Most of the structural failures and operational vices of the dispute settlement system of the WTO, as discussed above, were already apparent to most observers by the date of the mandatory review of the system, to have taken place by the end of 1998. However, some of the main trade partners were not yet fully convinced of what particularly had to change. Thus, by the end of 1998, Japan was, not surprisingly, the only QUAD (USA, EU, Japan and Canada) country to have submitted a proposal for the reform of the DSU. On the other hand, a few diplomats have, to the stupefaction of most observers, extolled the attributes of the workings of the dispute settlement system of the WTO by calling it not only a ´success story´ ´(sic)´, but also a great example of contribution to international public law [1].
Even if some developing countries submitted their proposals for review, the prevalent attitude was for a postponement of the whole process until the end of 1999. When that failed, a statement for the reform consisting of improvements and clarifications of the DSU was included in the Doha Ministerial Declaration [2] establishing a deadline of May 31, 2003 [3], which was not met. This time, many countries, both developed and developing submitted their proposals, including the USA, EU, Japan, Canada, Mexico, Chile, China, Australia, Ecuador, South Korea, Taiwan and Thailand. Some other parties submitting suggestions were the Africa Group of Countries and the Group of Least Developed Countries (LDCs). These negotiations on the reform of the DSU are exempt from the single undertaking pact covering the other areas [4]. This means that an agreement on the reform of the DSU may be obtained independently of and before the other sundry matters under discussion within the ambit of the Doha Round.
The suggestions for the reform of the DSU presented by the Member-States were so voluminous that only a compilation prepared by the ubiquitous Secretariat resulted in a short version with 77 pages calling for changes in all of the 24 articles and 4 appendixes of the DSU! The proposals also addressed many of the omissions of the dispute settlement mechanism of the WTO. The reform became the reconstruction of a system most thoroughly compromised by its many vices and defects that caused its ultimate disrepute. Unfortunately, the operational disaster of the dispute settlement system of the WTO led many developing countries to despondency with respect to the merits of a proper judicial structure for the resolution of disputes, in accordance with international law.
Such developing countries had believed the propaganda to the effect that WTO´s mechanism was ´rules´ oriented´ and confounded the specious idiosyncratic legal structure of the DSU with a proper judicial one. Thus, many are now favouring a return to a more strict diplomatic process in the vain hope that this route will accord a better treatment. For instance, LDCs criticised AB decisions for having displayed ´[e]xcessively sanitised concern with legalisms, often to the detriment of the evolution of development-friendly jurisprudence [5]´.
The broad spectrum of the proposals made covering the entirety of the current regulation of the dispute resolution system of the WTO should not belie the fact that they are desultory, disconnected and often contradictory, because they are presented by a number of different countries with diverse expectations. The areas covered by the proposals of the Member-States for the reform of the DSU are basically 7:
(a) Consultations;
(b) Panel formation and procedures;
(c) AB procedures;
(d) Implementation and relief;
(e) ´Case law´;
(f) Developing countries; and
(g) New Treatment for Third Parties and Amicus Curiae.
Reform on Consultations
With respect to consultations, proposals have been made with a view to broadening the scope of the institute ratione personae, by means of allowing a wider range of interested parties in the mechanism. In addition, the suggestions have been made as to the deportment and discipline of the parties during the respective procedures. A modest attempt at greater transparency has been proposed with respect to the timely communication of a settlement at consultations to the DSB.
India proposed a very interesting suggestion to the effect that, when a developed country consults with a developing country on a given matter, it should indicate to the latter how it took into account the particular problems and interests of the developing Member-State concerned. If the matter goes to arbitration, this topic should become a matter of record and the respective panel should make a ruling on the issue [6].
Reform on Panel Formation and Procedures
In connection with panel formation and proceedings, many proposals have been made, starting with the transformation of the first instance arbitration body into a permanent one, rather than an ad hoc panel, as it is currently structured. This change has been endorsed by, among others, Canada and the EU, and is quite important in the elimination of many of the current operational vices of the system, as seen above. Chile and the USA tried in their joint proposal to achieve this same objective by inserting a mechanism to ensure that members of panels have appropriate expertise to appreciate the issues presented in a dispute. The EU also proposed a set of rules on conflict of interests within the DSB, which is another initiative to be highly commended [7].
Norms have been proposed in order to allow and regulate the participation of independent lawyers in the dispute settlement system, which are much needed. Some rules as to evidence have also been suggested, including a chronology for the presentation and filing of documents and apposite material. In the joint contribution made by Chile and the USA [8], proposals were put forward for the recognition of the wayward institute of ´judicial economy´. Chile and the US also proposed that a set of rules of interpretation of WTO agreements be created, acknowledging the inconsistency of the decisions proffered by the system since its inception.
Furthermore, still with respect to panel formation and proceedings, proposals to permit counterclaims and to clarify the issues of multiple parties and notices of appeal have been made. Very importantly, the USA has advocated greater publicity in the acts and workings of the dispute settlement system of the WTO, including the permission for public observers to participate in all meetings, although those portions dealing with confidential information should be excluded from this rule. In addition, the USA proposed that all parties´ submissions and statements not containing confidential information, as well as final panel awards should be made immediately available to the public. Canada endorsed this suggestion and added that parties providing confidential information would be required to provide edited versions of their filings that could be made available to the public.
Reform of AB Procedures
India proposed to limit the term of AB members to a non-renewable six-year term, to which the EU has recently concurred. The EU and others also proposed a much necessary remand authority and adequate procedures thereof, with a view to ensuring that proceedings did not drag on indefinitely. The remand authority is to be used when the AB finds that the first instance panel failed to make adequate findings on facts. Of course, as we saw above, this modification by itself would be of difficult implementation if the structure of panels of first instance is not transformed from and ad hoc to a permanent basis.
Reform of Implementation and Relief
This is one area of the DSU that received justifiably most proposals for reform. The frustration many countries experience with the appalling shortcomings of the compliance system of the DSU led Mexico to propose granting WTO panels authority to determine the level of retaliation that may be imposed on a Member-State for non-compliance, once that panel had issued an interim ruling on the merits of the case [9]. The improvement of the mechanisms for the surveillance of the implementation of recommendations and rulings has also been suggested. The EU has made an effort to clarify when a Member-State may initiate proceedings to secure retaliation. A proposal has also been made to the effect that cross-retaliation should be reconsidered as this provision is more likely to work against developing countries. Cross-retaliation occurs when a retaliation is authorised in one sector (goods) for compensation for a defeat in another area (services, for instance).
The Africa Group of countries, supported by China, called for financial compensation to be provided to members affected by trade measures later found to be in violation of WTO norms, and the application of ´collective sanctions´ by all developing countries against a developed country member applying illegal measures against developing countries. The system was devised because often developing countries, individually, do not have a sufficient current of trade to impose DSU retaliations or are intimidated to do so. Professor Hu Wei observed that the suggestion, if implemented, ´could resolve the problem of availability in the WTO retaliation system because the economic strength of individual States is not important any more under this “collective retaliation system” [10]´. On the other hand, it has been noted that this initiative is unlikely to be accepted and would simply spread the economic damage to other poor nations [11]. If it is indeed refused, it would be so for other much more practical grounds than causing damages to poor countries.
On the other hand, the EU reiterated its demand for a specific prohibition against the so-called ´carousel´ retaliation, which is the listing by the USA of potential goods and countries for removal of concessions, as this brings uncertainty to the business climate and thus becomes a sanction in itself.
Elimination of the ´Case Law´ Approach
A number of developing countries, led by India, have proposed measures to ensure that the WTO panels and AB do not encroach into rights reserved to them under the WTO Agreements. Late into the revision process, the USA indicated that it would also support the initiative in order to prevent panels and the AB from imposing on national authorities obligations that are not contained in the agreements. In support of this line, the Africa Group proposed that parties to a dispute should have the right to refer questions on interpretation of WTO provisions to the General Council, before the DSB authorises retaliation in a given case [12]. This is a proposal trying to limit the effects of the quasi-judicial system with a recourse to a diplomatic last instance to be.
Brazil, on the other hand, took the opposite approach in a confused proposal in which that country suggests the application of the stare decisis approach to DSU disputes, via a ´fast track or an expedited procedure [13]´. This should be implemented with a view to eliminate what its mission calls a de novo review of a matter that is not res judicata. This proposition, clearly without a professional legal review, is even more puzzling if one considers the fact that the doctrine ´stare decisis´ is neither accepted nor employed in the orbit of domestic law in Brazil.
Measures Concerning Developing Countries
The clear perception by most developing countries that the dispute settlement system of the WTO is biased against them evoked a number of different proposals in this area. One of such sundry suggestions pertains to the recovery of costs, a subject of great relevance particularly to LDCs. Others relate to the matters of more time for submissions, permission of cross-retaliation against developed countries, and the creation mechanisms for legal assistance and for the monitoring of the application of the special and differential treatment provisions in the DSU. In this latter area, China commented that: ´[I]n particular, the current DSU lacks general and horizontal provisions applicable to all developing-country Members, which is different from other WTO agreements [14]´.
China also expressed a position in favour of allowing developing countries the right to seek cash compensation from developed countries, in support of the stance by the Africa Group of countries. This should be permitted in the cases where developed countries fail to comply with an award given by the dispute settlement system of the WTO, since the imposition of sanctions is an ineffectual option for many developing countries. Others have proposed norms in line with abuse of process and vexatious litigation rules of municipal law, with a view to limiting the use of the system for the harassment of developing countries.
New Treatment for Third Parties and Amicus Curiae
As we saw above, the matter of third parties in the DSU needs major improvements in the treatment of the question of joinders. Thus, it is not surprising that there have been proposals for the institution of a proper system with a view to allow a tertius a legal standing equal to the litigating parties, under certain conditions. A proposal has also been made to allow all parties to a customs union to participate fully, should they so wish, in the dispute settlement mechanism of the WTO, in matters having to do with a common trade policy of that customs union.
Many proposals have been made by developing countries to disallow the AB rule to permit unsolicited submissions, the so-called amicus curiae briefs, to the dispute settlement system of the WTO. In accordance with such suggestions, only the parties to a dispute would have the right to file briefings in the proceedings of a given case. The Africa Group proposed sensibly that any co-operation to be offered by NGOs, or other non-parties to a panel, should be forwarded to the parties in a dispute, who can then decide whether to incorporate it in their submissions. Accordingly, the Like-minded Group, formed by Cuba, Honduras, India, Indonesia, Malaysia, Pakistan, Sri Lanka, Tanzania and Zimbabwe, indicated that whilst ´there is no need for making any provision for accepting amicus curiae briefs, it would be necessary and useful to address this issue during the review [15]´. This could be done through a clarification to the effect that any information to be filed should be what is specifically sought by the panels and that unsolicited information should not be taken into consideration.
The US, in its first and individual communication [16], unsurprisingly, not only differed but also took the opposing view, in a trenchant support of the amicus curiae mechanism developed by the AB, and proposed that it should be incorporated into the body of the DSU. This position enjoys ample support amongst legal scholars, trade commentators and observers at large in the USA and had already been publicly defended both by the USTR and by the then President of that country, Mr. Bill Clinton.
Some Concluding Remarks on the Reform of the DSU
As already observed at the beginning of this Section, the utter discredit of the dispute settlement system of the WTO prompted proposals for reform of a very broad nature, involving all of the articles of the DSU and its Annexes. However, as we have already commented, the proposals for reform made by the Member-States are desultory, disconnected and often contradictory, as it becomes eminently clear in the case of amicus curiae discussed above. In addition, there are conflicts in many other areas, both in terms of concepts, as well as in implementation detail or even drafting. On the other hand many important omissions were not addressed in the suggestions made by the Member-States.
Thus, the proposals presented by the Member-States address many important points, but by no means all of them and very often in a inept legal approach. The suggestions presented lacked the appropriate legal methodology and were drafted by diplomats using terms such as ´front loading´, ´mandatory law´, ´discretionary law´, ´hit and run´, ´fast track´, ´playing with the time periods´, ´stress of the system´, etc. Most of the suggestions presented had very serious legal drafting problems that will undoubtedly result in more critical results, if adopted in those terms. None of the Member-States, not even developed countries with ample resources, forwarded a substantial legal study for a complete review. Extensive published contributions made by academics, of much better quality even if also understandably inconsistent, were largely ignored.
Furthermore, the system chosen for the reform of the dispute settlement system of the WTO allows for the preparation of a draft under the responsibility of the chairman of the DSB, based on the suggestions presented. However, how will be conflicting interests be conciliated? In addition, the ubiquitous Legal Affairs Division of the Secretariat, source of so many of the problems of the system, will be in charge of the drafting of a proposal. What credibility does the institution have for this task? What legal expertise does it have? What are the conflict of interests of their members? These are queries that entail difficult answers and permit us to prognosticate an inadequate draft and a difficult review of the DSU. The end results are certainly going to fall very short of expectations but, if the dispute settlement system of the WTO fails to move towards a judicial structure, its days are counted for no arbitration mechanism can possibly survive in disrepute.
Lawyer admitted in Brazil, England and Wales and Portugal. GATT and WTO panelist. Brazilian government ad-hoc representative for the Uruguay Round of the GATT. Post-graduation professor of the law of international trade.