WTO Dispute Settlement Mechanism(1)

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Over decades of years past, many countries have come to recognize the crucial role that dispute settlement mechanism plays for any treaty system. This is particularly the case for a treaty system designed to address the myriad of complex economic questions of international relations today and to facilitate the cooperation among nations that is essential to the peaceful and welfare-enhancing role of those relations. Dispute settlement procedure assists in making rules effective, thereby adding an essential measure of predictability and effectiveness for the operation of a rule-oriented system in the otherwise relatively weak realm of international norms.
The Uruguay Round result, including the Agreement establishing the World Trade Organization (‘the WTO Agreement’), is one important effort to face up to some of the problems associated with interdependent international economic activity. Central and vital to the WTO institutional structure is the dispute settlement procedure derived from decades of experiment and practice in the GATT, but now elaborately set forth, as part of the WTO Agreement, in the new treaty text of the Dispute Settlement Understanding (‘the DSU’).
The entry into force of the WTO Agreement on 1 January 1995, including the new DSU, creates an improved system of rules and procedures for settling international trade disputes. According to Art. II:2 of the WTO Agreement, the DSU in Annex 2 to it is an “integral part of this Agreement, binding on all Members”. Art. 23 of the DSU under the heading “Strengthening of the Multilateral

System” emphasizes the legal primacy and exclusive character of the WTO dispute settlement system vis-à-vis alternative dispute settlement systems outside the WTO. Art. 23.1 requires, in part: “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.”
The new WTO dispute settlement system is an integrated system with much broader jurisdiction and less scope for “rule shopping” or so-called forum shopping. While the traditional panel system of settling disputes within the GATT remains the central feature of this system, the new mechanism indicates a distinctive trend towards “judicialization” within a change from power-oriented diplomatic methods of dispute settlement to rule-oriented legal ones. Henceforth, the emphasis of the DSU is upon “rule-orientated” rather than “power-orientated” interpretation and application of the WTO dispute settlement procedures, with the move towards a more judicial form of process that allows for review of decisions through an Appellate Body and the enforcement of panel and Appellate Body decisions. The DSU is in turn a key element of the legalization of the world trade system agreed in the Uruguay Round through the establishment of the WTO and the reinforcement of substantial rules of conduct.
Besides “judicializing” or codifying former GATT practice, the DSU has an institutional dimension. The Agreement establishes a Dispute Settlement Body (‘DSB’) to administer the rules and procedures for panel proceedings, for appeal against panel decisions to the standing Appellate Body and for adopting panel and Appellate Body reports. Art. 2 of the DSU provides

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