1.1 The dispute resolution system of the World Trade Organisation (WTO) was hailed as one of the major successes of the Uruguay Round of GATT with its stated intention of providing increased juridicity to the multilateral trade system. However, less than 5 years after its creation, there are general doubts as to its efficacy and calls for its urgent reform. This article will attempt to analyse this question, and is presented as follows:

i) This Introduction;

ii) Brief History of GATT and the WTO;

iii) The Understanding Regarding Dispute Resolution of the Uruguay Round;

iv) Arbitration Proceeding in the WTO;

v) Institutional and Procedural Failings of the System; and

vi) Conclusions.
2.1 The General Agreement on Tariffs and Trade (GATT) was signed by 23 countries in 1947 and went into effect in 1948. GATT was one of the international treaties celebrated at the end of the Second World War as part of a new post-conflict international order, much the same as the International Monetary Fund (IMF), the World Bank (WB) and the United Nations Organisation (UNO). Like these other organisations, GATT was largely inspired by the United States of America (USA) that, at the time, dominated international trade relations. In reality, the GATT is only a part of the frustrated initiative of the International Trade Organisation (ITO). GATT was thus formed as a limited treaty and not as an international organisation with comprehensive powers to regulate international trade.

2.2 The principle object of GATT was to regulate international trade by way of providing a certain legal structure to a field of infamous notoriety for its lack of laws. This regulation, nonetheless, had very narrow boundaries in that the USA did not permit for rules that compromised its hegemonious trade and its capacity for, unilaterally, modifying the rules of the game and the establishment of its own sanctions. One scandalous example of this game of marked cards conducted by the USA was the exclusion of the agricultural sector from the GATT regime, rightfully the commercial area of major world tradition and one of the most important sectors to developing countries. In whatever form, from the viewpoint of the non-existence of international norms, GATT represented progress.

2.3 GATT´s basic principle is that of its Most Favoured Nation (MFN) clause, by means of which a concession granted to one trading partner is immediately multilateralised and, therefore, extended to all the signatories of the treaty, in such a way that international trade can be conducted on a non-discriminatory basis. Other GATT principles are national treatment, by means of which foreign products have equal treatment as national products after the payment of tariffs; legislative transparency; and the correction of improper commercial practices and quantitative import restrictions.

2.4 The systemisation of the MFN clause led to the evolution of the multilateral system through the so-called rounds of negotiations. Said rounds were traditionally convoked by the USA, desirous of obtaining the greatest commercial concessions from its partners, while the European Union (EU) and Japan economies became more competitive and reduced the economic participation of the USA in global trade. To achieve its hegemonious commercial objectives, the USA launched various institutionalised absurdities such as commercial rules, coarsely dressed in apparently legal clothes, such as its “anti-dumping” legislation and its inducement of trade administered through voluntary contention. Thus, for the first time a country other than the USA, Japan, justifiably the greatest (but not the only) victim of the abuses and demands of the USA, took the initiative to instigate a new round of negotiations of the multilateral system, the Uruguay Round.

2.5 Japan´s greatest interest in the Round´s initiative was to increase the juridicity of the system by way of clearer and more comprehensive rules, which included an effective system of dispute resolution. In fact, the GATT dispute resolution system was, originally, an illusory and pale imitation of legal process known as a “conciliation” in which the relevant parties would meet with the purpose of transacting business. Subsequently, the system evolved to indicate arbiters that, in reality, were diplomats with little or no legal knowledge and, worse still, incapable or lacking the will, certainly by force of traditional training, to make decisions in a clear and unequivocal manner. Still, the major problem of the GATT dispute resolution system was the possibility of one party impeding the formation of a panel; blocking its progress and/or refusing the implementation of a decision. The USA was an user and cynic in the tactics of neutralising the system, which were combined with violations of the rules. An example of such attitude was the refusal to comply with an arbitration report of a GATT panel that decided in favour of Brazil in the case of footwear.

2.6 The USA and the EU soon were convinced that they could take advantage of the Japanese initiative in a new round of GATT, hoping to include in the multilateral system so-called new areas, that covered the sectors of services, investment and intellectual property. Thus commenced the so-called Uruguay Round of GATT in 1986, immediately dominated by acrimony because the developing countries, represented by the Group of 11, led by India and Brazil, whilst favourable to an increase of legality in the system, were against the inclusion of the so-called new areas, while traditional commerce, represented by the agriculture and textile sectors, continued outside of the multilateral system. After an impasse of several years, due to a consensual decision by GATT, there arrived an understanding enabling the incorporation of the new areas in the system, together with the traditional areas, the later on a time deferred basis, which could take ten years in the textile area and much more in the agriculture area.

2.7 The final result of the Uruguay Round, closed in 1994, that lead to the creation of the World Trade Organisation in 1995, in strictly commercial terms, favoured developed countries, with 64% of the benefits, counter to developing countries, that had 36% of the benefits, according to a study published by the World Bank. Still, the vast number of agreements in general and, particularly, the “Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU)” gave great hope to developing countries in the functioning of more efficient rules, with an automatic mechanism for a system that will give formation to panels and the implementation of arbitration awards. In my work, “The WTO and the Treaties of the Uruguay Round,” written in 1994, I affirmed “in the system of actual dispute resolution one of the principle foundations of the WTO can be seen.” Yet, as well-noted by Victor Prado, “these agreements result not from the intellectual work of jurists, but much more from the work of commercial negotiators and diplomats that frequently have to attend to divergent interests.”
3.1 Before launching into this topic, I have to say that the official languages of the WTO are English, French and Spanish. Still, for practical purposes, nearly all effective negotiations and panel activities are conducted in English. This fact represents a serious systematic disadvantage for the nationals of countries that do not speak these languages as natives, as will be developed further on in my presentation. Article 23.1 of the DSU reserves use of the system for those members of the WTO who can bring about reparation for violation of the obligations by other members, including the cancellation or impairment of benefits deriving from multilateral trade agreements. In its turn, Article 2 of the DSU establishes that the Dispute Settlement Body (DSB) is the competent agency to arbitrate disputes in the ambit of the multilateral system. Its decisions, however, cannot be made “contra-legem” in the case of treaties of the multilateral system. Cross-complaints are expressly excluded and, strangely, the process of resolution is most regarded as “litigious.”

3.2 The first stage of the WTO dispute resolution process concerns itself with consultation and mediation, as can be found in the preliminary rules of article 4 and the secondary rules of article 5 of the DSU. The system of formal consultation foresees a period of approximately 40 days; communication to the secretariat of the WTO; and confidentiality. Normally, formal consultations take place at the headquarters of the Organisation, in Geneva, Switzerland. Frequently, the formal consultations are preceded by informal consultations, performed in effect by chancellors or ambassadors of countries involved in the respective territories. If the formal consultation is not approved within a maximum time period of 60 days an arbitration panel is automatically formed. Should the parties prefer, the matter may be passed for “good offices,” settlement or mediation in the time period of 60 days. The director-general of the WTO may offer good offices at any time during a dispute. In practice, however, the consultation is passed directly for the formation of a panel.

3.3 In the WTO dispute resolution system the right of action falls within the sovereign state member of the Organisation excluding, consequently, non-member states and their nationals. In this way, a company prejudiced by a measure taken by a sovereign state cannot resort to the WTO dispute resolution system. Thus, the company would have to convince its government to initiate the process in the name of the sovereign state, an effort always onerous and laborious. This results in States acting for companies, as occurred, for example, in the recent case Brazil vs Canada, in which the interests at play were, in principle, those of a Brazilian company, Embraer, and the Canadian company, Bombardier. The representation of the sovereign state is the responsibility of its mission jointly with the WTO, but contraction of and representation by independent lawyers is permitted.

3.4 The request to install a panel should be made in writing to the DSB and can take place at the first DSB meeting following the respective petition. The panel can be composed of 3 individuals or, at maximum, 5 independent arbiters (also known as panellists) as chosen by the parties at the dispute. Should, however, an agreement not be reached as to number of arbiters within a time period of 20 days, the Director-General will make the respective nomination. The WTO secretariat has a list of arbiters composed of individuals who are recognised specialists in the area of international trade and that have been arbiters or lawyers in a GATT panel, representatives or officers of the government, members of the secretariat or authors in the area of international trade law. Nothing prevents, however, an individual undeniably qualified but whose name is not on the list from being indicated. Should the dispute involve a developing country, and should that country so desire, they can request that the panel include at least one arbiter from another developing country. A national of a state who is involved in the dispute cannot be nominated as an arbiter without the express concordance of the other parties. It should be mentioned that in the four years of the WTO dispute resolution system there has been a clear tendency for consensual choice of arbiters to be unsuccessful, which has led to the selection being by the director-general, after an internal process of internal consultation of little transparency. It is to be noted that it is not one of the prerequisites for the position of WTO arbiter that one be a legal expert.

3.5 The WTO dispute resolution system provides for joinder of plaintiffs when over possible (sic.). The procedural rules are the same for all involved parties. The DSU also admits the participation of third parties in panel activities without complete procedures, but with the capacity to represent its position and to have its position considered towards an arbitration award. The third party may petition for the installation of a proper panel in accordance with its interests, in which case it has full procedural right. This odd notion of limited third party participation exists on the side of jointer of plaintiffs and is highly compromised from the judicial point of view and can only be explained as the diplomatic taste for intrigue and not as the desire to establish proper legal process. In the same way, the non-possibility of a cross-complaint brings the potential risk that two panels, formed to decide on a question involving the same parties, may render a decision in a form diverse and even contradictory.

3.6 Very important for the WTO dispute resolution system is the question of the so-called “terms of reference” which is in reality the substantive petition formulated by the prejudiced party to the DSB for the installation of an arbitration panel. The panels cannot decide “ultra-petita”, that is, outside the terms of reference. Contrary to what takes place in tribunals and judiciary systems with certain juridical substance, in WTO the legal argument necessarily composes the petition above the reasons arising from the description of the facts. Thus, a disparate assessment of the law, or of the applicable legal dispositions to a determined case, may in reality irremediably compromise a claim founded on worthy motives based on other legal fundamentals. The same thing can occur in the case of a defence. There is still the possibility of arriving at specific terms of reference that will be drawn up by the co-ordinator of the DSB, however, to date, no special terms of reference have been issued.

3.7 The arbitration decisions are the result of the confidential deliberations of the arbiters, anonymously, and drawn up without the presence of the representatives of the parties in accordance with the provisions of the order. There are no deliberations without the testimony of the opposing party. In practice, the WTO secretariat generally, and its legal division in particular, has an important role but little transparency regarding the conduct of the panels. The arbiters do not have their own infrastructure and, as a result, depend on legal, procedural and jurisprudential support from the legal division. In this way, frequently, the arbiters are supported and directed by advisers that operate in the shadows of the vast corridors and ample lobbies of the WTO. Those who know of the fundamental importance of the function of legal assistance in the development of activities within the dispute resolution system, countries such as the USA, Canada and the EU control the activities and dominate the technical positions. The participation of developing countries is marginal.

3.8 The arbitration panel will present a preliminary report to the parties, with written commentary, after which a final award is communicated to the parties and delivered to the DSB for adoption. The communication remains confidential for 20 days, with notification to the parties to convene at the DSB to adopt its contents within 60 days of its decision. The publication of the report, once adopted by the DSB, can only take place once it is translated into the official languages of the WTO, which usually takes more than a month. This results in little transparency and is detrimental to the civil societies of the member countries, preventing to have timely information to evaluate the performance of their representatives and evaluate the consequences of their actions, adversely affecting the state of law in the internal order.

3.9 An appeal has a suspensive effect in the implementation of an arbitration award in the first instance. The creation of the appeals body was a good innovation of the DSU. It has seven arbiters, each appeal panel necessarily having 3 arbiters. The maximum term for the decision to be taken is 60 days and the appeals body will consider all points raised by the appealing party. The appeals award which will modify or reverse the decision being appealed will be accepted by the DSU and unconditionally accepted by the parties involved. Once the appellate panel award is adopted, the culpable party must notify of its intentions in regard to its respective implementation. In the event that prompt implementation is not feasible, the culpable party has a reasonable period of time in which to implement it. Such reasonable time period will be that suggested by such party, if accepted. Otherwise, this time period will be the period of time as agreed between the parties, within a time frame of 45 days. If not possible within this time period, the time period will be determined by the arbiters within 90 days of the date of the adoption of the award and cannot exceed a time period of more than 15 months.

3.10 In the event of absence or omission of the implementation of the arbitration award by the culpable party, the claimant may initiate a compensation proceeding and a proceeding for the suspension of concessions by the prevailing party to the losing party, in a way that will compensate estimated losses resulting from non-compliance. These measures may take the form, for example, of suspending the MFN clause, for the increase of tariffs relative to determined products, to the detriment of the losing country as an exporter to the prevailing country. This mechanism is activated in conformity with specific rules foreseen by DSU, and has occurred recently, for the first time in the history of multilateral trade, when the WTO authorised the USA to establish sanctions against the EU in the amount of US$ 191 million for failing to implement an arbitration award relative to the import of bananas.

3.11 Below find a summarised table of WTO dispute resolution procedures:


4.1 The procedural rules of the WTO dispute resolution system are those that are the objective of the ” working procedures” of annex 3 of the DSU or the “Working Procedures for Appellate Review” also annexed to the DSU. With its poor lexicon clearly shown, the procedural norms were not created by jurists and present serious problems, as will be shortly seen. A literal translation of these texts will be offered so as to provide for a precise idea of the terminological confusion instituted by the lack of the greatest scientific rigour and the abundance of the lowest level of juridical influence. It must be noted that that same stupefaction caused by the mediocrity and imprecision of these texts in translation can be verified by an examination of the original, in as much as English has adequate vocabulary to express the juridical notions embodied in law.

4.2 The following passages are the procedural norms of the first instance. “The panel shall meet in closed session. The parties to the dispute, and interested parties, shall be present at the meetings only when invited by the panel to appear before it.” “The deliberations of the panel and the documents submitted to it shall be kept confidential.” “Before the first substantive meeting of the panel with the parties, the parties to the dispute shall transmit to the panel written submissions in which they present the facts of the case and their arguments.” “At the first substantive meeting with the parties the panel shall ask the party which has brought the complaint to present its case. Subsequently, and still at the same meeting, the party against which the complaint has been brought shall be asked to present its point of view.” “All third parties which have notified their interest in the dispute to the DSB shall be invoked in writing to present their views during a session of the first substantive meeting of the panel set aside for that purpose. All such third parties must be present during the entirety of this session.” “Formal rebuttals shall be made at a second substantive meeting of the panel. The party complained against shall have the right to take the floor first, followed by the complaining party. The parties shall submit, prior to that meeting, written rebuttals to the panel.” “The panel may at any time put questions to the parties and ask them for explanations either in the course of a meeting with the parties or in writing.” “The parties to the dispute and any third party invoked to present its views in accordance with Article 10 shall make available to the panel a written version of their oral statements.” “In the interest of true transparency, the presentations, rebuttals and statements shall be made in the presence of the parties.”

4.3 A chronology of arbitration panel activities is demonstrated by the following table:


a) Receipt of the first written submissions of the parties:

(1) Complaining party … 3 to 6 weeks

(2) Party complained against … 2 to 3 weeks

b) Date, time and place of first substantive meeting with the parties;

third party session … 1 to 2 weeks.

c) Receipt of the written rebuttals of the parties … 2 to 3 weeks.

d) Date, time and place of second substantive meeting with the parties … 1 to 2 weeks.

e) Issuance of the descriptive part of the report to the parties … 2 to 4 weeks.

f) Receipt of comments by the parties on the descriptive part of the report … 2 weeks.

g) Issuance of the interim report, including the findings and conclusions, to the parties … 2 to 4 weeks.

Deadline for party to request review of part(s) of report … 1 week.

i) Period of review by panel, including possible additional meeting with parties … 2 weeks.

j) Issue of the final report to the parties to dispute … 2 weeks.

h) Circulation of the final report to the Members … 3 weeks.

4.4 Regarding appeal, the timetable is presented in the following way:


Notification … 0 days

Appellant´s submission … 10 days

Submission by other appellants … 15 days

Appellee´s submission … 25 days

Third Participant´s submission . . . 25 days

Oral Audience (sic) … 30 days

Circulation of the Appellate Award … 60 to 90 days

Meeting of the DSB for its adoption … 90 to 120 days
5.1 In spite of all the hopes invested in the Uruguay Round in 1994, the WTO dispute resolution system represented a great disappointment, which fostered a generalised perception that the Organisation is failing in its mission. Such shortcomings derive from the systematic deficiencies of the structure of dispute resolution, due to the simplistic and inadequate formation of juridical and procedural material and the inobservance of the decisions of the WTO dispute resolution body by the parties involved, which appears limited to the EU, in the cases of beef and bananas. In fact, one cannot show surprise for the critical failure of a system created to apply jurisdiction to the law in international trade without paying the slightest attention to the legal structures and procedural legal experience of thousands of years. The product of a crazed fantasy of mind in the clouds of diplomacy by which conflicts could be resolved without a litigious system, it is of no surprise that the system has been revealed to be impotent in achieving its objectives with efficiency and scientific rigour.

5.2 Furthermore, the tragedy of the critical failure in the WTO dispute resolution system is even greater when one calls to mind that the developing countries were to be the main beneficiaries of the increase of juridicity to the multilateral trade system. The frustration is felt even more when it is seen that, in view of the multiple systematic failings, material and procedural, the administration of the arbitration procedure is deficient and, principally, not transparent in a way that the results if not, in the background, clearly directed by the bureaucrats of the legal division of the secretariat, are certainly influenced by the ethnocentric stamp of USA and EU nationals that dominate the department.

5.3 One of the principal defects of the DSU is the non-admission of cross-complaint. This requires the installation of a panel for the cross-complaint of one party and another, with distinct arbiters, for the cross-complaint of the other, in a connected matter and, obviously, with the same parties. Such situation creates the possibility, in theory, that the awards of the two panels can be diverse and contradictory, creating an imbalance. The possibility of an occurrence of such an extraordinary and unjust situation is not remote in that within the short period of the four years of the WTO we have had the profound example of the case of Brazil vs Canada, regarding incentives for the aeronautic industry, when two distinct panels were formed and their respective decisions were, in principle, in conflict because the program of financing Brazilian exports was deliberated as illegal, while it was admitted that the analogous Canadian program was accepted. Such decision in effect renders Brazil the only exporting country in the world of stature without a program that legally allows for the financing of exports, with the aggravating circumstance that it is a developing country.

5.4 An analogous situation of disparate and conflicting decision regarding the same case can occur in circumstances of jointer of plaintiffs when there are distinct panels that are formed for the joined parties or their groups. On the other hand, the variable norms for the terms are the source of procedural instability that may result in serious injustice. In fact, a panel has within its discretion to establish a period within authoritative parameters to program activities. This period may vary according to the party and vary from case to case, a situation that, for obvious reasons, was prohibited in all civilised legal systems. In the same way, definition of the so-called “terms of reference” is preoccupying for the capacity to potentially aggravate the failings of the system. As we have seen, contrary to the legal regimes traditionally established, in the WTO it is imperative that one explains the legal basis to one´s petition. Thus, the probability is great that the same case may have two or three different panels, two or three distinct terms of reference and two or more divergent decisions.

5.5 Another latent failing to the system, disgracefully already confirmed in practice, regards the omission in the treatment of preliminary issues such as, for example, those pertinent to conflicts between treaties. This was a problem foreseen by the premiere English expert in international law, Supreme Court Judge John Toulmin CMG QC, ex-President of the Council of Lawyers of the European Union, when he posed the following in a noteworthy lecture presented in the city of Sao Paulo in April, 1997: “There exist circumstances in which a panel should have the capacity to resolve disputes resolving cases preliminarily.” In fact, there are questions regarding conflict between international treaties that justify preliminary decision making. Such conflicts occur, for example, between the assured rights of signatory developing countries of the transitory treaty clause of the IMF and the obligations arising from the treaties of the Uruguay Round.

5.6 On the occasion referenced above, John Toulmin CMG QC called attention to the inconsistency of the system in differentiating “the interested third party” from the joint party. In fact, juridically speaking, the interest is materialised by the joint party which turns perfectly useless, irrelevant and, as a consequence, dispensable, the grotesque figure of the “interested third party.” On this point, it should be commented that as the interests in dispute in the multilateral system are eminently private, the non-recognition of the right of action of private parties is not justified. International Law has evolved to accept physical persons and entities as subject to obligations, as well as their capacity to act, and the WTO should legitimise this, always maintaining the right of concurrent actions of the member states in order to preserve their interests.

5.7 Such as with the International Court of Justice, the WTO dispute resolution system does not support the principle of “stare decisis,” rendering its decisions only between the parties. Judicial precedent, however, may or may not serve as reference to future cases. But given the degree of procedural confusion governing the adjective rules and the little reliability of the system, the marked tendency is that each case be analysed on its own merits, independent of analogous past decisions. Such situation is reinforced by the sterile tradition of the GATT dispute resolution system, originating in the vacillating converse of reception room diplomacy, kept alive by the legal division of the WTO, with the notion that the panels “note,” “remember” and “recognise” past cases and circumstances as if its members are able to evoke picturesque events and diverse fairy stories to combat the tedium of a springlike reprise at the edge of a lake.

5.8 As was observed earlier in the text, the official languages of the WTO are English, French and Spanish however, for all practical purposes, not just negotiations but also arbitration panel activities are conducted in English. This excessively prejudices those countries who do not have English as their native language in that the self-confidence of their representatives is naturally diminished. This relative disadvantage is aggravated by the potential use of semantic arguments, uncertain and dangerous ground due to rough omissions of appropriate juridical lexica in the DSU, and the idiosyncratic use of patois and imprecise and frequently contradictory jargon. It is certain that a revision of the DSU is absolutely indispensable in such a way that it will be endowed of adequate legal institutions and appropriate legal terminology. It will also be important that each country may petition in its own language.

5.9 A recurring semantic question before appellate panels recently has been when a “decision” is not a “decision” (sic). We have also seen that rules of appeal create an “oral audience,” perhaps because a written audience comes across as impersonal. In cases of first instance, “substantive meetings” are valid. Happily, there are no “adjective meetings” foreseen for when the furtive meetings are, and there are many, sanctioned in the customary practice of the multilateral system. The term “revision” is used as much equally for the “reconsideration” of the first instance as for the appreciation of the appellate level. The substantive “submission” is utilised indiscriminately in the place of the initial petition; contest, response, rejoinder, interlocutory petition, appellate reasons and appellate counter reasons, without mentioning, the “submissions” of third parties. We have already had the pleasure of considering the lexicon “rebuttal” of noble roots footballistic and sometimes given value by the rebounds from party to party. We have also commented on the terms “parties in dispute” and “the interested parties”, but we should also like to mention that to avoid use of the horrible and abrasive expressions “plaintiff” and “defendant,” which certainly should have no place in a commercial conflict, effete euphemisms such as “the party which has brought the complaint” and “the party against which the complaint has been brought” are utilised.
6.1 During the WTO ministerial conference to take place in Seattle, Washington State, USA, from 29 November to 3 December, 1999, it is expected that a new round of negotiations of the multilateral trade system will be launched, called the Millennium Round. This time, the initiative came from the EU, but was quickly supported by the USA, with the great economic potencies seeking to broaden their already significant commercial advantages. For the developing countries, however, it is certainly much more important to address the correction of errors and inconsistencies of the multilateral system resulting from the Uruguay Round than launching into the cold and uncertain waters of a new round of negotiations, where, as always, they will depart inexorably as the losers. From this perspective, a complete reformation of the WTO dispute resolution system is an imperative, so that the rule of law in international economic relations can prevail and for proper credibility of the system. To this end, it must be recognised that a dispute resolution system is necessarily litigious and that it has to be structured within the rigour of the legal sciences, both in aspects of material law as well as procedures.