WTO Institutions & Dispute Resolution

The WTO

The Uruguay Round led to the creation of the World Trade Organization in 1994/5, which is now the overarching governing body. The World Trade Organization comprises a ministerial conference that meets every two years. There is a General Council which has delegates from all member countries and various committees.

The WTO Agreement provides for the establishment and constitution of the World Trade Organization. Variation of key provisions require the unanimous agreement of all members to amend. Others require a two thirds majority binding, only on the members who have voted in favour of it. There are provisions whereby members who dissent from changes which have be approved by three quarters of the members can be bound or withdraw or remain as members with the consent of the ministerial conference.

The World Trade Organisation serves as an umbrella organisation and a single administrative body in relation to the various agreements negotiated under the GATT  and it successors.

It provides a common institutional framework for the implementation of the GATT and other Agreements.   It acts as a forum for ongoing negotiation.  It is a tribunal for the resolution of disputes.  It reviews the trade policies and practices of member states.

There are over 150 members of the World Trade Organisation.  Less developed states are  required only to undertake commitments consistent with their degree of development, financial and trade needs.

Institutions

The WTO  consists of a Ministerial Council, a General Council, a Council for Trade in Goods, a Council for Trade in Services, a Council for Trade-related aspects of Intellectual Property and a Trade Review Body.

The Ministerial Conference  is  made up of representatives of member states. The Ministerial Conference meets at least yearly to oversee the operation of the agreements.  Standing committees deal with trade and development, balance of payment restrictions, budget finance and administration, trading environment and regional agreements.

The General Council is the WTO’s highest-level decision-making body, based in Geneva, meeting regularly to carry out the functions of the WTO. It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years.

The General Council carries on the functions of the Ministerial Conference on an ongoing basis.  It is convened as necessary to function as a dispute settlement body or and trade policy review body.Each has its own chairman.

There are three councils within the General Council

• the Council for Trade in Goods,
• the Council for Trade in Services and
• TRIPS

The General Council also meets, under different rules, as the Dispute Settlement Body and as the Trade Policy Review

The General Council makes arrangements for cooperation between intergovernmental organisations.  It also works with non-Governmental organisations in matters relevant to trade.

The WTO functions by way of consensus.  It can proceed by way of vote, if consensus is not possible.  Each member has one vote.  The EU carries the votes of its member state.

There is a Secretariat headed by a Director General who is appointed by the agreement of the States which has an administrative role. The responsibility of the secretariat has grown since the establishment of the WTO. It has taken on a role of assisting states in relation to their trade policies in accordance with the work of the Trade Policy Review Body.

The Director-General has administrative responsibilities and limited powers.  The important decisions are made by members states through the  Ministerial Conference and General Council.

There is a dispute settlement body which has a quasi-judicial role. The Ministerial Conference and General Council have authority to adopt authoritative and binding interpretations of the WTO agreements, acting with a three quarters majority.

WTO Dispute Mechanism

The parties to disputes under the agreement are the state members themselves. Members are to allow sympathetic consideration of the complaints of others and allow opportunities for consultation. If they cannot resolve the dispute through negotiation, in some cases with mediation (including by a third party or the Director General of GATT), the dispute may be dealt with under the Rules.

If a member considers that any benefit arising directly or indirectly under GATT is being nullified or impaired by the law, policy or practice of another state member, it may refer the matter, the complaint to the General Council of the WTO, acting as a dispute settlement body. It is to appoint a panel to investigate the complaint and make recommendations to the Council for resolution.

The WTO\’s Dispute Settlement Process is embodied in by the Understanding on Rules and Procedure governing the Settlement of Disputes (DSU). There is a single process in relation to all disputes under the WTO agreement.

Seeks Resolution by Consensus

States are encouraged to resolve disputes by consultation and agreement.  There must be an attempt to resolve the dispute by consultation.  The parties may seek the assistance of a third party to resolve the differences.  This may proceed by conciliation, mediation or other similar process.

If a resolution cannot be agreed, the parties may proceed to the dispute settlement panel. If the state fails to consult or respond within a certain period, a member can request the establishment of a WTO dispute settlement panel.  If a solution is not reached within 60 days after the request or consultation, a panel may be sought.

Panel

The dispute settlement panel is made up of three panellists.  Five may be requested.  The WTO secretariat names proposed panellists and the parties may object if they have a compelling reason.

Panels usually comprise three individuals from third countries who consider the dispute, ascertain the facts and seek to resolve the dispute informally, if possible. Otherwise they will make a recommendation for resolution.

If the panel cannot be agreed within 21 days, the WTO Director General in consultation with the chairman of the dispute settlement body  (the General Council) and the relevant committee appoint panellists, bearing in mind the particular consideration relevant to the case. The panellists do not represent any government or body, they must be made up of third party states unless otherwise agreed.

The dispute settlement panel notionally assists the Council (the dispute settlement body/ DSB) in making an objective assessment of the matter including the facts and the application of the relevant agreement to them.  It  makes findings that assist the dispute settlement body to make recommendations and rulings to resolve the dispute.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 practice, the Council as dispute settlement body decides the dispute based on the panel\’s recommendation. The recommendation may be rejected only by consensus which would require the support of the relevant countries, so that the recommendation is effectively binding.

Panel reports are adopted by the General Council/ dispute settlement body within 60 days unless the party notifies the body that there is to be an appeal or it is decided by consensus not to accept it or report.

Appeal

The decision of a panel may be appealed to an Appellate Body. Either party can appeal within 90 days. The process may take a year to 15 months.

The appellate body is an appeal board made up of seven persons.  Three will serve in any case.  They must be recognised authorities, demonstrate expertise in trade law and the WTO agreement.

An appeal relates to the legal issues in  the panel report and matters of interpretation.  The proceedings of the appellate body are held in private and individual opinions of members are not expressed.  The body may uphold or reverse the finding and conclusion.

Decision and Enforcement

The Council adopting the recommendations of the panel or the Appellate Body makes its decision A similar negative consensus rule applies to its rejection (effectively making it binding).

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.

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

The state member is obliged to modify or withdraw the policy or practice or modify it so that it is in conformity with the state’s obligations in accordance with the decision.

If it does not do so, the Council may permit countermeasures by the aggrieved state by way of suspension of trade concessions or obligations of equivalent value. The level is to be subject to arbitration.

The decisions under the dispute settlement understanding may have a precedent like effect.  Although they are not legal determinations,  they be relevant to future disputes.