The Dispute Settlement System (DSS) was formed to resolve trade disputes between
the member states of WTO. This multilateral trading system has been facing
unprecedented challenges ever since its establishment in 1995. The trade and
tariff war continue to digress from its established and precedent rules,
therefore escalating in the backdrop of several complex factors. The primary
factor is the emerging economic rivalry and the deadlock between developed and
developing countries such as that between the USA and China.
The Dispute Settlement System of WTO is considered as a central pillar for the
multilateral trading system, which has made several contributions towards the
stabilization of the global economy. Even though the WTO Dispute Settlement
System (DSS) can be seen as a great development within the periphery of
International Economic Relations and Trade Law, this system is far away from a
neutral technocratic procedure in terms of its operation and structure. It is
evident that larger economies and the developed members of WTO are
better-positioned than the developing members and the poorer economies.
The first part of this paper gives a brief overview of the WTO and its DSS
process. The second part entails an analysis of why the DSS is diminishing and
failing as a mechanism to resolve trading disputes between the ratified members
of WTO. Lastly, the paper conclusively reflects upon the suggestions as well as
the recommendations for reform, which shall ensure effective and efficient
functioning of the WTO DSS.
WTO and DSS: An Overview
Before the establishment of WTO and DSS, any trade-related disputes were
governed and resolved by GATT (General Agreement on Tariffs and Trade), 1947.
However, the GATT, 1947 had its own weaknesses which disabled its efficiency and
limited its effectiveness. There were no consistent rules and obligations, lack
of appeal and lack of strict enforcement of rulings deferred from the purpose of
having a dispute resolution mechanism in trade law.
One of the main criticisms
with the GATT system was that the reports produced by the panel of experts could
only become binding when they were adopted by a consensus by the GATT parties.
This means that anybody could block these reports from becoming legally binding.
There was an immediate and necessary requirement to establish a platform which
addressed and reformed these faults and improve the governance of international
In 1995, WTO was established to provide an avenue for dispute settlements
between member states and international trade negotiations. The DSS was created
as a result of an eight-year-long Uruguay Round of negotiations conducted within
the framework of GATT, 1947 which highlighted the importance of adopting Dispute
Settlement Understanding (DSU) to govern trade disputes between the ratified
The main agenda of DSS is to provide “security”
multilateral trading system to the member states as is described in Article 3(2)
of the Dispute Settlement Understanding (DSU). The WTO DSS primarily channels
the behaviour of all member states, therefore resolving any differences which
arise between them on trade matters while ensuring that the provisions of the
covered agreements are properly applied and adhered to. DSU offers a forum not
only to the aggrieved state to validate their rights but also allows the
respondent state to defend or acknowledge its claims, thus interpreting,
clarifying as well as applying the rights and obligations which are provided
within the WTO agreements.
The goal of DSS is essentially to settle the disputes
between its members via a mutually agreed upon solution, following the
provisions and procedures that are mandatory in order to conduct efficient and
The DSS essentially comprises of three stages:
- Consultations between the member states;
- Adjudication by the Panels or by Appellate body; and
- Implementation of the declaration which also includes the possible
countermeasures in case the losing party fails to implement the given
A dispute is said to have been arisen when any of the member states
adopt a trade policy/measure which is considered to be inconsistent with the
obligations laid out in the WTO trade agreement and is firmly opposed by one or
more member states. Since WTO has a compulsory jurisdiction on all its members
who have signed and ratified the agreement, this system is deemed mandatory for
all the ratified member states.
With the establishment of DSS, several reforms were brought in international
trade laws which broadened the scope of GATT, 1947. These reforms were
essentially crucial for the developing countries as well as the LDC's as they
ascertained a rule-oriented system, in contrast to the existing power-oriented
one. An example of this shift is the replacement of consensus-based procedure
with a negative consensus mechanism which was used for the establishment of
panels and adoption of Appellate Body (AB) reports, this meant that any ruling
is considered automatically binding and adopted unless there's a negative
consensus made against it.
WTO DSS is one of the most active international dispute settlement systems in
the world. Ever since its establishment in 1995, DSS has witnessed 595 disputes
and has issued over 350 rulings in total. It has a higher compliance rate as
compared to other major international adjudicatory bodies like International
Court of Justice (ICJ) which was established in 1945, International Criminal
Court (ICC), established in 2002 and the ITLOS, established in 1982 which have
received 177, 27 and 29 cases respectively till now from their
respective years of establishment. From the given statistics, it is evident that
the high frequency with which the member states approach and invoke DSS subtly
enhances the confidence in the mechanism to resolve disputes related to
international trade law
The WTO dispute settlement system is promising and effective if we view it as an
avenue which allows its member states to seek legal advice and adjudication if
their rights have been infringed. However, at this juncture, it must be noted
that this is merely one way of viewing the entire system.
WTO DSS: A jewel in the crown
I. Developed V. Developing Member
It is crucial to understand that WTO DSS as a platform is successful, for
seeking legal help and advice by the member states in situations where dispute
related to trade law arises, however the question which arises is that whether
all the member states have an easy and equal access to such a dispute settlement
system. It is imperative to notice that not all countries have the same economic
resources, political stability and social understanding.
Different member states differ in terms of development which can adversely
affect their ability and capacity to access such a system. Even though several
developing countries are actively involved in the cases where they perform as
complainants, the prime issue arises when they’re brought in as respondents.
Since this system is mandatory and binding for all the member states, very often
the richer and developed states like USA, Japan, Canada and EU end up
manipulating the opposing poorer or lesser developed member states like Korea,
India, Ethiopia, Sudan etc.
For example- the USA-India dispute on solar panel which drastically hampered
India’s ability to revamp its renewable energy (International obligation) under
Jawahar Lal Nehru National Solar Mission and compete with china who had a major
share of solar cells in the U.S.
Moreover, it can be seen that the frequent users of this mechanism amongst the
developing member states are usually the larger economies like China, India,
Brazil etc. and very rarely is it seen that smaller economies amongst developing
nations approach the WTO DSS. For example, India is an active participant in WTO
DSS and has been a complainant, respondent and has also participated as a third
party in several WTO cases.
Initial reactions to India ratifying and becoming a
participant of WTO were cynical and gloomy as there was a grave apprehension
that this could affect the country’s poverty and sovereignty, this apprehension
further grew after India lost the “Mailbox
” Patent Caseagainst the USA after
which India enacted its Patent Amendment Act, 1999 for the grant of exclusive
market rights. However, these losses further enhanced India’s institutional as
well as human capacity and enabled India to become a proactive litigant,
following which India won several jurisprudential important cases before the DSS
like US-Shrimp Case which argues upon the rights of the states to have
private regimes for environmental protection.
From India's example, one might wonder that DSS is an amicable platform for the
developing member states as well as the poorer economies, however, it is
apparent that India is one of the most active and leading developing member
state of WTO. Several poorer economies show apprehension to even approach DSS as
a complainant. This happens because the smaller economies are reluctant to
approach the system due to their fear of losing out on their dependence on other
countries (political barriers).
For example- Israel's relationship with the USA
is now a fundamental pillar of the country's national security as the USA
supports its military, diplomacy and economy. In such a case, if a dispute ever
arises between these two countries, then it can be inferred that Israel would
show hesitation to approach WTO DSS due to its dependence on the USA.
Another reason as to why several developing countries (specifically smaller
economies) refrain from bringing cases is lack of experience (no proper
expertise in international trade) and resources. It is absolutely undeniable
that the cost of hiring a private counsel for litigating WTO matters has
increased over the past years, thus making it difficult for poorer economies to
approach WTO DSS (economic barriers). An example of this would be
the Chile-Price Band System Case, wherein the Association of the Argentine
Edible Oil Industries paid a private US-based law firm $4 million just for
writing the briefs and for preliminary legal advice.
Moreover, bringing a case to WTO DSS does not only involve the cost of hiring an
expert legal team to commence litigation but also requires legal, technical as
well as economic expertise in international trade law within the local
Government for a more efficient and effective outcome (Expertise Barriers).
Apart from the aforementioned reasons as to why not all member states have equal
access to this mechanism, there are several other grounds which causes
reluctance in participation by several member states. These can include cultural
differences, delayed results and ineffective remedies due to non-compliance by
the offending member state.
This reasoning can be inferred with the help of EC &
Certain Member States- Large Civil Aircraft Case. In this case, the European
Union and certain other member states had failed to implement the
recommendations as well as the rulings of DSB to bring the measures into
conformity with the obligations specified in their SCM Agreement.
The same can
be seen as an unsuccessful WTO dispute settlement system case due to
non-compliance by EU and certain other member states thus causing a delay in
time and henceforth resolved inefficiently.
Moreover, the average time taken at each stage of the DSS procedure is longer
than what is given as the statutory deadline in the DSU. These delays are caused
because of several reasons like- unavailability of lawyers having expertise in
international trade law, unavailability of the panellists, delayed reports
submitted to WTO due to improper or delayed translations and sometimes delays
are caused intentionally to trigger the opposing member state.
One of the greatest significances of WTO DSS is that it depoliticizes the
disputes between countries and softens the diplomatic importance of the
disputes, therefore, resolving the disputes practically. This happens primarily
because WTO has a compulsory and exclusive jurisdiction (as no other dispute
settlement process is available to the disputing parties) in trade law matters
for all its members which cannot be invoked.
This is essentially how WTO DSS can
be differentiated from ICJ which may have a mutually voluntary jurisdiction, or
which is enforceable by special agreements. The main issue with such a stringent
jurisdiction as that of WTO DSS is that it treats all its members at par with
one another and often fails to understand the differences between the economic,
social and political conditions of its member states. Even though the number of
developed and developing countries approaching the WTO for the settlement of
disputes is impressive, the number of developing and lesser developed countries
who are reluctant in approaching this system is substantial, therefore raising
objections to the efficiency and effectivity of WTO DSS.
From the above arguments, one can conclusively argue that fundamental
distinctions and biases exist between the developed and developing countries.
The WTO tends to be influenced by larger and richer economies like EU, due to
which poorer economies like Ethiopia, Sudan, Kenya etc. continue to suffer due
to their inability to participate in the WTO DSS proceedings. Some criticisms of
the WTO DSS are the following:
- Free Trade benefits the developed counties more than the developing
countries. The developing countries require extra trade protection as they
tend to usually specialize in primary industries (for example- Agriculture)
and need to diversify themselves into other sectors, which would enable them
to come up with new industries in order to diversify their economy (The
Infant Industry Argument). Many of the developed and highly industrialized
countries used tariff protection during the early stages of
industrialization. Hence WTO is often
criticized for being ignorant and unfair towards the needs of developing and
- The “Most Favored Nation Principle”- countries should be able to trade
without any form of discrimination. This implies that local firms aren’t
allowed to favour the local contractors, thus giving an unfair advantage to the MNC's
which prevents the local firms from being favoured thus hampering the right of
developing economies from emerging, industrially.
- Incompetence to Reduce Tariffs on Agriculture often aggrieves the farmers
in developing nations as developed countries like the USA and EU maintain high
tariffs on agriculture.
- Insensitivity towards Environmental Hazards”- often the concept of free
trade fails to consider environmental degradations and the impact trading
has on the environment. In an era of increasing global warming and the
future potential of natural and environmental disasters.
WTO fails to identify the domestic conditions of its member states. Firstly, it
fails to address the ongoing political discomfort which heavily affects the
member states while entering into a legal dispute with one another, for example-
the ongoing USA- China Trade War. Secondly, several poorer countries are
dependent upon the developed countries for their economic stability like in the
example of Israel and the USA.
Finally, several member countries have social
imbalances which can further prevent them from approaching WTO DSS. Lack of
expertise and resources continues to worsen this issue. DSS has resolved several
disputes within the developing countries like India, however, the worst affected
are the poorer economies or the least developed countries who fail to take
advantage of this system. Even though WTO offers a plethora of opportunities for
its members, it fails to distinguish the basic difference between the developed
and the developing countries.
II. USA claims on the incompetency of AB
Apart from the ongoing and persistent argument of WTO being biased and unfair
towards the developing countries, the DSS faces another major crisis within the
Appellate Body. This crisis exists because the USA continuously and repeatedly
vetoes the initiation of the procedure to firstly nominate and then appoint the
United States criticize the WTO DSS in multiple ways (prior to Trump
administration) by claiming that the AB has reversed the factual findings of the
panel and has created several new obligations along with reinterpretation of the
existing obligations in matters which aren't agreed upon by the WTO members.
US further argues that such practised have made the US trade remedies less
effective at addressing subsidies and dumping. In addition to this, there
have been claims made against the AB’s failure to provide reports within the
period of 90 days as per the DSU. The current US administration also claims that
remedies which are available under WTO law aren’t as elaborate as they claim to
be. They fail to preserve intellectual rights (such as trade secrets, patents
and even industrial designs) as well as technological innovations.
As a blanket rule, WTO promises to prohibit unfair trade practices, however it
fails to plug and reform several loopholes. As a result, the appeals mechanism
in DSB is slowly diminishing.
WTO DSS maintains an amicable record in resolving many disputes between several
countries and has effectively helped in stabilizing the global economy. However,
access to this dispute settlement, in my opinion, is a grave problem pertaining
to the effectiveness of the WTO DSS. In order to tackle this issue, it is
imperative to make adjustments which lead to an increase in the number of
sanctions, ensure proper compliance of WTO agreements and laws pertaining to
international trade within a reasonable time and without any undue delays,
ensure that the developing and lesser industrialized countries get reasonable
tariff protection which would enable them to grow industries belonging to
different sectors which would not only grow them economically but would also
increase their participation in WTO DSS, WTO should provide for a legal recourse
by establishing a pool of legal officers comprising of WTO members who could
assist developing and poorer economies in legal disputes in terms of hiring
legal counsels, drafting etc. The WTO should also come up with new rules and
obligations which would be in the best interest of the environment.
Apart from the above, there must be a parallel dispute settlement structure
within the WTO mechanism which would enable the members to participate in an
equal and an alternate dispute resolution. As per Article 25 of DSU, disputing
parties can resolve disputes via arbitration as they can mutually agree to
either use arbitration for the entire dispute settlement or simply at the
appeals stage which can circumvent the non-functioning of AB.
which arises is that whether article 25 of DSU can help in retaining the role of
WTO whilst maintaining the standards of DSU? The disputing parties could
mutually agree upon the arbitration procedures and unlike the selection
procedures of AB, outside parties would have no control or influence over the
arbitration procedure and awards. This can be seen as a huge advantage as a
stricter implementation of article 25 would incapacitate the USA from affecting
the appeals procedure, therefore retaining the stature of WTO and DSU.
Lastly, the panels and AB should avoid delays in producing the reports and
should conduct the settlement procedures fairly in just and durable time as per
Therefore, it can be concluded that there is a clear deficiency within the
current DSS mechanism as several member states have no realistic access to this
system and this failure arises from the complexities of the barriers within the
- Understanding on Rules and Procedures Governing the Settlement of
Disputes, Annex 2 of Marrakesh Agreement Establishing the World Trade
Organization, 1869 U.N.T.S. 401, April 15, 1994
- Article 3.2, Dispute Settlement Understanding
- WTO Handbook, Pg. 18
- “Dispute Settlement”, World Trade Organization [https://www.orfonline.org/wp-content/uploads/2019/09/ORF_OccasionalPaper_209_WTO.pdf]
- International Court of Justice” [https://www.icj-cij.org/en/decisions]
- International Criminal Court” [https://www.icc-cpi.int/Pages/cases.aspx]
- International Tribunal for the Law of the Sea” [https://www.itlos.org/cases/list-of-cases/]
- DS456: India- Certain Measures Relating to Solar Cells and Solar Modules
- DS50: India- Patent Protection for Pharmaceutical and Agricultural
- DS58: United States- Import Prohibition of Certain Shrimp and Shrimp
- DS207: Chile-Price Band System & Safeguard Measures Relating to Certain
Agricultural Products [https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds207_e.htm]
- DS316: EC & Certain Member States- Large Civil Aircraft Case [https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds316_e.htm]
- Center for Strategic and International Studies [https://www.csis.org/analysis/article-25-effective-way-avert-wto-crisis]
- General Understanding of Article 25 of Dispute Settlement Understanding.