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Wto Dispute Settlement Mechanism Compared to American Arbitration System

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This paper is a look into the World Trade Organization's method of international alternate dispute resolution as compared and contrasted to the United State's arbitrational system of alternate dispute resolution. Section I is an overview of the World Trade Organization and the Dispute Settlement Understanding which governs the dispute settlement process. Section II will explore the different stages of the World Trade Organization's dispute settlement process. Section III will compare and contrast the World Trade Organization's dispute settlement process with that of arbitrational system as backed by the Federal Arbitration Act. Finally in section IV draws the conclusion that the World Organization's alternate dispute resolution mechanism does bare similar characteristics to the arbitrational dispute resolution system.


The WTO is an organization for liberalizing trade and maintaining trade barriers. Their purpose is for trade to flow freely without any adverse side effects all across the world. The WTO also provides a forum for its government Members to negotiate trade agreements as well as settle their disputes. The institution of the WTO shifted "the governance of international trade disputes from the General Agreement on Tariffs and Trade's (GATT) fundamentally power-oriented system to one based more on rules and third-party" determination.

The Uruguay Round of multilateral trade negotiations lasted from 1986 to 1994 and resulted in the establishment of the World Trade Organization (WTO), which became effective on January 7, 1995. The WTO has replaced the GATT as an international organization, however the WTO's "dispute settlement system is built on the pre-existing GATT regime. The WTO Agreements has gone beyond the scope GATT Agreements to include the trade of goods, services, and intellectual property.

The WTO Agreements are The Agreements Establishing the WTO and are said to be the heart of the WTO. The WTO Agreements are the result of Member negotiations and provide the legal ground-rules for international commerce. The WTO derives its authority from the Agreements Establishing the WTO, which is binding on all members. The rules are actually enforced by "the members themselves under agreed procedures that they negotiated, including the possibility of sanctions." By becoming a signatory of the WTO, the government Members are agreeing to abide by the substantive obligations under the WTO agreements, including the dispute settlement rules and procedures found in Annex 2 of the Dispute Settlement Understanding (DSU).

The DSU is the primary legal means of settling international trade related disputes between Members . The goal of the DSU is to provide security and predictability to the multilateral trading system . The DSU offers a process based on clearly defined rules with timetables for completion and binding adjudication along with retaliatory measures. It normally takes about one year for a case to reach a first ruling by a panel and about fifteen months if the case is appealed. But first disputing Members must undergo consultations for at least sixty days and if that fails then either party may request the establishment of a panel, whose rulings are automatically adopted unless rejected by a consensus. Fortunately appeals on issues of law are available to either of the disputing parties.

The DSU has jurisdiction over any dispute arising under any of the WTO agreements. The DSU ensures Member rights by providing a forum where complainant and respondents may defend themselves on equal footing. It also ensures that trade conflicts are settled in accordance with the rule of law and in a timely manner. The DSU encompasses a dispute settlement mechanism (DSM), which includes an appeals process, authority to render binding decisions, and includes retaliatory measures, such as trade sanctions, for noncompliant Members. "Access to the WTO's dispute settlement procedures is an important source of benefits for governments at risk of conflict with other, more powerful partners. Similarly, Membership guarantees an opportunity to participate in multilateral trade negotiations and rule-making processes, including the opportunity for smaller and economically weaker governments to negotiate with larger governments on more equal footing than is possible in bilateral or regional frameworks"

As signatories of the WTO, the Members agree to resolve all disputes via the DSU. Unlike the GATT's dispute resolution mechanism where each agreement had a different set of signatories plus a different set of dispute settlement rules, the DSU applies to all disputes under the WTO agreement; Members are even allowed to file complaints under multiple WTO agreements in a single dispute proceeding. Article 23.2 makes it clear that no Member shall "make a determination to the effect that a violation has occurred, that benefits have been nullified or impaired or that the attainment of any objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding." Instead of taking the law into their own hands Members must use the WTO's multilateral dispute resolution system. Accordingly, Members are to abide by procedures established in the DSU and are to respect the rulings.

Only WTO Member governments can bring a claim under the DSU as parties or third parties with an interest in the case. A Member having a substantial interest in a dispute but is not a party to the dispute enjoys the right to be heard orally or in writing. Unfortunately, private individuals, private companies, and non-governmental organizations do not have the ability to initiate a WTO settlement proceeding. They can however lobby, encourage, or influence a government Member to initiate the dispute settlement proceedings.

The WTO Members can bring a claim based on any of the trade agreements arising out of any of the multilateral WTO agreements. Usually, disputes arise when one country feels that another country has adopted a trade policy or has taken some other action in violation of the WTO agreements or a country feels that his WTO benefits are being violated and "span among other measures, such as, the use of trade defense, intellectual property protection, trade-related investment measures, domestic taxes on products, product regulation,



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