The Uruguay Round and the Improvements to the Gatt Dispute Settlement Rules and Procedures

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The Uruguay Round and the Improvements to the Gatt Dispute The Uruguay Round and the Improvements to the Gatt Dispute
Settlement Rules and Procedures Settlement Rules and Procedures
Jean-Gabriel Castel
Osgoode Hall Law School of York University
, castel@fake.osgoode.yorku.ca
Source Publication: Source Publication:
International and Comparative Law Quarterly. Volume 38, Issue 4 (1989), p. 834-849.
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and Procedures."
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38.4 (1989): 834-849.
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THE
URUGUAY
ROUND
AND
THE
IMPROVEMENTS
TO
THE
GATT DISPUTE
SETTLEMENT
RULES
AND
PROCEDURES
J.-G.
CASTEL*
I.
INTRODUCTION
IT
is
generally
agreed
that
the
GATT
system
of
settlement
of
trade
disputes
has
worked
relatively
well
since
its
creation
in
1948.
Over
the
years
it
has
been improved on
a
number
of
occasions.
However,
today
most
members
of
the
GATF
are
of
the
opinion
that
further
improve-
ments are
necessary to make
the
system
more
flexible,
efficient
and
effective.
The procedures
should
be
strengthened
and
some
of
the
rules
should
be
made
clearer.
In
other
words,
there
are
shortcomings
in
the
system
itself
and
in
the
way
in
which
it
is
operated.
A
better
system
of dispute
settlement
would
eliminate
other,
less
legitimate
methods
of
resolution
of disputes,
especially
resort
to
"voluntary
restraints"
agreements,
"orderly
marketing" agreements
and unila-
teral
action
in
the
form
of
retaliatory
measures
in
national
trade
legis-
lation.
For
these
reasons,
the members of the
GATT
decided
to
review
the
rules
and
procedures
of the dispute
settlement
process
and
to
appoint
a
Negotiating
Group
on
Dispute Settlement,
at
the Uru-
guay
Round
of
negotiations
that
began
at
Punta
del
Este
on
15
Sep-
tember
1986.
In
1988
this
group
proposed
a
number
of
improvements
which
served
as
a
basis
for
those
which
the
Trade
Negotiations
Com-
mittee,
meeting at
Montreal
on
9
December
1988
at
the
ministerial
level,
recommended
for
approval
by
the
Contracting
Parties'
on
a
trial
basis.
The purpose
of
this article
is
to describe
very briefly
the
existing
sys-
tem of
dispute
settlement
and,
in
the
light
of
criticisms
addressed
to
it,
examine
the
new
improvements.
*
Professor of International
Business
Law,
Osgoode
Hall
Law
School,
York
University,
Toronto.
1.
When
the members
of
the
GATT
act
collectively
they
are
referred
to
as
Contracting
Parties
in
italics.
(1989)
38
I.C.L.Q.

OCTOBER
1989]
The
GA
TT
Dispute
Settlement
Rules
I.
THE
PRESENT
SYSTEM
A.
General
Survey
of
the GA
TT
System
1.
Relevant
provisions
The
GATT
contains
several
articles,
with
clauses
dealing
with
the
resolution
of
disputes.
2
However, Articles
XXII
and XXIII
supple-
mented
by
the
1979
Understanding
Regarding
Notification, Consul-
tation,
Dispute
Settlement
and
Surveillance,
3
and
the
1982
Ministerial
Declaration
on
Dispute Settlement
are
the
most
important.
4
2.
Brief
analysis
of
relevant
provisions
(a)
Consultations.
Article
XXII
as
amended
in
1955
provides
for
con-
sultations
with
respect
to
any
matter
affecting
the
operation
of
the
GATT.
Contracting parties
are invited to
solve
their
disputes
by
bila-
teral
consultations
and,
if
this
fails,
by
the
conciliatory
intervention
of
the
Contracting
Parties.
5
This
is
the
diplomatic
solution.
Although
working
parties
may
be
established
under
this
Article,
contracting
par-
ties
have
resorted
to
this
procedure
on only
ten
occasions
between
1948
and
1986.
The
1979
Understanding
adds
that
contracting
parties
undertake
to
respond
to
requests
for
consultations
promptly
and
to
attempt
to
con-
clude
them
expeditiously
with
a
view
to reaching mutually
satisfactory
conclusions.
6
2.
E.g.
Arts.XIX
(safeguards),
XXVII
(modification
of
schedules
of
concessions),
XXV.5
(waivers).
For
a
complete
list
of
the
19
clauses
in
the
GATT
which
oblige
the
dis-
putants
to
resolve
differences
by
consultations,
see
J.
H.
Jackson,
World
Trade
and
the
Law
of
GA
TT
(1969),
p.
164
.
The
text
of
the
GATT
may be
found
in
(1969)
IV
B.I.S.D.
3.
(1978-79)
B.I.S.D.,
26th Supp.
210.
4.
(1982)
B.I.S.D.,
29th Supp.
13.
See also
1984
Decision
which
completed
and
clari-
fied
the
1979
Understanding
on
certain
questions
and
contains
directives applicable
on a
one-year
trial
basis
especially
with
respect
to
a
short
roster of
non-governmental experts
qualified to serve
as
panelists:
Action
by
Contracting Parties
on
Dispute Settlement
Pro-
cedures
(1985)
B.I.S.D.,
31st
Supp.
9.
5.
(1955)
B.I.S.D.,
3rd
Supp.
250.
Art.XXII
provides
as
follows:
"Consultation:
1.
Each
contracting party
shall
accord
sympathetic
consideration
to,
and
shall
afford
adequate opportunity
for
consultation
regarding,
such
representations
as
may
be
made
by
another
contracting
party
with
respect
to
any
matter
affecting
the
operation
of
this
Agreement.
2.
The
Contracting
Parties
may,
at
the
request
of
a
contracting party,
consult
with
any
contracting
party
or
parties
in
respect
of
any
matter
for
which
it
has
not been
possible
to
find
a
satisfactory
solution through consultation under
paragraph
1."
6.
Para.4.
Note
that
any
contracting
party
requesting
consultations
under
Art.XXII.2
must inform the
Director-General
of
the
GATT
to
allow
notification
of
all
other
contract-
ing
parties.
1958
Decision
(1959)
B.I.S.D.,
4th
Supp.
24.

836
International
and
Comparative
Law
Quarterly
[VOL.
38
(b)
Nullification
or
impairment.
A
contracting
party
may
have
recourse
to
the procedures
provided
for
by
Article
XXIII
when
it
con-
siders
that
any
benefit
accruing
to
it
directly
or
indirectly
under
the
GATT
is
being
nullified
or
impaired
or
that
the
attainment
of
any
objec-
tive
of
the
GAT[
is
being
impeded
as
a
result
of:
7
(a)
the
failure of
another
contracting party
to
carry
out
its
obligations
under
this
Agreement,
or
(b)
the application
by
another
contracting
party
of
any
measure,
whether
or
not
it
conflicts
with
the
provisions
of
this
Agreement,
or
(c)
the
existence
of
any
other
situation.
A
presumption
exists
that
a
breach
of
the
rules
of
the
GATT
has
an
adverse
impact
on
other
contracting
parties,
and
in
such
a
case
it
is
up
to
the
contracting
party
against
which
the complaint
is
made to
rebut
the
charge.
8
The
object
is
to
stop
the
violation
of
agreed-upon
rules
in
order
to preserve
the integrity of the
GATT.
Emphasis
is
placed
on
adjudi-
cation.
"If
a
contracting party
bringing
an
Article XXIII
case, claims
that
measures
which
do
not
conflict
with
the
provisions
of
the
General
Agreement
have
nullified
or impaired
benefits
accruing
to
it
under
the
General
Agreement,
it
will
be
called
upon
to
provide
a
detailed
justifi-
cation."
9
The
complainant
must
prove
that
a
benefit
accruing
to
it
under
the GATT
has
been
nullified
or impaired.
In
this
case
the
emphasis
is
placed
more
on
negotiation
than
on
adjudication
since
no
agreed-upon
rules are
involved.
Bilateral
consultations
between
the
disputants
under
Articles
XXII,"'
XXIII.1,"
or
XXXVIII.2
and
512
in
order
to
obtain
a
satisfactory
adjustment
of
the
matter
must
precede
recourse
to
the
dispute
settle-
ment procedures
found
in
Article
XXIII.2.
Thus,
when
the
contracting
parties
are
unable
to
resolve
their
dispute
through
consultation,
negotia-
tion
or
conciliation,'
3
the
aggrieved
party
1 4
may
request the
Council
of
the
GATT
to
appoint
a
panel
to
adjudicate
such
dispute.
Although
there
is
no
legal
requirement,
a
request
for
the
establishment
of
a
panel
will
usually
be
granted
by
the
Council
in
accordance
with
"standard
practice" of the
GATT,
unless
the
request
is
opposed
by
the other
party.
7.
Art.XXIII.1.
8.
1979
Understanding,
Annex, para.5.
9.
Ibid.
Note
that
the
concept
of
nullification
or
impairment
is
related
to
the
expec-
tations of
a
contracting
party.
10.
1960
Decision
(1961)
B.I.S.D.,
9th Supp.
19.
11.
1979
Understanding, para.6.
12.
Art.XXXVII
deals
with
commitments
to less-developed
contracting
parties.
13.
1979
Understanding,
para.8.
14.
Private
persons
have
no
standing
under
the
GATT.
They
must
act
through
their
governments.

OCTOBER
1989]
The
GA
TT Dispute
Settlement Rules
The
use
of the
dispute
settlement
procedures
must
not
be
intended
or
considered
as
a
contentious
act
and
all
parties
must engage
in
these
pro-
cedures
in
good
faith
in
an
effort
to
resolve
the
dispute.
15
The
panel,
pursuant
to
its
terms of reference,
will
investigate
the
dis-
pute
in
the
light
of
the
rules
of the GATF,
hear the
arguments
of
the
parties
concerned
and make
such findings
as
will
assist
the
Contracting
Parties
in
making
recommendations
or
rulings.
1
6
Since
the
1982
Minis-
terial
Declaration
on
Dispute Settlement
was
made,
no
more
than
12
months
have
elapsed
between the
decision
of
the
Council
to establish
a
panel
and
its
adoption
of the panel
report.
On
average,
panels
have
completed
their
reports
within
six
months.
17
In
cases
of
urgency,
the
panel
should
deliver
its
report
within
three
months
following
its
estab-
lishment.
1
8
It
is
always
possible
for
the
parties
to
the dispute
to
reach
a
settlement
before
the
panel
submits
its
report
to
the
Council,
in
which
case
it
is
the
end of
the
matter.
19
The
panel
may,
20
if
nullification
or
impairment
is
found, recommend
that
the
offending
measure
be
withdrawn,
2
'
or
if
this
cannot
be
done
immediately,
that
the injured
party
be
compensated,
for instance
by
lower
tariffs until
the
withdrawal
takes
place.
22
The
report
containing
the
findings
and
recommendations
or
rulings
must
be
given
prompt
con-
sideration
and
approval
by
the
Council
which
is
empowered
to
act
on
behalf
of
the
Contracting
Parties
in
order
to acquire
legal
force.
23
Adop-
tion
of
the
report
and
action
taken pursuant
to
it
within
a
reasonable
period
of
time
are
decided
by
consensus.
24
Thus,
any
contracting
party,
including
the party
which
is
the object
of the
recommendations
or
rul-
15.
1979
Understanding,
para.9. The
function
of
Art.XXIII.2
is
to
encourage the
par-
ties
to settle
their
dispute.
16.
Idem,
para.16.
17.
Idem,
para.20:
the
time
required
by
panels
varies
with
the
particular
case.
Also
1982
Ministerial
Declaration
on
Dispute
Settlement,
para.(vi). The
panels
are
composed
of
three
to
five
independent
experts
agreed
upon
by
the
parties
to
the dispute
or
selected
by
the
Director-General:
1979
Understanding,
para.ll;
Annex,
para.6(iii).
Also
1984
Decision.
The
panel's
composition
and
terms
of
reference
must,
in
principle,
be
deter-
mined
within
30
days
following
the
decision
to
establish
it.
18.
1979
Understanding,
para.20.
19.
Idem,
para.17.
The
report of
the
panel
may
be
confined
to
reporting
that
a
solution
has
been
reached.
20.
Idem,
Annex, paras.3
and 6(viii);
1982
Ministerial
Declaration
on
Dispute
Settle-
ment,
para.(v).
21.
Idem,
Annex,
para.4.
Note
that
idem,
paras.2
and
3
provide
for
publication
and
notification
of
trade
measures
possibly
in
advance of
implementation.
Thus,
if
the
measures
were to
violate
GATT
obligations,
a
dispute
could
be
avoided
before
it
arose
by
consultations
leading
to
the
withdrawal of
the
measures.
22.
Idem,
Annex,
para.4.
23.
Idem,
Annex,
para.1,
fn.1.
24.
1982
Ministerial
Declaration
on
Dispute
Settlement, para.(x).

Frequently asked questions

Q1. How long after the application of any concession or other obligation is in fact suspended?

If the application to any contracting party of any concession or other obligation is in fact suspended, that contracting party shall then be free, not later than sixty days after such action is taken, to give written notice to the Executive Secretary to the Contracting Parties of its intention to withdraw from this Agreement and such withdrawal shall take effect upon the sixtieth day following the day on which such notice is received by him. 

Q2. How long does the Council have to wait for the implementation of the recommendations or rulings?

at least ten days prior to each such Council meeting, the contracting party concerned shall provide the Council with a status report in writing of its progress in the implementation of the panel recommendations or rulings. 

Q3. Why are there no compulsory time limits for panel procedures?

52 Since panel procedures should provide sufficient flexibility to ensure high-quality panel reports while not unduly delaying the panel process, no compulsory time limits are fixed. 

Q4. How long does it take to submit a panel report to the Council?

Contracting parties having objections to a panel report must give written reasons to explain their objections for circulation at least ten days prior to the Council meeting where the report will be considered. 

Q5. What is the next step in the dispute settlement process?

In the event that no mutually acceptable solution is reached, the next step is conciliation mediated by the administering committee. 

Q6. How long does the period from the request to the decision of the Council last?

The period from the request under Article XXII.1 or XXIII.1 until the Council makes a decision shall not, unless the parties agree otherwise, exceed 15 months. 

Q7. What are the suggestions to improve the present system?

Of the many suggestions that have been made to improve the present system, the following should be mentioned: a mechanism for early warning; notification to the Council of mutually agreed solutions where any GATT member could raise matters relating to such solutions; provision for going directly to the Council and requesting a panel should the other party fail to respond to a request for consultations within an established time period; the enhancement of the consultation, mediation and conciliation process, especially mediation by the Director-General; new options such as voluntary or mandatory binding arbitration to respond to the different nature of disputes, provided the rights of third parties are not affected; automatic access to panels; strict time limits for the Council when establishing panels; the creation of a permanent tribunal of legal experts or the holding of regular meetings of the Council devoted exclusively to dispute settlement; the use of standard terms of reference by panels; the expansion and the regular updating of a roster of non-governmental panelists; the imposition of strict time limits on the work of panels and the examination and implementation of their reports44. 

Q8. How long does the panel aim to provide its report?

The GA TT Dispute Settlement Rulesbeen agreed upon to the time when the final report is provided to the parties to the dispute, shall not exceed six months and, in cases of urgency, the panel shall aim to provide its report within three months as is the case pursuant to the 1979 Understanding. 

Q9. What is the time limit for the parties to enter into consultations?

If the requested party does not respond within ten days, or does not agree to enter into consultations within a period of no more than 20 days or any other period otherwise mutually agreed, from the date of the request, the complaining party may then proceed directly with a request for the establishment of a panel or working party. 

Q10. What is the procedure for establishing a panel or working party?

If the consultations under Article XXII.1 or XXIII.1 fail to settle a dispute within 60 days after the request for consultations, the complaining party may request the establishment of a panel or working party under Article XXIII.2. 

Q11. What is the way to determine if a party fails to implement the award?

Although the arbitration award does not require the approval of the Contracting Parties, it is probable that a party failing to implement the award will have to make compensation or face retaliation.