Page |1

A STUDY ON STRUCTURE AND WORKING OF

DISPUTE SETTLEMENT MECHANISAM UNDER
WTO

CHAPTER NO: - 1. INTRODUCTION

1.1 Back-Ground

GATT Born in 1995, but not so young The WTO began life on 1
January 1995, but its trading system is half a century older. Since
1948, the General Agreement on Tariffs and Trade (GATT) had
provided the rules for the system. (The second WTO ministerial
meeting, held in Geneva in May 1998, included a celebration of

Page |2

the 50th anniversary of the system.) It did not take long for the
General Agreement to give birth to an unofficial, de facto
international organization, also known informally as GATT. Over
the years GATT evolved through several rounds of negotiations.
The last and largest GATT round, was the Uruguay Round which
lasted from 1986 to 1994 and led to the WTOs creation. Whereas
GATT had mainly dealt with trade in goods, the WTO and its
agreements now cover trade in services, and in traded inventions,
creations and designs (intellectual property).
The General Agreement on Tariffs and Trade (GATT) was an
international organization created in 1947 to reduce trade barriers
through multilateral negotiations. In January 1995, the GATT was
replaced by a stronger World Trade Organization (WTO), the
result of eight years of GATT negotiations. Rules apply to over 90
percent of international trade.
The WTO has become increasingly controversial as it has
expanded the scope of its work from its original narrow GATT
focus on reducing tariffs on manufactured goods to agriculture and
services. The WTO now also works to eliminate non-tariff barriers,
and can be used to challenge environmental, health and other
regulations that may serve legitimate social goals but may be
regarded as impediments to international trade. The 1995
replacement of GATT by the WTO heightened concern among

Page |3

critics because its stronger enforcement powers represent a further

shift in power from citizens and national governments to a global
authority.
The GATTSs (and now the WTOs) approach to reducing trade
barriers was based on the most-favored nation principle, which
requires that when a nation grants a trade privilege to one country,
it must grant the same privilege to all GATT members. Another
guiding principle is that of national treatment, which requires
that of naton treatment, which requires nations to domestic
goods or services.

The distinctive features of WTO World Trade

Organization are :
1. Unlike the GATT, it is a legal entity.
2. Unlike International Monetary Fund (IMF) and World Bank
it is not an agent of the United Nations.
3. Unlike the IMF and the World Bank there is no weighted
voting, but all the WTO members have equal rights.

Page |4

4. Unlike the GATT, the agreements under the WTO are

permanent and binding to the member countries.
5. Unlike the GATT, the WTO dispute settlement system is
based on dilatory but automatic mechanism it is also quicker
and biding on the members. As such the WTO is a powerful
body. Unlike the GATT, the WTOs approach is rule based
and time bound.
6. Unlike the GATT, the WTO has a wider coverage. It covers
trade in goods as well as services.
7. Unlike the GATT, the WTO has a focus on trade related
aspects of intellectual property rights and several other issues
of agreements.
8. Above all the WTO is huge organizational body with a large
secretariat.

The WTO is a body designed to promote free trade through

organizing trade negotiations and act as an independent arbiter in
settling trade disputes. To some extent the WTO has been
successful

Free
1.

in

promoting

trade

has

greater

many

free

trade.

advantages:

Lower prices for consumers. Removing tariffs

enables us to buy cheaper imports

Page |5

2.

Free trade encourages greater competitiveness.

Firms face a higher incentive to cut costs. For example, a

domestic monopoly may now face competition from
foreign firms.
3.

Law of comparative advantage states that free trade

will enable an increase in economic welfare. This is

because countries can specialise in producing goods where
they have a lower opportunity cost.
4.

Economies of scale. By encouraging free trade,

firms can specialise and produce a higher quantity. This

enables more economies of scale, this is important for
industries with high fixed costs, such as car and aeroplane
manufacture.
5.

Free trade can help increase global economic

growth.
Disadvantages of WTO

However, the WTO has often been criticised for ignoring

the plight of the developing world.

It is argued the benefits of free trade accrue mostly to the

developed world.

Free trade may prevent developing economies develop their

infant industries. For example, if a developing economy was trying

to diversify their economy to develop a new manufacturing

Page |6

industry, they may be unable to do it without some tariff

protection.

1.2 Objective Of The Study

To Get A Knowledge
To Increase a Knowledge
The help full to the economy
And also profitable to indian country
.

1.3 Significant Of the Study

. To increase my Knowledge
. To know the Indian people about wto
. And Indian country political are also know about WTO
. Thats after economic are know about WTO
. And this is very profitable to economic.

1.4 Problem of Study

. This is secundary data
. This very difficult to put right information
. And this information are ready but very difficult to find out
.And this not sutable to studies

Page |7

1.5 Research of Desire

The study of secondary data
Book, News Paper, Articles, etc, are referred to get the relevant
information.
Data obtain to various sources observation are made and
accordingly conclusion is derived
This study is base on the information available for the time period
etc.

1.6 Chapter Schemes

Chapter No 1.In this chapter full information about WTO

Chapter No 2.In this chapter efforts are made to review

various research articles of research on WTO.

Chapter No 3.Function and Objective of WTO & Its

various members.

Chapter No 4.Dispute settlement under WTO & Procedure

steps of solve the WTO disputes.

Chapter No 5.Real Dispute Case Study

Chapter No 6.Finding, Conclusion, Suggestion .

Page |8

CHAPTER NO:- 2.ARTICLES ON WTO

This Articles are take from Economics Times News paper 8articles I noted In this project , this are related to WTO .

India to seek support for food security proposal

at WTO
Dilasha Seth, ET Bureau Sep 25, 2013, 02.00AM IST
India has objected to some of the clauses in the trade facilitation
agreement and sought support for the developing countries' food
security proposal at the World Trade Organization (WTO).
Senior officials from WTO member countries are in Geneva to
prepare the ground for the forthcoming Bali ministerial meeting.
"There are certain things that we cannot do and even the developed
world knows we cannot concede on those," said a commerce
department official.

Page |9

Trade

facilitation measures

require

countries

to

improve

infrastructure at borders, standardise procedures and rules and cut

red tape to allow seamless trade.
New Delhi is averse to some provisions due to the high cost of
compliance and requirement of additional infrastructure and
investment obligations that some countries may not have the
capacity to meet.
India has also opposed the condition of keeping adequate time gap
between the publication of new or amended tariffs and their
coming into effect. Decisions on tariffs are part of the Finance
Bill and announced in the budget for immediate implementation.
The country, however, has extended support proposals on customs
cooperation and mandatory return of the rejected consignment to
the exporter, instead of the current practice of destroying goods
at EU ports.

P a g e | 10

In the latest rounds of talks, India has also made it amply clear that
if there is no forward movement on G-33nations food security
proposal, trade facilitation would also not move.
The G-33 proposal wants subsidies, which are a part of the
procurement for public stockholding for poor and marginal
farmers, to not be regarded as a prohibited subsidy by the WTO.

Towards a tariff-free world

GUEST COLUMN / ROBERT R BLACKWILL, Dec 4, 2002, 12.40am IST

On November 26, the United States proposed a bold plan, in the

context of ongoing negotiations in the World Trade Organisation,
to eliminate all tariffs on manufactured products by the year 2015.
US trade representatives formally began discussing this proposal
with our trading partners, including India, in the WTO this week.
In making this proposal, the American goal is to stimulate
economic growth, raise incomes and lower taxes, generate jobs,
reduce poverty aThis effort fits in very well with the similarly
ambitious US propositions for market access liberalisation in the
agriculture and services sectors. In fact, the Bush administration's
goal for all trade in goods is the same: the complete elimination of
tariffs.

P a g e | 11

Removing tariffs would result in nearly $6 trillion of duty free

global trade. The World Bank estimates that removing all barriers
to goods trade would expand the international economy by $830
billion by 2015, resulting in a 2.5% annual in That is about $136
dollars more earnings each year for every person in the world. The
US proposal will also significantly contribute to worldwide
economic development.
Increasingly, WTO members are coming to accept that the path to
higher standards of living and eradicating poverty lies not in
continuing protectionist trade policies, but rather in multilateral
trade liberalisation.
The evidence shows that those countries that are willing to actively
seek a better future through freer trade are the ones that prosper
while those that cling to insular and outdated economic policies
continue to fall behind.
Developing countries, on the whole, maintain high tariff levels,
and eliminating these will provide considerable benefits for the
world's poor. For example, nearly half of all developing country
trade is with other developing countries.
The result is that about 70% of the duties paid by these nations are
paid to each other. Furthermore, as the WTO recently reported,

P a g e | 12

high tariffs hamper a country's ability to grow through exports.

High tariffs are, therefore, most harmful to developing economies.

WTO meet: India needs to pitch for trade

facilitation for export diversification
ET Bureau Aug 10, 2013, 04.01AM IST

The commerce ministry is reportedly seeking inputs from industry

as it firms up strategy for the forthcoming ministerial planned by
the World Trade Organization (WTO) in Bali, Indonesia. India
needs a proactive stance to purposefully advance world trade talks,
taking into account the interests of developing economies and the
least developed countries (LDCs).

P a g e | 13

US steel protection tariffs illegal: WTO

PTI May 3, 2003, 09.10pm IST
The World Trade Organisation has ruled that US tariffs to protect
the American steel industry are illegal.
The ruling, which has been made available to governments but has
not been publicly released, was confirmed by a US trade
official, The Washington Times reports.
The official, who asked not to be named, said the US plans to
appeal the decision, leaving the tariffs in place in the meantime.

P a g e | 14

A final ruling by an appeals panel would not be expected until late

November, the official said. By that time, the temporary
protections would be past their halfway mark.
President Bush slapped tariffs as high as 30 per cent in March 2002
on foreign steel products to protect the ailing and uncompetitive
US steel companies. The tariffs are set for three years, with less
protection each year.
The 15-nation European Union and other major steel-producing
nations complained to the WTO that the US tariffs broke
international trade rules.
The ruling on steel tariffs, The Washington Times notes, is the
latest in a string of high-profile losses for the US.

US trade officials say that the dispute-panel rulings overall have

been balanced, with the US winning several important cases.
However, lawmakers are increasingly annoyed with rulings against
the United States.

Brazil's Roberto Azevedo to head World Trade

Organization

P a g e | 15

Dilasha Seth, ET Bureau May 9, 2013, 04.00AM IST

NEW DELHI: Brazil's Roberto Azevedo was named head of
the World Trade Organization at a time it struggles to find ways to
revive stalled talks on freeing global commerce and to help
develop poorer nations. He will replace Pascal Lamyat the helm of
the Geneva-based body in September.
The 55-year-old has been the Permanent Representative of
Brazil to

the WTO and

other International

Economic

Organisations in Geneva since 2008. His backers, including India,

believe that as an insider, he will be able to forge a consensus
between conflicting members before the 9th ministerial in Bali,
seen as key to the future of the multilateral trade talk started way
back in 2001 in Doha.
Azevedo has said that he believes in ensuring that developing
countries must secure a share of international trade commensurate
with their needs, referring to the preamble of the Marrakesh
Agreement that was signed in 1994, thereby establishing WTO.
Welcoming

the

appointment,

commerce

and

industry

minister Anand Sharma said, "It is significant that this apex trade
body is being headed by an able nominee from the developing
world. He is assuming office at a crucial juncture as there is
considerable expectations from theDecember Bali Ministerial
Conference."

P a g e | 16

Differences between the developed and the developing nations

have prevented a successful conclusion of the multilateral trade
talks

as India and

other

developing

nations

defend

their

agricultural markets to protect millions of subsistence farmers from

easy imports that may result from the multilateral agreement.
"Reduction in the agriculture subsidies by the developed nations
will

definitely

see

breakthrough,"

saidManoj

Pant,

professor, JNU.
Azevedo has on several occasions challenged Europeans and the
US against the farm-subsidy policies. "Since India and Brazil are
working together as BRICS, having a Brazilian as the director
general of WTO is a good sign", said Anwarul Hoda, former,
deputy director general, WTO and presently chair professor
atICRIER. How far this will help the developing economies and
India will depend on his leadership qualities, he felt. "Azevedo has
never been the minister, which may be an initial hurdle in terms of
clout in dealing with ministers. But then a DG can only go to an
extent of moderating or give a direction to the talks," he said.

China's trade still smaller than that of US:

China Commerce Ministry

P a g e | 17

PTI Feb 13, 2013, 09.56PM IST

BEIJING: The Chinese Commerce Ministry today contradicted
reports that China has overtaken the US to emerge as the world's
biggest trading country.
China's combined export and import volume in 2012 still ranked
behind that of the US when using the same method to measure, the
Ministry said today.
The Ministry expects the country's total international goods trading
to be USD 15.64 billion less than that of the US according to the
measurement adopted by the World Trade Organization (WTO),
state run Xinhua news agencyreported.
The announcement is in response to a previous report by the state
run CCTV that China, with its foreign trade amounting to USD
3.867 trillion in 2012, has overtaken the US as the world's biggest
goods trading nation.
The US Commerce Department has released two sets of figures for
its international goods trading USD 3.82 trillion (based on
international balance of payments) and USD 3.882 trillion (based
on the measurement which is similar to the WTO's measurement),
an MOC official said.
The WTO usually adopted the latter figure in its annual
international trading report that is due to be released late February
or early March, the official added.

P a g e | 18

China's export and import volume increased 6.2 per cent year on
year to USD 3.867 trillion in 2012, according to the data issued last
month by the General Administration of Customs. This was higher
than the USD 3.82 trillion in goods registered by the US
Commerce Department.

Visa, MasterCard and American Express

demand action against China
Bloomberg Mar 28, 2010, 07.52am IST
BRUSSELS/WASHINGTON/NEW YORK: VISA, American
Express and MasterCard have talked with US trade officials about
taking action against China for shutting the companies out of its
$723 billion payment-processing market, people briefed on the
issue said.
The US Trade Representative's Office has discussed a possible
complaint at the World Trade Organization with lawyers for the
three companies, as well as Discover Financial Services and First
Data, said the people, who declined to be identified because the US
hasn't announced a complaint.
The case highlights rising tensions between the world's largest and
third-biggest economies, adding to disputes ranging from currency
policy to import duties to Internet censorship. US trade

P a g e | 19

associations, including the Business Software Alliance, in January

accused China of developing policies that favour local companies.
"If the government was looking to get tough on China, this is a
solid case to take on," David Hartridge, a senior trade policy
adviser for the law firm White & Case in Geneva and a former
WTO official, said in an interview.
At stake is a market in which payment-card purchases surged more
than 26-fold since 2002, according to Terry Xie, an analyst at
Mercator Advisory Group, a research firm in Maynard,
Massachusetts. Card spending, excluding ATM transactions,
jumped to 4.93 trillion yuan ($722.7 billion) in China last year and
may reach 8.4 trillion yuan by 2012, Xie said. That would be
almost half the payments Visa processed worldwide in 2009.
"China is still very much a cash-based society," Adam Frisch, an
analyst with Morgan Stanley in New York, said in an interview.
"You have a market that over the long term could be an immense
opportunity."
US lawmakers such as Senator Charles Schumer, a New
York Democrat, have called for moves to counteract China's
economic policies. The two countries are in a running debate over
the value of China's currency, the US has imposed duties that
China has called protectionist and President Barack Obama's

P a g e | 20

administration has sided with Google in its decision to stop abiding

by China's rules for censorship of the Internet.
A complaint with WTO, the Geneva-based trade arbiter, would be
the second by the Obama administration against China. A US
filing last year said limits on exporting raw materials such as
magnesium, coke and zinc give an unfair advantage to Chinese
manufacturers.
"This is a very important issue for each of the companies affected,"
John Frisbie, president of the US-China Business Council, a trade
group in Washington, said in an interview. "If there are WTO
violations and we have winnable cases, then we should bring
them."
China doesn't let foreign companies issue their own bank cards
denominated in its currency, build networks to support such cards
or process interbank point-of-sale transactions. Foreign banks must
"co-brand" with Chinese operators to supply these services and
execute payments through Shanghai-based China UnionPay Data,
the country's only national electronic-payment network.

India, WTO call for restart of stalled trade

talks

P a g e | 21

AGENCIES Aug 12, 2008, 03.52pm IST

NEW DELHI: The head of the World Trade Organization and
India's commerce minister called Tuesday for the resumption of
global trade talks that stalled last month in Geneva.
"India is committed to the multilateral system but when we
resume, I urge you to come to the table looking not for what you
can get, but what you can give,'' said Commerce Minister Kamal
Nath, singling out foreign diplomats who had gathered to hear him
speak at a trade conference in New Delhi.WTO Director General
Pascal Lamy said that after trade talks stalled July 29, WTO
member states had urged him to push ahead. ``Don't throw in the
towel. Please reserve what's on the table. We

have never been

so close,'' they said, he recalled.``Two days after a failure such

unanimous view was and remains surprising,'' he added. Lamy and
Nath were speaking at a trade conference organized by the
Federation of Indian Chambers of Commerce and Industry, or
FICCI, a business group, and the Consumer Unity & Trust Society
International, or CUTS, a non-governmental consumer advocacy
group.
They did not lay out any time frame for kick-starting the so-called
Doha round, which began in 2001 with the goal of helping
emerging economies benefit from freer trade. Talks foundered last
month because India and China failed to reach an accord with the

P a g e | 22

US on emergency agricultural tariffs, which would protect

developing markets from sudden surges of imported farm products.
Lamy said that if the talks had been successful, the sum of global
import tariffs would have been slashed by half, a savings of
US$150 bn a year. Developing countries would have contributed
one-third of that savings and reaped two-thirds of the rewards, he
said. The US would have been required to cap trade-distorting
subsidies, which could surge to US$48 bn a year, at US$14.5 bn a
year, he said. US Trade Representative Susan Schwab will also
meet with Lamy, her spokeswoman Gretchen Hamel said by e-mail
fromWashington.

CHAPTER NO:- 3.FUNCTION & OBJECTIVE OF

WTO

Functions of WTO
The former GATT was not really an organisation; it was merely a
legal arrangement. On the other hand, the WTO is a new
international organisation set up as a permanent body. It is
designed to play the role of a watchdog in the spheres of trade in
goods, trade in services, foreign investment, intellectual property

P a g e | 23

rights, etc. Article III has set out the following five functions of
WTO;
(i) The WTO shall facilitate the implementation, administration
and operation and further the objectives of this Agreement and of
the Multilateral Trade Agreements, and shall also provide the
frame work for the implementation, administration and operation
of the plurilateral Trade Agreements.
(ii) The WTO shall provide the forum for negotiations among its
members concerning their multilateral trade relations in matters
dealt with under the Agreement in the Annexes to this Agreement.
(iii) The WTO shall administer the Understanding on Rules and
Procedures Governing the Settlement of Disputes.
(iv) The WTO shall administer Trade Policy Review Mechanism.
(v) With a view to achieving greater coherence in global economic
policy making, the WTO shall cooperate, as appropriate, with the
international Monetary Fund (IMF) and with the International
Bank for Reconstruction and Development (IBRD) and its
affiliated agencies.

Decisionmaking
Most decisionmaking in the WTO follows GATT practices and is
based on consultation and consensus. The consensus practice is of

P a g e | 24

value to smaller countries, as it enhances their negotiating leverage

in the informal consultations and bargaining that precede
decisionmaking, especially if they are able to form coalitions.
Although recourse to voting may be had if a consensus cannot be
reached, in practice voting occurs only very rarely. If a vote is
needed, it is based on the principle of one member, one vote.
Unanimity is required for amendments relating
to general principles such as MFN or national treatment.
Interpretation of the provisions of the WTO agreements and
decisions on waivers of a members obligations require approval
by a threequarters majority vote A two-thirds majority vote is
sufficient for amendments relating to issues other than the general
principles mentioned above. Where not otherwise specified, and
where consensus cannot be reached, a simple majority vote is, in
principle, sufficient. In practice, voting does not occur. Indeed, in
1995 WTO members decided not to apply provisions allowing for
a vote in the case of accessions and requests for waivers but to
continue to proceed on the basis of consensus (WT/L/93).
Legislative amendments are also likely to be quite rare, as, in
practice, changes to the various agreements occur as part of
broader multilateral rounds.

Management of the Secretariat and Daily Operations

P a g e | 25

Unlike the World Bank and the IMF, the WTO does not have an
executive body or a board comprising a subset of members some
of whom represent a number of countries. Such executive boards
facilitate decisionmaking by concentrating discussions within a
smaller but representative group of members.
The closest the GATT ever came to such a forum was the
Consultative Group of Eighteen (CG18), established in 1975. It
ceased meeting in 1985 and never substituted for the GATT
Council of Representatives (Blackhurst 1998). As of January 1,
2002, the WTO had a membership of 144. Achieving consensus
among such a large number of members is not a simple matter, and
mechanisms have therefore been developed over the years to
reduce the number of members that are active participants in WTO
deliberations. The first and most important device is to involve
only principals, at least initially. To some extent
this is a natural process; a country that has no agricultural sector is
unlikely to be interested in discussions
centering on the reduction of agricultural trade barriers. In general
the Quad economies Canada, the European Union, Japan, and
the United Statesare part of any group that forms to discuss any
topic. They are supplemented by countries that have a principal
supplying interest in a product and by the major (potential)
importers whose policies are the subject of interest. Finally, a
number of countries that have established a reputation as

P a g e | 26

spokespersons tend to be involved in most major meetings.

Historically, such countries have included Egypt, India, and
Yugoslavia.

Objectives of WTO
Important objectives of WTO are mentioned below:
(i) to implement the new world trade system as visualised in the
Agreement;
(ii) to promote World Trade in a manner that benefits every
country;
(iii) to ensure that developing countries secure a better balance in
the sharing of the advantages resulting from the expansion of
international trade corresponding to their developmental needs;
(iv) to demolish all hurdles to an open world trading system and
usher in international economic renaissance because the world
trade is an effective instrument to foster economic growth;
(v) to enhance competitiveness among all trading partners so as to
benefit consumers and help in global integration;
(vi) to increase the level of production and productivity with a
view to ensuring level of employment in the world;

P a g e | 27

(vii) to expand and utilize world resources to the best;

(viii) to improve the level of living for the global population and
speed up economic development of the member nations.

CHAPTER

NO:-

4.DISPUTE

SETTELMENT

UNDER WTO AND ITS STEPS SETTLE THE

DISPUTE.
The WTO Dispute Settlement Mechanism and
Developing Countries
Developing countries need access to foreign markets if they are to
reap the benefits of globalization. Multilateral negotiations under

P a g e | 28

the World Trade Organization (WTO) play a pivotal role in

facilitating market access. 2 Yet, throughout the global economy,
pressures for protectionism abound, threatening to roll back these
gains.
As a result,the WTOs dispute settlementmechanism is widely
seen as one of the most critical and successful features of the
trade regime. Using this mechanism, WTO member-states can
shine thespotlight of international legal scrutiny on the
protectionist practices of their trading partners. This rule-of-law
system is especially important for developing countries, which
typically lack the market size to exert much influence through
more power-oriented trade diplomacy. Indeed, some poorer
countries have used the WTO dispute settlement system to great
effect, proving the systems worth from a development
perspective.3 Nonetheless, the technical and legal complexity of
this regime makes it difficult for other developing countries to
effectively use the system, many of which have never filed a WTO
dispute, despite having repeated grounds to do so. In this issues
brief, we elaborate this point by describing: (a) how WTO dispute
settlement works; (b) the prospective benefits and hurdles to
effective use of the regime by developing countries; and (c) some
potential directions for technical assistance and capacity-building,
focusing on WTO dispute settlement, in particular

P a g e | 29

1. How WTO Dispute Settlement Works

A WTO dispute proceeds through three main stages:
consultation;

formal

litigation;

and,

if

necessary,

implementation (figure 1). All disputes start with a request for

consultations, in which the member government bringing the
case to the WTO (the complainant) sets out its objections to the
trade measure(s) of another member government (the
defendant). The two sides are then required to consult for 60
days with the goal of negotiating a mutually satisfactory
solution to the dispute. Interestingly, a large proportion of
cases are successfully resolved during consultations; 46% of all
disputes brought to the WTO end at this stage, and threequarters of those yield at least partial concessions from the
defendant. 4 If consultations do not result in a mutually
satisfactory solution, the complainant can request a panel
proceeding, marking the start of the formal litigation stage.
Panels are comprised of three to five persons with a
background in trade law, agreed to by the parties on a case-bycase basis. There are typically two rounds of testimony,
including from other countries (third parties) that notify the
WTO of a substantial interest in the case. The panel then
circulates an interim report, offering both sides an
opportunity

to

comment

and

seek

clarification.

The

P a g e | 30

complainant and defendant can still negotiate a settlement at

this point. In fact, another 13% of all cases end at this stage
before a ruling is rendered. If not, the panel issues its final
report, which is then adopted by the WTO, unless one of two
things happens. First, the two sides can agree not to adopt the
panel report for whatever reason, although to date this has not
happened. Second, one or both sides (but not third parties) can
appeal the panels report, which happens frequently (i.e., in
73% of panel rulings).

WTO Dispute Settlement from a Development

Perspective

Trade liberalization promises considerable returns, but comes with

risks. One such risk is the possibility that a foreign government
will succumb to lobbying by its own domestic producers and grant
them protection. This can undermine a developing countrys
interest in reallocating resources to the affected export sector, since
poor countries tend to have fewer alternative export markets, and
fewer export goods. As a result, the mere anticipation of such
protectionism can deter or dilute muchneeded trade reform in
developing countries. The WTO dispute settlement system can
help insure against this risk by maintaining market access once it is
won, thereby encouraging developing countries to embark on an
opentrade growth strategy.

P a g e | 31

STEPS IN DISPUTE SETTLEMENT PROCESS

Dispute settlement is the central pillar of the multilateral trading
system, and the WTOs unique contribution to the stability of the
global economy. Without a means of settling disputes, the rulesbased system would be less effective because the rules could not
be enforced. The WTOs procedure underscores the rule of law,
and it makes the trading system more secure and predictable. The
system is based on clearly-defined rules, with timetables for
completing a case. First rulings are made by a panel and endorsed
(or rejected) by the WTOs full membership. Appeals based on
points of law are possible. However, the point is not to pass
judgement. The priority is to settle disputes, through consultations
if possible. By January 2008, only about 136 of the 369 cases had
reached the full panel process. Most of the rest have either been
notified as settled out of court or remain in a prolonged
consultation phase some since 1995.

Principles:
Equitable,

fast,

effective,

mutually

acceptable

Disputes in the WTO are essentially about broken promises. WTO

members have agreed that if they believe fellow-members are

P a g e | 32

violating trade rules, they will use the multilateral system of

settling disputes instead of taking action unilaterally. That means
abiding by the agreed procedures, and respecting judgements. A
dispute arises when one country adopts a trade policy measure or
takes some action that one or more fellow-WTO members
considers to be breaking the WTO agreements, or to be a failure to
live up to obligations. A third group of countries can declare that
they have an interest in the case and enjoy some rights.
A procedure for settling disputes existed under the old GATT, but
it had no fixed timetables, rulings were easier to block, and many
cases dragged on for a long time process with more clearly defined
stages in the procedure. It introduced greater discipline for the
length of time a case should take to be settled, with flexible
deadlines set in various stages of the procedure. The agreement
emphasizes that prompt settlement is essential if the WTO is to
function effectively. It sets out in considerable detail the
procedures and the timetable to be followed in resolving disputes.
If a case runs its full course to a first ruling, it should not normally
take more than about one year 15 months if the case is
appealed. The agreed time limits are flexible, and if the case is
considered urgent (e.g. if perishable goods are involved), it is
accelerated as much as possible.

P a g e | 33

The Uruguay Round agreement also made it impossible for the

country losing a case to block the adoption of the ruling. Under the
previous GATT procedure, rulings could only be adopted by
consensus, meaning that a single objection could block the ruling.
Now, rulings are automatically adopted unless there is a consensus
to reject a ruling any country wanting to block a ruling has to
persuade all other WTO members (including its adversary in the
case) to share its view.Although much of the procedure does
resemble a court or tribunal, the preferred
solution is for the countries concerned to discuss their problems
and settle the dispute by themselves. The first stage is therefore
consultations between the governments concerned, and even when
the case has progressed

These approximate periods for each stage of a dispute settlement

procedure are target figures the agreement is flexible. In
addition, the countries can settle their dispute themselves at any
stage. Totals are also approximate.

P a g e | 34

Consultations,
60 day

mediation, etc
Panel set up and

45 day

panellists appointed
Final panel report

6 month

to parties
Final panel report

3 week

to WTO members
Dispute Settlement

60 day

Body adopts report

(if no appeal)
(without appeal)

Total = 1 year
Appeals report
6090 day
Dispute Settlement
30 day

Body adopts appeals

Report

Total = 1y 3

(with appeal)

1. CONSULTATION (UP TO 60 DAYS)

Before taking any other actions, the countries in a dispute have to
talk to each other to see if they can settle their differences by
themselves. If that fails, they can also ask the WTO directorgeneral to mediate or try to help in any other way (so called good

P a g e | 35

offices). The consultations also offer a country an opportunity to

assess the merits of the other countrys case and sometimes submit
written questions that it wants the defending country to answer
during the consultation if they find the process informative or if
they think they may be able to reach a settlement.
Consultations are not always followed by a request for a panel.
Since sometimes the threat of action is more potent than the action
itself, consultations may provide information and leverage for
negotiations that to a successful resolution of the dispute. On
occasion, a complaining party may learn from the consultation
process about weaknesses in its arguments or damaging facts;
either situation could lead to a decision not to press the matter.
To complaining party may request the formation of panel, if the
parties to the dispute jointly consider that the good offices,
conciliation or mediation process has failed to settle the dispute.

2.The panel (up to 45 days for a panel to be

appointed, plus 6 months for the panel to conclude)
If consultations fail, the complaining country can ask for a panel
to be appointed. The country in the dock can block the creation
of a panel once, but when the Dispute Settlement Body meets for a
second time, the appointment can no longer be blocked (unless

P a g e | 36

there is a consensus against appointing the panel). Officially, the

panel is helping the Dispute Settlement Body make rulings or
recommendations. But because the panels report can only be
rejected by consensus in the Dispute Settlement Body, its
conclusions are difficult to overturn. The panels findings have to
be based on the agreements cited.
The panels final report should normally be given to the parties to
the dispute within six months. In cases of urgency, including those
concerning perishable goods, the deadline is shortened to three
months.o other stages, consultation and mediation are still always
possible.

The main stages are in Panel:

Before the first hearing: each side in the dispute presents its case
in writing to the panel.
First hearing: the case for the complaining country and defence:
the complaining country (or countries), the responding country,
and those that have announced they have an interest in the dispute,
make their case at the panels first hearing.
Rebuttals: the countries involved submit written rebuttals and
present oral arguments at the panels second meeting.

P a g e | 37

Experts: if one side raises scientific or other technical matters, the

panel may consult experts or appoint an expert review group to
prepare an advisory report.
First draft: the panel submits the descriptive (factual and
argument) sections of its report to the two sides, giving them two
weeks to comment. This report does not include findings and
conclusions.
Interim report: The panel then submits an interim report,
including its findings and conclusions, to the two sides, giving
them one week to ask for a review.
Review: The period of review must not exceed two weeks.
During that time, the panel may hold additional meetings with the
two sides.
Final report: A final report is submitted to the two sides and three
weeks later, it is circulated to all WTO members. If the panel
decides that the disputed trade measure does break a WTO
agreement or an obligation, it recommends that the measure be
made to conform with WTO rules. The panel may suggest how this
could be done.
The report becomes a ruling: The report becomes the Dispute
Settlement Bodys ruling or recommendation within 60 days unless

P a g e | 38

a consensus rejects it. Both sides can appeal the report (and in
some cases both sides do).

3.Appealing
Either side can appeal a panels ruling . Sometimes both sides do
so. Appeals have to be based on points of law such as legal
interpretation

they cannot request reexamination of existing

evidence or examination of new evidence . Each appeal is heard by

three members of a permanent seven-member Appellate Body set
up by the DSB. Members of the Appellate Body have four-year
terms. They have to be individuals with recognized standing in the
field of law and international trade, not affiliated with any
government.
The appeal can uphold, modify or reverse any of the panels legal
findings and conclusions. Normally appeals should not last more
than 60 days, with an absolute maximum of 90 days. In other
words, the Appellate Body should normally issue a report within
60 days from the date the notice of appeal is field.
The DSB has to accept (i.e., adopt) the report, as modified by the
ruling of the Appellate Bodys report unless there is a consensus to
reject it.

P a g e | 39

4.COMPLIANCE :After DSB adoption of a report in which a countrys trade measure

has been found to violate its WTO obligation, the country is
required to act on the recommendations in the report and bring the
measure into compliance with its obligations. The country must
state its intention to comply at a DSB meeting held within 30 days
of the reports adoption to. If complying with the recommendations
immediately proves impractical, the member will be given a
reasonable period of time to do so. To date in most WTO
disputes the losing party has brought its measure into compliance.
If a losing party fails to act within a reasonable period of time, it
has to enter into negotiations with the complaining country (or
countries) in order to determine mutually acceptable complaining
country

5.ARBITRATION
Members may seek arbitration within the WTO as an alternative
means of dispute settlement to facilitate the solution of certain
disputes that concern issues that are clearly defined by both parties.
Those parties must reach mutual agreement to arbitration and the
procedures to be followed. Agreed arbitration must be notified to
all members prior to the beginning of the arbitration process. Third

P a g e | 40

parties may become party to the arbitration only upon the

agreement of the parties that have agreed to have agreed to have
recourse to arbitraton.

CHAPTER NO:-5.CASE STUDY ON DISPUTE IN

WTO
INDIA PATENTS (US) 1 (DS50)
AGREEMENT
S

PARTIES

Complaina
n

Responden

Unite
d
State
India

TIMELINE
OF
THE
DISPUT

20
TRIPS
Art. Establishmen Novembe
70.8 and 70.
t of Pane
r 199
5
Circulation
Septembe
of
Panel r 199
Report
Circulation
of AB Repor

19
December
199

Adoptio
16
January
199

1. MEASURE AND INTELLECTUAL PROPERTY AT

ISSUE

P a g e | 41

Measure at issue: (i) India's "mailbox rule" under which patent

applications for pharmaceutical and agricultural chemical products
could be filed; and
(ii) the mechanism for granting exclusive marketing rights to such
products.

Intellectual

property

at

issue:

Patent

protection

for

pharmaceutical and agricultural chemical products, as provided

under TRIPS Art. 27.
2. SUMMARY OF KEY PANEL/AB FINDINGS
TRIPS Art. 70.8: The Appellate Body upheld the Panel's finding
that India's filing system based on "administrative practice" for
patent applications for pharmaceutical and agricultural chemical
products was inconsistent with Art. 70.8. The Appellate Body
found that the system did not provide the "means" by which
applications for patents for such inventions could be securely filed
within the meaning of Art. 70.8(a), because, in theory, a patent
application filed under the administrative instructions could be
rejected by the court under the contradictory mandatory provisions
of the existing Indian laws: the Patents Act of 1970.
TRIPS Art. 70.9: The Appellate Body agreed with the Panel that
there was no mechanism in place in India for the grant of exclusive

P a g e | 42

marketing rights for the products covered by Art. 70.8(a) and thus
Art. 70.9 was violated.

2.

OTHER ISSUES
Interpretation of the TRIPS Agreement: The Appellate
Body rejected the Panel's use of a "legitimate expectations"
(of Members and private right holders) standard, which
derives from the non-violation concept, as a principle of
interpretation for the TRIPS Agreement. The Appellate
Body based its conclusion on the following:

(i).the protection of "legitimate expectations" is not something that

was used in GATT practice as a principle of interpretation; and
(ii) the Panel's reliance on the VCLT Art. 31 for its "legitimate
expectations" interpretation

was not correct because the

"legitimate expectations of the parties to a treaty are reflected in

the language of the treaty itself." Pointing to DSU Arts. 3.2 and
19.2
3, the Appellate Body clarified that the process of treaty
interpretation should not include the "imputation into a treaty
words that are not there or the importation into a treaty of concepts
that were not intended."

P a g e | 43

CHAPTER NO.6 .CONLCUSION , SUGGESTION,

FINDING.
Suggestion
The Uruguay Round and the establishment of the WTO changed
the character of the trading system. The GATT was very much a
market accessoriented institution: its function was to harness the
dynamics of reciprocity for the global good.Negotiators could be
left to follow mercantilist logic, and the end result would be
beneficial to all contracting parties. This dynamic worked less well
for developing countries, where the burden of liberalization rested
much more heavily on the shoulders of governments. Even if they
wanted to, their scope to use the GATT was often limited because
exporters had fewer incentives and were less powerful than in
industrial countries. The reciprocal, negotiationdriven dynamic
also worked much less well for issues that were lumpy and
where the terms of the debate revolved around what rules to adopt,
not around how much of a marginal change was appropriate.

P a g e | 44

Once discussions center on rules, especially on disciplines for

domestic policy and regulations, it is more difficult to define
intraissue compromises that make economic sense. Cross-issue
linkage becomes necessary. Disengagement was not an option
during the Uruguay Round (because of the single undertaking),
so the task was to come up with a balanced package that ensured
gains for all players. One can argue whether the package that
emerged from the round was a balanced one; views on this point
differ widely. Whatever the conclusion, it is clear that the approach
taken toward ensuring and supporting implementation of WTO
agreements by developing countries was not an effective one.

CONCLUSION:Limiting recognition of this problem to the setting of uniform

transition periods was clearly inadequate. The case for uniform
application of agreements that involve reducing trade barriers
tariffs and nontariff barriers is very strong. But in other areas
requiring minimum levels of institutional capacity, such as
customs valuation, a good case can be made that implementation
should be linked to national capacity and international assistance
(Hoekman 2002).

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