DISPUTE SETTLEMENT UNDER WTO

Nagendra Goel*

The WTO (World Trade Organization) provides for a strong and effective multilateral grievance settlement mechanism for settlement of disputes between member Nations.

The procedures were prepared during the Uruguay Round which is innovative and significant. It is based on security and predictability which are necessary for traders and market participants. The procedure is called the Dispute Settlement Understanding (DSU) and is administered by the Dispute Settlement Board (DSB).

The General Council of the WTO functions as the Dispute Settlement Board and is chiefly responsible for implementation of the rules and regulations relating to inter-governmental disputes. The disputes arising under multilateral trade agreements are first sent for consultations. Alternative dispute settlement procedures such as conciliation, good offices, mediation and arbitration are primarily employed. After the failure of the efforts for mutual settlement the parties should after 60 days bring the dispute to the dispute settlement body.

The parties may approach the DSB for the constitution of a panel thereby setting into motion the dispute settlement mechanism. The panel is required to submit its recommendation within six to nine months after an objective assessment of the case, to the DSB. The DSB would then on adoption of the report, implement it and authorize retaliatory measures, if necessary. The decisions have to be implemented by the parties within reasonable time not exceeding fifteen months from the date of report of the panel or Appellate Body. Non-compliance by the members can be visited with sanctions which may take the form of suspension of concession or other obligations which may adversely affect the trade of the party in breach.

It is generally agreed that the doctrine of precedent is not applicable to international proceedings but this concept is not totally given up by the international adjudicating forums. The Marrakesh Agreement establishing the WTO requires in Article 16.1 that the WTO “shall be guided by the decisions, procedures and customary practices followed by the contracting parties to GATT 1947 ………….” It has also been stated by the Appellate Body that WTO is part of general legal landscape for world affairs and thus in interpreting the WTO Uruguay Round Text, it shall apply the customary rules of general public international law which are expressed in the Vienna Convention on the Law of Treaties, 1969.

The major areas of dispute till date amongst member nations have been on subsidies, custom duties, sanitary and phytosanitary cases and patent protection.

EXAMPLES

Subsidies : Brazil requested a panel to be set up to examine whether Canada 's new aircraft financing system is WTO compatible. It alleged that the system had an element of subsidy in it.

Custom Duties : US and Canada showed grave concern over the way the EC (European Commission) was using representative prices quoted on world grain exchanges rather than transactional values. This resulted in greater duty paid import prices in EC markets as transactions value was higher than the representative price.

Sanitary and Phytosanitary cases : The agreements cover areas exposed to risks to animals or plant life or health, from diseases and pests and risks arising from additives, contaminants, toxins or diseases carrying organisms in foods, beverages or feedstuffs.

In a case EU banned beef imports from USA and Canada on grounds that it was hormone treated and as such poses health hazards. The claims of the EU scientists were rejected by US and Canadian scientists. The DSB though ruled in favour of Canada and USA , the EU continued to disallow import of beef but agreed to pay compensation to Canada and USA .

Patent : In some countries the practice is to patent a product while in some others the process is patented. The WTO Trips Agreement realizing this difficulty provides for transnational patent arrangements.

India challenged the patenting of Basmati rice, turmeric and neem products by some US firms. The US firms applied for patent of Basmati rice under US Law by the name of Taxmati and Kansmati. After India protested the US firms withdrew their claim.

CONCLUSION

But, the procedures are not free from certain drawbacks. The dispute settlement proceedings are extremely expensive and also the developing and least developed countries do not have necessary legal expertise to handle such cases. Also, the proceedings are competitively used by certain developed countries to prove their aggression to domestic constituencies.

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* The writer is a Supreme Court Advocate and a Qualified Chartered Accountant.