CHAPTER 5. CONSULTATION, GOOD OFFICE, CONCILIATION AND MEDIATION IN WTO DISPUTE SETTLEMENT SYSTEM

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1 CHAPTER 5. CONSULTATION, GOOD OFFICE, CONCILIATION AND MEDIATION IN WTO DISPUTE SETTLEMENT SYSTEM Consultation Introduction The aim of the WTO dispute settlement system is to secure a positive solution to a dispute (1). It is one of its admirable features that in addition to the adjudicative system, alternative methods of dispute settlement through consultation, mediation and conciliation have been adopted. The DSU expresses a clear preference for solutions mutually acceptable to the parties to the dispute, rather than solutions resulting from adjudication by a panel. Therefore, each panel process must be preceded by consultations between the complaining and responding parties to the dispute with a view to reaching a mutually agreed solution. The DSU provides (2) that in the course of consultations and before resorting to further action, Members should attempt to obtain satisfactory adjustment of the matter.(3) The DSU requires that Members shall engage in consultations in good faith in an effort to resolve the dispute amicably before the dispute can be referred to a panel. To resolve disputes through consultations is obviously cheaper and more satisfactory for the long-term trade relations with the other party of the dispute than adjudication by a panel. The consultations enable the disputing parties to understand better the factual situation and the legal claims in respect of the dispute. Such understanding may allow then to resolve the matter without further proceedings and, if not, will allow a party to learn more about the facts and the legal arguments that the other party is likely to use when the dispute goes to adjudication. In this respect, the consultations may serve as an informal pre-trial discovery mechanism. Their primary object and purpose, however, is to settle the dispute amicably The procedure of consultation

2 The WTO dispute settlement process starts when a WTO-Member government formally requests WTO consultations with another Member. (Frequently, formal WTO consultation follows unsuccessful efforts to resolve a dispute through normal bilateral diplomatic efforts.) A member-country may request consultations when it considers another member- country to have "infringed upon the obligations assumed under a Covered Agreement (4) If the respondent fails to respond within ten days or enter into consultations within thirty days, the complaint "may proceed directly to request the establishment of a panel. (5) The essential function of consultations is to settle disputes amicably. For this purpose, they should be as informal as possible with regard to legal questions and the exploration of possibilities of amicable settlement. In addition, consultations also serve to clearly establish the facts of the case. This is not in contradiction with the first function, since an amicable settlement tends to become more likely when both parties to the dispute have a clear view of the facts. (6) If a member state feels that its rights are being infringed upon by another member, it is entitled to call this member to consultation. The party against whom the complaint has been brought must respond within 10 days and consultations are held within 30 days. Should the dispute not be settled during this stage, the complaining party can request the formation of a panel to consider the matter? (7) The DSU requires parties to a dispute to first attempt to settle the dispute through consultations with each other. Most disagreements are solved in this manner within the 60-day time frame. If the parties are unable to solve their differences through informal consultations, they may resort to mediation or conciliation, and may ask the WTO Director General to assist them in any way. If consultations fail to settle a dispute within an overall 60 days from the request, or if the party has not responded to the request, another party has the right to ask the DSB to set up a panel. (8) The consultations also offer a country an opportunity to assess the merits of the other country s case and to clarify the facts. To facilitate the process, the complaining country may sometimes submit written questions that it wants the defending country to answer during the consultations. The countries may hold more than one round of consultations if they find the process informative or if they think they may be able to reach a settlement. Consultations are not always followed by a request for a panel. Since sometimes the threat of action is more potent than the action itself, consultations may provide information and leverage for negotiations that lead to a successful resolution of the dispute. On occasion, a complaining party may learn from

3 the consultation process about weaknesses in its arguments or damaging facts; either situation could lead to a decision not to press the matter. (9) The designers of understanding have considered consultation, good efforts, mediation and compromise as official and fixed methods of dispute settlement by the panel or appellate body. If a dispute is raised, all members are obliged to adopt one of these methods with good intention to solve the problem. The members also approve on improving their settlement solutions and increase the effects of using the process of consultation by members and before attributing to any other methods, the understanding does its all efforts to achieve a satisfactory compromise. It should be noted that consultation process had been one of the most important dispute settlement methods in GATT as well. WTO has accepted the same process and in addition, it has determined a scheduling plan, for the application of consultation and its replying it, as to be of duties of dispute settlement body, if the results are not acceptable. The dispute settlement is used only for new application and request for consultation, raised in accordance with the regulations of consultation, which have been effective from the execution date of WTO agreement and protocol. For disputes which according to GATT or other protocols signed before the included agreements and WTO s effective date, the dispute settlement methods which have been current before WTO will be still practiced (10) In case of disputes on execution of any of the items of agreement letter or is taking measures which may cause harm to other members, the concerned parties will try to take actions for its settlement through negotiations with other member countries. According to the regulations of GATT 1947, the member countries had been asked to do their utmost efforts in adopting consultation as the first step in settling disputes. The consultation process starts with the request of one of the parties. The request should be submitted in writing. The number of members as parties to dispute and also, reasons and legal basis; that is national regulations and the regulations of WTO which have been offended and breached by any of the members should be mentioned in the request. A member who asks for consultation should submit its request to the dispute settlement body and committees and related councils as mentioned in the WTO, in connection with the agreements which have been breached. This request will be submitted to all members for information. (11) To accelerate dispute settlement, as one of the most important goals of dispute settlement system of organization, a time is considered for consultation process. If a request for consultation is made under an agreement covered by the understanding, the addressee member, if

4 not agreed on another time, should undergo consultation process within 10 days as of request, to achieve a mutual agreement with god intention. If the addressee does not reply within 10 days as of receiving the request, or does not start consultation within 30 days as of receiving the request, or expiry of an agreed date, the requesting member might directly ask for establishing an investigation council. (12) Now suppose the other party gives positive reply to consultation request and starts consultation, in such case, a time process will be taken for consultation. That is, consultation should be started within 60 days as of receiving the request and if the dispute is not settled within this time, or parties conclude that the consultation has failed in solving the problem, the claimant may ask for an investigation council with a 60-day period. (13) It seems the purpose underlying this arrangement had been to achieve a way so if consultation fails to solve problem, the claimant could ask for investigation council in 60 days. In emergency cases, such as damageable products, the members should start negotiations and consultation within 10 days and if this consultation does not solve problem within 20 days as of receiving the request, the claimant might ask for establishment of an investigation council. (14) In the other expression, Each Member undertakes to accord sympathetic consideration to and afford adequate opportunity for consultation regarding any representations is made by another Member. If a request for consultations is made pursuant to a covered agreement, the Member to which the request is made shall reply to the request within 10 days and shall enter into consultations in good faith within a period of no more than 30 days. If there is no proper response, then, the Member may proceed directly to request the establishment of a panel. All such requests for consultations shall be notified to the DSB and the relevant Councils and Committees by the Members which requests consultations. Any request for consultations shall be submitted in writing and shall give the reasons for the request. Consultations shall be confidential, and without prejudice to the rights of any Member in any further proceedings. If the consultations fail to settle a dispute within 60 days after the date of receipt of the request for consultations, the complaining party may request the establishment of a panel. In the case of perishable goods, Members shall enter into consultations within a period of no more than 10 days. If the consultations have failed to settle the dispute within a period of 20 days, the complaining party may request the establishment of a panel. During the consultations, Members should give special attention to the particular problems and interests of developing country Members. (15)

5 Since 1995, a significant number of disputes on which consultations were held have been resolved, or appear to have been resolved, by the parties without the need for recourse to adjudication by a panel. In some cases, the dispute was simply not pursued any further; in other cases, a mutually agreed solution to the dispute was reached Interference of a Third Party The consultation process in the dispute settlement system will be a confidential one. The confidentiality of consultation is a reason which attracts members to use this method for solving their problems, for in trades and particularly in international trades, the countries usually do not like to reveal their trade relations and for this purpose, they prefer consultation for its confidentially. In connection with interference of third party, clause 11 of Art 4 of understanding memorandum establishes that when any member, rather than the requesting members (for consultation) believes that it has considerable trade benefits in the consultation which is to be done according to regulations, it can submit its intention to join consultation within 10 days as of distribution of the consultation request, informed to members according to the said law and the dispute settlement body may condition the arrival of this member into consultation only when a requesting member accepts that the concerned member has considerable benefits on the case. In such case, the consulting member will inform the dispute settlement body of the matter. If request to join the consultation is accepted, the applicant member will be opt to ask for consultation, in accordance with clause to Art 22 or clause 1 of Art 23 of GATT 1994, clause 1 of Art 33 of general agreements on trade or services or similar regulations Evaluation of Consultation Process Parties have broad discretion as regards the manner in which consultations are to be conducted. The DSU provides few rules on the conduct of consultations. The consultation process is essentially a political-diplomatic process. Since 1995, a significant number of disputes on which consultations were held have been resolved, or appear to have been resolved, by the

6 parties without the need for recourse to adjudication by a panel. In some cases, the dispute was simply not pursued any further; in other cases, a mutually agreed solution to the dispute was reached. An evaluation has been made on the first ten-year function of consultation process ( ). From the beginning of effectiveness of understanding till now, there have been 85 cases of requesting consultation process and 78 cases of them have been settled (of 107 cases which are still on the way, 32 case are in pre-investigation council or appeal committee stages and 75 cases are in consultation process). Of the 78 cases of settled claims, 37 claims have been completed with acceptance of the investigation council s report and/or appeal committee and 41 cases (52%) have been settled without attributing to the investigation council process. In 19 cases of these claims (the recent 41 cases) both members have been of developed countries and the other party is of developing countries. Paying attention to the aforementioned statistics shows that WTO has been very successful without attributing to the investigation council. (16) Comparing Consultation and Negotiation in International Law Some researchers believe in no difference between negotiations in international law and consultation in WTO. In connection with the consultation process it has been said that such as general system of dispute settlement, this is the first step in negotiation. In the memorandum of understanding, no mention has been made of political negotiations or in another word, diplomatic negotiators and in turn, the term Consultation has been used. (17) On the existence of any difference between negotiations and consultation, there are some differences in views and, ultimately, the position of consultation among other methods of dispute settlement method is the same as negotiations. That is, in some instances, consultation can help settlement of disputes as an independent method and/or prevent it and in times, it might lead to exchange of views and information so the parties would know each other s stands and settle the problem from other ways. In another word, it is considered as a type of introductory actions. (18) During few years of function of consultation process, suggestions have been given to amend it. Article 10 of the Establishment Protocol of WTO regulates that the members should submit their suggestions to the Minster s conference for due amendments. Nevertheless, these

7 amendments should also take their special process in terms of acceptance by majority or unanimously, as mentioned in Article 10. The consultation process has fulfilled the DSU drafters goal of enhancing and promotion resolution of disputes without recourse to panels. (19) Following suggestions could be made for amending consultation process First suggestion is related to the time for consultation process. Most members believe that this period is too long and should be shorter. (20) Second suggestion is on establishing consultation center as an effort to help developing countries that do not have access to dispute settlement mechanism of WTO. The consultation center could be a source for developing countries and offer consultation services (supports) in the claims of developing countries against WTO members Conclusions Consultation is a compulsory requirement and is a significant step in resolving the trade disputes, whether by adjudicative or by alternative methods. It helps in increasing mutual knowledge of the problem and understanding of the seriousness of the competing claims. It allows parties to clarify the facts of the dispute, to dispel misunderstandings and to arrive at mutually satisfactory solution. It appreciably contributes to quick, cheap and effective disposal of disputes. The fact that a decade of DSB s functioning has witnessed disposal of at least 50% of cases through consultation without going to panel process has established credibility and efficacy of consultation process. This is a welcome development for the developing and least developed countries. There are suggestions that there should be consultation centers and that the period of consultation shall be shortened Good offices, Conciliation and Mediation Introduction The international organizations, which have been established under law, hold a legal entity completely separate from the legal entity of member states. These organizations have

8 certain goals and they appoint and employ personnel who are faithful to the Secretary General. (21)This characteristic generates from the opinions of member states that establish the said organization and the reason underlying it is to allow the organization keep its independence and remain apart. The limit of its scope, which is enjoyed by international organizations, according to the public international law is limited to the actions, which is necessary to enable the organization to achieve its goals (22). Like other organizations, WTO has legal entity and any of the member states empower it the necessary legal qualification to perform duties related to those organizations. The benefits and securities which are assigned to the officials and member representatives might be similar to the benefits and safeties, which are established in the conventions of benefits and safeties of specialized commissioning, approved by the general assembly of United Nations on November 21, The process of dispute settlement of WTO is a regulated and ordered process which starts with the claims. In the public international law, the parties to dispute have many options in using various methods of dispute settlement and this is one of the important principles of dispute settlement. On this basis, the parties are entitled to choose methods of settling their disputes upon mutual agreements; however, the understanding memorandum ignores this principle to some extent. Although it has been stipulated that the parties to the claim are entitled to put together the systems of dispute settlement at the understanding memorandum and make agreement on using other current methods of dispute settlement, such as good offices discussion, compromise, mediation and even international arbitration; the requisite of attributing to this method is an agreement of parties to the contract; otherwise, the dispute settlement method as predicted in this memorandum of understanding is somehow imposed to the parties to dispute (23) Good offices, conciliation and Mediation Good offices, and conciliation mediation as methods of solving disputes are more diplomatic actions and mostly for settling political disputes than legal principles and fundamentals. These methods have not been mentioned in GATT 1947; however, in the memorandum of understanding 1979 and Ministers Decisions of 1989, these have been presented and recommended to GATT as methods of solving disputes. They were repeated in the

9 understanding memorandum as well; however, contrary to consultations which should be taken by the parties, the aforementioned methods are practicable only when the parties to dispute agree on them. Any party to dispute may ask for good offices, compromise or mediation and the claimant party might ask for establishment of investigation council. Good offices, conciliation and mediation are procedures that are undertaken voluntarily if the parties to the dispute so agree. The proceedings shall be confidential and without prejudice to the rights of either party in any further proceedings. If the parties to a dispute agree, procedures for good offices, conciliation or mediation may continue while the panel process proceeds. The Director-General may, acting in an ex-officio capacity, offer good offices, conciliation or mediation with the view to assisting Members to settle a dispute. (24) Definition A. Good offices involve the most restricted and limited interference of a third party to settle disputes. By good offices it means friendly efforts of a third country to establish a suitable atmosphere and preparing parties to dispute to reach an agreement. Thee third party might take good offices upon its own initiation or request of one or both parties. B. Conciliation is a process similar to facilitation negotiation (25). The name is taken for bringing a third party into the negotiation process. Nevertheless, there are important differences between the two methods. In addition, depending taking a private place or court, the conciliation goals vary. When conciliation is made in a private place, a neutral party, known as conciliation helps the parties as a communicator to inform the other party of its views and suggestions for settling the dispute. In the other word, An informal process similar to mediation that involves a neutral third party who assists others in resolving problems by working on communication and relationships Generally used prior to mediation during the problem solving stage and can result in resolution of the issues The conciliator focuses on reducing tension by clarifying facts between the parties and helping them understand the value of good relationships. The conciliator may inform the parties of relevant facts or arrange for meetings between them. The parties may reach satisfaction or resolution without the need for a settlement agreement or may negotiate a written agreement. The issue of the dispute must be defined, in writing, at this stage of the process. (26)

10 A practice under which, in a conflict, the services of a third party are utilized to reduce the differences or to seek a solution. Mediation differs from good offices in that the mediator usually takes more initiative in proposing terms of settlement. It differs from arbitration in that the opposing parties are not bound by prior agreement to accept the suggestions. (27) C. Mediation is a diplomatic method for solving disputes and its aim is to settle disputes by encouraging concerned parties to reach an agreement. According to assumption, a mediator should remain neutral; however, it may give constructive suggestions for settling disputes of parties, rooted in procedure code. A process whereby a mediator serves as a neutral third party and assists the disputing parties in reaching a mutually satisfactory resolution of a problem. A mediator is selected. No person should serve as a mediator when that person was previously involved in the informal problem solving efforts, or is responsible for processing of the grievance. Assistance will be provided to the mediator to enable the mediation to proceed. This is typically in the form of human resources and office of counsel support or the staff team support. The mediator determines what documents and persons are necessary for the mediation. The mediator proceeds expeditiously and informs the aggrieved person and the settlement official about the mediation process, including procedures and schedules. (28) Unlike consultation in which "a complainant has the power to force a respondent to reply and consult or face a panel," good offices, conciliation and mediation "are undertaken voluntarily if the parties to the dispute so agree." (29). No requirements on form, time, or procedure for them exist. (30). Any party may initiate or terminate them at any time. (31) The complaining party may request the formation of panel, "if the parties to the dispute jointly consider that the good offices, conciliation or mediation process has failed to settle the dispute." (32). Thus the DSU recognized that what was important was that the nations involved in a dispute come to a workable understanding on how to proceed, and that sometimes the formal WTO dispute resolution process would not be the best way to find such an accord. Still, no nation could simply ignore its obligations under international trade agreements without taking the risk that a WTO panel would take note of its behavior. Sometimes, the involvement of an outside, independent person unrelated to the parties of a dispute can help the parties find a mutually agreed solution. To allow such assistance, the DSU provides for good offices, conciliation and mediation on a voluntary basis if the parties to the dispute agree. (33) Good offices normally consist primarily of providing logistical support to

11 help the parties negotiate in a productive atmosphere. Conciliation additionally involves the direct participation of an outside person in the discussions and negotiations between the parties. In a mediation process, the mediator does not only participate in and contribute to the discussions and negotiations, but may also propose a solution to the parties. The parties would not be obliged to accept this proposal. Good offices, conciliation and mediation may begin at any time (34) but not prior to a request for consultations because that request is necessary to trigger the application of the procedures of the DSU, including Article 5 (35). For example, the parties can enter into these procedures during their consultations. If this happens within 60 days after the date of the request for consultations, the complainant must not request a panel before this 60-day period has expired, unless the parties jointly consider that the good offices, conciliation or mediation process has failed to settle the dispute (36). However, these procedures can be terminated at any time (37). If the parties so agree; these procedures may continue while the panel proceeds with an examination of the matter (38) Time, procedure and Interference of Third Party When good offices, conciliation or mediation are made within 60 days after receiving the consultation request, the claimant should give a 60-day period as of receiving consultation request, before asking for investigation council. If the parties to dispute jointly recognize that the good offices, conciliation or mediation have not been able to solve problem, the claimant may ask for establishing an investigation council within 60 days. If the parties to dispute accept, the investigation council may follow and continue procedures of good offices, conciliation and mediation (39). Procedure that request good efforts, compromise and mediation and particularly positions taken by the parties to dispute through investigation process will be confidential and will not breach the rights of parties who have adopted this method (40) In any of the three methods mentioned above, a third party interferes and gives suggestions to parties. In other words, the proceedings of good offices, conciliation and mediation are strictly confidential, and do not diminish the position of either party in following dispute settlement procedure (41) This is important because, during such negotiations, a party may offer a compromise solution, admit certain facts or divulge to the mediator the outer limit of the terms

12 on which it would be prepared to settle. If no mutually agreed solution emerges from the negotiations and the dispute goes to adjudication, this constructive kind of flexibility and openness must not be detrimental to the parties. As regards the independent person to be involved, the DSU states that the Director- General of the WTO may offer good offices, conciliation or mediation with a view to assisting Members to settle their dispute (42) Due to the absence of recourse to the procedures of Article 5 of the DSU, the Director-General issued a formal communication to the Members of the WTO. In this communication, the Director-General called the Members attention to his readiness to assist them as contemplated in Article 5.6 of the DSU, with a view to helping settle disputes without recourse to panels and the Appellate Body. The communication also details the procedures to be followed when Members request the Director-General s assistance for good offices, conciliation or mediation. (43) Furthermore, the requesting Members considered the matter not to be a dispute within the terms of the DSU, but agreed that the mediator could be guided by procedures similar to those envisaged for mediation under Article 5 of the DSU. The Director-General nominated a Deputy Director-General to be the mediator, whose conclusions if was agreed by the parties would remain confidential upon completion of the procedure. The DSU specifically foresees good offices, conciliation and mediation for disputes involving a least-developed country Member. Where the consultations have not resulted in a satisfactory solution and the leastdeveloped country Member so requests, the Director-General or the Chairman of the DSB must offer their good offices, conciliation and mediation. Here as well, the aim is to assist the parties to settle the dispute before the establishment of a panel. (44) Conclusion Any of the three methods mentioned above; that is, good offices, conciliation and mediation in international law differ from WTO regulations. While in the international law, these methods are taken as non-official methods to settle disputes among states in WTO, they can be used when the decisions are taken by the officials of dispute settlement. In this basis (findings of offices, conciliation and mediation) the investigation council follows the findings of these councils and gives its view. These views, if having necessary conditions and acceptance by

13 dispute settlement council, could be enforced. Attributing to Investigation Council has been also mentioned in GATT 1947 and without using these methods, it had not been possible to settle problems; however in the new regulations, more importance is given to the views of parties in dispute in settling their problems and no special time has been considered for using any of these methods to solve the disputes.

14 Notes: 1. DSU Art Ibid Art Ibid Art See, Jr. Dillon, Thomas J. ' The World Trade Organization: a New Legal Order for World Trade?' Michigan Journal of International Law 16 (1995), p381, and also for further information see:http://www.law.georgetown.edu/journals/lpib/symp00 /documents/parlin.pdf and NARSINGHEN H., 'DISPUTE SETTLEMENT PROCESS UNDER GATT/WTO DIPLOMATIC OR JUDICIAL PROCESS?' SOCIAL SCIENCES & HUMANITIES AND LAW & MANAGEMENT Research Journal - Volume University of Mauritius, Réduit, Mauritius. From 'WTO Dispute Settlement Improving the system, review of the Dispute Settlement Understanding (DSU)', Discussion paper from the European Communities, Brussels, 21 October 1998 from and Barshefsky Charlene, 'U.S. Interests and Experience in the WTO Dispute Settlement System', (U.S. Trade Representative; testimony before the Trade Subcommittee of the Senate Committee on Finance, Washington), DC, June 20, 2000 from //usembassy.state.gov/colombia/wwwsmane.shtml 5. Ibid. 6. See 7. Fawzi Sameh, ' Developing Countries and the WTO's Dispute Settlement Mechanism' from: 8. Johnson Michael, 'The WTO Dispute Settlement System: How it works', from 9. See Barshefsky Charlene, supra n. 4 10) DSU Article Ibid. 12. Ibid, Art Ibid, Art Ibid, Art. 4.8

15 15. S.R. Myneni, World Trade Organization (WTO), Asia law house, second edition, 2003 p.126 and also for further information see Joost Pauwelyn, 'The Limits of Litigation: Americanization and Negotiation in the Settlement of WTO Disputes' from and html&hs=mxm act one of the following offices: - Christopher Parlin,C, 'Law and Policy in International Business', Spring 2000, see -CONCILIATION AND MEDIATION 16. See 17. Momtaz Jamshid, 'Understanding Protocol of WTO on the regulations and procedures that govern dispute settlement, innovations and initiations', collection of papers and articles for legal aspects of WTO,( Institute of Trade Studies and Research, Tehran, 1997). 18. Mir Abbasi Seyed Bagher, Public International Law, International Dispute,( vol 2. Dadgostar Publication, 1997) P , 6 th clause, suggestions for amending consultation process. 19. See 20. See 21. Valticos Nicholas, International Organizations and International Law, Morteza Najafi Asfad, Seasonal Journal, Legal Viewpoints, Second Edition, Vol. 5, 6, Spring andsummer1997.and for further information see and and //trade-info.cec.eu.int/doclib/ docs/2003/december/tradoc_ lpib/symp00/documents/parlin and regions/sea/cepsingdocs/singcep4a.html 22. Zaidel Aigkas, Honuman eldren, Economic International Law, Seyed Ghasem Zamani, Legal Study and Research Institute, Tehran, Majlesi Mohammad Shervin, Dispute Settlement System in WTO, M.A. thesis of Private Law, Tehran University, 1997, P S.R. Myneni, supra n Facilitating negotiation is the arrival of a neutral third party into negotiations to help the parties reach an agreement.

16 26. See 27. See 28. See 29. DSU Art Ibid. Art Ibid. 32. Ibid. Art Ibid. Art Ibid. Article 5,3 35. Ibid. Art. 5.1 and see: and_mediation.htm 36. Ibid. Art Ibid. Art Ibid. Art Ibid. Art. 5.4, Ibid. Art For more details see dispu_e/disp_settlement_cbt_e/c8s1p2_e.htm 42. Ibid. Art Supra n DSU Art.24.2

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