Dispute Settlement

Mechanism under WTO

Table of Contents
 Introduction
 Stages in settlement of trade disputes
o Stage 1: Consultations (Article 4 of the DSU)
o Stage 2: Establishment of Panels (Articles 6, 8 and 11 of the DSU)
o Stage 3: Selection of panellists (Article 8 of the DSU)
o Stage 4: Procedure of Panel (Articles 10 and 12 of the DSU)
o Stage 5: Interim report (Article 15 of the DSU)
o Stage 6: Appeal (Article 17 of the DSU)
o Stage 7: Acceptance of report by Dispute Settlement Body (Article 30 of the DSU)
 Time framework for Dispute Settlement
o The Director-General
 WTO Secretariat (Article 27 of the DSU)
 Panel
o Composition of the panel:
 Dispute Settlement Body (DSB)
o Composition (Article 4.3 of the WTO agreement)
o Functions 9 (Article 2 of the DSU)
o Time-frame for the decision of Dispute Settlement Body (Article 20 of the DSU)
 Where no appeal is preferred by the parties
 Where an appeal is preferred by the parties
 Standing Appellate Body (Article 17 of the DSU)
 Arbitration (Article 25 of the DSU)
 References

Introduction
The World Trade Organization (WTO) is responsible for maintaining the free
flow of trade between its member countries. WTO, in the form of Dispute
Settlement Undertaking (DSU), provides an instrument for the settling of
trade disputes between the parties. The dispute generally arises when any
member country violates any provision of WTO agreement which other
member countries think unreasonable. 

This dispute settlement process is the outcome of the Uruguay round (1996-
1994). This mechanism provides a speedy resolution of a trade dispute. This
settlement system applies to all disputes covered under the WTO agreement.
The Dispute Settlement Body (DSB) is responsible for DSU to resolve a
dispute between parties.
Stages in settlement of trade disputes

Stage 1: Consultations (Article 4 of the DSU)

Before referring any dispute to mediation or taking any other actions, both
the WTO member countries shall affirm to resolve their disputes through
consultation. If a WTO member requests for consultation with another
Member concerning measures affecting the operations of the former
member, the latter member must accept such request within a period 10
days after the date of receipt of such request and shall enter into
consultation within 30 days. 

If the consultation fails to provide a satisfactory solution to the problem

within 60 days after the date of receipt of the request for consultation, then
the complaining party may request for construction of the panel. All such
requests for consultation and construction shall be notified in writing
including reasons for such requests to the Dispute Settlement Body by the
complaining member.

Stage 2: Establishment of Panels (Articles 6, 8

and 11 of the DSU)
If no satisfactory solution is reached through consultation between the
member countries, the complaining member may request for the
establishment of panels in writing to the Dispute Settlement Body including a
summary of the case and issues involved. The panel is established at the
second meeting of DSB at which request appears as an agenda item of the
meeting.

The function of the Panel is to aid the Dispute Settlement Body in resolving
the matter in dispute. The panel assesses the entire dispute, including the
facts of the case and issues involved therein and examines whether it
conforms with the covered agreement between the member countries. The
Panel shall provide its final report to the parties within 6 months from the
date when panel procedures start.

Stage 3: Selection of panellists (Article 8 of the

DSU)
After the establishment of the panel, the next step is to select panellists. The
panellists are selected by the WTO Secretariat. The parties cannot oppose
the selection unless they state reasons satisfactory to the Secretariat. The
panel shall consist of three panellists. The parties can agree to have five
panellists on board if they consider necessary within 10 days from the
establishment of the panel. 

The WTO Secretariat assists the parties in the selection of panellists by

creating a list of all governmental and non-governmental individuals having
certain qualifications from which panellists may be chosen by the parties. 

Members may, at any reasonable time, make an addition to the list of

individuals by suggesting the name of individuals who can assist the parties
by providing any information related to international trade law or any of the
matter as covered in the agreement because of which dispute arose in the
first place. The addition to the list can be made only after the approval of the
Dispute Settlement Body.

If panellists are not selected within 20 days after the date of establishment of
the panel, the Director-General, in consultation with the Chairman of Dispute
Settlement Body and Chairman of relevant Council or Committee appoint
panellists which they consider appropriate. The chairman of the Dispute
Settlement Body, then informs the members of the composition of the panel
within 10 days. 

Stage 4: Procedure of Panel (Articles 10 and 12

of the DSU)
The panellists shall, within one week after the composition of the panel fix a
timetable for the panel process. After this, the panel decides a deadline for
written submission to be made by each party. Each party has to submit its
submissions with the secretariat which shall transfer each submission to the
panel and submission made by one party shall be sent to the other party as
well. At the first substantive meeting of the panel, the complaining party
shall be the first to present their case ahead of the responding party. 

The third parties who have notified the Dispute Settlement Body having
substantial interest in the subject matter of the dispute are also asked to
present their views during the same meeting. Any rebuttals between the
parties shall be made at the subsequent meeting of the panel. Here, the
responding party shall be the first to respond against the complaining party.
The parties, before that meeting, have to submit their written rebuttals to
the panel. The panel, if they consider necessary, put any questions before
the parties to be answered in the duration of that meeting.

Where after the examination, a solution has been reached between the
parties, the panel shall submit a written report to the Dispute Settlement
Body which shall have a brief description of the case along with the solution
which has been reached. Where the solution has not been found, the panel
shall send a written report to the Dispute Settlement Body mentioning its
findings of the case and recommendations, if any, it makes. 

The report has to be sent within six months of its examination. In case of
urgency, including the case of perishable goods, the report has to be sent
within three months. The maximum period during which the report has to
send is nine months from the establishment of the panel. 

Stage 5: Interim report (Article 15 of the DSU)

Following the oral arguments and rebuttal that has been performed and
examination has been made, the panel shall issue a draft report to the
parties. The parties have to submit their comments in writing after receiving
the draft report within the period set by the panel.

After the expiration of the said period for receiving the comments from the
parties, the panel shall issue an interim report, including its findings in the
draft report and its new findings and conclusion. Both the parties, within the
time given the panel may submit its written request to revise its interim
report accordingly. 

At the request made by the parties, the panel shall call for a further meeting
to discuss the comments made by the parties to the dispute. If both the
parties are satisfied with the solution reached, then such a revised interim
report shall be the final panel report and is circulated among the members.

In case, the parties are not satisfied with the outcome of the report reached
then any objections of the members shall be considered at the meeting of
the Dispute Settlement Body. Such objections have to be reported at least 10
days before the meeting of the Dispute Settlement Body. 

The final report shall be adopted by the Dispute Settlement Body within 60
days from the date panel report is circulated to the members unless any
party to the dispute is unsatisfied with such report and notifies its decision of
appeal to Dispute Settlement Body or the Dispute Settlement Body
unanimously decides not to adopt such report, as the case may be. In case
of an appeal, the report shall deem to be invalid for adoption by the Dispute
Settlement Body unless the Standing Appellate Body provides its Appellate
Body Report. 

Stage 6: Appeal (Article 17 of the DSU)

Either of the parties unsatisfied with the ruling of the panel report can appeal
to the Standing Appellate Body established by the Dispute Settlement Body.
Only parties to the dispute can appeal to a panel report and not the third
parties. Third parties can be allowed to be heard only in case such third party
has notified in writing to the Dispute Settlement Body of its substantial
interest in such dispute.

The proceeding of the Appellate Body shall not exceed 60 days from the date
a party to the dispute notifies its intention of appealing to the Appellate Body
to the Dispute Settlement Body. In case of delay, the maximum period
granted to the Appellate Body is 90 days. The Appellate Body has to submit
in writing to the Dispute Settlement Body its reasons for the delay together
with the period within which the final decision is notified. 

The Appellate Body will not re-examine any shreds of evidence, issues or
previous arguments but its examination shall be limited to laws covered in
the panel report or legal interpretation evolved by the panellists. The
Appellate Body has the power to uphold, modify or reverse the panel report
and provide a conclusive report. 

Stage 7: Acceptance of report by Dispute

Settlement Body (Article 30 of the DSU)
The Dispute Settlement Body has to either accept the Appellate Body report
or reject it within a maximum period of 30 days after receiving such a report.
The report can only be rejected unanimously.

Time framework for Dispute Settlement

STAGE PERIOD

Consultation 60 days

Establishment of panel and selection of Panellists 45 days

Panel report to parties 6 months

Final panel report to WTO members 3 weeks

Dispute settlement body adopts report (without appeal 60 days

 Total time (without appeal) 1 year

Appellate body report (if an appeal is made) 60-90 days

Dispute settlement body adopts appellate body report 30 days

Total time (with the appeal) 1 year 3 months

The Director-General
 The Director-General of WTO in his official capacity assists both the
parties in settling their disputes by providing his good offices,
conciliation, and mediation. (Article 5.6 of the DSU)
 In a dispute settlement case involving a least-developed country where
a settlement of the dispute through consultation is a failure, such least-
developed member nation may request the Director-general to provide
his good offices, conciliation, and mediation before requesting for
establishment of the panel. The Director-General, when considered
satisfactory, will provide his good offices, conciliation, and mediation to
settle the dispute between the parties. (Article 24.2 of the DSU)
 When there are no panellists appointed by either of the parties to
dispute, the Director-General, at the request of either party, in
consultation with the Chairman of Dispute Settlement Body and
Chairman of the relevant Council or Committee, appoints panellists as
he considers appropriate. (Article 8.7 of the DSU) 

WTO Secretariat (Article 27 of the DSU)

The Secretariat has the responsibility to select panellists for the panel. It
must provide a panel with all the support they need.

The Secretariat also help member countries in dispute by offering legal

assistance by making an available qualified legal expert from the WTO to the
members.

The Secretariat also conducts special training courses for members interested
in the dispute settlement mechanism. 

Panel
The panel established in the second meeting of Dispute Settlement Body, are
bodies responsible for adjudicating disputes between the parties.

Composition of the panel:

The panel generally consists of three panellists but can be a maximum of
five, if the parties consider it necessary. (Article 8.5 of the DSU)

The Panel shall consist of well-qualified governmental and non-governmental

individuals, including the persons who have served a panel or presented a
case to a panel. The panellists shall be from amongst the persons who have
served as a representative of a member or a contracting party to GATT, 1947
or as a representative to the Council or Committee of any covered agreement
or its predecessor agreement, or in the Secretariat, taught or published on
international trade law or policy, or served as a senior trade policy official of
a member.

The parties at dispute can select any individual having the above-mentioned
qualifications from the list created by the Secretariat to the panel to resolve
their dispute. (Article 8.1 of the DSU) 

Dispute Settlement Body (DSB)

Dispute settlement Body is a body established for resolving the disputes
between the conflicting parties by overseeing the entire dispute settlement
mechanism. The General Council of WTO, which carry out the functions of
the Ministerial Conference, renders its obligations under the Dispute
Settlement Understanding through Dispute Settlement Body. (Article 4.3 of
the WTO agreement)

Composition (Article 4.3 of the WTO agreement)

The Dispute Settlement Body consists of a Chairman and representatives of
all WTO members (usually government representatives). [1] The Chairman is
usually a leader of the permanent mission of one of the member countries of
WTO. The Chairman is elected with the consent of all WTO members. [2]

Functions 9 (Article 2 of the DSU)

 The main function of the Dispute Settlement Body is to administer the
rules and procedures which are provided in the Dispute Settlement
Understanding.
  It has the authority to establish a panel for adjudication of the dispute
between the parties in the meeting of Dispute Settlement Body unless
it is decided in that meeting not to establish a panel.
 It has to adopt the panel or Appellate Body reports to make these
reports binding on both the parties to the dispute.
 The parties must comply with the rulings and recommendations of the
Dispute Settlement Body. The Dispute Settlement Body will scrutinize
the application of adopted recommendations and rulings by the parties.
If the parties do not comply with these recommendations and ruling
within a prescribed period then measures in the form of compensation
and termination of concessions will be adopted by the Dispute
Settlement Body. (Article 21.6 and 22.1 of the DSU)

Time-frame for the decision of Dispute Settlement

Body (Article 20 of the DSU)

 Where no appeal is preferred by the parties

The Dispute Settlement Body has to render its decision within nine months
(i.e., the period starting from the date of establishment of panel till the
adoption of the panel or appellate body report by the Dispute Settlement
Body). If there is a delay on the part of the panel or Appellate Body in
providing its report, then additional period granted will be added to nine
months.

 Where an appeal is preferred by the parties

Where the panel report or the Appellate body report is appealed by the
parties, then the Dispute Settlement Body has to give its decision within 12
months and if there is any delay in providing the reports, then such an
additional period granted will be added to 12 months.

Standing Appellate Body (Article 17 of the

DSU)
The Dispute Settlement Body shall be responsible for the establishment of
the Appellate Body. Where the parties are not satisfied with the decision of
the panel report, then either of the parties may appeal to the Appellate Body
who shall prove his award in the form of Appellate Body report which shall
ultimately be adopted by the Dispute Settlement Body.
The Appellate body consists of seven persons. But only three of them shall
serve in one case. These three people shall be selected based on rotation.
The appointed person shall be in service for four years and can be re-
appointed once. Therefore, a member can serve for a maximum of eight
years. The persons comprising the Appellate body shall be persons of a
recognized authority having expertise in the field of law, international trade
and subject matter of the agreement in dispute. The person shall not be part
of any governmental service. They shall be made themselves available till the
end of the dispute. 

Arbitration (Article 25 of the DSU)

The parties to a dispute can refer a dispute to arbitration as an alternative
means for the settlement of their dispute. Referring a dispute to arbitration
shall be made with the mutual consent of both the parties. Third parties can
be a party to a dispute only after the mutual consent of the parties in
arbitration. The arbitral awards are binding on both the parties and are not
appealable. The arbitral award shall be notified to the Dispute Settlement
Body and the Council or Committee.