The wto dispute settlement mechanism - some legal issues for developing countries

• Author: H Patrick Wells
• Position: BA, MSc (Soc), LLB,M Sc (Int'l Rel), LL.M, Attorney at Law
• Pages: 179-196

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THE WTO DISPUTE SETTLEMENT MECHANISM - SOME LEGAL ISSUES FOR DEVELOPING COUNTRIES

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The effective integration of developing countries into the international trading system has been the focus of considerable scholarship over the years. The extent to which these nation-states have been meaningfully incorporated into the various multilateral trading regimes’ has given rise to much debate, ranging from issues of access, rights and obligations, fairness, and equity, to those of political and economic domination or dependency. The World Trade Organization (WTO) has been no exception to the criticisms made of such international trading institutions. This is particularly so in respect of the WTO Dispute Settlement Mechanism (DSM), under the Dispute Settlement Understanding (DSU) which makes reference to certain “differential” considerations that should be accorded to developing and least developed states.

In so far as multilateral trading arrangements are concerned, the WTO has been deemed to be the most significant institutional development that has emerged within the last decade.2 It was officially created on January 1, 1995,

* BA, MSc (Soc), LLB,M Sc (Int’l Rcl), LLM, Attorney at Law.
1. Multilateralism should be understood to mean “an institutional form which co-ordinates relations among three or more states on the basis of generalized principles of conduct- that is, principles which specify appropriate conduct for a class of actions, without regard to the particularistic interests of the parties or the strategic exigencies that may exist in any specific occurrence ”, and a regime should be viewed as that which “satisfies the definitional criteria of encompassing principles, norms, rules, and decision-making procedures around which actor expectations converge”. Both definitions are adapted from John Gerard Ruggie, “Multilateralism: the Anatomy of an Institution”, International Organization, 46(3), Summer 1992, p 561, at 570 and 573 respectively.

2. The GATT/WTO system has been widely viewed as the most successful multilateral trading institution today, for example, see Robert Hudec, Enforcing International TradeLaw: The Evolution of the Modern GATT Legal System, Salem, NH: Butterworth Legal Publishers, 1993, p 353 and Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settlement System: International Law, International Organizations, and Dispute Settlement, Lon don: Kluwer, 1997, pp 63-65.

H PATRICK WELLS

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by 125 countries, under the Marrakesh Agreement Establishing the World Trade Organization, at the end of the Uruguay Round. The WTO was created under the recognition that:-

relations in the field of trade and economic endeavour should be conducted with a view to raising the standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and enhance the means for doing so in a manner consistent with their respective needs and concerns at the different levels of economic development.3

In spite of such impressive aspirations, the implementation of the rules, relative to rights and obligations under the WTO, in so far as promoting and protecting the interest of all relevant parties is concerned, has been a major source of tension in the organization. This has been considered to be a poignant characteristic of international law in general, relative to the great disparity in strength and size among the nations to which it applies.4 As Martin [1994] explains, “having many players can increase the conflicts of interest among them.. .”5 With specific reference to the WTO-DSM, the touchstone of much of the criticism has been the degree of influence prevailing over the system by powerful developed countries, vis-á-vis that of their less wealthy, developing counterparts. In large measure, the prevailing view is that the scales are as yet still very far from being balanced, and that even where provisions in the nature of more favourable terms are available, the application and manifestation of these “preferences” and “accommodations” are not proving significantly beneficial to the developing Member countries. Arising from this, therefore, must be the pivotal question - to what extent does the WTO-DSU, in its “differential treatment” provisions, prove adequate and effective, relative to the interests of developing countries?’

Notwithstanding what will be argued to be the dubious impact of the WTO-DSM on the interests of developing Member countries as a whole, there is one very important school of thought which maintains the view that the promulgation of the WTO mechanism epitomises substantial progress in the realm of the settlement of international trade disputes. John Jackson’s

3. Legal Texts “Marrakesh Agreement Establishing the World Trade Organization”, p 6.
4. H L A Hart, for instance, explores this strand of reasoning in The Concept of Law, Oxford, 2nd cdn, 1994, pp 195-198.

5. Lisa L Martin, “Interests, Power, and Multilateralism”, International Organization, 46(4), Autumn 1992, p 765, at 773.

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analysis of “power oriented" diplomacy versus “rule-oriented” diplomacy has been at the heart of intellectual discourse on the nature and construct of the adjudication and settlement of international disputes in the realm of international trade.6 7 Jackson proposes that “one can roughly divide the various techniques for the peaceful settlement of international disputes into two types: settlement by negotiation and agreement with reference (explicitly or implicitly) to relative power status of the states; or settlement by negotiation or decision with reference to norms or rules to which both parties have previously agreed"/

In his analysis, a rules oriented mechanism is, at the very least, a useful tool of diplomacy, which gives rise to a degree of predictability and stability to what he describes as a “risk-rife” world.8 In seeking to develop his trajectory, Jackson explains that within the scope of a power-oriented system, there would in fact be a process of negotiation between states, as regards settlement of disputes, but the more powerful would consistently have the advantage, with the use of such leverage as foreign aid, military stratagem or trade restrictions. To that extent, a smaller nation would be reluctant to mount a challenge against a large state on whom it is dependent. In this scheme of arrangements, Jackson argues, implicit or explicit intimidation would be largely characteristic of the dispute settlement arrangements between larger and smaller states.

Correspondingly, it is Jacksons thesis that, in a rules-based system, dispute settlement between the parries would unfold in the context of applying a set of agreed rules, failing which, the dispute is resolved by what he describes as “impartial third party judgements” based on the set rules. In that connection he continues, “the negotiators would be negotiating with reference to their respective predictions as to the outcome of those judgements and not with reference to potential retaliation or actions exercising power of one or more of rhe parties to the dispute”.9 In this context, rhe system which is predicated on negotiation based on implemented rules seems preferable to Jackson.’10

6. John H Jackson, “The Crumbling Institutions of the liberal Trade System”, 12 Journal of World Trode Law, 93, 1978; John H Jackson, “Governmental Disputes in International Trade Relations: A Proposal in the Context of the GATT”, 13 Journal of World Trade 1, 1979.

7. John H Jackson, “Govenmental Disputes...”, supra n 15,p3.
8. Ibid p 2.
9. Ibid p 4.
10. A useful summary of Jackson’s views on the subject can be found in “The Crumbling Institutions nf the liberal Trade System”. Journal of World Trade Law. 12(2). March:April 1978, pp 98-99. He writes thus:-ir seems to me that diplomatic techniques can be roughly categorized into two groups: (1)
the technique we can call ‘power oriented”: and (2) the technique which we might call “rule oriented . Power oriented techniques suggest a diplomat asserting, subtly or otherwise, rhe power of the nation he represents. In general, such a diplomat prefers negotiation as a

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This is, however, not the conclusion of the matter for Jackson, as he goes further to explain that the mere existence of the rules is not the end, as there must as well be a belief in the adjudication process set up to interpret and enforce the rules, such that the parties can expect outcomes that are mutually fair. Where such a system does not exist, then the process is indirectly relegated to no more than a mechanism operating relative to respective “power positions”, modulated solely by the restraint and good faith of the more powerful party. This of course is based on cognisance of its own interest in the longer term.

In seeking to distinguish the merits of a rules-based system, Jackson, in the earlier years, embarked on a critique of the GATT dispute settlement mechanism, describing it as a process characterized by uncertainties. He adopted the view that it did not inspire confidence as a whole, as the process was beset with suspicions of power and political influences. Some of his basic contentions as he summarized them were:

(z) The procedures for initiating a complaint process [were] ill defined, subject to delay... and “permission” of a political body through vote of the Contracting Parties;

(ii)... (iii) Meagre resources of personnel, staff, and money may contribute to inadequate consideration of facts and arguments of particular cases;

(iv) Factfinding resources and procedures [were] inadequate;

(v) There are inadequate procedures for reopening a complex case when a...