1 The global practice in dispute settlement in different regional free trade agreements and other RTAs dealing with dispute settlement Thomas Mathew, Economic Affairs Officer, UNCTAD Mina Mashayekhi, Head, TNDCB, UNCTAD
2 Overview WTO and DSM. Characteristics of DSM in RTAs. Coverage of DSM in WTO and RTAs. DSM in RTAs- Issues of overlap/and or conflict. DSM in RTAs-WTO Dispute Settlement Understanding's Article 23 Versus WTO Member Rights Under GATT Article XXIV. DSM in RTAs- Case study: the Brazilian Tyres dispute. DSM in RTAs- Case study: the Argentina-Definitive Anti- Dumping Duties on poultry from Brazilian dispute.
3 Overview ( contd) Examples of DSM in selected RTAs:Characteristics of the DSM in ASEAN. Examples of DSM in selected RTAs: Characteristics of the DSM in the proposed TPPA. Conclusions.
4 WTO and the DSM The WTO's dispute settlement mechanism remains the most effective forum for the adjudication of trade disputes between its Members. Shortcoming: overly long time period it takes to obtain a resolution, and criticisms that recommendations of the DSB are not always adhered to. Dispute settlement mechanism in WTO and in RTAs have common and some differential features. Differences may reflect a range of divergent views among WTO Members as to what the dispute settlement rules should be, as well as new thinking about the best approach to certain issues based on experience.
5 Characteristics of DSM in RTAs RTA-DSM design to some extent, reflects what RTA parties think on ensuring the balance between treaty compliance and domestic regulatory autonomy. NB. Some contend that more legalistic dispute settlement procedures tend to augur well for improved RTA compliance, as less legalistic dispute settlement procedures tend to reserve more domestic policy space for RTA.
6 Characteristics of DSM in RTAs (2) An examination of the 226 RTA-DSMs notified to the WTO also finds that the degree of innovation in their design is limited. The design of most RTA-DSMs that adopt a model based on third party adjudication follows a structure that is similar to the WTO panel process, i.e: (a) consultations stage, (b) arbitration-like third party adjudication, (c) implementation stage.
7 Characteristics of DSM in RTAs (3) Departures from WTO panel procedures are relatively few. With few exceptions, the level of institutionalization of RTA- DSMs is far lower than that of the WTO DSM. Other significant departures include: o Transparency, implementation procedures, and remedies. Some RTA-DSMs require more transparency than the WTO's Dispute Settlement Understanding (DSU). o Remedies: some RTA-DSMs provide for the possibility of provisional measures and others provide for financial compensation, both of which are remedies that are generally considered not to be available in the WTO.
8 Characteristics of DSM in RTAs (4) Shorter deadlines in some RTA DSMs than the DSU. Nevertheless, it is difficult to determine whether these shorter deadlines are not aspirational until they are tested in actual cases. A small number of RTA-DSMs include provisions that appear to be intended to resolve procedural problems that have arisen in the operation of the implementation stage of the DSU: 1. The so-called "sequencing" issue, which concerns the sequence between a proceeding to review the consistency of a compliance measure and the right to suspend concessions or other obligations. 2. Whether a respondent party can itself initiate a compliance review proceeding where it has taken a measure to comply after the complaining party has suspended concessions or other obligations.
9 Characteristics of DSM in RTAs (5) Even RTAs that have their own DSM do not deny its signatories who are WTO Members to avail themselves of the WTO's DSM. This can lead to problems such as 'forum shopping'. Many disputes are still brought to the WTO for adjudication. For instance, disputes between NAFTA members.
10 Coverage of DSM in WTO and in RTAs The WTO's DSM may not be available to enforce deeper RTA commitments (WTO+). For instance, commitments on IPR that go beyond the WTO's TRIPS Agreement. The WTO's DSM is also applicable to: only the covered agreements, i.e. areas falling under the Marrakesh Agreement, the Multilateral Trade Agreements in Goods, Services, IPRs, the DSU, and several plurilateral agreements. It does not cover commitments: in areas not currently covered by the WTO, but which are covered by some RTAs. For example, labour rights, environment or good governance issues, such as transparency and corruption. (WTO-X). Once parties to an RTA need to negotiate a dispute settlement mechanism to enforce such commitments, the transactional costs of extending its coverage to commitments or areas also covered by the WTO would be low. Alternatively, the negotiation of an RTA-DSM could be motivated by a desire on the part of RTA parties to increase their enforcement capacity or the enforceability of commitments.
11 DSM in RTAs- issues of overlap/and or conflict There are differences in dispute settlement provisions and the type of dispute resolution processes they establish within the sample of RTAs examined. The various systems can generally be characterized as one of the following: 1) choice of forum agreements to adjudicate their trade grievances, with or without a further requirement granting exclusive jurisdiction to the forum chosen first; 2) exclusive jurisdiction agreements, which require all disputes arising under the RTA to be brought only under the RTA's dispute settlement mechanism; 3) preference agreements, which specify a preferred forum that can be changed to an alternative forum only upon agreement among the parties. NB. Most RTAs notified to date are of the first type, providing for a choice of forum that allows the complaining party to choose whether to bring a claim under the DSM of the RTA or under- the WTO's DSM. In many RTAs, these choices of forum provisions go on to require that once a dispute has been initiated in a given forum, the same dispute cannot be initiated in the other forum.
12 DSM in RTAs-WTO Dispute Settlement Understanding's Article 23 Versus WTO Member Rights Under GATT Article XXIV The existence and nature of the dispute settlement provisions in many RTAs may raise questions about their consistency with the WTO-particularly Article 23 of the WTO's dispute settlement provisions. Article 23 provides that: "When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding." Some scholars, for example, Debra Steger( previously Director of the Appellate Body Secretariat at the WTO), have argued that Article 23 should be read to mean that the DSU has "not only compulsory jurisdiction over matters arising under the covered agreements, [but that] it also [has] exclusive jurisdiction over such matters."
13 DSM in RTAs-WTO Dispute Settlement Understanding's Article 23 Versus WTO Member Rights Under GATT Article XXIV These scholars claim that Article 23 requires that if a WTO member seeks redress for violations of obligations under the covered agreements, it must use DSU procedures. Consequently, once a request for a panel is made, the panel is automatically established and the rulings of that panel or of the Appellate Body are legally binding on the parties. If Article 23 does provide compulsory and exclusive jurisdiction to resolve disputes involving the WTO covered agreements, then, does it follow that RTAs with substantive provisions that are similar to the WTO but which have the effect of requiring resolution of a dispute by the RTA's dispute settlement process-either by compulsion or by being the first chosen exclusive forum-deprive parties of the right of access to the WTO's dispute settlement process? The flip-side of this issue is whether the WTO should be concerned by RTA members who initiate WTO dispute settlement proceedings in possible violation of their RTA obligations. To date, there has been little clarification of the exact legal relationship between the RTA dispute settlement systems and the DSU. Article XXIV of the GATT clearly acknowledges the existence of RTAs within the GATT/ WTO system. As such, WTO members are allowed to use RTA dispute settlement mechanisms to settle disputes under WTO-compatible RTAs.
14 DSM in RTAs-WTO Dispute Settlement Understanding's Article 23 Versus WTO Member Rights Under GATT Article XXIV The growing overlap in the substantive obligations and multiple dispute settlement forums raise many questions about the nature of the legal relationship between these international agreements. Because Article 23 of the DSU provides that WTO violations can be resolved through the WTO's DSM, it is not clear that a WTO panel can decline jurisdiction because an RTA is a more convenient forum, has more specific rules, is already considering a case on the same claim, or has already adjudicated the matter. This raises important legal principles such as: Res judicata, Estoppel, Comity Les alibi pendens Lex specialis and lex posteriori Forum non convenience
15 DSM in RTAs- the Brazilian tyres dispute The issues arising from an overlap in jurisdictions can be seen from at least two dispute cases: in the Brazilian tyres dispute. Brazil imposed an import ban on retreaded tyres as part of its efforts to reduce the volume of tire waste and the "risks to human, animal, and plant life and health" associated with waste tires. Uruguay challenged this import ban in the MERCUSOR arbitral proceedings on the basis that Brazil's import ban was against its obligations in MERCUSOR.
16 DSM in RTAs- the Brazilian tyres dispute(2) The MERCOSUR arbitral tribunal found that Brazil's import ban was incompatible with MERCOSUR regulations. Following this, Brazil enacted new provisions that exempted from the import ban certain retreaded tires (referred to as remolded tires) originating in MERCOSUR countries. The EU filed a dispute against Brazil at the WTO alleging that it had violated GATT Art XI (prohibition on the use of quantitative restrictions- QRs) and GATT Article XX. Brazil acknowledged that it had violated GATT Art XI but not GATT Art XX.
17 DSM in RTAs- the Brazilian tyres dispute(3) The WTO Panel ruled in Brazil's favour. However, this decision was overturned by the Appellate Body, on the grounds that while the import ban could provisionally be justified under GATT Art XX(b), the exemption resulted in the application of the import ban in a manner that constituted arbitrary or unjustifiable discrimination. The Appellate Body continued to address this issue of potential conflicts between the WTO and RTAs by adding the following footnote:
18 DSM in RTAs- the Brazilian tyres dispute(4) "In addition, we note that Article XXIV:8(a) of the GATT 1994 exempts, where necessary, measures permitted under Article XX from the obligation to eliminate "duties and other restrictive regulations of commerce" with respect to 'substantially all the trade' within a customs union. Therefore, if we assume, for the sake of argument, that MERCOSUR is consistent with Article XXIV and that the Import Ban meets the requirements of Article XX, this measure, where necessary, could be exempted by virtue of Article XXIV:8(a) from the obligation to eliminate other restrictive regulations of commerce within a customs union."
19 DSM in RTAs- the Brazilian tyres dispute(5) Simply put, the Appellate Body was alluding to the fact that the MERCUSOR regulations that forbid the use of QR measures within the MERCUSOR was contrary to the provisions of GATT Art XXIV(8) which provided that such a measure could be availed of even within the MECUSOR, if the said measure was justified under GATT Art XX, asssuming that the MERCUSOR was a WTO compliant RTA.
20 DSM in RTAs- the Argentina- Definitive Anti-Dumping Duties on poultry from Brazilian dispute The panel in Argentina-Definitive Anti-Dumping Duties on Poultry from Brazil stated that panels are not bound to follow the rulings of RTA panel proceedings, even if the proceedings involve the same measures. Panel Report, (Apr. 22, 2003). There, a MERCOSUR panel had ruled in Argentina's favor. In the subsequent WTO case brought by Brazil, Argentina claimed that the panel could not disregard the precedents set forth in the MERCOSUR proceedings.
21 DSM in RTAs- the Argentina- Definitive Anti Dumping Duties on poultry from Brazilian dispute(2) The panel rejected those claims stating: [T]here is no basis in Article 3.2 of the DSU, or any other provision, to suggest that we are bound to rule in a particular way... [W]e see no reason at all why we should be bound by the rulings of non-wto dispute settlement bodies.
22 Characteristics of ASEAN's DSM The ASEAN DSM for adjudication of trade disputes which was strengthened as an institutional mechanism in 2003 very much mirrors the WTO's DSM in terms of process in the WTO's DSU. It also has an appeals procedure through its own Appellate Body. Any Member can seek recourse to any fora before it has made a request for the establishment of a panel to the ASEAN Senior Officials Meeting- which assumes the role as the DSB in the WTO. Alternative Dispute Resolution( ADR) such as arbitration is also encouraged. Also includes compensation and suspension of concession. But, not financial compensation.
23 Characteristics of the DSM in the proposed TPPA The DSM in the TPPA also closely mirrors that of the WTO's DSM in terms of process in the WTO's DSU. Choice of forum: the TPPA allows any member to choose the forum when a subject matter falls in parallel in both the TPPA and any other international agreement, such as the WTO. Like in the ASEAN DSM, once a complaining Party has requested the establishment of, or referred a matter to, a panel or other panel under an agreement under the TPPA, the forum selected shall be used to the exclusion of other fora.
24 Characteristics of the DSM in the proposed TPPA(2) Also includes compensation and the suspension of benefits; and the payment of a monetary assessment, although it stipulates that they shall all be temporary measures. None of these measures are preferred to full implementation through elimination of the non-conformity or the nullification or impairment. Compensation, and suspension of benefits and the payment of a monetary assessment shall only be applied until such time as the responding Party has eliminated the non-conformity or the nullification or impairment, or a mutually satisfactory solution is reached.
25 Characteristics of the DSM in the proposed TPPA(3) The Section on Domestic Proceedings and Private Commercial Dispute Settlement requires that No Party may provide for a right of action under its domestic law against any other Party on the ground that a measure of the other Party is inconsistent with its obligations under this Agreement, or that the other Party has otherwise failed to carry out its obligations under this Agreement. On ADR, the TPPA encourages the use of ADR methods between private parties in the free trade area.
26 Conclusions The design and structure of DSMs available in RTAs and at the WTO in many instances do not differ substantially in terms of process although there are requirements for greater transparency and also financial compensation for non compliance in some RTAs. The nature of the legal relationship between the dispute settlement procedures in various RTAs and the WTO's DSU needs to be clarified. This arises from the growing overlap in the substantive obligations and multiple dispute settlement forums and the possibility of forum shopping. Bilateral RTAs do not have their own DSMs but rely on ad hoc dispute settlement mechanisms or on the WTO's DSM.
27 References WTO Staff Working Paper ERSD TPPA (version subject to legal review) Chapter 28 Jennifer Hillmann Conflicts between Dispute Settlement Mechanisms in Regional Trade Agreements and the WTO - What Should WTO Do, Cornell International Law Journal, Issue 2, Spring Jaime Granados, Inter American Development Bank, Washington.
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