WTO
Dispute Settlement System Of The World Trade Organization
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The World Trade Organization (WTO) is the only international organization dealing with promotion and regulation of international trade at a global level. Its aims are to help trade flow as freely as possible, to achieve further liberalization gradually through negotiation, and to provide an impartial means of settling disputes.

The WTO was established in 1994 to replace the less structured system of the General Agreement on Tariffs and Trade (GATT) which, since 1948, had provided a normative framework for international trade. That framework had been upgraded by subsequent rounds of negotiations, the last of which, the Uruguay Round, led to the creation of the WTO. The 1994 Agreement Establishing the WTO introduced an Annex on dispute settlement referred to as the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). Although the DSU can be regarded as a direct offspring of the dispute settlement procedures under the old GATT, it has substantially departed from its predecessor. For this reason, the data contained in this matrix refers only to the DSU and not to the old GATT dispute settlement system.

In particular, the main new feature is the creation of the Dispute Settlement Body (DSB) and the Standing Appellate Body (AB). The DSB is a political body comprising representatives of all WTO members. Its function is to administer the WTO dispute settlement system. To this end it supervises the process of consultation between disputing members; establishes panels to settle disputes, adopts or rejects panel or AB recommendations; maintains surveillance of implementation of rulings and recommendations, and eventually authorizes retaliatory measures in cases of non-implementation of recommendations.

If a dispute arises between members of the WTO over their respective obligations, first, each party may request the other to enter into consultations. Upon failure of consultations, each party may propose to employ other dispute settlement procedures (e.g., mediation, good offices, etc.). If these alternative procedures also fail, the complaining party may request the DSB to establish an ad hoc Panel. Panels conduct hearings on the dispute and issue a report on the merits of the case. The recommendations contained in the Panel's report become binding after their adoption by the DSB. Adoption by the DSB is automatic unless all WTO members agree to reject it. This is the main innovation lacking in the old GATT dispute settlement system, where Panel reports had to be adopted by a consensus of GATT members to become binding.

The Panel report may be appealed, but only on legal grounds before the AB, a permanent body composed by seven individuals. The appeal is heard before a three-person division of the AB, who may uphold, modify or reverse the findings of the panel. The report of the AB is then to be adopted by the DSB and has binding force unless, as in the case of the Panel report, it is unanimously rejected.