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  • Subject area(s): International Relations
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World Trade Organization

The World Trade Organization (WTO) is the international organization which deals with the rules of international trade and the conduct of trade in the international forum. The Organization enables in smooth and effective mechanism of the trade around the world. The WTO was established on January 1, 1995, created by the Uruguay round negotiations which was held during 1986 to 1994. The WTO replaced the General Agreement on Trade and Tariffs (GATT) which commenced in 1948. There are a total of 160 members in the WTO which represents 98% of the world trade. The headquarters of the WTO is located in Geneva, Switzerland.

Dispute Settlement Body

The Dispute Settlement Body is one of the principle organs of the World Trade Organization. Resolving trade disputes is one of the core activities of the WTO. A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO. The WTO has one of the most active international dispute settlement mechanisms in the world. Since 1995, over 500 disputes have been brought to the WTO and over 350 rulings have been issued.

Appellate Body

The Appellate Body has been established in 1995 under Article 17 of the Understanding on Rules and Procedures governing the Settlement of Disputes. It is a standing body of seven persons that hears appeals from reports issued by panels in disputes brought by WTO members. The Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel, and Appellate Body Reports, once adopted by the Dispute Settlement Body, must be accepted by the parties to the dispute. The Appellate Body has its seat in Geneva, Switzerland.

India – Member of World Trade Organization.

India played an important part in establishment of GATT and then in the establishment of the WTO. India became a member of the World Trade Organization since 1 January 1995 and a member of GATT since 8 July 1948. India is in favor of the governance of international trade which is based on international rules and regulations. It is evident to state that India strongly believes that trade lead to prosperity and the trade based on rules and regulations will lead to good predictability. It further believes that trade will not only benefit its economy but it will also benefit all the members of the WTO.


Dispute settlement is the central pillar of the multilateral trading system, and the WTO’s unique contribution to the stability of the global economy. Without a means of settling disputes, the rules-based system would be less effective because the rules could not be enforced.

Under the 1947 General Agreement on Tariffs and Trade, the early cases were decided by rulings of the Chairman of the GATT Council and later were referred to working partied composed of representatives from all interested member who adopted their reports by consensus decisions. They wrote independent reports with recommendations and rulings for resolving the dispute, and referred them to the GATT Council for approval, whereupon they became legally binding. In particular, a GATT panel report could be blocked by any GATT party or any GATT council member, including the losing party in the dispute. In short, a procedure for settling disputes existed under the old GATT, but it had no fixed timetables, rulings were easier to block, and many cases dragged on for a long term inconclusively. The GATT dispute settlement process was characterized by a greater reliance on diplomacy as opposed to the WTO’s more legalistic nature and greater reliance on clarifying the law that member states should honor. The ineffective approach of GATT in resolving the disputes between the nations led to the Uruguay round whereby the main focus was to establish a comprehensive and an effective dispute resolution process.

The new dispute resolution procedure adopted in the Uruguay round is incorporated in the Understanding on Rules and Procedures Governing Settlement of disputes. The Uruguay Round agreement also made it impossible for the country losing a case to block the adoption of the ruling. The members of the World Trade Organization agreed on establishing the dispute settlement rules and procedure. Article 1 of the Understanding on Rules and Procedures governing the Settlement of Disputes provides for coverage and application of the rules. It states that the rules and procedures of the Understanding shall apply to disputes brought pursuant to the consultation and dispute settlement provisions of the agreement listed in Appendix 1 (which is referred to as “covered agreements”). The rules and procedures shall also apply to consultations and the settlement of disputes between Members concerning their rights and obligations under the provisions of the Agreement Establishing the World Trade Organization (which is referred to as WTO Agreement).

Procedure followed in dispute resolution.
The World Trading Organization’s procedure of settling disputes underscores the rule of law, and it makes the trading system more secure and predictable. The system is based on clearly-defined rules, with timetables for completing a case. First, rulings are made by a panel and endorsed or rejected by the World Trade Organization’s full membership. Appeals based on points of law are possible.

The disputes between the member nations usually arises when a member nation fail to follow the principles laid down by the Organization or when the member nation fails to adhere to the promise made by the said member nation. There arises a dispute between the particular member nation and the nations which are affected by the steps taken by the member nations. A dispute may also arise when one country adopts a trade policy measure or takes some action that one or more fellow – WTO members considers to be breaking the WTO agreements, or to be a failure to live up to the obligations which the member nations have agreed to. A third group of countries can declare that they have an interest in the case and enjoy some rights.

The WTO member files a complaint for initiation of dispute resolution with the Dispute Settlement Body and requests consultations with the country that has taken the action that is deemed contrary to WTO obligations. The Dispute Settlement Body is committed to facilitating these consultations with a view toward an amicable resolution of the dispute. The consultative process may resolve the dispute, although in many cases it does not. For those instances where the parties cannot agree on a resolution in 60 days, then the complainant can request appointment of a panel.

The Dispute Settlement Body then proposes a panel from the roster of approved panelists that is maintained for each area of WTO jurisdiction. Normally, the panel will consist of three experts who are from countries other than those involved in the dispute and may include experts who are not on the roster. The parties attempt to agree on a slate of panelist; however, if the parties cannot agree, The Secretariat of the World Trade Organization selects the panelists. This places a significant degree of discretion with the Secretariat. Panels operate according to time limits, which usually result in a decision about a year after the complaint is lodged.

The following chart provides a clear view of the time table as agreed by the member states in the Uruguay agreement.
60 days Consultations, mediations, etc.
45 days Panel set up and panelists appointed
6 months Final panel report to parties
3 weeks Final report to WTO members
60 days Dispute Settlement Body adopts report (if no appeal)
Total = 1 year In case of no appeal
60 – 90 days Appeals report
30 days Dispute Settlement Body adopts appeals report
Total = 1 year and 3 months In case of appeal

The above chart can be briefly explained as under:
• First Stage: Consultation: Before taking any other actions, the countries in dispute have to talk to each other to see if they can settle their differences by themselves within 60 days from the date of filing of the compliant. If that fails, they can also ask the World Trade Organization Director General to mediate or try to help in any other way.
• Second Stage: Panel: If consultations fail, the complaining country can ask for a panel to be appointed. This process may take up to 45 days. The country against whom the complaint has been lodged can block the creation of a panel once, but when the Dispute Settlement Body meets for a second time, the appointment can no longer be blocked.
The panel shall hear all the countries involved in the dispute and shall conclude the proceedings within 6 months. The panel’s report can only be rejected by consensus in the Dispute Settlement Body. However, it is difficult to overturn the report submitted by the panel as the conclusion is drawn by the panel based on the arguments advanced by the parties to the disputes.

Once the panel concludes the arguments and comes to a conclusion, the report shall be sent to the parties. The report shall then be circulated to all the World Trade Organization members within three weeks. If the panel decides that the disputed trade measure does break a WTO agreement or an obligation, it recommends that the measure be made to conform with WTO rules. The panel may suggest how it could be done. The report submitted by the panel shall be adopted by the Dispute Settlement Body within 60 days unless a consensus rejects it.

The Appellate Body is a permanent body of seven members entrusted with the task of reviewing the legal aspects of the reports issued by panels. The Appellate Body is thus the second and final stage in the adjudicatory part of the dispute settlement system. The Appellate Body did not exist in the old dispute settlement system under GATT 1947. It was decided by the member nations in the Uruguay round of Multilateral Trade Negotiations in respect of the Appellate Body to hear the appeals from the Dispute Settlement Body.

If a party files an appeal against a panel report, the Appellate Body reviews the challenged legal issues and may uphold, reverse or modify the panel’s findings. The Appellate Body, while considering the appeal filed by a party, looks into the legal proposition involved in the matter and shall provide its decision after hearing all the parties concerned to the dispute.

Composition and structure of Appellate Body
The Dispute Settlement Body established the Appellate Body in 1995, after which the seven first Appellate Body members were appointed. The Dispute Settlement Body appoints members by consensus, for a four-year term and can reappoint a person once. An Appellate Body member can, therefore, serve a maximum of eight years. On average, every two years a part of the Appellate Body membership changes.

Appellate Body members must be persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally, and they must not be affiliated with any government. Most Appellate Body members have so far been university professors, practicing lawyers, past government officials or senior judges. The seven Appellate Body members must be broadly representative of the membership of the WTO, although they do not act as representatives of their own countries but rather they represent the WTO membership as a whole.

Appellate Body Secretariat
The Appellate Body Secretariat provides legal assistance and administrative support to the Appellate Body. To ensure the independence of the Appellate Body, this Secretariat is only linked to the World Trade Organization Secretariat administratively, but is otherwise separate. The Appellate Body Secretariat is housed together with the World Trade Organization Secretariat at the headquarters of the World Trade Organization in Geneva, where the panels and the Appellate Body hold their meetings.

Appellate Procedures
Appeals are conducted according to the procedures established under the Understanding on Rules and Procedures Governing the Settlement of Disputes and the Working Procedures for Appellate Review. The Working Procedures are drawn up by the Appellate Body in consultation with the Director – General of the WTO and the Chairman of the Dispute Settlement Body.

The Appellate stage may follow the issuance of a report by a panel established pursuant to the Understanding entered by the member nations. Panel reports must be adopted by the Dispute Settlement Body within 60 days of their circulation to the members of the World Trade Organization, unless a party decides to appeal. Parties to a dispute may appeal a panel report at any time before the panel report is adopted by the Dispute Settlement Body. Third parties are not entitled to appeal a panel report.

An Appeal is commenced upon written notification to the Dispute Settlement Body and the simultaneous filing of a notice of Appeal with the Appellate Body Secretariat. A party that files a notice of Appeal is known as the “appellant”. On the same day the Notice of Appeal is filed, the appellant must also file a written submission under Rule 21 (1) of the Working Procedure. A party to the dispute that wishes to respond to the allegations raised by the appellant may file its own written submission under Rule 22 of the Working Procedure, within 18 days of the date on which the Notice of Appeal and the appellant’s submission were filed. A party that files a written submission is known as an “appellee”. There might be disputes wherein multiple appeals can be involved in a dispute. A party to the dispute other than the original appellant may also appeal on the same grounds or on other alleged errors by filing a Notice of Other Appeal and a written submission within 5 days of the filing of the Notice of Appeal. This party is known as “other appellant”. Parties wishing to respond to the allegations raised by the “other appellant” may file a written submission within 18 days of the filing of the Notice of Appeal. The role of the third parties is also recognized by Rule 24 of the Working Procedure whereby the third parties are allowed to submit written submission within 21 days of the date of filing of the Notice of Appeal. The Third Parties could be allowed to attend the oral hearing at the discretion of the Appellate Body Division (comprising three Appellate Body members) hearing the appeal.

An oral hearing is held for each appeal. At the oral hearing, appellants, other appellants, appellees and third participants are given an opportunity to present oral arguments and to respond to questions put to them by the Appellate Body Division hearing the appeal. The hearing generally takes place within 30 to 45 days of the filing of the Notice of Appeal. Proceedings before the Appellate Body are confidential. Only the members of the World Trade Organization who are appellants, other appellants, appellees or third participants are entitled to attend oral hearings. The oral hearings are opened to the public by the Appellate Body, at the request of the parties.

After the oral hearing and before finalizing the Appellate Body report, the Appellate Body division hearing the appeal exchanges views with the other four Appellate Body members. The Appellate Body report is circulated to the members of World Trade Organization in the three official languages of the WTO within 90 days of the date when the Notice of Appeal was filed, and it becomes public immediately upon circulation to Members. Within 30 days of the circulation of an Appellate Body report, the report, together with the panel report, as upheld, modified or reversed, will be put on the agenda of the Dispute Settlement Body for adoption. The Dispute Settlement Body will adopt the reports, unless the DSB decides by consensus not to adopt them. It is notable to state that DSB has accepted all the appellate body report and there is no instance where the appellate report has not be adopted by the Dispute Settlement Body. An adopted Appellate Body report, together with the adopted panel report, must be unconditionally accepted by the parties to the dispute.

When the World Trade Organization came into operation, India was just emerging from a largely closed and protectionist economy. Before the establishment of the Dispute Settlement System, India could hardly be called a major player in international trade disputes. Prior to the 1980s, India rarely used the GATT dispute settlement mechanism. Indian Government officials could have taken a backseat in the emerging WTO dispute settlement system fearing that India might become a target for disputes against its protectionist regime were it so bold as to initiate disputes as a complaining party. But India chose to come out of the shadows, able and willing to fully engage as both a complaining and defending member. India’s absence from the international trade scene changed substantially upon the creation of the Dispute Settlement Body in the year 1995 at the Uruguay round of agreement between the member nations. In the first five years of the WTO dispute settlement system – between 1995 and 2000 – India could be seen as one of the most active members in the dispute settlement system. Many of the early disputes in which India was actively involved became landmark WTO decisions establishing important precedents. As of January 2019, India has acted as a complainant in 24 cases, as a respondent in 25 cases and as a third party in 150 cases . India’s complaints typically involve trade goods such as textiles and clothing and antidumping claims. When India is a respondent, the complaints usually involve quantitative restrictions, the agreement on Trade Related Aspects of Intellectual Property Rights, anti-dumping claims and tariffs and other trade restrictions.

India’s role in the dispute settlement mechanism began in the DSM’s birth year itself when India requested consultations with Poland regarding Poland’s preferential tariff treatment of automobile from the EC. This dispute was amicable settled by both parties which was notified on 16th of July, 1996 and did not subsequently proceed to the panel stage.

Mr. Abhijith Das and Jayanth Raguram opines that given that the Dispute Settlement Understanding is not an exhaustive code of procedural and substantive rules on WTO dispute settlement, most of the concomitant gaps on these aspects have often had to be bridged by panel and Appellate Body jurisprudence. In this context, it would be important to note that many disputes in which India has either been a complainant or a respondent have generated new jurisprudence on various and critical aspects of WTO dispute settlement. In some of these disputes, such as EC-GSP and Turkey-Textiles, jurisprudence has been developed on multiple aspects whereas in other disputes such as US-Shrimp they have focused on a sole but crucial aspect. These disputes are of such significant status that no understanding of WTO dispute settlement law and practice can be complete without appreciating the key jurisprudence developed in these particular disputes.

It is relevant to provide a brief of some of the cases wherein India has played an important role for the development of World Trade Organization Jurisprudence.
a) US – Shrimp case
The countries, namely, India, Malaysia, Pakistan and Thailand lodged a complaint against United States for banning of importation of shrimp and shrimp products from the countries who lodged the complaint which was imposed by the US under Section 609 of US Public Law 101-162 stating that the ban was in violation of Article I, XI and XIII of the General Agreement on Trade and Tariff, 1994. The Dispute Settlement Body established a panel and the panel after concluding the hearings of all the parties, including the third parties, issued a report which was circulated to the members. The panel found that the import ban in shrimp and shrimp products as applied by the United States is inconsistent with Article XI:1 of the GATT 1994, and cannot be justified under Article XX of the GATT 1994.

The United States notified its intention to appeal certain issues of law and legal interpretations developed by the panel. The Appellate Body reversed the panel’s finding that the US measure at issue is not within the scope of measures permitted under the chapeau of Article XX of the GATT 1994, but concluded that the US measure, while qualifying for provisional justification under Article XX(g), fails to meet the requirement of the chapeau of Article XX. The Dispute Settlement Body adopted the Appellate Body report and the Panel report, as modified by the Appellate Body.

The case became significant because it was the first time the WTO recognized environmental protection as one of the objectives of international trading regulation. This case was probably not good for India specifically, but India’s active participation in the dispute shows that India was committed to follow the principles established by the World Trade Organization.

b) US – Rules of Origin case
India requested consultations with the United States in respect of its rules of origin applicable to imports of textiles and apparel products as set out in Section 334 of the Uruguay Round of Agreement, Section 405 of the Trade and Development Act of 2000 and customs regulations implementing these provisions.

India argued that, prior to the abovementioned Section 334, the rule of origin applicable to textiles and apparel products was the “substantial transformation” rule. India considered that Section 334 changed the system by identifying specific processing operations which world confer origin to the various types of textiles and apparel products. In India’s view, these changes appear to have been made to protect the United States textiles and clothing industry from import competition. India indicated that the changes introduced by Section 334 had already been challenged by the European Communities on the grounds that they were incompatible with the United States’ obligations under the Agreement on Rules of Origin and other WTO Agreements.
Initially the Dispute Settlement Body deferred the establishment of panel. Further to a second request by India, the DSB established a panel. The panel requested for extension of time since the dispute involved complex matter and that it needed more than 6 months – time period. The panel concluded hearing of the dispute and circulated the report to the members. The panel found that India failed to establish that the United States had violated the GATT agreement.

It is said that this is the only case wherein the interpretation of the World trade Organization on Rules of Origin was sought. It is further said that even though India lost the case, India’s “original arguments” helped shape the interpretation of the WTO Rules of Origin.

c) EC – Bed Linen case
In this case, India requested consultations with the EC in respect of a Council Regulation on imports of cotton-type bed-linen from India. India asserted that the EC initiated anti-dumping proceedings against imports of cotton-type bed-linen from India by publishing a notice of initiation. Provisional anti-dumping duties were imposed by EC Council. This was followed by the imposition of definitive duties. India contended that the determination of standing, the initiation, the determination of dumping and injury as well as the explanations of the EC authorities’ findings are inconsistent with the WTO law and such other contentions.

The Dispute Settlement Body established a panel and concluded that the EC did not act inconsistently with some of its obligations under the anti-dumping agreement. The role of the Dispute Settlement Body in this case was crucial in establishing that the WTO could uphold the rights of poorer nations in the context of trade defense. In this case, the Dispute Settlement Body considered the legal interpretation of certain key principles under the anti-dumping agreement, including the calculation of the “constructed value” based on data from “other producers or exporters”, and the consideration of sales at a loss when calculating administrative, selling and general costs under the anti-dumping agreement. It is said that the most significant contribution of the proceeding concerned the prohibition of zeroing, more specifically ruling illegal the pernicious practice of resetting negative dumping margins as zeroes under the anti-dumping agreement.

d) India – Agricultural Products case
The United States requested consultations with India with respect to the prohibitions imposed by India on the importation of various agricultural products from the United States purportedly because of concerns related to Avian Influenza. The United States claims that the measures appear to be inconsistent with the Sanitary and Phytosanitary measures (SPS) and also Articles I and XI of the GATT 1994. The United States also claims that the measures appear to nullify or impair the benefits accruing to the United States directly or indirectly under the cited agreements. The panel found that the India’s Avian Influenza was in violation of several articles of SPS agreement.

The India – Agricultural Products case is the first challenge against a sanitary and phytosanitary measure imposed by a developing country. The challenge came from the United States, against certain import prohibitions imposed by India on countries reporting Avian Influenza. India – Agricultural Products has shed new jurisprudence on several key aspects of the SPS Agreement. The most important contribution is on the relationship between various Articles of the SPS agreement, which specify the obligations on regionalization and compartmentalization.

India has played a major part in the Dispute Settlement Mechanism of the World Trade Organization. India, being a developing country, has filed many cases with the Dispute Settlement Body and has asked for consultations with the member nations wherever there has been a violation of the agreement of the WTO or any other trade related agreements. India’s interest in protecting the interests of the developing nations can be seen from its leadership of coalitions of developing nations which is a prime example of India’s increasingly expansionist view of how best to operate at the WTO.

The creation of the Dispute Settlement System under the World Trade Organization created under the Uruguay round of agreement has helped India and other developing countries to effectively carry on International Trade with other countries. The Dispute Settlement Body under the Agreement of 1995 has changed the perspective of the countries which was formed during the dispute settlement mechanism under GATT. The effective mechanism of the dispute settlement body under the World Trade Organization has encouraged countries to trade and the trade activities has steadily increased after the Uruguay Agreement, 1995. As India and the World Trade Organization continue to develop, it can be expected that India will remain a major power player, along with other countries, helping the very foundations of the World Trade Organization.

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