Justice for All in the Dispute Settlement System of the World Trade Organization?

• Publication year: 2011
• Citation: Vol. 39 No. 3

Justice for All in the Dispute Settlement System of the World Trade Organization?

Kim Van der Borght^*

Table of Contents

I. Introduction...............................................................................788

II. Developing Countries in the Dispute Settlement System...........................................................................................788

III. Developing Country Proposals to Reform the Dispute Settlement System......................................................792

IV. The Primitive Remedies of WTO Dispute Settlement Are Only for the Strong Members.........................................796

V. Conclusion...................................................................................805

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I. Introduction

The World Trade Organization (WTO) was established in 1995 with the purpose of extending trade disciplines to services and intellectual property rights. To ensure the efficacy of the realization of this objective, it was necessary to ensure that the organization has a broad membership. In the General Agreement on Tariffs and Trade (GATT) period (1947-1995), the membership was small and consisted mostly of Western developed countries, a "gentlemen's club" of trading nations. The new WTO Agreements are important to ensure trading opportunities for the old club members in developing countries. Possibly even more important in ensuring a wide membership for the WTO is guaranteeing the enforcement of intellectual property rights on newly industrialised or industrialising countries mostly in Asia.

Attracting countries into the WTO was done by forecasting not only trade opportunities but also by promising a fairer trading system, ensuring the system would promote sustainable development and that positive efforts would be made for developing countries.

The dispute settlement system is a crucial element in the realization of the hopes of the WTO members and the realization of the organization's objective. This Article will review the failure of the system to live up to the high hopes that were created at the inauguration of the system as well as the proposed improvements.

II. Developing Countries in the Dispute Settlement System

The position of developing countries in the WTO dispute settlement system is ambivalent.¹ Their position is procedurally better than in the GATT period because the WTO is a rule-based system and not a power-based system.² It is generally accepted that a rule-based system with a quasi-judicial dispute settlement system serves the interests of developing

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countries, least-developed countries (LDCs) and small economies better.³ Renato Ruggiero, first Director-General of the WTO, declared that the dispute settlement system is "an important guarantee of fair trade for middle-sized exporting nations."⁴

But developing countries have been among the most vocal critics of the dispute settlement system. Their confidence was already shattered by what has been described as the betrayal of the Uruguay Round and the disregard of their interests in the Sutherland report.⁵ As developing countries face an increasingly independent and activist dispute settlement system enforcing a substantive body of rules that they regard as biased against them, most developing countries have become more fearful of the system and its consequences.⁶ The African Group sharply notes that "in their interpretation and application of the provisions, the panels and the Appellate Body have in several instances exceeded their mandate and fundamentally prejudiced the interests and rights of developing-country Members as enshrined in the WTO Agreement."⁷ Fasan writes that developing countries have become hostage to the quasi-judicial enforcement of skewed rules.⁸

An impartial dispute settlement system based on legal rules may be more advantageous to developing countries but it would be naive to assert that the WTO is based on rules only and not on power.⁹ Empirical analysis suggests that the system still reflects power-based relationships.¹⁰ The Quad Countries (EU, U.S., Canada, and Japan) gain more out of the dispute settlement system because they can afford to employ a full-time team to

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monitor the reports, to safeguards their rights, and to enforce their entitlements. It is commentators from those countries that are most hostile to strengthening procedural advantages for developing countries and LDCs.¹¹ The current procedural set-up ostensibly based on sovereign equality hides a weighted voting system that entrenches real power in the hands of the few.¹² This "organised hypocrisy in the procedural context" serves them well and is safeguarded by their resistance to meaningful change.¹³ Only a minority of developing countries can benefit from the system. Countries like Argentina, Brazil, Chile, China, India, Mexico, South-Africa, and Thailand are well placed to use the system to their advantage. These countries are atypical developing countries and are better classified as emerging economies.¹⁴

Most developing countries and all LDCs can be only be disappointed in the system despite it being heralded as one of the great success stories.¹⁵ The African Group, of which thirty-four members are LDCs, formulates it succinctly: "Experience has shown that the [dispute settlement system] has not satisfactorily and clearly aimed in its operation to contribute towards the tangible attainment of the development objectives of the WTO Agreement."¹⁶ Who could disagree with former Director-General Supachai Panitchpakdi's understated observation that "[for] all its virtues, . . . [the] system is not perfect"?¹⁷ Many developing countries, and especially LDCs, cannot afford to mount a serious defense if they are facing a claim; let alone identify and prepare a case.¹⁸ Only one case has ever been brought by an LDC and not a single panellist from an LDC has been appointed.¹⁹ This

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unbalanced representation in panels and the Appellate Body was noted with concern by the African Group that stressed that a "balanced geographical representation will assist in promoting a balanced [dispute settlement] that reflects the various backgrounds and inherent concerns of the entire WTO membership."²⁰

A few developing countries have used the opportunities offered by intervening in dispute settlement procedures.²¹ India and China, for example, actively use the third party intervention to learn the process and train their diplomats to be better prepared. Any developing country that has the human capacity to be so involved, even if only to observe the proceedings as a passive observer without filing written submissions, would be well advised to make use of this learning opportunity.²² But again, this opportunity reveals an important difference in the level of engagement of developing countries and the main players in the system. The EU and the U.S., as a matter of strategy, declare a third party interest in almost every Appellate Body Proceeding that they are not involved in as a disputant.²³ The Appellate Body actively encourages such third party participation and takes care to glean their views and opinions.²⁴ It is, for the small number of countries that can afford to be actively involved in every case, a valuable opportunity to give direction to the reasoning of the Appellate Body and by extension to the direction of WTO law.

Access to justice is thus a genuine issue for many WTO members to such an extent that it brings the legitimacy of the system in question if it not forcefully addressed. Hence, the system demands structural and substantive reforms to address this if the system wants to remain credible for all WTO members.²⁵ Indeed, the African Group states:

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It should be clearly affirmed, that the DS [dispute settlement] is not just about expedition or speed, it is also about real justice to all Members; and that the DS must be part of the mechanisms for attaining the development objectives of the WTO as an institution. Its success should be equally determined on the basis of the extent to which findings and recommendations fully reflect and promote the development objectives.²⁶

III. Developing Country Proposals to Reform the Dispute Settlement System

The awareness of their precarious position has led developing countries to formulate proposals that are simultaneously defensive, attempting to restrict the progressive strengthening of the system, and combative, fighting to improve their own interests in the system. These include proposals to overcome the lack of expertise and experience in the system or to address the cost of acquiring such expertise and proposals to improve the special and differential treatment provisions. Both these sets of proposals are discussed in this section. Other proposals, such as those aimed at turning back some of the developments introduced by the Appellate Body and supported by developed countries and the proposals to change the system of enforcement are discussed in the relevant sections.

The lack of experienced personnel is a recurring issue for developing countries and one that is identified time and time again as a major obstacle for developing countries in making better use of the system.²⁷ The proposals call for better training for civil servants from LDCs, financial support for legal assistance, and the establishment of a not-for-profit law firm.²⁸ Some of these have been achieved either wholly or in part. The technical assistance and training has been increased with donations from individual WTO members.

Overcoming the lack of human resources by hiring private counsel proved an issue when St. Lucia retained counsel to represent it in the Bananas Case. Despite opposition from the U.S. and the EU, the Appellate Body allowed the use of such private counsel, stressing its particular significance to allow

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full participation in dispute settlement procedures for developing countries. It was a useful step for developing countries but one...