Critique of the WTO Dispute Resolution System (LAWS20062)

This report provides a comprehensive overview of the World Trade Organization's (WTO) dispute resolution system. It begins by outlining the historical background and evolution of the WTO, emphasizing its role in settling international trade disputes. The report delves into the structure and functioning of the Dispute Settlement Body, explaining the various stages involved, including consultations, investigative panels, and the appellate body. A critical analysis of the dispute resolution processes is presented, highlighting both the strengths and weaknesses of the system, and the challenges faced by developing countries. The report also examines specific case studies, such as the US Gasoline Case, the Japan Alcoholic Beverages Case, and the Brazilian Coffee-bean Case, to illustrate the practical application of the dispute resolution mechanisms. The analysis considers the impact of political and economic influences on the system and suggests areas for improvement to ensure fair and effective dispute resolution in the international arena. The report concludes with a summary of the key findings and recommendations for enhancing the WTO's dispute resolution capabilities.

Running head: INTERNATIONAL COMMERCIAL LAW
INTERNTIONAL COMMERCIAL LAW
Name of the Student
Name of the University
Author Note

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Introduction
There has been an increase in the treaties and agreements that are related to international
trade between countries. With the increase in the connectivity between the nations after the
world wars which led to vast devastation in order to prevent such practices from happening
further a body was set up which would help the countries to come together and solve the
problems and difficulties which were prevailing post war and which would assist and help the
countries in connecting and helping each other through several trade related facilities. Therefore,
GATT was set up which was considered to be the General Agreements on Tariffs and Trade. It
was set up in order to encourage the countries for international trade by trying to decrease the
several barriers that were prevailing in the international trade arena. The World Trade
Organization was considered to be the biggest form of change in the international arena and it
was the successor of GATT. The General Agreements on Trade and Treaty mainly dealt with the
international trade with respect to goods. On the other hand, the WTO that was the immediate
successor of GATT dealt with international trade with respect to services as well as intellectual
property. Therefore, a broader arena had been established under this. The international trade
intensifies the disputes between the countries that are addressed by the dispute settlement body,
which has been set up to handle the disputes regarding trade in the international arena1.
This paper discusses the background of the World Trade Organization in brief and talks
about the working and the functioning of the dispute settlement body and how they try to resolve
the disputes that occur between the countries. A critical analysis regarding the processes of the
dispute resolution system has also been made and the problems that arises in order to resolve
1 Sacerdoti, Giorgio. "Resolution of international trade disputes in the WTO and other Fora." Journal of
International Trade Law and Policy 14.3 (2015): 147-156.

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such disputes have been identified. In conclusion, it summarizes the several points that have been
discussed in the paper.
Discussion
A Brief Overview of the Dispute Resolution System of the WTO
The WTO Dispute Resolution System has been set up with the objective or purpose of
settling the disputes or resolving the disputes that arise between the countries in the international
arena. The Dispute Settlement Body is considered to be a special assembly of that of the
General Assembly and it tries to adjudicate the disputes that are related to or in connection with
the international trade. The dispute resolution system tries to provide security in the multi-lateral
trading systems along with predictability. The purpose of the system is to protect the interests
and the rights of the members who are a part of the WTO2.
The Various Processes of the Dispute Resolution System
In order to resolve the disputes that arises due to issues involving in or pertaining to
international trade the settlement body was created which would address the problems or
conflicts that were occurring in the international trade arena. The process includes:
Consultation between parties: The consultations between the parties are considered to be
informal and the parties at this stage try to figure out a way in where they would be able to
resolve the disputes regarding the trade facilities in the international arena. If the parties are not
able to resolve the disputes at this stage then the parties are considered to go into the
investigative panel stage.
2 Sacerdoti, Giorgio. "Resolution of international trade disputes in the WTO and other Fora." Journal of
International Trade Law and Policy 14.3 (2015): 147-156.

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Investigative Panel: If the dispute which has been taking place between two parties have failed
to be resolved then the party who is not satisfied with such consultation is considered to go for
investigative panel stage which consists of three members and thus after investigation the
outcome would be measured and evaluated which would decide the fate of the parties. After such
a stage the panel that would consist of a report or recommendations that would be provided to
the parties would make the submissions.
Appellate Body: In this stage, the panel would make certain decisions and they would be able to
come up with recommendations and solutions for the disputes that have been between the
parties. This would be consisting in reports where the reasons that are to be established or the
causes for the disputes are considered to be comprehended and the solutions for the same would
be given. If the parties are not satisfied by the decision of the disputes they can appeal to the
appellate body which would look after the matters and try to come up with a solution that would
assist in resolving the dispute between the parties3.
Critical Analysis of the Processes of the Dispute Resolution System
According to the author, the mechanisms which are used in order to resolve the disputes
in the dispute settlement forums are considered to be in order to comprehend and get a clear
understanding about the procedures that are involved in settling those disputes and are
considered to be regulated. However, this being said the author also tries to contradict by saying
that such is not an innovative technique or strategy because it is a system that is considered to be
a concentrated on judicial decisions. Prior to such settlement forum the disputes or any conflicts
were considered to be negotiated between the parties through diplomatic channels that were
3Hillman, Jennifer. "Dispute settlement mechanism." Trans-Pacific Partnership: An Assessment 104
(2016): 213.

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considered to become void easily since there were no rules or legal frameworks which were
governing such negotiation and that made it difficult to resolve the conflicts or the disputes4.
According to another author, consultation between the parties which is considered to be
the first stage includes a sixty days time period which is given for negotiation between the parties
in order to resolve the disputes or the conflicts. If the disputes that are at this stage does not get
resolved then it would be taken to the second stage. However, the author also states that most of
the disputes get resolved in this stage5.
According to the author the second stage consists of the investigative panel stage where
the parties to a dispute establish the causes for such disputes and in order to resolve the disputes
investigation is carried on which would dig into the matter and try to resolve the issues between
the parties. The panel does so by being able to comprehend the submissions that have been made
by the parties to that dispute and through other parties who are involved with the disputes. They
come up with a conclusion and try to submit it through preparing reports and the implementation
of such interim reports are considered to be embraced by the WTO and if there has been any kind
of opposition by any of the parties in this process then such dispute would be considered to go to
the last stage. However, the author also mentions that even in this stage there are at least over ten
percent of the disputes that are reported gets resolved at this stage.
According to the author in the third stage, the appellate body consists of the jurists who
try to evaluate and assess the findings which have been established by the panel. The appellate
body is considered to be a competent body. The parties that go to this stage they have to
4 Proelss, Juliane, Denis Schweizer, and Volker Seiler. "Do announcements of WTO dispute resolution
cases matter? Evidence from the rare earth elements market." Energy Economics 73 (2018): 1-23.
5 Busch, Marc L., and Krzysztof J. Pelc. "Dispute Settlement in the WTO." The Oxford Handbook of the
Political Economy of International Trade (2015): 400.

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implement the decisions given by the appellate body and it also has the power to direct
compensations and try to make the parties agree on resolving the disputes. However, it has been
said that the panel rulings in most of the disputes come to this stage and are referred to such
body6.
According to the author in this article such dispute settlement mechanisms which help in
resolving the conflicts between the countries are considered to be handled by experts in the field
of law and trade who are also considered to be a member of the WTO. This system helps in
trying to resolve the disputes in a swift manner without taking much time compared to that of the
court and with such success it has been trying to establish the principles of providing withy
prompt settlements which would make the developing countries adopt such techniques in order
to settle the disputes that arise between them. However, the expenses are a big concern as it helps
in resolving the disputes but are considered to be expensive which would also make it difficult
for the developing countries to adopt it quickly7.
According to the author it was stated that the dispute settlement system was set up and
created in order to help the developing nations to solve their disputes with the other countries as
the developing countries were considered to be more in numbers who were the members of the
WTO. However, the practical application was not much. The effectiveness of the success of
resolving of the disputes under this system was low as the main concentration of resolving any
disputes were considered to be the political influence of a country along with the economic
status. Therefore. The countries with less power were considered to be neglected. The
developing country was not considered to be having effective participation and it was mainly
6 Hillman, Jennifer. "Dispute settlement mechanism." Trans-Pacific Partnership: An Assessment 104
(2016): 213.
7 Creamer, Cosette D., and Zuzanna Godaimirska. "(De) legitimation at the WTO dispute settlement
mechanism." Vand. J. Transnat'l L. 49 (2016): 275.

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because of the three grounds that the powerful countries which had both economic and political
powers were considered to influence during resolving of the disputes. There were low rate of
technical capacity along with the financial capacity for the developing countries to participate or
take part in an effective manner in order to resolve the disputes. The enforcement power was also
considered to be weak. The WTO settlement forum was not considered to be accessed freely by
the members and was considered to not be equal for all the countries who were a member8.
According to the author, the most favored nation principle, which had been created under
the GATT articles that governed international trade regime, was also being influenced along with
the national treatment principle. The countries in disputes were taking advantage of the MFN
principle which was increasing the conflicts between the countries. However, the dispute
settlement forum tried to resolve such disputes and arbitrary proceedings were being carried
forward which would assist them in resolving such disputes which were taking place in the
international arena and to maintain peace and facilitate trade between the countries9.
Therefore, it can be understood that the processes which were adopted by the Dispute
Resolution System needed guidance and improvements which would help them in bringing a
change and try to function effectively. It would also aim to help the developing countries in order
to resolve the disputes without any political or economical assistance and influence from other
countries which had strong political and economical influence in the international arena.
8Hyams, Adam, and Gonzalo Villalta Puig. "Preferential Trade Agreements and the World Trade
Organization: Developments to the Dispute Settlement Understanding." Legal Issues of Economic
Integration 44.3 (2017): 237-264.
9 Rossati, David. "The WTO Dispute Settlement System: Challenges of the Environment, Legitimacy and
Fragmentation, by Kati Kulovesi." (2015): 191.

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Cases in the Dispute Resolution System of the WTO
US Gasoline Case: In this case, the main issue, which was discussed, was the violation of the
national treatment principle where the imported gasoline products were not being considered and
the domestic products were being favoured. According to the Clean Air Act the use of Gasoline
was a violation to the paragraphs (b), (g) and (d), of the GATT Article XX which dealt with
exceptions and the US considered it to be consistent to the Article III of GATT. Venezuela and
Brazil found such to be inconsistent and unfair. The panel’s decision was that it found US to be
inconsistent to the article III of GATT and it also did not apply to the exceptions mentioned
under Article XX of GATT10.
Japan Alcoholic Beverages Case: In this case the main issue was considered to be unfair tariffs
and taxes which were being made for the domestic alcoholic drink shochu towards the other
drinks like vodka, gin, whisky, brandy and others. It was considered to be a violation of the
national treatment principle and the appellate body had found it to be inconsistent and a violation
towards Article III:1 and III:2 of the GATT11.
Brazilian Coffee-bean Case: In this case the main issue that was to be understood was that
Spain was under Article I:1 of GATT violating the Most Favoured Principle where it was
discriminating between Brazil and the other countries where it put high tariff rates on the
products which were exported by Brazil to Spain. In this case along with the M.F.N. principle the
likeness of the products or which were considered to be like products were also discussed. If it
could have been established that these imports on coffee from around the world was considered
to be like products then Brazil would get the panel’s decision in their favour. The like products
10 Bartels, Lorand. "The chapeau of the general exceptions in the WTO GATT and GATS agreements: a
reconstruction." American Journal of International Law 109.1 (2015): 95-125.
11Wto.Org (Webpage, 2019) <https://www.wto.org/english/res_e/booksp_e/dispu_summary95_11_e.pdf>

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depended on the chemical composition of the product, the consumer preference of that product,
the manufacturing of the product. If these were same then it would be considered to be like
products. In this case it was established that the coffee beans were considered to be like products
and thus, the panel’s decision was in favour of Brazil and it was found that Spain had violated
the Most favoured nation principle12.
The Effectiveness of the Dispute Resolution System in WTO
The countries who are a member of the WTO have participated in the discussions, which
are held by the WTO members. The Dispute Resolution System has been set up in order to
resolve the disputes in the international arena that would help or assist the countries to have a
smooth way, which would help in facilitating trade in the economy. The countries who are
developing and who have been able to resolve the conflicts or the disputes had stated that the
enforcement power of the dispute resolution system is considered to be weak and therefore, the
implementations of the compensations for the damages that have been caused to the countries are
not taken care of and the implementation of such tends to take time and not that effective.
Therefore, the Dispute resolution system should implement new strategies which would help
them to run effectively and make the developing countries take part in such initiatives which
would help them to resolve the disputes13.
12 Wto.Org (Webpage, 2019) <https://www.wto.org/english/tratop_e/dispu_e/gatt_e/80coffee.pdf>
13 Sacerdoti, Giorgio. "The WTO Dispute Settlement System: Consolidating Success and Confronting New
Challenges." Bocconi Legal Studies Research Paper 2809122 (2016).

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Conclusion
Therefore, from the above discussion it can be comprehended, that the WTO was
considered to be the biggest form of change in the international arena and it was the successor of
GATT. The WTO Dispute Resolution System has been set up with the objective or purpose of
settling the disputes or resolving the disputes that arise between the countries in the international
arena. The mechanisms that are used in order to resolve the disputes in the dispute settlement
forums are considered to be in order to comprehend and get a clear understanding about the
procedures that are involved in settling those disputes and are considered to be regulated. Prior to
such settlement forum the disputes or any conflicts were considered to be negotiated between the
parties through diplomatic channels that were considered to become void easily since there were
no rules or legal frameworks which were governing such negotiation and that made it difficult to
resolve the conflicts or the disputes. The enforcement power of the dispute resolution system is
considered to be weak. Therefore, the Dispute resolution system should implement new
strategies which would help them to run effectively and make the developing countries take part
in such initiatives which would help them to resolve the disputes.

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References
Bartels, Lorand. "The chapeau of the general exceptions in the WTO GATT and GATS
agreements: a reconstruction." American Journal of International Law 109.1 (2015): 95-125.
Busch, Marc L., and Krzysztof J. Pelc. "Dispute Settlement in the WTO." The Oxford Handbook
of the Political Economy of International Trade (2015): 400.
Creamer, Cosette D., and Zuzanna Godaimirska. "(De) legitimation at the WTO dispute
settlement mechanism." Vand. J. Transnat'l L. 49 (2016): 275.
Hillman, Jennifer. "Dispute settlement mechanism." Trans-Pacific Partnership: An Assessment
104 (2016): 213.
Hyams, Adam, and Gonzalo Villalta Puig. "Preferential Trade Agreements and the World Trade
Organization: Developments to the Dispute Settlement Understanding." Legal Issues of
Economic Integration 44.3 (2017): 237-264.
Proelss, Juliane, Denis Schweizer, and Volker Seiler. "Do announcements of WTO dispute
resolution cases matter? Evidence from the rare earth elements market." Energy Economics 73
(2018): 1-23.
Rossati, David. "The WTO Dispute Settlement System: Challenges of the Environment,
Legitimacy and Fragmentation, by Kati Kulovesi." (2015): 191.
Sacerdoti, Giorgio. "Resolution of international trade disputes in the WTO and other Fora."
Journal of International Trade Law and Policy 14.3 (2015): 147-156.
Sacerdoti, Giorgio. "The WTO Dispute Settlement System: Consolidating Success and
Confronting New Challenges." Bocconi Legal Studies Research Paper 2809122 (2016).

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Wto.Org (Webpage, 2019) <https://www.wto.org/english/tratop_e/dispu_e/gatt_e/80coffee.pdf>
Wto.Org (Webpage, 2019)
https://www.wto.org/english/res_e/booksp_e/dispu_summary95_11_e.pdf.