DISPUTE

SETTLEMENT ANUSHTHA SAXENA

UNDER WTO
THE DISPUTE SETTLEMENT
UNDERSTANDING
The current dispute settlement system was created as part of
the WTO Agreement during the Uruguay Round. It is embodied in
the Understanding on Rules and Procedures Governing the
Settlement of Disputes, commonly referred to as the Dispute
Settlement Understanding and abbreviated “DSU”.
The DSU, which constitutes Annex 2 of the WTO Agreement, sets
out the procedures and rules that define today’s dispute settlement
system. It should however be noted that, to a large degree, the current
dispute settlement system is the result of the evolution of rules,
procedures and practices developed over almost half a century under
the GATT 1947.
FUNCTIONS, OBJECTIVES AND
KEY FEATURES OF THE DISPUTE
SETTLEMENT SYSTEM
Providing security and predictability to the multilateral trading
system
A central objective of the (WTO) dispute settlement system is to
provide security and predictability to the multilateral trading system
(Article 3.2of the DSU). Although international trade is understood
in the WTO as the flow of goods and services between Members,
such trade is typically not conducted by States, but rather by private
economic operators.
These market participants need stability and predictability in the
government laws, rules and regulations applying to their commercial
activity, especially when they conduct trade on the basis of long-term
transactions.
In light of this, the DSU aims to provide a fast, efficient, dependable
and rule-oriented system to resolve disputes about the application of
the provisions of the WTO Agreement. By reinforcing the rule of
law, the dispute settlement system makes the trading system more
secure and predictable.
Preserving the rights and obligations of WTO Members  
Typically, a dispute arises when one WTO Member adopts a trade
policy measure that one or more other Members consider to be
inconsistent with the obligations set out in the WTO Agreement. In
such a case, any Member that feels aggrieved is entitled to invoke the
procedures and provisions of the dispute settlement system in order
to challenge that measure.
If the parties to the dispute do not manage to reach a mutually agreed
solution, the complainant is guaranteed a rules-based procedure in
which the merits of its claims will be examined by an independent
body (panels and the Appellate Body).
If the complainant prevails, the desired outcome is to secure the
withdrawal of the measure found to be inconsistent with the WTO
Agreement. Compensation and countermeasures (the suspension of
obligations) are available only as secondary and temporary responses
to a contravention of the WTO Agreement (Article 3.7 of the DSU).
Thus, the dispute settlement system provides a mechanism through
which WTO Members can ensure that their rights under the WTO
Agreement can be enforced.
This system is equally important from the perspective of the
respondent whose measure is under challenge, since it provides a
forum for the respondent to defend itself if it disagrees with the
claims raised by the complainant.
In this way, the dispute settlement system serves to preserve the
Members’ rights and obligations under the WTO Agreement (Article
3.2 of the DSU).
The rulings of the bodies involved (the DSB the Appellate Body,
panels and arbitrations) are intended to reflect and correctly apply the
rights and obligations as they are set out in the WTO Agreement.
They must not change the WTO law that is applicable between the
parties or, in the words of the DSU, add to or diminish the rights and
obligations provided in the WTO Agreements (Articles
3.2 and 19.2 of the DSU).
The WTO Agreement provides that the Ministerial Conference and
the General Council of the WTO have the “exclusive authority to
adopt interpretations” of the WTO Agreement.
However, the DSU expressly states that the dispute settlement system
is intended to clarify the provisions of the WTO Agreement “in
accordance with customary rules of interpretation of public
international law” (Article 3.2of the DSU).
The DSU, therefore, recognizes the need to clarify WTO rules and
mandates that this clarification take place pursuant to customary
rules of interpretation. In addition, Article 17.6 of the DSU implicitly
recognizes that panels may develop legal interpretations.
The “exclusive authority” of Article IX:2 of the WTO Agreement
must therefore be understood as the possibility to adopt
“authoritative” interpretations that are of general validity for
all WTO Members — unlike interpretations by panels and the
Appellate Body, which are applicable only to the parties and to the
subject matter of a specific dispute.
Accordingly, the DSU mandate to clarify WTO rules is without
prejudice to the rights of Members to seek authoritative
interpretations under Article IX:2 of the WTO Agreement (Article
3.9 of the DSU).
As regards the methods of interpretation, the DSU refers to the
“customary rules of interpretation of public international law”
(Article 3.2 of the DSU). While customary international law is
normally unwritten, there is an international convention that has
codified some of these customary rules of treaty interpretation.
“Mutually Agreed Solutions” as “Preferred Solution”
Although the dispute settlement system is intended to uphold the
rights of aggrieved Members and to clarify the scope of the rights
and obligations, which gradually achieves higher levels of security
and predictability, the primary objective of the system is not to make
rulings or to develop jurisprudence.
Rather, like other judicial systems, the priority is to settle disputes,
preferably through a mutually agreed solution that is consistent with
the WTO Agreement (Article 3.7 of theDSU).
Adjudication is to be used only when the parties cannot work out a
mutually agreed solution. By requiring formal consultations as the
first stage of any dispute, the DSU provides a framework in which
the parties to a dispute must always at least attempt to negotiate a
settlement.
Even when the case has progressed to the stage of adjudication, a
bilateral settlement always remains possible, and the parties are
always encouraged to make efforts in that direction (Articles
3.7 and 11 of the DSU).
Notably, Articles 31, 32 and 33of the Vienna Convention on the Law
of Treaties embody many of the customary rules of interpretation of
public international law.
While the reference in Article 3.2 of the DSU does not refer directly
to these Articles, the Appellate Body has ruled that they can serve as
a point of reference for discerning the applicable customary rules*.
Prompt settlement of disputes 
The DSU emphasizes that prompt settlement of disputes is essential
if the (WTO) is to function effectively and the balance of rights and
obligations between the Members is to be maintained (Article 3.3 of
the DSU). It is well known that, to be achieved, justice must not only
provide an equitable outcome but also be swift.
Accordingly, the DSU sets out in considerable detail the procedures
and corresponding deadlines to be followed in resolving disputes.
The detailed procedures are designed to achieve efficiency, including
the right of a complainant to move forward with a complaint even in
the absence of agreement by the respondent (Articles 4.3 and 6.1 of
the DSU).
If a case is adjudicated, it should normally take no more than one
year for a panel ruling and no more than 16 months if the case is
appealed (Article 20 of the DSU). If the complainant deems the case
urgent, consideration of the case should take even less time (Articles
4.9 and 12.8 of the DSU).
Prohibition against unilateral determinations 
WTO Members have agreed to use the multilateral system for
settling their WTO trade disputes rather than resorting to unilateral
action (Article 23 of the DSU). That means abiding by the agreed
procedures and respecting the rulings once they are issued — and not
taking the law into their own hands.
Unilateral actions are not able to settle disputes harmoniously. Things
may spiral out of control and, unless one of the parties backs down,
there is a risk of escalation of mutual trade restrictions, which may
result in a “trade war”.