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Improving Developing Country Access to the Dispute Settlement Mechanism of the WTO

(held in the Centre William Rappard, Geneva on 25 February 2000)

Introduction

The Fundamentals of the WTO Dispute Settlement Mechanism

The needs of LACs in relation to the DSM

The private sector involvement

The projected Advisory Centre on WTO Law

Conclusions

 

I. Introduction

1. In response to requests from less-advantaged countries (LACs) and in the current series of assistance projects, on 25 February 2000 AITIC held a forum on improving developing country access to the Dispute Settlement Mechanism (DSM). It was organised in collaboration with the World Trade Organization (WTO).

2. The forum covered:

• the fundamentals of the DSM;

• the need of LACs in relation to the DSM;

• the private sector involvement;

• the projected Advisory Centre on WTO Law;

II. The Fundamentals of the WTO Dispute Settlement Mechanism

3. The dispute settlement mechanism was important:

• as an aspect of WTO Law, in the promotion of economic growth and such human rights as individual freedom, non-discrimination, the rule of law and peaceful change;

• as a trade policy instrument for opening-up foreign markets;

• as a legal instrument for the protection and progressive development of WTO Law.

4. The four major phases of the dispute settlement process are:

i. the political approach, involving consultation and mediation, which in practice has proved an effective means of resolving disputes;

ii. the quasi-judicial panel proceedings within a tight time frame. A fact which could cause difficulties for developing countries with limited resources;

iii. the Appellate Body process, again with a tight time frame;

iv. the multilateral surveillance of implementation.

5. On the participation of developing countries it was noted that they were complainants in more than 50 cases and respondents in more than 60 out of a total of 189 cases since the creation of the WTO. In 16 cases, developing countries complained about the action of other developing countries and developing countries frequently intervene as third parties. This increased activity by developing countries is healthy in that it demonstrates interest in protecting the WTO laws, despite their lack of resources compared to the developed sector. It was noted that the tight time-frames imposed by the panel and in particular the appellate procedures might be onerous to developing countries. However, this streamlined approach to dispute settlement was preferable to the very lengthy procedures of the GATT and of other international courts.

6. The special DSU provisions for developing countries have lesser significance because, as best endeavour clauses, they have little substance. It was interesting that under the WTO, with its broader scope than the GATT, there are alternative dispute settlement mechanisms, e.g. the WIPO procedures for intellectual property and numerous bilateral agreements for investment disputes. These had the advantage of being confidential but still binding. The DSU also provides for arbitration, which has yet to be used.

7. The ways in which developing countries might be assisted in using the dispute settlement mechanism were identified. Legal advice was available within the WTO Secretariat, but this was very limited indeed and could only cover a brief initial consultation. The WTO did not have the resources to assist with the preparation of a full case, either as complainant or respondent. The use of private law firms (see Section IV), the Advisory Centre on WTO Law (see Section V) and initiatives by the WTO and UNCTAD in running regional seminars were mentioned. The clear preference was to increase developing countries’ in-house expertise by training and secondments.

III. The needs of LACs in relation to the DSM

8. In the personal experience of the participants, the following main points were made:

i. A full use of the DSM was of great consequence to all Members and in particular to developing-country Members. This was a valid means of achieving wide-ranging aims: from improving market access to contributing to the refinement and strengthening of WTO Law. Developing country versus developing country cases were just as valid, albeit the market access considerations in these occasions could well be less important.

ii. Prevention of disputes was important. The need for unambiguous agreements in the first instance was stressed. Many disputes stemmed from poor, or deliberately vague, drafting.

iii. The provision for Members' authoritative interpretation of WTO Agreements had not been used so far. It should be considered as a suitable means of settling differences.

iv. For developing countries a shortage of expertise was a major problem. Outside assistance – from the WTO Secretariat, the projected Advisory Centre on WTO Law or the private sector – was essential, but it should have as its long-term objective the training of in-house staff. WTO, UNCTAD and AITIC seminars were helpful. The severe shortage of capacity within the Secretariat to advise developing countries was regrettable, though the perceived need for neutrality meant that the Secretariat could not act for a Member in a particular case. However, Secretariat-related but "autonomous"’ alternatives could be considered. In general, the three main means of providing assistance were not mutually exclusive.

v. Panel/Appellate Body rulings had the effect of changing the rights and obligations of Members. The implications of this should be given consideration in the development of WTO jurisprudence.

vi. The complainant retaliation provisions were unsatisfactory as it was left to the complainant to choose the products, up to a total sum, from which to take compensation. This was trade-distorting and could lead to the "carousel effect", given that products could be targeted for short periods. There was a case for the Dispute Settlement Body setting, or approving, the detailed arrangements, which would include the ending of the retaliation.

vii. It was important to avoid the politicisation of the DSM, but reality was that there is now a much wider interest, amongst NGOs in particular, in trade dispute decisions. More transparency and therefore more information being available to outsiders might help. To this end simpler, shorter, more easily read reports might lead to a wider understanding.

viii. Authoritative judgments are essential. Given the complexity of many of the issues, there was a case for "professional" panelists.

IV. The private sector involvement

9. In pursuing an interest in a case, as a complainant, a respondent or a third party, the ideal situation is the use of in-house expertise. However, for developing countries and also for developed countries this is rarely available and one of the options is to use private sector assistance. Factors influencing the decision to use a private law firm or an independent consultant include:

• The importance of the case, politically and/or economically. A significant case could justify the expenditure, and where there is a major trade interest, funding is sometimes available from this source, though it is important for control to be retained by the government.

• The complexity of the case. Where extensive research is required which would otherwise tie-up scarce in-house manpower, private sector assistance is useful; and where specialist knowledge of a topic (e.g. anti-dumping) or a market (e.g. the US) is required, the private sector can often provide the appropriate experience.

• The importance of winning. Where a case is marginal, there is advantage in having an outside agency to "blame" for any failure; or if it is necessary to lose to make internal changes, again the arms length relationship with the private sector can be helpful.

10. In choosing a law firm or consultant, it is important, given the complexity of WTO law, that the advisers have the requisite WTO experience, professional training, advocacy skills and some basic economic training. Prior service with a major developing country’s delegation is an advantage when considering action concerning that country. Also language skills should be kept in mind when research in a local market is required. It is often also helpful to establish links with a firm that will provide continuity and through this liaison to eventually enhance in-house skills. Indeed there is a case for the research to be handled by the private sector and for the advocacy to be left to a civil servant, which can indicate a proper commitment to the cause.

11. Lawyers and consultants specializing in WTO dispute settlement cases are found in three main locations: Geneva, Washington and Brussels. Geneva is often the preferred location, given that delegations and the WTO are there. Washington has particular advantages when dealing with disputes involving the US and Brussels when dealing with the EU.

12. The costs of employing private sector lawyers vary from about $200 to $450 per hour, depending on the seniority and experience of the staff member. In addition all incidental costs (e.g. telephone calls, postage), travel costs (business class) and hotels are billable. In selecting a law firm, it could be prudent to seek competitive estimates backed by detailed estimates and/or to seek to cap the bill. It might also be shrewd to seek preferential rates, especially where there is the prospect of a continuing relationship, and indeed one Geneva law firm is offering a free initial period of consultations for least-developed countries.

V. The projected Advisory Centre on WTO Law

13. On 1 December 1999, 29 WTO Members signed the Agreement establishing the Advisory Centre on WTO Law. It is open to WTO Members and those in the process of accession either by signature before 31 March 2000 or anytime thereafter through an accession procedure. The Agreement will enter into force when it has been ratified by 20 Members and the financial commitments exceed $12 million. The aim is to have the Centre operational by the end of 2000. It will be established in Geneva, independent from the WTO, with an Executive Director, four lawyers and support staff.

14. Members from developed countries make a minimum contribution of $1 million to the endowment fund. Members from developing countries and economics in transition contribute in accordance with their capacity to pay and least-developed countries make no contribution.

15. The Centre will provide training (internships and seminars) and legal assistance (support throughout dispute settlement proceedings) to its Members and all least-developed countries. Least-developed countries will receive priority in the use of the Centre's services (although it should be noted that to date there has not been a single dispute in the GATT or WTO that has involved an LDC). The basic fee for legal advice will be $250 per hour, which will be discounted for developing and least-developed countries. Least-developed countries will pay $25 per hour, a 90% discount. The Centre will be able to hire specialist lawyers, e.g. on anti-dumping issues, where this is necessary. A key consideration will be the development of skills within the developing countries.

VI. Conclusions

16. The clear message that emerged from the forum was that for LACs to have effective access to the DSM they needed technical and financial assistance. The sensitive nature of the mechanism made it clear that any external assistance to Member countries of the WTO to launch a case against another Member (developed and even more so developing) complicated the modalities by which effective assistance could be provided to the LACs in this respect. Any, or all, of the following could be considered:

i. An expansion of the WTO Secretariat legal advice facility which might include not only initial consultations with the LACs, but also assistance with the detailed preparation of a case. It could be argued that the Secretariat should maintain a neutral position, but means could be found for a Secretariat-related body (and not the Secretariat itself) to be as committed an adviser as would be a private sector lawyer.

ii. The effective launching of the Advisory Centre on WTO Law, particularly if this would provide a wide-ranging service of effective first rate discounted service and resourceful capacity-building with the objective of creating in-house expertise within LACs.

iii. The expansion of pro-bono legal services, be it by law firms (one in Geneva had already made its services available to LDCs) or by other institutions which can provide expertise on international trade law.

iv. The use of experienced private sector lawyers has merit, in particular in helping the in-house development of LACs’ staff. This can be expensive, but financing perhaps through the WTO Secretariat, through a special endowment fund, through the Advisory Centre on WTO Law or some other pro-bono/discounted arrangement could lighten the burden for LACs.

v. More broadly-based training by way of seminars organized by the WTO, UNCTAD, or AITIC could be a useful addition to all the above.

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