DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE

EFFECTIVENESS OF DISPUTE SETTLEMENT BOARD IN WORLD TRADE

ORGANISATION.

SUBJECT

Public international law

NAME OF THE FACULTY

PROF. Varshita mangamoori.

Name of the Candidate

Roll No. & Semester

Jaswanth siram

2016043 & SEMESTER -V

SYNOPSIS

INTRODUCTION

The WTO was born out of negotiations, and everything the WTO does is the result of
negotiations. The bulk of the WTO’s current work comes from the 1986–94 negotiations
called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs
and Trade (GATT). The WTO is currently the host to new negotiations, under the ‘Doha
Development Agenda’ launched in 2001.

Where countries have faced trade barriers and wanted them lowered, the negotiations have
helped to open markets for trade. But the WTO is not just about opening markets, and in
some circumstances its rules support maintaining trade barriers — for example, to protect
consumers or prevent the spread of disease.

At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s
trading nations. These documents provide the legal ground rules for international commerce.
They are essentially contracts, binding governments to keep their trade policies within agreed
limits. Although negotiated and signed by governments, the goal is to help producers of
goods and services, exporters, and importers conduct their business, while allowing
governments to meet social and environmental objectives.

The system’s overriding purpose is to help trade flow as freely as possible — so long as there
are no undesirable side effects — because this is important for economic development and
well-being. That partly means removing obstacles. It also means ensuring that individuals,
companies and governments know what the trade rules are around the world, and giving them
the confidence that there will be no sudden changes of policy. In other words, the rules have
to be ‘transparent’ and predictable.

Trade relations often involve conflicting interests. Agreements, including those painstakingly
negotiated in the WTO system, often need interpreting. The most harmonious way to settle
these differences is through some neutral procedure based on an agreed legal foundation.
That is the purpose behind the dispute settlement process written into the WTO agreements.1

1
World trade organisation < https://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm> last
accessed on 15th October 2018.
RESEARCH QUESTION

Who are the members state using the WTO DSS? Is it used equally by developed, developing
and least developed countries? Are poor countries more likely than rich ones to settle cases?

How long do WTO dispute settlement procedures take?

OBJECTIVES OR AIM OF THE STUDY:

The objective of the study is to find out how wto influences disputing parties and try to solve
those cases under wto?

SIGNIFICANCE OR BENEFIT OF THE STUDY:

The significant of the study is to learn how the international trade organisation play key role
in settling disputes.

SCOPE OF THE STUDY:

The scope of the study is limited to those disputes which are solved by the world trade
organisation.

REVIEW OF LITERATURE:

The dispute settlement procedure of the World Trade Organization (WTO) is governed by
the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
With certain exceptions, the DSU is uniformly applicable to differences that arise in the
context of all WTO agreements. In some cases, the “Special or Additional Rules and
Procedures Contained in the Covered Agreements” apply.

RESEARCH METHODOLOGY:

This project is purely Doctrinal and explanatory based on primary and secondary sources
such as websites, books, articles and internet sources. The referencing style followed in this
project is OSCOLA (The Oxford University Standard for Citation of Legal Authorities)
format of citation. This Research process deals with theoretical and analyzing information
that is collected. The Research is purely descriptive in its boundaries of the topic.

INTRODUCTION
The General Council convenes as the Dispute Settlement Body (DSB) to deal with disputes
between WTO members. Such disputes may arise with respect to any agreement contained in
the Final Act of the Uruguay Round that is subject to the Understanding on Rules and
Procedures Governing the Settlement of Disputes (DSU). The DSB has authority to establish
dispute settlement panels, refer matters to arbitration, adopt panel, Appellate Body and
arbitration reports, maintain surveillance over the implementation of recommendations and
rulings contained in such reports, and authorize suspension of concessions in the event of
non-compliance with those recommendations and rulings.

The dispute settlement procedure of the World Trade Organization (WTO) is governed by the
Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). With
certain exceptions, the DSU is uniformly applicable to differences that arise in the context of
all WTO agreements. In some cases, the “Special or Additional Rules and Procedures
Contained in the Covered Agreements” apply. WTO demands that all its Members respect the
rules in the interests of a safer and more reliable multilateral trade system. In this sense, WTO
Members have agreed that, when they judge that other Members have broken trade rules, they
shall refer the matter to the dispute settlement mechanism rather than adopting unilateral
measures. This involves complying with the agreed procedures and respecting the decisions
reached by the dispute settlement bodies set up for that purpose.2

Dispute settlement is regarded by the World Trade Organization (WTO) as the

central pillar of the multilateral trading system, and as the organization's "unique contribution
to the stability of the global economy". A dispute arises when one member country adopts a
trade policy measure or takes some action that one or more fellow members considers to a
breach of WTO agreements or to be a failure to live up to obligations. By joining the WTO,
member countries have agreed that if they believe fellow members are in violation of trade
rules, they will use the multilateral system of settling disputes instead of taking action
unilaterally — this entails abiding by agreed procedures (Dispute Settlement Understanding)
and respecting judgments, primarily of the Dispute Settlement Body (DSB), the WTO organ
responsible for adjudication of disputes. A former WTO Director-General characterized the
WTO dispute settlement system as "the most active international adjudicative mechanism in
the world today.

2
DISPUTE SETTLEMENT IN THE WORLD TRADE ORGANIZATION https://idatd.cepal.org/soluciones/iTemplate-
OMC-explicacion.pdf
BODIES

WTO bodies include the political institution known as the Dispute Settlement Body (DSB)
and the independent and quasi-judicial institutions that are the Panels, the Appellate Body
and Arbitrators:

I – Dispute Settlement Body (DSB) - article 2 of the DSU - Comprises a chairman (head of
the permanent mission of one of the Member countries appointed by consensus among the
Members of WTO) and representatives of all WTO Members (government representatives,
usually diplomats who belong to ministries of trade or foreign affairs). In their capacity as
government officials, the representatives receive instructions from their governments on the
positions they must adopt and the statements they must make within the DSB, hence the latter
is considered a political body. - The DSB is responsible for the application of the DSU, in
other words it oversees the entire dispute settlement procedure. It has the authority to set up
panels, adopt panel and Appellate Body reports, monitor the application of recommendations
and authorize retaliatory measures when a Member fails to comply with rulings. - The DSB
usually meets once a month, and the Director-General may convene extraordinary meetings
at the request of Members. The staff of the WTO Secretariat provide administrative support
to the DSB. - As a general rule, the DSB makes decisions by consensus. However, when the
DSB sets up panels, adopts reports or authorizes retaliation, the decision is automatically
considered to be adopted, unless there is a consensus to the contrary (a negative consensus).

II – Director-General and Secretariat of WTO –

The Director-General of WTO participates in the Dispute Settlement Body (DSB) in the
following ways: The Director-General may, acting in an ex officio capacity, offer good
offices, conciliation or mediation with the view to assisting Members to settle a dispute
(article 5.6 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes (DSU)), especially in cases involving a less developed country; If there is no
agreement on the panelists, at the request of either party, the Director-General, in consultation
with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall
convene DSB meetings and determine the composition of the panel (article 8.7);

The Director-General appoints an Arbitrator to determine a reasonable period of time if

the parties are unable to agree on a period of time or the appointment of an Arbitrator (article
21.3 c); The Director-General shall examine proposed retaliatory measures in cases of non-
implementation (article 22.6). Within the Dispute Settlement Body (DSB), the Secretariat can
act in the following ways (article 27): Reports to the Director-General; provides assistance in
respect of dispute settlement to Members at their request; organizes special training courses
and provides additional legal advice and assistance to developing country Members; provides
assistance to parties in the formation of panels; and helps established panels and provides
administrative support to the DSB.

III - Panels - articles 6, 7 and 8 of the DSU - Panels are quasi-judicial bodies responsible for
settling differences between Members in the first instance. - They comprise three, and in
exceptional cases five, experts specially selected for each case (there is no permanent panel,
but rather a different one is set up for each case). WTO Members regularly put forward
names to be included in the list kept by the Secretariat. People appointed to a panel provide
their services independently, in an individual capacity, and not as a representative of any
government or organization.

IV – Appellate Body - article 17 of the DSU - Unlike the panels, the Appellate Body is a
standing body made up of seven members appointed by the DSB by consensus and for a
period of four years, with a maximum of two terms. The Appellate Body examines the legal
aspects of panel reports (rather than studying evidence or facts), and represents the second
and final instance of the legal process.

V - Arbitrators - article 25 of the DSU - Arbitration is an alternative means of dispute

settlement to panels and the Appellate Body. Arbitrators can thus be called on to resolve
certain issues at various stages of the dispute settlement process (when there is no agreement
on determining the reasonable period of time or on the level of retaliation). Arbitral awards
are not subject to appeal and may be enforced by the DSB.

VI - Experts - article 13 and appendix 4 of the DSU - Panels may seek the opinions of
experts in dealing with technical or scientific issues, such as when the case relates to the
Agreement on the Application of Sanitary and Phytosanitary Measures, Agreement on
Technical Barriers to Trade, or the Agreement on Subsidies and Countervailing Measures. -
Groups of experts act under the authority of the panel, and provide the latter with their
opinion. These groups carry out a purely consultative role. The final decision on legal issues
and fact-finding, based on expert opinion, remains with the panel.3

3
https://idatd.cepal.org/soluciones/iTemplate-OMC-explicacion.pdf
DISPUTE SETTLEMENT UNDERSTANDING

In 1994, the WTO members agreed on the Understanding on Rules and Procedures
Governing the Settlement of Disputes or Dispute Settlement Understanding (DSU) (annexed
to the "Final Act" signed in Marrakesh in 1994). 4 Pursuant to the rules detailed in the DSU,
member states can engage in consultations to resolve trade disputes pertaining to a "covered
agreement" or, if unsuccessful, have a WTO panel hear the case. 5 The priority, however, is to
settle disputes,
Duration of a Dispute Settlement procedure
through
These approximate periods for each stage of a dispute settlement
consultations
procedure are target figures
if possible. By
The agreement is flexible. In addition, the countries can settle
January 2008,
their dispute themselves at any stage.
only about 136
Totals are also approximate.
of the nearly 60 days Consultations, mediation, etc.
369 cases had 45 days Panel set up and panellists appointed
6 months Final panel report to parties
reached the 3 weeks Final panel report to WTO members
full panel 60 days Dispute Settlement Body adopts report (if no appeal)
process. Total = 1 year (without appeal)
60–90 days Appeals report
The operation 30 days Dispute Settlement Body adopts appeals report
Total = 1 year 3 months (with appeal)
of the WTO
Source:Understanding the WTO: Settling Disputes - A unique contribution
dispute
settlement process involves the parties and third parties to a case and may also involve the
DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts, and
several specialized institutions. The General Council discharges its responsibilities under the
DSU through the Dispute Settlement Body (DSB). Like the General Council, the DSB is
composed of representatives of all WTO Members. The DSB is responsible for administering
the DSU, i.e. for overseeing the entire dispute settlement process. It also has the authority to
establish panels, adopt panel and Appellate Body reports, maintain surveillance of
implementation of rulings and recommendations, and authorize the suspension of obligations
under the covered agreements. The DSB meets as often as necessary to adhere to the
timeframes provided for in the DSU.

4
 Bown, Chad P.; Mavroidis, Petros C. (2017-04-01). "WTO Dispute Settlement in 2015: Going Strong after
Two Decades". World Trade Review. 16 (2): 153–158. doi:10.1017/S1474745616000604. ISSN 1474-7456.
5
tewart-Dawyer, The WTO Dispute Settlement System, 7
From complaint to final report

If a member state considers that a measure adopted by another member state has deprived it
of a benefit accruing to it under one of the covered agreements, it may call for consultations
with the other member state.6 If consultations fail to resolve the dispute within 60 days after
receipt of the request for consultations, the complainant state may request the establishment
of a Panel. It is not possible for the respondent state to prevent or delay the establishment of a
Panel, unless the DSB by consensus decides otherwise.7 The panel, normally consisting of
three members appointed ad hoc by the Secretariat, sits to receive written and oral
submissions of the parties, on the basis of which it is expected to make findings and
conclusions for presentation to the DSB. The proceedings are confidential, and even when
private parties are directly concerned, they are not permitted to attend or make submissions
separate from those of the state in question.8 Disputes can also arise under Non-violation
nullification of benefits claims.9

The final version of the panel's report is distributed first to the parties; two weeks later it is
circulated to all the members of the WTO. In sharp contrast with other systems, the report is
required to be adopted at a meeting of the DSB within 60 days of its circulation, unless the
DSB by consensus decides not to adopt the report or a party to the dispute gives notice of its
intention to appeal.10 A party may appeal a panel report to the standing Appellate Body, but
only on issues of law and legal interpretations developed by the panel. Each appeal is heard
by three members of the permanent seven-member Appellate Body set up by the Dispute
Settlement Body and broadly representing the range of WTO membership. Members of the
Appellate Body have four-year terms. They must be individuals with recognized standing in
the field of law and international trade, not affiliated with any government. The Appellate
Body may uphold, modify or reverse the panel's legal findings and conclusions. Normally
appeals should not last more than 60 days, with an absolute maximum of 90 days.11 The
possibility for appeal makes the WTO dispute resolution system unique among the judicial
processes of dispute settlement in general public international law.12
6
Article 2.3 of the DSU
7
A.F. Lowenfeld, International Economic Law, 152
8
Article 6.1 of the DSU
9
A.F. Lowenfeld, International Economic Law, 153
10
Faunce TA, Neville W and Anton Wasson A. Non Violation Nullification of Benefit Claims: Opportunities
and Dilemmas in a Rule-Based WTO Dispute Settlement System in Bray M (ed) Ten Years of WTO Dispute
Settlement: Australian Perspectives. Office of Trade Negotiations of the Department of Foreign Affairs and
Trade.Commonwealth of Australia. 123-140
11
 Article 6.1 of the DSU
12
Article 17 of the DSU.
Members may express their views on the report of the Appellate Body, but they cannot derail
it. The DSU states unequivocally that an Appellate Body report shall be adopted by the DSB
and unconditionally accepted by the parties, unless the DSB decides by consensus within
thirty days of its circulation not to adopt the report 13. Unless otherwise agreed by the parties
to the dispute, the period from establishment of the panel to consideration of the report by the
DSB shall as a general rule not exceed nine months if there is no appeal, and twelve months
if there is an appeal.14

Compliance

The DSU addresses the question of compliance and retaliation. Within thirty days of the
adoption of the report, the member concerned is to inform the DSB of its intentions in respect
of implementation of the recommendations and rulings. If the member explains that it is
impracticable to comply immediately with the recommendations and rulings, it is to have a
"reasonable period of time" in which to comply. This reasonable amount of time should not
exceed 15 months. If no agreement is reached about the reasonable period for compliance,
that issue is to be the subject of binding arbitration; the arbitrator is to be appointed by
agreement of the parties. If there is a disagreement as to the satisfactory nature of the
measures adopted by the respondent state to comply with the report, that disagreement is to
be decided by a panel, if possible the same panel that heard the original dispute, but
apparently without the possibility of appeal from its decision. The DSU provides that even if
the respondent asserts that it has complied with the recommendation in a report, and even if
the complainant party or the panel accepts that assertion, the DSB is supposed to keep the
implementation of the recommendations under surveillance.15

Compensation and retaliation

If all else fails, two more possibilities are set out in the DSU:

 If a member fails within the "reasonable period" to carry out the recommendations
and rulings, it may negotiate with the complaining state for a mutually acceptable
compensation. Compensation is not defined, but may be expected to consist of the grant
of a concession by the respondent state on a product or service of interest to the
complainant state.

13
M. Panizzon, Good Faith in the Jurisprudence of the WTO, 275
14
Article 20 of the DSU.
15
Article 22.2 of the DSU
 If no agreement on compensation is reached within twenty days of the expiry of the
"reasonable period", the prevailing state may request authorization from the DSB to
suspend application to the member concerned of concessions or other obligations under
the covered agreements. The DSU makes clear that retaliation is not favored, and sets the
criteria for retaliation. In contrast to prior GATT practice, authorization to suspend
concessions in this context is semi-automatic, in that the DSB "shall grant the
authorization [...] within thirty days of the expiry of the reasonable period", unless it
decides by consensus to reject the request. Any suspension or concession or other
obligation is to be temporary. If the respondent state objects to the level of suspension
proposed or to the consistency of the proposed suspension with the DSU principles, still
another arbitration is provided for, if possible by the original panel members or by an
arbitrator or arbitrators appointed by the Director-General, to be completed within sixty
days from expiration of the reasonable period.
While such "retaliatory measures" are a strong mechanism when applied by economically
powerful countries like the United States or the European Union, when applied by
economically weak countries against stronger ones, they can often be ignored. Whether or not
the complainant has taken a measure of retaliation, surveillance by the DSB is to continue, to
see whether the recommendations of the panel or the Appellate Body have been
implemented16.

The number of cases over the years A dispute between two WTO member states is formally
initiated by a request for consultations under DSU Article 4. A member who receives such
request for consultations is obliged to accord it sympathetic consideration and afford
adequate opportunity for the consultations.17 If the consultations fail to settle a dispute
within 60 days, the complaining party has the right to request the establishment of a dispute
settlement panel.18 In some cases, approximately 20% of the whole,19 the consultations lead
to a mutually agreed resolution of the dispute. In most cases, however, the dispute is referred
to a panel. Between January 1, 1995, when the WTO dispute settlement system became
functional, and December 31, 2016, the system has dealt with 573 requests for
consultations.20 It has issued over 350 dispute settlement decisions.

Cases

16
https://www.wto.org/english/res_e/booksp_e/14_anrep18_disputesettlement_e.pdf
A WTO dispute: The ‘shrimp-turtle’ case This was a case brought by India, Malaysia,
Pakistan and Thailand against the US. The appellate and panel reports were adopted on 6
November 1998. The official title is “United States — Import Prohibition of Certain Shrimp
and Shrimp Products”, the official WTO case numbers are 58 and 61. What was it all about?
Seven species of sea turtles have been identified. They are distributed around the world in
subtropical and tropical areas. They spend their lives at sea, where they migrate between their
foraging and nesting grounds. Sea turtles have been adversely affected by human activity,
either directly (their meat, shells and eggs have been exploited), or indirectly (incidental
capture in fisheries, destroyed habitats, polluted oceans). In early 1997, India, Malaysia,
Pakistan and Thailand brought a joint complaint against a ban imposed by the US on the
importation of certain shrimp and shrimp products. The protection of sea turtles was at the
heart of the ban. The US Endangered Species Act of 1973 listed as endangered or threatened
the five species of sea turtles that occur in US waters, and prohibited their “take” within the
US, in its territorial sea and the high seas. (“Take” means harassment, hunting, capture,
killing or attempting to do any of these.) Under the act, the US required US shrimp trawlers
to use “turtle excluder devices” (TEDs) in their nets when fishing in areas where there is a
significant likelihood of encountering sea turtles. Section 609 of US Public Law 101–102,
enacted in 1989, dealt with imports. It said, among other things, that shrimp harvested with
technology that may adversely affect certain sea turtles may not be imported into the US —
unless the harvesting nation was certified to have a regulatory programme and an incidental
take-rate comparable to that of the US, or that the particular fishing environment of the
harvesting nation did not pose a threat to sea turtles. In practice, countries that had any of the
five species of sea turtles within their jurisdiction, and harvested shrimp with mechanical
means, had to impose on their fishermen requirements comparable to those borne by US
shrimpers if they wanted to be certified to export shrimp products to the US. Essentially this
meant the use of TEDs at all times.

The ruling In its report, the Appellate Body made clear that under WTO rules, countries have
the right to take trade action to protect the environment (in particular, human, animal or plant
life and health) and endangered species and exhaustible resources). The WTO does not have
to “allow” them this right. It also said measures to protect sea turtles would be legitimate
under GATT Article 20 which deals with various exceptions to the WTO’s trade rules,
provided certain criteria such as non-discrimination were met. The US lost the case, not
because it sought to protect the environment but because it discriminated between WTO
members. It provided countries in the western hemisphere — mainly in the Caribbean —
technical and financial assistance and longer transition periods for their fishermen to start
using turtle-excluder devices. It did not give the same advantages, however, to the four Asian
countries (India, Malaysia, Pakistan and Thailand) that filed the complaint with the WTO.
The ruling also said WTO panels may accept “amicus briefs” (friends-of-the-court
submissions) from NGOs or other interested parties.17

INDIA – PATENTS (EC)1 (DS79)

PARTIES AGREEMENT TIMELINE OF THE DISPUTE Complainant European

Communities TRIPS Arts. 70.8 and 70.9 Establishment of Panel 16 October 1997 Circulation
of Panel Report 24 August 1998 Respondent India Circulation of AB Report NA Adoption 22
September 1998

1. MEASURE AND INTELLECTUAL PROPERTY AT ISSUE • Measure at issue:

(i) The insufficiency of the legal regime – India's “mailbox rule” – under which patent
applications for pharmaceutical and agricultural chemical products could be filed; and

(ii) the lack of a mechanism for granting exclusive marketing rights to such products. •
Intellection property at issue: Patent protection for pharmaceutical and agricultural chemical
products, as provided under TRIPS Agreement Art. 27. 2.

SUMMARY OF KEY PANEL FINDINGS2 •

TRIPS Art. 70.8 (filing of patent application): The Panel held that India's filing system based
on “administrative practice” for patent applications for pharmaceutical and agricultural
chemical products was inconsistent with Art. 70.8.

The Panel found that the system did not provide the “means” by which applications for
patents for such inventions could be securely filed within the meaning of Art. 70.8(a),
because, in theory, a patent application filed under the current administrative instructions
could be rejected by the court under the contradictory mandatory provisions of the pertinent
Indian law – the Patents Act of 1970. • TRIPS Art. 70.9 (exclusive marketing rights): The
Panel found that there was no mechanism in place in India for the grant of “exclusive
marketing rights” for pharmaceutical and agricultural chemical products and thus Art. 70.9
had been violated.
17
http://www.meti.go.jp/english/report/downloadfiles/2012WTO/02_16.pdf
Indonesia — Autos case: Complainant: European Communities

Respondent: Indonesia

Third Parties: India; Korea, Republic of; United States.

On 3 October 1996, the EC requested consultations with Indonesia, on 4 October 1996 and
29 November 1996, Japan requested consultations with Indonesia, and on 8 October 1996,
the US requested consultations with Indonesia concerning Indonesia’s National Car
Programme. The EC alleged that the exemption from customs duties and luxury taxes on
imports of “national vehicles” and components thereof, and related measures were in
violation of Indonesia’s obligations under Articles I and III of GATT 1994, Article 2 of the
TRIMs Agreement and Article 3 of the SCM Agreement. Japan contended that these
measures were in violation of Indonesia’s obligations under Articles I:1, III:2, III:4 and
X:3(a) of GATT 1994, as well as Articles 2 and 5.4 of the TRIMs Agreement. The US
contended that the measures were in violation of Indonesia’s obligations under Article I and
III of GATT 1994, Article 2 of the TRIMs Agreement, Article 3, 6 and 28 of the SCM
Agreement and Articles 3, 20 and 65 of the TRIPS Agreement.

On 17 April 1997, Japan requested the establishment of a panel with respect to complaints
WT/DS55 and WT/DS64. At its meeting on 30 April 1997, the DSB deferred the
establishment of a panel. On 12 May 1997, the EC requested the establishment of a panel
with respect to WT/DS54. At its meeting on 23 May 1997, the DSB deferred the
establishment of a panel.

Panel and Appellate Body proceedings

Further to the EC’s and Japan’s second requests, the DSB established a panel at its meeting
on 12 June 1997. In accordance with Article 9.1 of the DSU, the DSB decided that a single
panel will examine the disputes WT/DS54, WT/DS55 and WT/DS64. India, Korea and the
US reserved their third party rights.

On 12 June 1997, the US requested the establishment of a panel. At its meeting on 25 June
1997, the DSB deferred the establishment of a panel. Further to a second request to establish
a panel by the US, the DSB established a Panel at its meeting on 30 July 1997. In accordance
with Article 9.1 of the DSU, the DSB decided that a single panel will examine this dispute
together with WT/DS54, WT/DS55 and WT/DS64. India and Korea reserved their third party
rights.
On 25 July 1997, the EC and Japan requested the Director-General to determine the
composition of the Panel. On 29 July 1997, the Panel was composed.

The report of the Panel was circulated to Members on 2 July 1998. The Panel found that
Indonesia was in violation of Articles I and II:2 of GATT 1994, Article 2 of the TRIMs
Agreement, Article 5(c) of the SCM Agreement, but was not in violation of Article 28.2 of
the SCM Agreement. The Panel however, found that the complainants had not demonstrated
that Indonesia was in violation of Articles 3 and 65.5 of the TRIPS Agreement. At its meeting
on 23 July 1998, the DSB adopted the Panel report.

Implementation of adopted reports

Indonesia indicated its intention to comply with the recommendations of the DSB within the
time permissible under Article 21 of the DSU. On 8 October 1998, the EC, pursuant to
Article 21.3 of the DSU, requested that the reasonable period of implementation be
determined by binding arbitration. The Arbitrator determined that the reasonable period of
time for Indonesia to implement the recommendations and rulings of the DSB was 12 months
from the date of adoption of the Panel Report i.e. it expired on 23 July 1999. The report of the
Arbitrator was circulated to Members on 7 December 1998. By a communication dated 15
July 1999, Indonesia informed the DSB that it had issued a new automotive policy on 24 June
1999 (the 1999 Automotive Policy), which effectively implemented the recommendations
and rulings of the DSB in this matter.18

KOREA – ALCOHOLIC BEVERAGES1 (DS75, 84)

PARTIES AGREEMENT TIMELINE OF THE DISPUTE

Complainants European Communities, United States GATT Art. III:2, second sentence.

Establishment of Panel 16 October 1997 Circulation of Panel Report 17 September 1998
Respondent Korea Circulation of AB Report 18 January 1999 Adoption 17 February 1999 1.

MEASURE AND PRODUCT AT ISSUE •

Measure at issue: Korea's tax regime for alcoholic beverages, which imposed different tax
rates for various categories of distilled spirits.

• Product at issue: Imported distilled liquors and Soju (traditional Korean alcoholic
beverage).
18
Wto Indonesia — Certain Measures Affecting the Automobile Industry
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds54_e.htm last accessed on 17th October 2018.
 2. SUMMARY OF KEY PANEL/AB FINDINGS

• GATT Art.  III:2 (national treatment – taxes and charges), second sentence (directly
competitive or substitutable products):

The Appellate Body upheld the Panel's conclusion that the Korean tax measures at issue were
inconsistent with Art. III:2, second sentence: More specifically, the Appellate Body upheld
the Panel's findings that the products at issue were “directly competitive or substitutable”
within the meaning of Art. III:2, second sentence and that Korea's tax measures on alcoholic
beverages were applied “so as to afford protection” to domestic production within the
meaning of Art. III:2, second sentence. On the question of the interpretation and application
of the term “directly competitive or substitutable product”,

the Appellate Body upheld the Panel's approach: (i) the Panel correctly considered evidence
of “present direct competition”, not the future evolution of the market, by referring to the
potential for the products to compete in a market free of protection because in a protected
market consumer preferences may have been influenced by that protection; (ii) the Panel was
not wrong in looking to the Japanese market for an indication of how the Korean market may
develop without the distortions caused by protection; and (iii) the Panel's approach of
grouping the products, which was based in part on a collective assessment of the products and
in part on individual assessment, was not flawed.

In addressing the issue of “so as to afford protection” under Art.  III:2, second sentence, both
the Panel and the Appellate Body once again emphasized the importance of examining the
“design, structure, and architecture” of the measures, as previously clarified by the Appellate
Body in Japan – Alcoholic Beverages II.19

BANANAS CASE20

1. MEASURE AND PRODUCT AT ISSUE

• Measure at issue: The European Communities' regime for the importation, distribution and
sale of bananas, introduced on 1 July 1993 and established by EEC Council Regulation
404/93.

19
WTO Dispute Settlement: 2015 EDITION
https://www.wto.org/english/res_e/booksp_e/dispu_settl_1995_2014_e.pdf
20
Ibid.
 • Product at issue: Bananas imported from third countries.2 2. SUMMARY OF KEY
PANEL/AB FINDINGS

• GATT Art. XIII (non-discriminatory administration of quantitative restrictions):

The Appellate Body upheld the Panel's finding that the allocation of tariff quota
shares to some Members not having a substantial interest in supplying bananas, but not to
others, was inconsistent with Art. XIII:1. The Appellate Body also agreed with the Panel that
the BFA tariff quota reallocation rules3, under which a portion of a tariff quota share not used
by one BFA country could be reallocated exclusively to other BFA countries, were
inconsistent with Arts. XIII:1 and XIII:2, chapeau.

• Lomé Waiver: The Appellate Body reversed the Panel's finding and found that the Lomé
Waiver does not apply to (i.e. exempt) violations of GATT Art. XIII given that the Waiver
refers only to Art. I:1 and that waivers must be narrowly interpreted and be subject to “strict
disciplines”.

• GATT Art. I (most-favoured-nation treatment): The Appellate Body upheld the Panel's
finding that the activity function rules, which applied only to licence allocation rules for
imports from other than traditional ACP countries, were inconsistent with Art. I:1. The
Appellate Body also agreed with the Panel that the EC export certificate requirement
accorded an advantage to some Members only, i.e. the BFA countries, in violation of Art. I:1.
In an issue not appealed to the Appellate Body, the Panel found that tariff preferences for
ACP countries were inconsistent with Art. I:1, but that they were justified by the Lomé
Waiver.

• GATT Art. III:4 (national treatment – domestic laws and regulations): The Appellate Body
agreed with the Panel that the EC procedures and requirements for the distribution of licences
for importing bananas from nontraditional ACP suppliers were inconsistent with Art. III:4.

• GATT Art. X:3(a) (trade regulations – uniform, impartial and reasonable administration)
and Licensing Agreement Art. 1.3 (neutral application and fair and equitable administration
of rules): The Appellate Body reversed the Panel's findings of violations of GATT Art.
X:3(a) and Licensing Agreement Art. 1.3, on the grounds that these provisions applied only
to the administrative procedures for rules, not the rules themselves.
• GATS Arts. II (most-favoured-nation treatment) and XVII (national treatment): The
Appellate Body upheld the Panel's finding that the EC measures were inconsistent with Arts.
II and XVII because they were discriminatory, and clarified that the “aim and effect” of a
measure is irrelevant under Arts. II and XVII.

Specificities of the system

In terms of developing country Members of WTO, the Understanding on Rules and

Procedures Governing the Settlement of Disputes (DSU) takes into account their particular
situation. Within the dispute settlement system, the special and differentiated treatment they
receive consists in additional or privileged procedures such as longer time periods.

Effective adjudicatory system The WTO dispute settlement system is an effective and
successful international system for dispute settlement. DirectorGeneral Roberto Azevêdo has
described it as “unquestionably one of – if not the – most active international adjudicatory
systems in the world. And it still operates faster than any other.”

CONCLUSION:

In 2017, the three WTO legal divisions dealt with 38.5 panel, appellate and arbitration
proceedings on average each month, compared with 32.3 in 2016. The number was over 33
per cent more than in 2014 (see Figure 1). At the end of 2017, there were 25 active panel
proceedings, seven appellate proceedings and three arbitration proceedings. Due to the
increase in dispute settlement activity, 29 WTO posts have been redeployed to the legal
divisions over the past two to three years.

Over the past 20 years, WTO members have agreed major updates to the WTO rulebook to
improve the flow of global trade. The WTO's membership has expanded to 164 members,
representing over 98% of international trade. In 2015, the WTO reached a significant
milestone with the receipt of its 500th trade dispute for settlement.

This article has presented the results of a statistical analysis of several aspects of the WTO
dispute settlement system, with a particular emphasis on effectiveness. The system has until
now been very busy, which would seem to reflect that member states have confidence in the
ability of the system to resolve disputes and to uphold their rights under the trade bargain
embedded in the WTO agreements.
 At the same time, the system is far from perfect and there is a keen interest of many
member states to improve its effectiveness and solve some problems that have emerged. Our
examination shows a significant decrease in the number of cases dealt with by the system
over the years, with an average of 37.8 cases per year during the first five years (1995-1999),
and around 19 cases per year on average for the last ten years (2007-2016). As for the users,
the numbers show a clear dominance of developed countries, and in particular the US and
EU, both as complainants and even more so as respondents alleged by other member states
not to have complied with their obligations under the covered agreements (compliance a
priori). Developing countries, which constitute about 53% of all WTO member states,
account for only about 40% of complainants, and even less of respondents. What is most
troubling, however, is that Least Developed Countries are almost non-existent in the system.
The characterization of the most active users is even more evident when using the World
Bank’s categorization of states according to their gross national income per capita. Indeed,
the paper shows a correlation between such income and the number of initiations of dispute
settlement procedures, and an even stronger correlation between GDP and number of
initiations. However, once a poor country has decided to initiate proceedings, it is not more
likely to settle than richer countries.21

The findings of this research should inform the review of the DSU that is ongoing now and
be taken into account when deciding what needs to be amended and improved in the WTO
dispute settlement system. Among other things, member states need to find ways to make the
system more accessible to poor countries, both at the stage of detecting injurious violations
against them, and at the stage of initiating complaints and litigating them. This involves also
financial and technical assistance to developing countries and would constitute an appropriate
part and parcel of the Doha Round which has been labelled the “Doha Development Agenda

References

Banana case background and history Brussels, 5 July 2000,

http://trade.ec.europa.eu/doclib/docs/2003/december/tradoc_114950.pdf last accessed on 19th
October 2018/

21
Arie Reich THE EFFECTIVENESS OF THE WTO DISPUTE SETTLEMENT SYSTEM: A STATISTICAL
ANALYSIS ISSN 1725-6739 <http://cadmus.eui.eu/bitstream/handle/1814/47045/LAW_2017_11.pdf?
sequence=1>
Arie Reich THE EFFECTIVENESS OF THE WTO DISPUTE SETTLEMENT SYSTEM: A
STATISTICAL ANALYSIS ISSN 1725-6739
http://cadmus.eui.eu/bitstream/handle/1814/47045/LAW_2017_11.pdf?sequence=1.

https://www.researchgate.net/publication/267819247_The_WTO_Dispute_Settlement_Mech
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Bown, Chad P.; Mavroidis, Petros C. (2017-04-01). "WTO Dispute Settlement in 2015:

Going Strong after Two Decades". World Trade Review. 16 (2): 153–
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