The Legal System of the WTO

1. 国际法商系 The Legal System of the WTO 主讲人：宋俊荣 E-mail：sjreileen@hotmail.com

2. The Legal System of the WTO Chapter 2 Procedural rules of the WTO

3. §2.1 Decision-making Mechanism Principle: Consensus is always preferred. In case consensus could not be reached, the matter at issue shall be decided by voting (one member, one vote). The decision to adopt an interpretation 3/4 majority The decision to waive an obligation of a member 3/4 majority consensus; 3/4 majority; 2/3majority Amendments of WTO agreements reverse consensus Dispute settlement

4. §2.2 Trade Policy Review Mechanism To facilitate the smooth functioning of the multilateral trading system by enhancing the transparency of Members’ trade policies. Objecitve All aspects of trade policy in all the WTO Members Subject matter The authority TPRB

5. §2.2 Trade Policy Review Mechanism Review cycles : Every 2 years Every 4 years Every 6 years U.S. EC Japan Canada U.S. EC Japan Canada U.S. EC Japan Canada China Hong Kong; China; Korea;Singapore; Switzerland; Mexico; Australia; Malaysia; Thailand; Norway; Indonesia; Brazil; Turkey; South Africa; Israel; India; United Arab Emirates all the other WTO members

6. §2.2 Trade Policy Review Mechanism Collection of information • A policy statement by the Member under review • A report prepared by economists in the Secretariat (not legally binding) Visit to the capital Final preparation of documents Review meeting organized and conducted Publication of documents

7. §2.3 The Dispute Settlement Mechanism DSU; provisions on dispute settlement in other WTO agreements. Legal basis All disputes arising under the WTO agreements. Coverage

8. §2.3 The Dispute Settlement Mechanism Dispute Settlement Body (DSB) -to establish panels -to adopt the reports of panels or AB -to monitor the implementation and recommendation of the panel and AB -to authorize suspension of concessions or other appropriate obligation of the member nations Panel/AB: to help the DSB make rulings or recommendations Authority consultation → panel →appellate review→ enforcement Four stages

9. §2.3 The Dispute Settlement Mechanism The General Principles: 1 Aimed to preserve the rights and obligations of Members and to clarify the existing provisions. 2 The results cannot add to or diminish the rights and obligations provided in the WTO agreements. 3 Mutually agreed solution which is consistent with the WTO agreements is preferred. 4 Withdrawal of the measures inconsistent with the WTO agreements is preferred. Retaliatory action is the last resort.

10. §2.3 The Dispute Settlement Mechanism The improvements : 1 Rule-based 2 Automaticity: through reverse consensus Compulsory jurisdiction on WTO members: through automatic establishment of panels 3 4 Quickness: through strict deadlines 5 Legal quality: guaranteed by the AB 6 Enforcement: through cross-retaliation 6

11. §2.3 The Dispute Settlement Mechanism Timetable

12. §2.3 The Dispute Settlement Mechanism The first stage: Consultation • Necessary stage • A diplomatic measure aimed to reach amicable solution. • Time limit: 60 days after the request.

13. §2.3 The Dispute Settlement Mechanism The second stage: Panel process A. Establishment of a panel Condition: consultations fail within 60-day time frame. a The selection of 3 panelists: (i) suggestion from the Secretariat (ii) parties nominate the panelists (never happened, because they never agree with each other) (iii) DG nominates the panelists ( it’s always the case) b

14. §2.3 The Dispute Settlement Mechanism The second stage: Panel process A. Establishment of a panel 3 categories of panelists: government officials; former secretariat officials; trade academics or lawyers. c Qualification of panelists: no nationals of parties or third parties, absent agreement of the parties; one panelist coming from a developing country (if requested) in a case involving a developing country. d

15. §2.3 The Dispute Settlement Mechanism The second stage: Panel process A. Establishment of a panel Rules of conduct: to be independent and impartial, avoiding direct or indirect conflicts of interest and respecting the confidentiality of proceedings. e

16. §2.3 The Dispute Settlement Mechanism The second stage: Panel process B. Who appears before panels? a Complainants & respondents • -Does a complainant need to demonstrate legal interest as a pre-requisite to submit a particular dispute? • -The composition of delegations participating in WTO dispute settlement proceedings.

17. §2.3 The Dispute Settlement Mechanism The second stage: Panel process B. Who appears before panels? Third parties b • -Legal basis: Art.10 of DSU • -timing of the request to participate as third party • -rights

18. §2.3 The Dispute Settlement Mechanism The second stage: Panel process B. Who appears before panels? Amicus curiae c • The statement of AB in U.S.—Shrimp (WT/DS58) : • The panel was not prohibited from examining amicus curiae(法庭之友) briefs.

19. §2.3 The Dispute Settlement Mechanism The second stage: Panel process C. The task of panels Terms of reference: defined by the request for establishment of a panel. a DSU Art.7.1: “To examine, in the light of the relevant provisions in (name of the covered agreement(s) cited by the parties to the dispute), the matter referred to the DSB by (name of party) in document ... and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in that/those agreement(s).”

20. §2.3 The Dispute Settlement Mechanism The second stage: Panel process • The roles of the panel request: -To define the terms of reference of the panel. The panel is not entitled to cite other provisions or agreements not cited by the complaining party in the panel request. -To inform the responding party and third parties its claim so that they have chances to respond to the case. • The requirement for drafting the panel request: -The complaining party must include all the relevant provisions in the panel request since it could not add new claims afterwards. (due process) C. The task of panels Terms of reference: defined by the request for establishment of a panel. a

21. §2.3 The Dispute Settlement Mechanism The second stage: Panel process • The facts of the case. • The applicability of and conformity with the relevant WTO agreements. • The deliberate disregard of, refusal to consider, wilful distortion or misrepresentation of the evidence put before a panel is not allowed. C. The task of panels b Objective assessment of the matter before it

22. §2.3 The Dispute Settlement Mechanism The second stage: Panel process (a) A panel’s authority lapses (b) Parallelism of the subject matter (c) Res Judicata （一事不再理） The parties could not bring a suit again on an event which was the subject of a previous legal cause of action that has already been finally decided between them. (d) Mutually Agreed Solutions D. Sources restraining a panel’s jurisdiction

23. §2.3 The Dispute Settlement Mechanism The second stage: Panel process (e) Agreements between parties as to the ambit of their dispute (f) Estoppel （禁止反言） A person is prohibited from denying or asserting anything to the contrary of that which has, been established as the truth by his own deed, acts, or representations, either express or implied. (g) Mandatory versus discretionary legislation (h) Measures challenged must be in effect when the panel is established D. Sources restraining a panel’s jurisdiction

24. §2.3 The Dispute Settlement Mechanism The second stage: Panel process Final report & its adoption (reverse consensus) E. The procedure Step 8 Step 7 Review Step 6 Interim report Step 5 First draft Step 4 Experts Step 3 Rebuttals/second meeting Step 2 Step 1 First hearing Each side presents its case in writing to the panel

25. §2.3 The Dispute Settlement Mechanism The third stage: Appellate Review • The qualification of AB members: legal experts • Usually, a case is heard by a division of 3 AB members, which are selected by a secret procedure that is based on randomness, unpredictability and the opportunity for all members to serve without regard to national origin. A. The Appellate Body: a permanent body consisting of 7 members, appointed for four-year terms with one reappointment permitted.

26. §2.3 The Dispute Settlement Mechanism The third stage: Appellate Review (a) The parties to a dispute Appellant v. appellee Only parties to a dispute , not third parties, may appeal a panel report. (b) Third parties (c) Amicus curiae B. Who appears before the AB?

27. §2.3 The Dispute Settlement Mechanism The third stage: Appellate Review C. Terms of reference: Only issues of law and legal interpretation in the panel report.

28. §2.3 The Dispute Settlement Mechanism The third stage: Appellate Review • Shortcoming: the AB has no power to remand a case to a panel. • The practice: to complete the analysis of particular issues in order to resolve cases where it has reversed a panel’s findings. Two conditions: the factual record before the AB is sufficient; there was a logical continuum between the legal provisions invoked. D. Power of the AB: to reverse, modify or affirm panel decisions.

29. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement A. Conclusions of the panel/AB report: a Rulings: is the measure at issue consistent with WTO rules? Art.19.1 of DSU: Where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement. In addition to its recommendations, the panel or Appellate Body may suggest ways in which the Member concerned could implement the recommendations.

30. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement A. Conclusions of the panel/AB report: b Recommendations: -Panels must issue recommendations in case an inconsistency has been established; -They are binding on their addressees; -They have an inflexible content: the respondent must bring its measures into conformity with WTO obligations; -They essentially amount to an obligation of result, in the sense that they allow WTO Members to choose the means (specific conduct) to reach the requested result (consistency with the WTO).

31. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement A. Conclusions of the panel/AB report: c -Panels have discretion to issue them, even if they are requested to do so; -They are not binding on their addressees who might choose to ignore them; -Their content is flexible and panels have discretion to shape it; The panel report on EC-Export Subsidies on Sugar is the only case so far where a panel suggested.

32. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement A. Implementation: • XII.CONCLUSIONS • 12.1 In light of our findings in Section XI.A, we conclude that it has not been proved that Resolution (ANA) No. 2235/96 is inconsistent with Argentina's obligations under Article XI:1 of the GATT 1994. • 12.2 In light of our findings in Section XI.B, we conclude that Resolution (ANA) No. 2235/96 is inconsistent with Argentina's obligations under Article X:3(a) of the GATT 1994. • 12.3-12.6 omitted • 12.7 We recommend that the Dispute Settlement Body request Argentina to bring Resolution (ANA) No. 2235/96 as well as General Resolutions (DGI) No. 3431/91 and 3543/92 into conformity with its obligations under the GATT 1994. • ——Argentina – Measures Affecting The Export of Bovine Hides and The Import of Finished Leather (WT/DS155/R)

33. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement B. The period of implementation a Prompt compliance is preferred. Reasonable period of time for implementation (within 15 months) - Proposals of the responding party approved by the DSB - Mutual agreements between the parties - Through arbitration under Art.21.3 b

34. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement C. Compliance review (Art.21.5) a Subject matter: Disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings.

35. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement C. Compliance review (Art.21.5) b The procedure: panel process (within 90 days) → appellate review Request to establish a compliance panel: -citing the recommendations rulings of the DSB in the original dispute as well as any preceding Art.21.5 proceedings, which, according to the complaining party, have not yet been complied with; -identifying the measures already taken by the respondent, as well as any omissions or deficiencies therein, or stating that no such measures have been taken by the respondent; -providing a legal basis for its complaint, by specifying how the measure taken, or not taken, fail to remove the WTO-inconsistencies found in the previous proceedings, or whether they have brought about new WTO-inconsistencies.

36. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement C. Compliance review (Art.21.5) c Time limit: no If the winning party is still unsatisfied with the second implementation measures taken by the losing party, it could launch a second compliance review. Examples: Brazil- Aircraft (DS46); Canada- Dairy products (DS103); EC-bananas III (DS27)

37. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement • Voluntary, through consultation between the parties. • In the forms of tariff concessions, increase of import quota, or broadened market access, rather than monetary payment. • Applied on the basis of MFN. • Non-retroactive: aimed to compensate the nullification or impairment of the interest accrued to the winning party after the expiry of the reasonable period of time for implementation. D. Remedies in case of non-implementation (temporary): a Compensation

38. §2.3 The Dispute Settlement Mechanism Article 22.2 of DSU  “  If the Member concerned fails to bring the measure found to be inconsistent with a covered agreement into compliance therewith or otherwise comply with the recommendations and rulings within the reasonable period of time determined pursuant to paragraph 3 of Article 21, such Member shall, if so requested, and no later than the expiry of the reasonable period of time, enter into negotiations with any party having invoked the dispute settlement procedures, with a view to developing mutually acceptable compensation. ‖If no satisfactory compensation has been agreed within 20 days after the date of expiry of the reasonable period of time, any party having invoked the dispute settlement procedures may request authorization from the DSB to suspend the application to the Member concerned of concessions or other obligations under the covered agreements.”

39. §2.3 The Dispute Settlement Mechanism Article 22.6 of DSU  “When the situation described in paragraph 2 occurs, the DSB, upon request, shall grant authorization to suspend concessions or other obligations within 30 days of the expiry of the reasonable period of time unless the DSB decides by consensus to reject the request……”

40. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement D. Remedies in case of non-implementation (temporary): b Retaliation non-implementation within reasonable period of time; (i) Prerequisite consultation on compensation fails within 20 days after the date of expiry of the reasonable period.

41. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement D. Remedies in case of non-implementation (temporary): b Retaliation in the same sector in the same agreement (ii) Means: suspension of concessions in other sector in the same agreement in other agreements

42. §2.3 The Dispute Settlement Mechanism Article 22.3 of DSU  “In considering what concessions or other obligations to suspend, the complaining party shall apply the following principles and procedures: (a) the general principle is that the complaining party should first seek to suspend concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment; (b) if that party considers that it is not practicable or effective to suspend concessions or other obligations  with respect to the same sector(s), it may seek to suspend concessions or other obligations in other sectors under the same agreement; (c) if that party considers that it is not practicable or effective to suspend concessions or other obligations with respect to other sectors under the same agreement, and that the circumstances are serious enough, it may seek to suspend concessions or other obligations under another covered agreement;”

43. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement D. Remedies in case of non-implementation (temporary): c Retaliation To be “equivalent” to the level of nullification or impairment. (iii) The level The level of nullification or impairment covers only the time-period after the DSB has granted authorization. (prospective rather than retroactive)

44. §2.3 The Dispute Settlement Mechanism The fourth stage: Enforcement D. Remedies in case of non-implementation (temporary): c Retaliation Subject matter: the level of suspension proposed; violation of the principles and procedures on suspension of concessions. (iv) Arbitration under Art.22.6 The arbitration is final. The parties could not initiate the arbitration again. Time frame: within 60 days after the date of expiry of the reasonable period of time.

45. §2.3 The Dispute Settlement Mechanism Critical issues in the WTO Dispute Settlement: • The conflict between • Art. 21.5 and Art. 22.6 Procedure under Art. 21.5： Panel procedure shall be completed within 90 days of the expiry of the reasonable period of time for implementation. In addition, it is possible that the party would appeal the panel report. Procedure under Art. 22.6： The DSB shall grant authorization to suspend concessions within 30 days of the expiry of the reasonable period of time for implementation. Even if the losing party objects to the level of suspension and initiates an arbitration, the arbitration shall be completed within 60 days after the date of expiry of the reasonable period of time. 

46. §2.3 The Dispute Settlement Mechanism Critical issues in the WTO Dispute Settlement: • The conflict between • Art. 21.5 and Art. 22.6 A. The dilemma: The DSB already granted the winning party authorization to suspend concessions or the arbitration on the level of suspension already concluded while the panel procedure on whether the implementation measures taken by the losing party comply with the DSB recommendations has not been completed. EC-bananas III (WT/DS27) 4 procedures: Ecuador: requesting for a compliance review under Art.21.5 E.C.: requesting for a compliance review under Art.21.5 U.S.: requesting for retaliation authorization and was allowed by the DSB E.C.: requesting for an arbitration under Art.22.6

47. §2.3 The Dispute Settlement Mechanism Critical issues in the WTO Dispute Settlement: • The conflict between • Art. 21.5 and Art. 22.6 B. The solution: Both the art.21.5 panel procedure and art.22.6 arbitration procedure will be commenced promptly after the end of the expiry of the reasonable period of time, but the art.22.6 arbitration procedure will be suspended until the art.21.5 panel rules (and in some cases until any appeal has been concluded).

48. §2.3 The Dispute Settlement Mechanism Critical issues in the WTO Dispute Settlement: -The WTO charter prevails over any other WTO agreements. -Any other Annex 1A agreements prevail over GATT 1994. 2. Conflict of norms

49. §2.3 The Dispute Settlement Mechanism Critical issues in the WTO Dispute Settlement: Prior cases do play an important role in dispute settlement. Both the panel and the Appellate Body frequently support their decisions by extensive citation and quotation of prior decisions. 3. The effect of previous cases

50. §2.3 The Dispute Settlement Mechanism Critical issues in the WTO Dispute Settlement: 4. The applicable law: Art.3.2 “The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system.  The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements.”