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Unit 3:
WTO DISPUTE
SETTLEMENT SYSTEM
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

WTO DISPUTE SETTLEMENT SYSTEM

LEGAL BASIS

n Article XXII and XXIII of GATT 1994;

n Dispute Settlement Understanding
(DSU).

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+ CONTENTS
q From GATT 1947 to DSU
q Objects and Purposes
q Jurisdiction
q Institutions
q Methods of dispute settlement
q Remedies
q Sources of Law Applicable in WTO Adjudication
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

What is the procedure of GATT 1947

dispute settlement?

a) Panelà Appellate Bodyà Remedies

b) Consultationà Adjudicationà Decision

c) Consultationà Investigationà Suspension

d) Negotiationà Investigationà Sanction

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+GATT 1947
Article XXII: Consultation
1. Each contracting party shall accord sympathetic
consideration to, and shall afford adequate
opportunity for consultation regarding, such
representations as may be made by another
contracting party with respect to any matter affecting
the operation of this Agreement .
2. The CONTRACTING PARTIES may, at the request
of a contracting party, consult with any contracting
party or parties in respect of any matter for which it
has not been possible to find a satisfactory solution
through consultation under paragraph 1.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+GATT 1947
Article XXII: Consultation
1. Each contracting party shall accord sympathetic
consideration to, and shall afford adequate
opportunity for consultation regarding, such
representations as may be made by another
contracting party with respect to any matter affecting
the operation of this Agreement.
2. The CONTRACTING PARTIES may, at the request
of a contracting party, consult with any contracting
party or parties in respect of any matter for which it
has not been possible to find a satisfactory solution
through consultation under paragraph 1.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted
Dr. Dao Gia Phuc
+ GATT 1947
Article XXIII: Nullification or Impairment
2. If no satisfactory adjustment is effected between the
contracting parties … The CONTRACTING PARTIES
shall promptly investigate any matter so referred to
them and shall make appropriate recommendations to
the contracting parties which they consider to be
concerned, or give a ruling on the matter, as
appropriate … If the CONTRACTING PARTIES
consider that the circumstances are serious enough to
justify such action, they may authorize a contracting
party or parties to suspend the application to any other
contracting party or parties of such concessions or
other obligations under this Agreement as they
determine to be appropriate in the circumstances ...
 RMIT Classification: Trusted
Dr. Dao Gia Phuc
+ GATT 1947
Article XXIII: Nullification or Impairment
2. If no satisfactory adjustment is effected between the
contracting parties … The CONTRACTING PARTIES
shall promptly investigate any matter so referred to
them and shall make appropriate recommendations to
the contracting parties which they consider to be
concerned, or give a ruling on the matter, as
appropriate … If the CONTRACTING PARTIES
consider that the circumstances are serious enough to
justify such action, they may authorize a contracting
party or parties to suspend the application to any other
contracting party or parties of such concessions or
other obligations under this Agreement as they
determine to be appropriate in the circumstances ...
 RMIT Classification: Trusted

+ GATT 1947
(Article XXII and XXIII)
n GATTavoids mention the term “dispute”. The principal
mechanism is diplomatic consultation to settle
“Misunderstandings”;
n When diplomatic consultation fails, Working parties
began to establish investigation and formulate
recommendations:
n Representatives of various countries;
n 1955 began referring disputes to “Panel”, ad hoc
groups of experts who acts as neutrals;
n Paneldecisions had no binding effect but were referred
to GATT Council on consensus basis.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+
GATT 1947
(Article XXII and XXIII)

Pros?

n Protect rights and interests of contracting

parties;
n Clarify WTO’s regulations.
Cons?

n Consensus mechanism;
n Without a judicial-type institution.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

What are main differences between the

GATT and WTO’s dispute settlement?

• …

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+ WTO : Dispute Settlement

Understanding

n DSU was negotiated during Uruguay Round to

remedy shortcomings of GATT’s system;

n GATT 1947: 101 disputes, in WTO: 18 disputes/year;

n Institutions: panel, Appellate Body, DSB;

n Reverse Consensus to adopt panels and AB’s

reports.

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+
OBJECT AND PURPOSE
Article 3.3 of the DSU:
“… essential to the effective functioning of
the WTO and the maintenance of a proper
balance between the rights and obligations
of Members.”

Article 3.2 of the DSU:

“ The dispute settlement system of the WTO
is a central element in providing security and
predictability to the multilateral trading
system …” Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+
OBJECT AND PURPOSE

Article 3.2 of the DSU:

“… and to clarify the existing provisions of
those agreements…”

Article 19.2 of the DSU:

“…in their findings and recommendations,
the panel and Appellate Body cannot add to
or diminish the rights and obligations
provided in the covered agreements ... ”

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+
OBJECT AND PURPOSE

Article 3.7 of the DSU:

“…The aim of the dispute settlement
mechanism is to secure a positive solution
to a dispute. A solution mutually
acceptable to the parties to a dispute and
consistent with the covered agreements is
clearly to be preferred …”

WTO dispute settlement proceeding must start

with consultations
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 RMIT Classification: Trusted
JURISDICTION
+ SCOPE OF APPLICATION

Article 1.1 of the DSU:

“The rules and procedures of this
Understanding shall apply to disputes brought
pursuant to the consultation and dispute
settlement provisions of the agreements listed
in Appendix 1 to this Understanding (referred
to in this Understanding as the "covered
agreements”)…”

Dr. Dao Gia Phuc

 JURISDICTION RMIT Classification: Trusted
Dr. Dao Gia Phuc
+SCOPE OF APPLICATION
The cover agreements, listed in Appendix 1 to
the DSU:
- WTO Agreement
- GATT 1994 and all other agreements on trade
in goods
- GATS
- TRIPS
- DSU
Article 1.2: Special or additional rules and procedures
on dispute settlement contained in the covered
agreements prevail over the DSU rules and procedures
to the extent that there is a ‘difference’ between them.
 JURISDICTION RMIT Classification: Trusted
Dr. Dao Gia Phuc
+SCOPE OF APPLICATION
 RMIT Classification: Trusted
+
What are the basic principles and their
exceptions?
Adjudication is to be used
The DSS provides security and
predictability
The DSS is an integrated set of
rules
Since legal provisions are
drafted in general terms, it is
necessary to
19
DAO Gia Phuc, 2021
1. which applies in a coherent
manner to disputes under all
the covered agreements.
2. only where parties cannot
reach a mutually agreed
solution in conformity with the
WTO Agreement.
3. clarify the provisions of the
WTO Agreement through
interpretation in accordance
with public international law.
4. for Member governments
and private economic operators
to carry out their commercial
activities.
 RMIT Classification: Trusted

+ JURISDICTION
COMPULSORY JURISDICTION

Article 6.1 of the DSU:

“If the complaining party so requests, a panel
shall be established at the least at the DSB
meeting following that at which the request
first appears as an item on the DSB’s agenda,
unless at the meeting the DSB decides by
concensus not to establish a panel.”

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+ JURISDICTION
EXCLUSIVE JURISDICTION

Article 23.1 of the DSU:

“When Members seek the redress of a violation
of obligations or other nullification or
impediment of benefits under the covered
agreements or an impediment to the attainment
of any objective of the covered agreements,
they shall have recourse to, and abide by, the
rules and procedures of this Understanding.”

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+ JURISDICTION

The jurisdiction of the WTO dispute settlement

system is compulsory and exclusive in nature:

- A complaining Member is obliged to bring any

dispute arising under the cover agreements to the
WTO;
- A responding Member has no choice but to accept it;
- There is no need for the parties to accept – by
declaration or agreement – the jurisdiction of WTO
to adjudicate their disputes.

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+ ACCESS TO THE WTO DISPUTE

SETTLEMENT
RIGHT TO COMPLAIN

US - Shrimp (1998), para. 101:

“It may be well stress at the outlet that access to

the dispute settlement process of the WTO is
limited to Members of the WTO. This access is not
available … to individuals and international
organizations, whether governmetal or non-
govermemtal.”
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+ ACCESS TO THE WTO DISPUTE

SETTLEMENT
RIGHT TO COMPLAIN

- A government – government dispute

settlement system for disputes concerning
rights and obligations of WTO Members.

- ‘Legal interest’ ?
§ No explicit provision in the DSU;
§ EC – Banana III.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted
A company in Elastia faces a trade barrier in
Hardia and believes that the measure is
incompatible with WTO:
a) It may bring a complaint by requesting
consultations, after which a panel may be
established.

b) It cannot bring a complaint in its own name, but

can initiate judicial proceedings before the
domestic courts of Hardia.

c) It may lobby its own government to bring a

dispute before the WTO. Dr. Dao Gia Phuc
 RMIT Classification: Trusted
26
+
DAO Gia Phuc, 2021

Match the following statements:

1. May have an interest in a

Parties dispute but have no right of
participation.

Third parties 2. Participate in a dispute as

“complainant” or “respondent”.

Non-state actors 3. Oversees the dispute

settlement process.

Dispute Settlement 4. Have an interest in a dispute

Body (DSB) and enjoy some rights.
 RMIT Classification: Trusted

+ ACCESS TO THE WTO DISPUTE

SETTLEMENT
TYPES OF COMPLAINTS

Dr. Dao Gia Phuc

 RMIT Classification: Trusted
Dr. Dao Gia Phuc
+ INSTITUTIONS
 RMIT Classification: Trusted

INSTITUTIONS
+DISPUTE SETTLEMENT BODY:
- A political institution - an alter-ego of the WTO’s
General Council;
- Functions (Article 2.1):
§ Decision on the establishment of panels;
§ Adoption of panel and AB reports by versus
consensus;
§ Maintain surveillance of implementation of rulings and
recommendations;
§ Authorisation of suspension of concession and other
obligations.
- Both consensus and reverse-consensus decision-
making.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+ INSTITUTIONS
PANEL:
- First instance level of WTO adjudication of disputes;
- ad hoc bodies – established by request of
complainant;
- Include 3-5 members as independent experts, not
citizens of parties to dispute;
- evaluate through written submissions from the
parties, meetings with the parties, and expert
opinions.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+ INSTITUTIONS
APPELLATE BODY:
- Review panel rulings – appeal stage;
- A standing institution composed by 7 persons
appointed by DSB for four-year terms (after Uruguay
Round). Renewable only once;
- An appeal is limited to issues of law and legal
interpretations. Issues of fact cannot be appealed;
- AB can uphold, modify or reverse the legal findings
and conclusions of the panel.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted
32
+
DAO Gia Phuc, 2021

Match the following statements:

1. Legal assistance to
Panel adjudicating bodies and
administrative assistance to DSB.

Appellate Body 2. Provide advice on complex

factual issues in disputes.

Experts 3. Permanent body that reviews

only legal aspects of the dispute.

WTO Secretariat 4. Must review the factual and

legal aspects of the dispute.
 RMIT Classification: Trusted

+ METHODS OF WTO DISPUTE

SETTLEMENT

CONSULTATIONS: (Article 4)
- Must always precede resort to adjudication;
- Cheaper and more satisfactory for the long-term
trade relations.

AJUDICATION: (Article 6 – Article 20)

- If consultations fail to resolve the dispute, the
complaining party can request to establish a panel;
- Either party to the dispute can appeals the findings
of panel in Appellate Body.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+ METHODS OF WTO DISPUTE

SETTLEMENT
ARBITRATION: (Article 25)

- An alternative means of dispute settlement

- The parties must agree to abide by the arbitration
award and such award must be consistent with
the WTO agreements.

MEDIATION or CONCILIATION: (Article 5)

Parties may request at any time.

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+ METHODS OF WTO DISPUTE

SETTLEMENT

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

Whether
+ the boxes belong to “Alternative to 36

adjudication” or “Adjudication”?
Alternative to adjudication Adjudication
Panel Appellate Body

Consultations Good offices,

conciliation
and mediation

Provide an opportunity to obtain

satisfactory adjustment before
resorting to adjudication
Mutually agreed
solution, which can be
reached anytime

Rule on whether a
measure is inconsistent
with the WTO covered
agreements
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+ REMEDIES FOR BREACH OF WTO LAW

WITHDRAWAL INCONSISTENT MEASURES

A panel or the Appellate Body concludes a measure is

inconsistent:
§ The withdrawal of the WTO-inconsistent measure
should normally be ‘immediate’ (Article 19.1 and
Article 3.7)
§ In case, it is impracticable to comply. There is a
reasonable period of time (Article 21.3):
• Determined by DSB
• Agreed on by parties to the disputes
• Determined through binding arbitration at the
request of either parties
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

After the adoption of the reports of the panel and

the AB, parties cannot agree on the 'reasonable
period of time' and refer the matter to
arbitration:
a) Should not exceed 15 months: the shortest period
possible within the legal system of the Member to
implement the recommendations and rulings of the DSB.

b) Should be 15 months, but can be shorter or longer,

depending on the economic power of the losing
Member.

c) Should be 15 months, unless there is an extreme

circumstance which justifies a longer or a shorter
period.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+ REMEDIES FOR BREACH OF WTO LAW

TEMPORARY REMEDIES

By the end of the reasonable period of time for

implementation:
- Compensation (Article 22.2):
§ Both parties have to agree;
§ Additional trade benefits to the complaining Member.
§ Does not compensate for past harmful effects of the
violated measure à prospective rather than
retrospective;
§ Must be consistent with covered agreements.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

P has lost a dispute against F. Because P is

unable to implement the ruling, they are
interested in the option of compensation:

a) P and F have to agree on the form of

compensation (alternative trade benefits).

b) P has to make a monetary payment to F.

c) An auction takes place in the DSB.

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+ REMEDIES FOR BREACH OF WTO LAW

TEMPORARY REMEDIES

By the end of the reasonable period of time for

implementation:
- Retaliation (Article 22.3)
§ Injured party may request authorization from DSB;
§ The suspension of concessions or other obligations;
§ Can take numerous forms, i.e. temporary increases in
tariff rates on certain products from the other Member.

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

N has lost a WTO case two years ago. It has

still not implemented the recommendations
and rulings of the DSB. As a consequence, it
faces the suspension of obligations by other
Members. In the regular DSB meetings,
several other Members criticize N for failing
to implement. N counters that it is only
making use of its right to pursue a different
avenue than implementation and that it is
happy to pay for not implementing. Who is
right?

Dr. Dao Gia Phuc

 RMIT Classification: Trusted

+ SOURCES OF LAW APPLICABLE IN

WTO ADJUDICATION
- The covered agreements (Appendix 1 of DSU)
- Secondary law:
§ Interpretations, waivers, amendments (WTO
Agreement)
§ Decisions and Recommendations by WTO organs
§ International agreements signed by the WTO
- The treatment of customary international law.
- General principles of law:
§ Estoppel
§ Res judicata
§ Non adimplenti contratus
§ Good faith (bona fides)
§ In dubio mitius.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+ DECLINE OF THE WTO DSS

- Due to the ineffectiveness of the political branch, WTO Members
tempted to use the DSS for interpretations/clarifications of the
existing rules.
- From 2005, the dispute settlement workload grew steadily
because of the increase of claims and the complexity of
challenged measures.
- The US began criticizing AB jurisprudence, such as safeguards,
SCM, ADM à it began to block the reappointment of AB
members in 2017-19.
- On December 2020, the number of AB members fell below the
minimum of 03 required to hear an appeal à the situation of
‘appealing into the void’.
- Several attempts have been proposed to address the crisis, but
none is effective to date.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+ Summary
This topic has discussed the following key points:
- There is no requirement in the DSU for a complainant to have a legal or economic
interest as a prerequisite for bringing a dispute to the WTO DSS.
- Members should have recourse to WTO dispute settlement in good faith, and not
frivolously set in motion the procedures contemplated in the DSU.
- Members cannot bring to the WTO DSS disputes concerning the rights and
obligations encompassed in legal provisions outside the “covered agreements”.
- A Member can resort to the DSS if it considers that any benefit accruing to it
directly or indirectly under the Agreement is being “nullified or impaired”, or that the
attainment of any objective of the Agreement is being impeded on the basis of one
of “violation”, “non-violation” or “situation” complaints.
- A measure is any act or omission attributable to a WTO Member which has
normative value, irrespective of how or whether those rules or norms are applied in
a particular instance.
- Article 3.2 of the DSU recognizes the need to clarify the rights and obligations of
Members under the WTO covered agreements pursuant to "customary rules of
interpretation of public international law”.
Dr. Dao Gia Phuc
 RMIT Classification: Trusted

+ References
1. Peter Van den Bossche and Werner Zdouc (2016), The Law and Policy of the
World Trade Organization (4th edn.), Cambridge University Press
2. Simon Lester, Bryan Mercurio and Arwel Davies (2012), World Trade Law:
Text, Materials and Commentary (2nd edn.), Hart Publishing, Oxford and
Portland, Oregon
3. P Matsushita, Mitsuo; Schoenbaum, Thomas J.; Mavroidis, Petros C.; and
Hahn, Michael, (2015), The World Trade Organization: Law, Practice, and
Policy, Oxford University Press
4. Understanding the WTO – The WTO dispute settlement system: a unique
contribution: http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm
5. More on dispute settlement:
http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm
6. The disputes:
http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm#disputes
7. Map of disputes between WTO Members:
http://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/signin_e.h
tm Dr. Dao Gia Phuc