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Effectiveness of dispute settlement mechanism in WTO – Some issues

By Manoj Gupta  

Last week when USA raised the issue of continuing subsidy in relation to civil aircraft from the EU, even after the adoption of the panel and appellate body’s report (DS316) concerning the same by the WTO Dispute Settlement Body (DSB), the question of effectiveness of the remedies available to the countries when the decisions of the DSB are not honored, arose again. This write-up discusses various aspects concerning the ‘Undertaking on Rules and Procedures Governing the Settlement of Disputes’ in the WTO and effectiveness of its implementation.

DSU and remedies available thereunder

Dispute Settlement Undertaking (DSU) or the Undertaking on Dispute Settlement is a fundamental instrument for ensuring effective functioning of the multilateral trading system as sought to be promoted by the WTO. It works on the principle that the member countries should not take unilateral actions against each other without trying to settle their trade-related disputes among themselves. The objective of DSB, however, is not adjudication but prompt settlement. Various agreements between the countries (Anti-dumping Agreement, Agreement on Technical Barriers to Trade, etc) also provide that if a member-country feels that the trade regulating mechanisms of another country are not in line with a particular article of relevant agreement, the aggrieved country can approach WTO and if consultations fail, seek setting up of Dispute Settlement Panel to adjudicate whether the disputed mechanisms violate some provisions.

Articles 19, 21 and 22 of the DSU provide the procedure for time-bound working of the panel or the appellate body and for implementation of their reports by the member-countries. Article 19 of the Undertaking states that if the panel finds that measures are inconsistent with certain agreement, then it shall recommend to the member concerned to bring such measures in conformity with the provisions. Article 21, while acknowledging the fact that prompt compliance is essential in order to ensure effective resolution of the dispute, provides that members should implement the panel or appellate body’s recommendations within a specified time-frame and in case of dispute relating to time for implementation, go for arbitration to decide the implementation time. Further, as per Article 21.5, if the member is not satisfied with the measures taken on the recommendations, it can further seek dispute settlement and constitution of the panel. Article 22 further provides for compensations and sanctions, with the authorization of DSB, in case the recommendations of the panel are not implemented. Again an arbitrator can be appointed to look into the fact whether the sanctions suggested are in line and level with the provisions.

The provisions under the DSU lay down clear time-lines for every stage, but this schedule is rarely followed. Moreover, there are numerous ways by which implementation of the recommendations can eventually be postponed while the loss to the concerned member-country continues.

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[The author is an Assistant Manager, Lakshmikumaran & Sridharan, New Delhi]
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