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International Trade Disputes Settlement in WTO—A Brief Introduction

International Trade Disputes Settlement in WTO—A Brief Introduction

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Schmitthoff defines ‘International Trade Law’ as: "... the body of rules governing commercial relationships of private law involving different nations". The scope of this law, according to Schmitthoff is as follows: 1) international sale and purchase; 2) securities; 3) laws concerning activities regarding the conduct of international trade; 4) insurance; 5) transportation by land and rail, sea, air, and/or inland waters; 6) industrial property; and 7) commercial arbitration.

The World Trade Organization (WTO) is the only international organization that regulates international trade, highlighting it as the main institution for international trade law. The WTO functions based on agreements, which were negotiated and agreed upon by many countries and ratified by respective parliaments. The purpose of WTO agreements is to assist producers of goods and services and exporters and importers with their activities by providing public policy framework guidelines that are supportive to international trade among its member countries.

Sometimes disputes arise in international trade because of differences in interpretation or implementation of a policy among and/or between the member countries of the WTO. The Dispute Settlement Body (DSB) plays its role in resolving any dispute arising from or related to the any agreement contained in the Final Act. It has the authority to erect and approve panels to examine the dispute, issue recommendations and decisions, examine appeals, supervise the execution of decisions and recommendations, and impose punishment as enforcement measures in the event there are parties who fail to implement its decision or recommendation. The following are the steps of dispute settlement within the WTO framework:

Consultation

Consultation is the first step of dispute settlement recommended by the WTO. A consultation usually involves a third party to facilitate a smooth process. If the consultation is successful, then the policy will be voluntarily withdrawn by the party or parties.

Good Offices, Conciliation, and Mediation

Good offices typically focus on providing logistical support to assist negotiation in a productive atmosphere. Conciliation involves direct participation of an independent third party in the discussions and negotiations between the parties. In the 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. However, the parties will not be obliged to accept the mediator’s proposal. ¹
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¹ https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c8s1p2_e.htm accessed on 5 October 2018

Panel

A Panel is composed of three or, in exceptional cases, five experts selected on an ad hoc basis ². There is no permanent panel within the WTO. The main functions of a Panel are as follows:

  1. To assess a dispute objectively and evaluate whether the object in dispute (typically a member country’s public policy) is contradictory with the WTO agreements;
  2. To submit its assessment to the DSB, enabling the DSB to make decisions.

Appellate Body

If a party does not accept the recommendations issued by the Panel, they may appeal to the Appellate Body. The Appellate Body is a standing assembly consisting of seven experts. The Appellate Body can uphold, modify, or reverse the legal findings and conclusions of a Panel. The decisions of the Appellate Body, called Reports, must be accepted by the parties in the dispute once they are adopted by the DSB.

Arbitrations

The role of arbitration is only to resolve one aspect or one part of the dispute. Arbitration is not intended to settle the primary dispute. Before arbitration begins, the parties must provide notice of their agreement to resort to arbitration to all the WTO Members. Other Members may become party to an arbitration only with the agreement of the parties engaged in the arbitration. The parties to the arbitration must agree to abide by the arbitration award, which, once issued, must be provided to the DSB and the relevant Councils and Committees overseeing the agreement(s) in question (Articles 25.2 and 25.3 of the Dispute Settlement Understanding (DSU)). The provisions of Articles 21 and 22 of the DSU on remedies and on the surveillance of implementation of a decision apply to the arbitration award (Article 25.4 of the DSU) ³.
The following is the timeline of dispute settlement through DSB in the WTO:

60 days Consultation, mediation, etc.
45 days Panel erected and panelists appointed
6 months Final panel report to parties
3 weeks Final panel report to the WTO members
60 days Dispute Settlement Body adopts report (if no appeal)
Total: 1 year Without appeal
60-90 days Appeals report
30 days Dispute Settlement Body adopts appeals report
Total: 1 year 3 months With appeal

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² https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c3s3p1_e.htm accessed on 5 October 2018
³ https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c8s2p1_e.htm accessed on 5 October 2018

Indonesia has been already involved in several International Trade Disputes such as the case involving Timor as the Indonesian National Car (Mobil Nasional or Mobnas). The Soeharto government’s policy on special taxes and tariffs imposed on the National Car Project were considered discriminative and against the principle of the Most Favored Nation by some countries, especially those with stakes and interests in the Indonesian automobile industry such as Japan, the United States, and several European countries. Therefore, such countries filed claims against the Indonesian government. The WTO then decided that Indonesia did issue a discriminative policy; therefore, the WTO ordered such policy to be stopped. Indonesia accepted this decision and did not appeal to the Appellate Body.

Here at Schinder Law Firm, we provide a comprehensive across-board analysis by taking into account the various aspects relevant to your business including public policy and public international laws. Our senior advisors have advised and represented not only corporations in commercial matters but also governments in national, regional, and international fora. From developing national policy to negotiating international treaties and inter-state territorial disputes, SLF is your experienced partner in global trade and its unique intracacies.


Written by: Wisnu Tikoariaji, S.H.




International Trade Disputes Settlement in WTO—A Brief Introduction