cannot add to or diminish the rights ".
Ministerial Conference and General Council have the exclusive authority to adopt interpretations of the covered agreements (IX WTO Agreement)
Compliance with Recommendations and Rulings
15% Compliance within RPoT No compliance within RPoT 85%
Remedies
1) 2) 3)
Withdrawal of the WTO-inconsistent measure Compensation Retaliation (suspension of concessions)
Withdrawal
(immediate) withdrawal of the WTO-inconsistent measure= obligation to cease the illegal conduct If this impracticable reasonable period of time for implementation (no > 15 months) (Art. 21) A period set by the DSB after proposal by the Member concerned; A period agreed by the parties A period determined through arbitration The domestic or political situation in the Member concerned is of no relevance in determining the reasonable period of time; Particular attention should be paid to matters affecting DCs
Sequencing Problem
1) 2) Sequencing problem: lack of guidance over what a losing party must do to comply.
Loosing party takes minimal steps and declare itself in full compliance; The winning party disagrees!
EC Bananas
1) compliance panel under art. 21 Revised banana regulations violated the GATT and the GATS 2) Arbitral panel under art. 22 Set the amount of compensation due to continued nullification or impairment of trade benefits Confusion, amendment would be better (Shoenbaum, Palmeter and Mavroidis)
Compensation
Failure to comply with recommendations and rulings of the DSB within a reasonable period of time trade areas future)
C o m p e n s a t i o n
Temporary, until implementation takes place Additional trade concessions by the losing party in related Forward looking (only damages that will be suffered in the Voluntary (parties have to agree) Option to buy out treaty obligations?
Retaliation
If no satisfactory compensation is agreed, Any Party having invoked the dispute settlement procedure May request authorization from the DSB to retaliate; -no need for the parties to agree -trade destructive, poisons int’l relations, inadequate to offset the losses -not a genuine option for developing countries But see Gambling case Antigua Barbuda v US
Authorized and monitored by the DSB
Retaliation
Suspension of concessions, equivalent to the nullification or impairment of benefits
Parallel Same sector Cross-sector Different sectors Same agreements Cross-Agreement
Towards
Stare Decisis
?
Evidence of treaty practice Persuasive or ‘informal’ precedents: they create ‘legitimate expectations’ among parties (US Japan Alcoholic Beverages, US Shrimp Turtle) Systemic considerations binding precedent but civil law jurisdictions comprise the majority of WTO members common law jurisdictions, Zeroing cases : acts of rebellion or declarations of independence?
Critical Assessment
Pros
Rule-oriented settlements v. power-oriented dispute settlements Quasi-judicial mode Very successful mechanism
Cons
Making law instead of interpreting law No mechanisms to correct AB’s mistakes (Matsushita Shoenbaum Mavroidis peer review group) need to open the dispute settlement process