Dispute Resolution and the WTO

Apparently, the rising number of disputes submitted to the WTO dispute settlement mechanism is a positive demonstration of the confidence placed in it by both developed and developing members. At the same time, it might indicate that lawyers across the world shall have an entirely new field in which to extend their practices and gain expertise.

Probability and Practicality

Probability of Legal Representation

Whether in civil or common law jurisdictions, the right to counsel is axiomatic; it is a demonstration of due process. For instance, both the Sixth Amendment (1971) to the US Constitution and the United Kingdom's Police and Criminal Evidence statute (1984) provide for the right to counsel.⁶ The right to counsel is also a prevailing practice in international courts and tribunals. However, in 1996 the Banana Panel of the WTO ousted the private lawyers who were advising some of the smaller Caribbean countries after the United States and others objected that they were not permanent government officials.⁷ This decision sparked a huge controversy in legal circles. David Palmeter argued that if the Banana Panel's decision stood it would mean that, when the panel's doors were closed, laymen from developing and smaller countries would be left on their own to debate points of law with US and EU legal specialists. This hardly represented the hallmark of due process.⁸ Rutsel Silvestre J. Martha went even further, stressing that the ruling to exclude the private attorneys in St. Lucia's delegation from the meeting constituted an ultra vires act. Moreover, the ruling affected the integrity of the WTO dispute settlement mechanism because it denied the party concerned full and effective legal representation in world trade disputes.⁹

Fortunately, though, when the panel report was appealed the Appellate Body rejected the objection lodged by the United States, noting that it found "nothing in the Marrakesh Agreement establishing the World Trade Organization, the DSU, or the Working Procedures, nor in customary international law or the prevailing practice of international tribunals, which prevents a WTO member from determining the composition of its delegation in Appellate Body proceedings". It thus ruled that it is for a WTO member to decide who should represent it as members of its delegation in an oral hearing of the Appellate Body.¹⁰ In the Gasoline decision, the Appellate Body also made clear that WTO law was part of the body of public international law. WTO procedures should reflect that status by being open and transparent, and by allowing parties to be represented in those public proceedings by whomever they choose, including private
attorneys.¹¹

Judging by events so far, lawyers' representation in WTO disputes is probable. As regards this issue, both the American Bar Association¹² and the Council of the Bars and Law Societies of the European Communities¹³ responded positively. They supported the aforesaid decision, and supported WTO members in choosing their own lawyers to attend all stages of WTO dispute settlement proceedings.

Practicality of Legal Representation

China is the seventh largest trading country in the world, but its legal system is only imperfectly developed. After accession to the WTO, China will inevitably face trade disputes involving other WTO members. This can be proved by other members' experiences. As noted above, Brazil and India are the heaviest users of the dispute resolution mechanism, with each being involved in between 10 and 20 cases as complainant and respondent. Moreover, in the period 1995 to 1999, South Korea was involved in 15 cases among which eight cases were as complainant, two as respondent, and five as third party.¹⁴ Usually, trade officials dispatched by member governments to fully handle trade disputes fail in WTO dispute proceedings. Although the WTO Secretariat offers to assist developing countries with legal counsel,¹⁵ the constraints of having only two legal officers and two consultants facing an increased caseload every year, impartiality issues and a limited capacity to interpret and advise on WTO law make such technical assistance entirely insufficient for developing countries.

Therefore, in China's case, the burden of representation in WTO dispute settlement proceedings will eventually fall to Chinese lawyers. Chinese lawyers can assist the government in analyzing complaints, interpreting WTO rules, providing legal opinions, preparing complaints and replies, serving as members of government delegations to WTO proceedings, attending panel hearings, and providing advice on enforcement, among other responsibilities.

WTO Dispute Issues Involving Lawyers

Cause of Action

In theory, a legal action in the WTO is not based on infringement or non-infringement of WTO rules, but on the nullification or impairment of benefits, or the impediment to attainment of any objective of the Covered Agreements under the DSU. ¹⁶ This differs from other international dispute settlement mechanisms, which take illegal acts as their targets. The reason for this is that members fear that the benefits gained through tough negotiations are affected and even offset by tariff and non-tariff measures imposed by other members.

In effect, Article 23 of the 1994 GATT (hereafter also referred to as the Agreement) devises two causes of action and six complaints. The details can be broken down as in the table below.¹⁷

In practice, members have only actively used two complaints. According to statistics, over 90% of the fewer than 200 disputes in GATT jurisprudence have been violation complaints over nullification or impairment of benefits accruing under the GATT while only 8% have been non-violation complaints over nullification or impairment of benefits accruing under the GATT.¹⁸ There were only three complaints involving attainment of any objective of the Agreement being impeded.

Locus Standi

The DSU has no strict requirements regarding locus standi, the right or capacity of members desiring to bring a case. In the EC Bananas Case of 1997, the EC argued that the US lacked an actual or potential trade interest to justify its claims, as US banana production was minimal and the US had never exported bananas. In the EC's view, the US thus had no standing for the case. The Appellate Body agreed, however, with a panel in finding that the US did have standing, as the DSU did not contain an explicit requirement that a member must have a "legal interest" when requesting a panel.¹⁹

Regarding a third party, if members have "a substantial trade interest", they can join in the consultation in light of Article 4.11 of the DSU; per Article 10.2, if members have "a substantial interest", they can attend panel hearings and make submissions.²⁰ Obviously, the latter's boundary is wider than the former.

On the issue of private parties' participation, since DSU has not endowed directly or indirectly any substantive or procedural rights on private parties, they have to turn to their government for help if they want to participate. In this respect, Regulation 3286/94 of the European Union and section 301 of the United States Trade Act of 1973 are good examples of indirect participation by private parties.²¹ It remains to be seen whether China will enact a similar law after accession to WTO.

Terms of Reference

One of the key steps in a panel hearing is ascertaining the terms of reference. Terms of reference first fulfil an important due process objective: they give the parties (including third parties) sufficient information concerning the claims at issue in the dispute in order to allow them an opportunity to respond to the complainant's case. Second, they establish the jurisdiction of the panel by defining the precise claims at issue in the dispute.²² In determining the terms of reference, Article 7 lays down the principle that where the parties to the dispute do not agree on the terms of reference within 20 days from the establishment of the panel, the following terms of reference shall be the standard terms of reference:

"To examine, in the light of the relevant provisions in (name of the covered agreements) cited by the parties to the dispute, the matter referred to the DSB by (name of party) in document...and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in that/those agreement(s)." ²³

The "matter" referred to is understood to consist of the specific claims pointed out in the documents that should identify the exact provisions of the agreements alleged to have been violated. In Coconut,²⁴ the Appellate Body held that a matter that includes the claims composing the matter does not fall within a panel's terms of reference unless the claims are identified in the documents referred to or contained in the terms of reference.²⁵

Burden or Onus of Proof

The burden of proof is an evidentiary rule that is fundamental to legal systems. In WTO law, in principle, the burden of proof rests with the party, whether complainant or defendant, that asserts the affirmation of a particular claim or defence. The details can be seen as follows:

The Complainant Must Prove the Alleged GATT Violation

The rule was explicitly confirmed in the panel reports on Japan-Alcohol,²⁶ India-Patent²⁷ and the Appellate Body report on USA-Shirts and Blouses.²⁸ For instance, in Shirts and Blouses, the panel found that the burden of proof rested with India to prove that there was a violation of the ATC due to the US safeguard measure. In addressing the issue of burden of proof the Appellate Body noted that a party claiming a violation of a provision of the WTO Agreement by another member must assert and prove its claim.

The Party Invoking an Exception or Defence Must Prove It

USA-Shirts and Blouses, USA-Gasoline, USA-Underwear²⁹ and Canada-Periodicals³⁰ all confirmed this rule. In USA-Gasoline, for example, the panel held that American rules regarding gasoline violated Article 3(4) of the GATT. In addressing the American party's invocation of Article 20(b), (d) and (g), the panel pointed out that the party, in invoking Article 20(b), has to prove the inconsistency was within the exception clause.

After addressing the burden of proof, the following issues need special attention:

¡¤ Claimants should first of all prove that there is a prima facie case regarding nullification and impairment of benefits. If there is no effective rebuttal from the respondent, the case is
established.³¹

¡¤ In cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. This is normally a presumption.³²

¡¤ In a non-violation case, claimants should particularize their justification in support of any complaint relating to a measure that does not conflict with the relevant covered agreement. Article 261 (a) states that "the complaining party shall present a detailed justification in support of any complaint relating to a measure which does not conflict with the relevant covered agreement".³³

Rules of Interpretation

The root cause of trade disputes is too often a misunderstanding over some provisions in a common agreement. Therefore the fundamental issue for DSB is how to interpret lengthy and complicated texts in the DSU. Article 3(2) of the DSU stipulates that the WTO agreements will have to be clarified in accordance with customary rules of interpretation of public international law.³⁴ This provision has been considered by panels and by the Appellate Body as referring to the rules of interpretation as codified by the 1969 Vienna Convention on the Law of Treaties (the Vienna Convention). To summarize briefly, the Vienna Convention firstly requires that interpretation of a treaty provision should begin with analysis of its text. Article 31(1) of the Vienna Convention states "a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose". Secondly, it recognizes the relevance of subsequent practice in the application of a treaty, as practice may establish the agreement of the parties regarding its interpretation. Finally, where the above methods are not sufficient for determining the correct meaning of the treaty provisions under consideration, reference may be made to the preparatory work for the treaty and the circumstances under which the treaty was concluded. ³⁵

Legal Remedies

Categories

The sanctions available at the disposal of the panel and the Appellate Body are varied, and depend on whether or not the complaint is a violation complaint. The remedies available consist of a recommendation or a ruling for the withdrawal of the offending trade policy measure, the authorization to suspend trade concessions and compensation. There is no provision for interim measures, or for compensation for loss during the proceedings.³⁶ The details can be seen in the table below.

Application of Legal Remedies

In the event of a violation complaint, the recommendation may be that measures should be brought in conformity with the agreement in question or withdrawn. However, in the event of a non-violation or situation complaint, only a ruling and/or a recommendation may be made. There is no obligation to withdraw the measure at issue. In a non-violation complaint the panel or Appellate Body can recommend that a mutually satisfactory adjustment be sought through compensation.

Principles of Application of Legal Remedies

Two principles underpinning the sanctions regime can be discerned. First, the objective of the removal of the inconsistent measures is paramount. Second, the redress must be proportional to the nullification or impairment.

Legal Status

The legal status of the WTO law decides to what extent the company or individual is able to invoke the
WTO law before the domestic courts of members. In this respect, both the EU and the US ruled out the possibility of the direct application of WTO law in their territories.³⁹ Pursuant to the provisions of the civil law and civil procedural law of the People's Republic of China, where there is a conflict between international treaties signed or accessed to by China and Chinese civil and civil procedural law, the international treaties prevail, except for provisions preserved by China. Where there is no stipulation in the international treaties, the customary international practice applies.⁴⁰ However, it is unclear whether these provisions make WTO law directly effective after China's accession to WTO. Essentially there are two arguments regarding this issue, the "monist" and "dualist" positions. The former is of the opinion that WTO law will constitute an integral part of the Chinese legal system without the need for transformation or incorporation. The latter sees WTO and Chinese law as two distinct legal domains, and the introduction of WTO law into the Chinese legal system as requiring a transformation. Some observers feel China will adopt the dualist approach. Monist or dualist, further enactment or clarification of laws by the National People's Congress or the Supreme People's Court, as the sole judicial interpreter, needs to be done immediately.

Endnotes

1 WTO Secretariat (ed.), "Understanding on Rules and Procedures Governing the Settlement of Disputes" in The Legal Texts: The Results of the Uruguay Round of Multinational Trade Negotiations, Cambridge University Press, 2000.

2 "The Dispute Settlement System" in Press Pack, World Trade Organization 4th Ministerial Conference, Doha, Qatar, November 9 - 13 2001.

3 "Issues Regarding the Review of WTO Dispute Settlement Mechanism," Working Paper No.1, South Centre, February 1999.

4 See supra note 2, pp. 48-52.

5 "WTO's Unique System of Settling Disputes Nears 200 Cases in 2000," http://www.wto.org/english/news_e/pres00_e/pr180_e.htm. The international trade products involved are alcohol, brooms, buses, cars, cement, coconuts, coffee, computers, footwear, gasoline, leather, macaroni, rice, scallops, steel, tomatoes and underwear. Agreements under the WTO cited by members are SPS/TBT (26), Agriculture (25), Textiles (13), TRIMS (15), TRIPS (21), and GATS (9).

6 The Sixth Amendment (1971) states: "In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial by an impartial jury of the state...and to have the Assistance of Counsel for his defence." Section 58(1) of Police and Criminal Evidence 1984 provides: "A person who is in police detention shall be entitled, if he so requests, to consult a solicitor privately at any time."

7 European Community, "Regime for the Importation, Sale and Distribution of Bananas," (EC Bananas Case, 1997).

8 David Palmeter, "The Need for Due Process in WTO Proceedings," Journal of World Trade 1997, 31(1), pp. 51-57.

9 See Peoples' Global Alliance (PGA) press release, May 18 1998. See also the PGA website: http: //www.agp.org.

10 American Bar Association Section of International Law and Practice, "Private Counsel In WTO Dispute Settlement Proceedings," Journal of International Economic Law, 1999, 2(1), pp. 163-181.

11 "United States-Standards for Reformulated and Conventional Gasoline," AB-1996-1, WT/DS2/AB/R, April 29 1996.

12 Peter E. Ehrenhaft "Right to Counsel in WTO Dispute Settlement Proceedings: A 1998 Resolution of the American Bar Association," Journal of International Economic Law, 1999, 2(1) pp.159-162.

13 Anonymous, "The CCBE Resolution," Journal of International Economic Law, 1999, 2(1), pp. 182-184.

14 Hyun Chong Kim, "The WTO Dispute Settlement Process: A
Primer," Journal of International Economic Law, 1999, pp. 457-476.

15 DSU, Article 27.2.

16 Agreements covered by the DSU: (a) Agreement Establishing the World Trade Organization; (b) Multilateral Trade Agreements Annex 1A: Multilateral Agreements on Trade in Goods; Annex 1B: General Agreement on Trade in Services; Annex 1C: Agreement on Trade-related Aspects of Intellectual Property Rights; Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes; (c) Plurilateral Trade Agreements Annex 4: Agreement on Trade in Civil Aircraft; Agreement on Government Procurement; International Dairy Agreement; International Bovine Meat Agreement.

17 Ernst-Ulrich Petersman, "The Dispute Settlement System of the World Trade Organization and the Evolution of the GATT Dispute Settlement Since 1948," Common Law Review, 1994 (31), pp. 1157-1244.

18 Ibid.

19 Kees Jan Kuilwijk, "Dispute Resolution," in World Trade Regulation Manual, CCH Editions Limited, 1999, p.78, 281.

20 DSU, Articles 4.11 and 10.2.

21 Bernd-Roland Killmann, "The Access of the Individual to International Trade Dispute Settlement," Journal of International Arbitration, 1996, 13(3), pp. 143-167.

22 Edwin Vermults, Petros C. Mavroidis & Paul Waer, "The Functioning of the Appellate Body After Four Years: Towards Rule Integrity," Journal of World Trade, 1999, 33(2), pp. 1-50.

23 DSU, Article 7.1.

24 The Appellate Panel Report on Brazil, "Measures Affecting Desiccated Coconut," adopted on March 20 1996,WT/DS22/R.

25 See supra note 22.

26 Panel Report on Japan, "Taxes on Alcoholic Beverages," adopted on November 1 1996, WT/DS8/11,10/11 and 11/8.

27 Panel Report on India, "Patent Protection for Pharmaceutical and Agricultural Chemical Products," adopted on January 16 1998, WT/DS50/R.

28 Appellate Body Panel Report, "USA-Shirts and Blouses," adopted on May 23 1997, WT/DS33/AB/R.

29 Panel Report, "Imports of Cotton and Man-Made Underwear," (USA-Underwear), adopted on February 25 1997, WT/DS24/R.

30 Panel Report on Canada, "Certain Measures Concerning Periodicals," WT/DS31/AB/R.

31 James Cameron and Kevin R. Gray, "Principles of International Law in the WTO Dispute Settlement Body," International and Comparative Law Quarterly, 2001, 50(2), pp. 248-298.

32 DSU, Article 3.8.

33 Ibid, Article 26(1)(a).

34 Ibid, Article 3.2.

35 Vienna Convention on the Law of Treaties (1969), Articles 31 and 32.

36 Asif H. Qureshi, International Economic Law, Sweet & Maxwell Ltd, 1999, p. 305.

37 GATT (1994), Article 23(2).

38 DSU, Article 26.

39 See supra note 19, p. 81,144.

40 PRC, Civil Law General Principles, Article 142; PRC, Civil Procedure Law, Article 238.