The WTO dispute settlement system: administration, court or tertium genus?

• Author: Marchetti, Barbara

1. INTRODUCTION

It is an undeniable reality that some organizations exercise their powers beyond and over national governments. Most of these supranational bodies (the World Trade Organization (WTO), the World Bank, and the Codex Alimentarius Commission) have to comply with a universal set of public law principles. (2) Their action is supposed to be consistent with the principles of natural justice, their decisions have to be reasonable and fair, and the decision-maker has a duty to give reasons, and so on. The application of these principles constitutes one of the effects of a rule-oriented development of these international bodies, and it can be considered the outcome of the judicial process of their original international paradigm.

The growing role of the rule of law in this context is also reflected in the creation of more and more sophisticated dispute settlement bodies, which perform their adjudication powers applying procedural and substantive rules of the Western legal tradition. They make their decisions using techniques that are not so different from those used by national courts and tribunals. Looking at these features, some of these international organizations are commonly called global or international administrations. (3) However, there is no concordance on this definition yet. Namely, international mechanisms and relationships existing between the parties involved do not seem to be consistent with the supposed administrative nature of the organizations; furthermore, it is difficult for sovereign national governments to accept the idea of administration by an international organization.

This project aims at analyzing the status of the judicial process in the WTO in order to verify if it is possible to find a typical administrative law relationship between the Member States and the international organization. Specifically, I will try to single out what kind of power is exercised, its possible classification (adjudicatory function, judicial power, or something else?) and the mechanisms of the implementation of the Dispute Settlement Body (DSB) decisions.

As the WTO does not have proper executive powers, and because of the persistent prominent role of its members in the lawmaking process, my research focuses on the adjudication proceedings of the Dispute Settlement System (DSS) in order to verify if--when member states are addressed by WTO decisions--the exercise of typical administrative powers occurs. Moving from the fundamental features of the system, this project aims at answering the following questions: 1) can the decisions adopted in the DSS be considered administrative decisions; 2) do we have to consider them judicial decisions; or 3) do we have other choices beyond these alternatives?

To answer these questions, we have to address a preliminary methodological question, clarifying the concepts of "administration" and "court" in order to apply them in this context.

In the global dimension, we need to consider different contents and definitions of administration, from the civil law concept (connected to the idea of authorities invested in the protection of public interest) to the common law concept (a neutral and arbitral administration that adjudicates with formalized procedures between conflicting interests), looking for a universal definition that includes both normative and adjudicatory elements. (4)

The same has to be done with the concept of court: domestic law and international law single out different features or patterns of the idea of court, but for our goals we conventionally consider a court an independent body that applies the law on the ground of legal arguments and whose decisions produce binding effects on the disputing parties.

1. The World Trade Organization and Its Dispute Settlement System: A Brief History

   The history of the WTO begins in 1994, but the transformation of the world trade regulation occurred over the entire forty-seven year General Agreement on Tariffs and Trade (GATT) operation (from 1947 to 1994). (5) Nevertheless, the 1994 WTO Treaty was very important because it led to the institutionalization of the GATT and it established the foundation for a new organization with legal personality, the WTO. (6)

   Before this institutionalization, no administrative machinery existed; yet in 1947, GATT articles XXII and XXIII established that if a violation of an agreement occurred, the contracting parties had to mutually settle any disputes without the possibility of applying before a court or another dispute settlement body. The Interim Commission of the International Trade Organization (ITO) provided the administrative services, and the intergovernmental meetings between the contracting parties were responsible for direction and oversight. (7)

   The GATT system was like a club, in which contracting parties mutually recognized principles and rules, settling their disputes diplomatically. (8) In 1952, panels were introduced for the first time, and consequently, disputes were assigned to these impartial bodies with the exclusion of the litigant parties. The use of panel proceedings marked an important shift in the GATT dispute settlement history, even though for a long period of time the member states were reluctant to show a significant amount of confidence in this new legal mechanism.

   The introduction of panel practice constituted an effort to give WTO members more objectivity in dispute resolution and to strengthen their legal obligations. During the Tokyo Round, some proposals were made from the United States to improve the panel procedural rules and to increase the predictability of the DSS. However, most of the limits of the prior GATT system remained and the Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance, (9) adopted on November 28, 1979, did not bring about a real systemic reform.

   Nevertheless, from this moment until the Uruguay Round, the question of the nature of the dispute settlement system became a crucial issue in the debate within the WTO. Two opposite directions were emerging. On one hand, the supporters of procedural legalism wanted to strengthen the system's judicial process with more formalized procedural rules, introduce a general duty to give reasons, create modified appointment mechanisms for panellists, and so on. On the other hand, supporters of the diplomacy paradigm tried to obtain more procedural flexibility and proposed to facilitate political and diplomatic assessment of the disputes.

   With the Uruguay Round, the procedural legalism direction prevailed, and the Understanding on Rules and Procedures Governing the Settlement of Disputes improved the legal standards of the proceedings. The powerful expression of this trend was highlighted by the creation of a permanent Appellate Body in the dispute settlement system. (10) More specifically, deficiencies and faults of the panel process were corrected, rigorous terms were established for the assessment of the panel, and the entire dispute system was streamlined. Most importantly, the right to veto the establishment of a panel or the adoption of its rulings was eliminated, and the Dispute Settlement Understanding (DSU) demanded a negative consensus of all members in order to block the process. (11)

   The judicial process of the panel procedures and dispute settlement mechanisms has not been completed: it must face the continued importance of the diplomatic habits and consequent practices of the WTO players. (12)

   Notwithstanding this diplomatic ethos, the DSU created a dispute settlement system that is based on third and impartial bodies, which shifted the adjudicatory function partially away from and beyond the WTO members. (13)

2. The Dispute Settlement System Structure

   1. A Two-Stage Process of Dispute Resolution

      There are two stages in the DSS. In the first stage, the dispute is assigned to a panel; in the second stage, an appeal from the panel's decision may be made to the Appellate Body. (14)

      Nevertheless, the dispute may be settled before a panel is established, within a process of consultation created ad hoc in order to negotiate a mutual solution. Article 3(7) of the DSU gives the DSS a positive and consensual definition of the case, and states that "a solution mutually acceptable to the parties ... is clearly to be preferred." (15) The idea that negotiated solutions are preferred is reflected by the fact that an attempt at conciliation must be made before the panel process may begin. (16) Yet, in order to prevent the possibility that these consultations may delay the process coming before the panel, the DSU establishes strict deadlines for the conciliation attempt. (17)

      The failure of conciliation entitles the complaining party the right to apply for the appointment of a panel. (18) The Dispute Settlement Body (DSB) plays a crucial role in the decision-making process of both the panel and the Appellate Body. This body is nothing more than the General Council in a different guise. Beyond its panel establishing power, it has the authority to adopt and supervise the panel's decisions and recommendations, and to authorize the suspension of concessions and other obligations of the WTO. (19)

      In this way, the dispute resolution taken by the adjudicatory bodies, temporary excluded from the Members negotiation circuit and given to third and neutral judicial bodies, comes back to the decision-making power of the contracting parties. Moreover, the subordination of the panel reports to the substantial approval of the governments was real in the widespread practice of the GATT agreements, in which the necessary conditions for the adoption of the decisions were possible only with the unanimous approval by all of the states in the DSB. However, the actual order was completely changed after the Uruguay Round negotiations. A decision of the panel or the Appellate Body is adopted by the DSB unless there is a unanimous vote against its adoption. (20)

      Reversing...