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BUCHAREST UNIVERSITY OF ECONOMIC STUDIES

Faculty of International Business and Economics

International Business and Economics

GRADUATION THESIS

ScientificCoordinator :

Ph.D Lecturer Volintiru Clara

Author :

Brega Alexandra

Bucharest, 2016

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BUCHAREST UNIVERSITY OF ECONOMIC STUDIES

Faculty of International Business and Economics

International Business and Economics

FEATURES OF WORLD TRADE


ORGANISATION SYSTEM OF
DISPUTE SETTLEMENT

ScientificCoordinator :

Ph.D Lecturer Volintiru Clara

Author :

Brega Alexandra

Bucharest, 2016
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FEATURES OF WORLD TRADE

ORGANIZATION SYSTEM OF DISPUTE SETTLEMENT

Content: Page.

Chapter 1. General presentation of the World Trade Organization 5

Chapter 2. Dispute settlement system 9

2.1 Significance of the W.T.O. dispute settlement system 9

2.2 The dispute settlement understanding 9

2.3 Functions, objectives and key features of the dispute 10

settlement system

2.4 Mutually agreed solutions a preferred solution 11

2.5 Prohibition against unilateral determinations 11

2.6 Participant in the dispute settlement system 12

2.7 W.T.O bodies involved in the dispute settlement

process 13

2.8 Panels 14

2.9 Appellate Body 14

2.10 Arbitrators 14

2.11 Experts 15

2.12 Triggering legal provisions for consultation and

dispute resolution 19

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2.13 Stages in a dispute settlement case
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2.13.1 Consultation 21

2.13.2 The Panel stage 22

2.13.3 Implementation by the” losing” member 23

2.13.4 Non-implementation 24

Chapter 3. Evaluation of the W.T.O. dispute settlement syste 29

Chapter 4. Weaknesses of the dispute settlement system 26

Glossary: 27

Cases studies: 30

Case study no 1 Dispute settlement U.S.A.-Romania-measures on

minimum import prices 30

Case study no 2 U.S.A.-Venezuela and Brazil- gasoline 32

Case study no 3 U.S.A.-India, Malaysia, Pakistan, Thailand- shrimp 35

Case study no 4 U.S.A.-Mexico- tuna 37

Bibliography: 39

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FEATURES OF WORLD TRADE ORGANIZATION

SYSTEM OF DISPUTE SETTLEMENT

CHAPTER 1.

GENERAL PRESENTATION OF THE WORLD TRADE ORGANIZATION

World Trade Organization (WTO) was created as a result of negotiations between


1986-1994, known as “Uruguay Round” negotiations. Permanent establishment of this
organization is set at Geneva in Switzerland. WTO currently has 160 countries as
members.
All the members of the World Trade Organization (WTO) may participate in all
councils, committees, except Appellate Body, Dispute Settlement panels, Textiles
Monitoring Body and plurilateral committees, according to the rules and procedures
accepted by membership for dispute settlement, for neutrality in decisions.
The countries that had signed the General Agreement on Tariffs and Trade (G.A.T.T.)
by the end of 1994 when the World Trade Organization (W.T.O.) replaced G.A.T.T. as the
organization overseeing the multilateral trading system.
It is important to mention that Romania is a member of G.A.T.T. from 14 November
1971 and respectively membership in the W.T.O. from 1 January 1995.
Countries that recently joined to W.T.O. are: Albania- 8 September 2000, Oman-9
November 2000, China- 11 December 2001, Republic of Moldova- 26 July 2001, Chinese
Taipei-January 2002, Vietnam -11 January 2007, Montenegro - 29 April 2012, Tajikistan-
2 March 2013.
The W.T.O. currently has registered 24 observers who include Bosnia and
Herzegovina, Vatican (Holy See), Serbia, Belarus.

World Trade Organization can perform the following functions: administering W.T.O.
trade agreements, forum for trade negotiations, handling trade disputes, monitoring
national trade policies, technical assistance and training for developing countries and not
least cooperation with other international organizations.
During the “Uruguay Round” negotiations it has been agreed to implement a new
integrated commercial system that incorporated the Agreement on Tariff and Trade
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(G.A.T.T.) called World Trade Organization. With this occasion they agreed on new
treaties and legal instruments related to the common institutional framework applied by all
W.T.O. members.
For consistency in economic policymaking worldwide, W.T.O. collaborates with the
I.M.F and B.I.R.D. and other affiliated institutions.
It was agreed a Ministerial Conference composed of representatives of all W.T.O.
members, which is held every two years and takes decisions at the request of members. In
the interval between meeting of the Ministerial Conference functions General Council
composed of representatives of all members. General Council structure has three boards,
respectively for trade in goods, for trade services and trade related aspect of intellectual
property rights. General Council establishes rules of procedure necessary to perform its
work. The councils within General Council establish its own rules of procedure.
The Ministerial Conference establishes Committees on: balance of payments
restrictions, budget; finance and administration; trade and development, and more,
considered necessary, inform General Council about their activity regularly.
W.T.O. Director General has appointed a Ministerial Conference and a purely
Secretariat functions, meaning that W.T.O. members are not subject.
W.T.O. takes decisions by consensus. As an exception, when there is no consensus,
proceed to vote. Each W.T.O. member has one vote. Decisions of the Ministerial
Conference of the General Council will be taken by majority, except for disputes where
another procedure is established.
In what concerns the benefits of World Trade Organization are important to note
that there: the system helps promote peace; disputes are handled constructively; rules and
procedures result in making matters easier for all; freer trade cuts the costs of living; it
provides a wider range of products and qualities; trade raises incomes; trade stimulates
economic growth; the basic principles make life more efficient; governments are shielded
from lobbying and not least the system encourages good government.

The increasing number of disputes brought to G.A.T.T. and its successor, the W.T.O.,
does not reflect increasing tension in the world. Rather, it reflects the closer economic lies
throughout the world, the G.A.T.T./W.T.O. s expanding membership and the fact that
countries have faith in the system to solve their differences. Decisions in the W.T.O. are
made in consensus.

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The non-discrimination principle of W.T.O. agreements avoids that complexity, the
fact that there is a single set of rules applying to all members greatly simplifies the entire
trade regime. And these confirmed rules give governments an indubitable perspective of
which trade policies are acceptable.

For an overview of World Trade Organization and to view the complexity of the
task of that international institution, a schematic representation of the connections between
fields and existing agreements, it is presented as the basis structure of the WTO.:

The main structure of the W.T.O. agreements: the umbrella W.T.O. agreements, goods, services,
intellectual property, disputes and trade policy review:

Umbrella Agreement establishing W.T.O.

Goods Services Intellectual property

Basic principles G.A.T.T.G.A.T.S. T.R.I.P.S.

Additional details Other Services

agreements and annexes

annexes

Market access Countries schedules Countries schedules

commitments of commitments of commitments

Dispute settlement Dispute settlement Dispute settlement Dispute settlement

Transparency Trade policy review Trade policy review Trade policy review

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Source: Understanding the WTO, 2012 updated -published by WTO

Nota (1):

The “Uruguay Round” agreements are the basis of the existent W.T.O. structure.

Auxiliary work is also underway in the W.T.O. This being the result of decision taken at
Ministerial Conferences.

Nota (2):

The additional details means:

These agreements and annexes deal with the following specific sectors or issues:

Nota (3): Generically called on the goods under the GATT agreements are concluded which
regulated rules and procedures applied to different domains of products and services.

GATS (annexes) subject covered services relating: movements of natural persons, air transport,
financial services, shipping and telecommunications.

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CHAPTER 2

DISPUTE SETTLEMENT SYSTEM

2.1 SIGNIFICANCE OF THE WTO DISPUTE SETTLEMENT SYSTEM

The best international agreement is not worth much if its obligation cannot be
enforced when one of the signatories fails to comply with such obligations.

The fact that the members of the WTO established the current dispute settlement
system during the “Uruguay Round” of Multilateral Trade Negotiations underscores the
high importance they attach to compliance by all members with their obligations under the
WTO Agreement. Settling disputes in a timely and structured manner is important.It helps
to prevent the detrimental effects of unresolved international trade conflicts and mitigate
the imbalances between stronger and weaker players by having their disputes settled on
the basis of rules rather having power determine the outcome.

Most people consider the W.T.O. dispute settlement system to be one of the major
results of the “Uruguay Round”.

2.2 THE DISPUTE SETTLEMENT UNDERSTANDING (DSU)

The Dispute Settlement Understanding ( D.S.U.) sets out the procedures and rules that
define today s Dispute Settlement System (D.S.S.) The current D.S.S. is the result of the
evolution of rules, procedures and practices developed over a century under the G.A.T.T.
1947.The annexes of the W.T.O. Agreement contain all the specific multilateral
agreements.

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2.3 FUNCTIONS, OBJECTIVES AND KEY FEATURES OF THE DISPUTE
SETTLEMENT SYSTEM

The central objective of the D.S.S. is to provide security and predictability to the
multilateral trading system. Although international trade is understood in the W.T.O.as the
flow of goods and services between members, such trade is typically not conducted by
states, but rather by private economic operators. The D.S.U. aim is to provide a fast,
efficient, dependable and rule-oriented system to resolve disputes about the application of
the provisions of the W.T.O. Agreement.

A dispute arise when one W.T.O. member adopts a trade policy measure that one or
more other members consider to be inconsistent with the obligations set out in the W.T.O.
Agreement. In such a case, any member that feels aggrieved is entitled to invoke the
procedures and provisions of the dispute settlement system in order to challenge that
measure. If the parties to the dispute do not manage to reach a mutually agreed s the
solution, the complainant is guaranteed a rules-based procedure in which the merit of its
claims will be examined by an independent body. If the complainant prevail, the desired
outcome is to secure the withdrawal of the measure found to be inconsistent with the
W.T.O. Agreement.

Compensation and countermeasures (the suspension of obligations) are available only


as secondary and temporary responses to a contravention of the W.T.O. Agreement. Thus,
the dispute settlement system provides a mechanism through which W.T.O. members can
ensure that their right under the W.T.O. Agreement can be enforced.

The W.T.O. Agreement provides that the Ministerial Conference and General Council of
the W.T.O. have the “exclusive authority to adopt interpretations” of the W.T.O.
Agreement. However, the D.S.U. expressly states that the dispute settlement system is
intended to clarify the provisions of the W.T.O. Agreement “in accordance with
customary rules of interpretation of public international law”. The exclusive authority
must therefore be understood as the possibility to adopt “ authoritative” interpretations
that are of general validity for all W.T.O. members, unlike interpretation by panels and
the Appellate Body, which are applicable only to the parties and to the subject matter of a
specific dispute.

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General rule of interpretation that these are priority: a treaty shall be interpreted in
good faith in accordance with the ordinary meaning to be given to the terms of the treaty in
their context and in the light of its object and purpose; the context for the purpose of the
interpretation of a treaty shall comprise, in addition to the text, including its preamble and
annexes (any agreement relating and any instrument which was made related to the treaty)
and a special meaning shall be given to a term if it is established that the parties so
intended.

It is not admitted to interpretation leaves the meaning ambiguous or obscure or leads


to a result which is manifestly absurd or unreasonable.

When a treaty has been authenticated in two or more languages, the text is equally
authoritative in each language, unless the treaty provided or the parties agree that, in case
of divergence, a particular text shall prevail. With respect of the Vienna Convention, the
WTO Agreement is authentic in English, French and Spanish.

2.4 MUTUALLY AGREED SOLUTIONS A PREFERRED SOLUTION

Although the dispute settlement system is intended to uphold the right of aggrieved
members and to clarify the scope of the right and obligations, which gradually achieves
higher level of security and predictability, the primary objective of the system is not to
make ruling or to develop jurisprudence. Rather, like other judicial system, the main
concern is to settle disputes, through a mutually agreed solution that is consistent with the
W.T.O. Agreement .The dispute settlement system of the W.T.O. functions relatively fast
and, in any event, much faster than many domestic judicial system or other international
system of adjudication.

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2.5 PROHIBITION AGAINST UNILATERALDETERMINATIONS

The W.T.O. members have agreed to use the multilateral system for settling their
W.T.O. trade disputes rather than resorting to unilateral action. That means abiding by the
agreed procedures and respecting the rulings once they are issued and not taking the law
into their own hands. If members were to act unilaterally, this would have obvious
disadvantages. Unilateral actions are not able to settle disputes harmoniously. Things may
spiral out of control and, unless one of the parties backs down, there is a risk of escalation
of mutual trade restrictions which may result in a “trade war”. The dispute settlement
system is compulsory. All W.T.O. members are subject to it, as they have all signed and
ratified the W.T.O. Agreement as a single undertaking, of which the D.S.U. is a part.

2.6 PARTICIPANTS IN THE DISPUTES SETTLEMENT SYSTEM

The only participants in the dispute settlement system are the member governments of
the W.T.O. which can take part either as parties or as third parties. The W.T.O. Secretariat,
W.T.O. observer countries, other international organizations, and regional or local
governments are not entitled to initiate dispute settlement proceedings in the W.T.O.
Since only W.T.O. member government can bring disputes, it follows that private
individuals or companies do not have direct access to the dispute settlement system, even
of they mau often be the ones (as exporters or importers) most directly and adversely
affected by the measures allegedly violating the W.T.O. Agreement. The same is true of
the other non-governmental organizations with a general interest in a matter before the
dispute settlement system. They, too, cannot initiate W.T.O. dispute settlement
proceedings.
Of course, these organizations can, and often do, expert influence or even pressure on
the government of a W.T.O. member with respect to the triggering of a dispute. There are
divergent views among members on whether non-governmental organizations may play a
role in W.T.O. dispute settlement proceedings, for example, by filing “amicus curae
“submissions with W.T.O. dispute settlement bodies. According to W.T.O. jurisprudence,

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panels and the Appellate Body have the discretion to accept or reject these submissions,
but are not obliged to consider them.

The D.S.U. provides for a coherent and integrated dispute settlement system. It put an
end to the former “G.A.T.T. a la carte, where each agreement not only had a different set
of signatories but also separate dispute settlement rules. Subject to certain exceptions, the
D.S.U. is applicable in a uniform manner to disputes under all the W.T.O. Agreement. In
some instances, there are so-called “special and additional rules and procedures” on
dispute settlement contained in the covered agreements. These are specific rules and
procedures “designed to deal with the particularities of disputes under a specific covered
agreement”.

2.7 WTO BODIES INVOLVED IN THE DISPUTE SETTLEMENT PROCESS

The operation of the W.T.O. dispute settlement procedure requires: the parties and
third parties to a case; the D.B.S. (dispute settlement body) panels; the Appellate Body; the
W.T.O. Secretariat; arbitrators; independent experts and several specialized institutions.
The General Council discharges its responsibilities under the D.S.U. through the D.S.B.
Like the General Council, the D.S.B. is composed of representatives of all W.T.O
members.

There are governmental representatives, in most case diplomatic delegates who


reside in Geneva and who belong to either the trade or the foreign affairs ministry of the
W.T.O .member they represent. As civil servants, they receive instruction from their
capitals on the positions to take and the statements to make in the D.S.B. As such, the
D.S.B. is political body. The D.S.B. is responsible for administering the D.S.U..The D.S.B.
has the authority to establish panels, adopt panel and Appellate Body reports, maintain
surveillance of implementation of ruling and recommendations and authorize the
suspension of obligations under the covered agreements. In practice, the D.S.B. usually has
one regular meeting per month (the Director General convenes additional special
meetings).The general rule is for the D.S.B. to take decisions by consensus.

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The D.B.S has its own chairperson who is appointed by a consensus decision of the
W.T.O. members. The chairperson is usually one of the Geneva based ambassador, i.e., a
chief of mission of a member s permanent representation to the W.T.O.

The General Director of the W.T.O. may acting in an ex officio capacity offer his/her
good offices, conciliation or mediation with a view to assisting members to settle a dispute,
before a request for a panel is made.

The staff of the W.T.O. Secretariat, which reports to the Director General, assist
members in respect of dispute settlement at their request, conducts special training courses
and provides auxiliary legal advice and assistance. The Secretariat also assists parties in
composing panels by proposing nominations for potential panelists to hear the dispute,
assists panels once they are composed and provided administrative (logistical
arrangements) support for the D.S.B.

2.8 PANELS

Panels are the quasi-judicial bodies, in charge of adjudicating disputes between


members in the first instance. They are composed of three, and exceptionally five, experts
selected on an ad hoc basis. This means that there is no permanent panel at the W.T.O.,
rather, a different panel is composed for each dispute. Anyone who is well-qualified and
independent can serve as panelist.

2.9 APPELLATE BODY (A.B.)

Unlike panels, the Appellate Body is a permanent body of seven members entrusted
with the task of reviewing the legal aspect 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.

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2.10 ARBITRATORS

In addiction the panels and the Appellate Body arbitrators, either as individuals or as
groups can be called to adjudicate certain questions at several stages of the dispute
settlement process. Arbitration is available as an alternative to dispute resolution by panels
and the Appellate Body, although it is a possibility that has so far very rarely been used.

2.11 EXPERTS

Disputes often involve complex factual questions of a technical or scientific nature,


for instance when the existence or degree of a health risk related to a certain product is
the subject of contention between the parties. Because panelists are experts in
international trade but not in those scientific fields, the D.S.U gives panels the right to
seek information and technical advice from experts. Expert review groups only have an
advisory role.

2.12 TRIGGERING LEGAL PROVISIONS FOR CONSULTATION AND DISPUTE


RESOLUTION

For dispute settlement procedure could be first in all agreements under the WTO legal
bases are provided related field.

These provision on “consultation and dispute settlement” are:

 Art. XXII and XXIII of G.A.T.T. 1994;


 Art. 19 of the Agreement on Agriculture;
 Art. 11 of the Agreement on the Application of Sanitary and Phytosanitary
Measures;
 Art.8.10 of the Agreement on Textiles and Clothing;
 Art. 14 of the Agreement of Technical Barriers to Trade;

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 Art. 8 of the Agreement on Trade – Related Investment Measures;
 Art. 17 of the Agreement on Implementation of Art.VI of G.A.T.T. 1994;
 Art. 19 of the Agreement on Implementation of Art.VII of G.A.T.T. 1994;
 Art. 7 and 8 of the Agreement on Pre-shipment Inspection;
 Art. 7 and 8 of the Agreement of Rules of Origin;
 Art. 6 of the Agreement on Import Licensing Procedures;
 Art. 4 and 30 of the Agreement on Subsidies and Countervailing Measures;
 Art. 14 of the Agreement on Safeguards;
 Art. XXII and XIII of the General Agreement on Trade and Services;
 Art. 64 of the Agreement on Trade Related Aspects on Intellectual Property Rights.

A dispute can be, and often is, brought under more than one covered agreement. In
such a case, the question of the proper legal basis has to be assessed separately for the
claims made under different agreements.

The W.T.O. dispute settlement system provide for three kinds of complaints:
violation complaints, non-violation complaints and situation complaints.

A violation complaint will succeed when the respondent fails to carry out its
obligations under G.A.T.T. 1994 or the other covered agreement.

The reason is that an international trade agreement such as the W.T.O. Agreement
can never be a complete set of rules without gaps. As a result, it is possible for W.T.O.
members to take measures that comply with the letter of the agreement, but
nevertheless frustrate one of its objectives or undermine trade commitments contained
in the agreement.( the non-violation complaint provides for a means to redress imbalance
between the mutual trade commitments of the two members.)

Situation complaint was intended to play a role in situation of macroeconomic


emergency (e.g. general depressions, high unemployment, balance of payment
difficulties, collapse of the price of a commodity). This provision has never been involved
by any member.

For practical purpose , it can be said that there are two types of complaints
which play a practical role in the W.T.O. dispute settlement process. These are the
violation complaint and, for less frequently, the non-violation complaint. It is possible for

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one case to simultaneously involve both these types of complaints. As a general rule,
only government measures can be object of complaints.

2.13 STAGES OF PROCESS IN A DISPUTE SETTLEMENT CASE

FLOW CHART OF THE DISPUTE SETTLEMENT PROCESS

___________________________________________________________________________________

60 days CONSULTATION

____________________________________________________________________________

By 2nd D.B.S. meeting PANEL ESTABLISHED BY DISPUTE

SETTLEMENT BODY (D.S.B.)

____________________________________________________________________________

0-20 days TERMS OF REFERENCE

COMPOSITION

_____________________________________________________________________________

20days(+10 if Director PANEL EXAMINATION expert

General asked to NORMALLY 2 MEETING WITH review

compose the panel) PARTIES group


(meeting with third parties)

_____________________________________________________________________________

INTERIM REVIEW STAGE

DESCRIPTIVE PART OF REPORT review

SENT TO PARTIES FOR COMMENT meeting with

INTERIM REPORT SENT TO panel upon

PARTIES FOR COMMENT request


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_____________________________________________________________________________________

6 months from panel s PANEL REPORT ISSUED TO

composition, 3 months PARTIES

if urgent

_____________________________________________________________________________

Up to 9 months PANEL REPORT ISSUED TO

from panel’s D.S.B.

establishment

_______________________________________________________ appellate

review

______________________________________________________ max90days

60 days for panel D.S.B. ADOPTS PANEL/APPELLATE . .30 days for appellate

report unless REPORT(S) INCLUDING ANY CHANGES report

appelled…. TO PANEL REPORT MADE BY APPELATE

REPORT

__________________________________________________________________________

Reasonable period IMPLEMENTATION REPORT BY LOSING dispute over

of time determined PARTY OF PROPOSED IMPLEMENTATION implementation

by members WITHIN REASONABLE PERIOD OF TIME 90 days

proposes, DSB

agrees or parties

in dispute or arbitrator

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__________________________________________________________________________

IN CASE OF NON-IMPLEMENTATION

PARTIES NEGOTIATE COMPENSATION

PEDING

__________________________________________________________________________

FULL IMPLEMENTATION

__________________________________________________________________________

30 days after RETALIATION possibility of

reasonable IF NO AGREEMENT OR COMPENSATION arbitration on

period D.B.S. AUTHORIZES RETALIATION PENDING level of suspension

expires FULL IMPLEMENTATION procedures and

CROSS-RETALIATION SAME SECTOR, principles of

OTHER SECTORS, OTHER AGREEMENTS retaliation

____________________________________________________________________________

Source: Understanding the WTO, 2012, updated, published by WTO

_____________________________________________________________________________

NOTE 1. DURING ALL STAGES GOOD OFFICES, CONCILIATION OR


MEDIATION ARE PERMITED.

NOTE 2. TOTAL FOR REPORT ADOPTION: USUAL UP TO 9 MONTHS (NO


APPEAL) OR 12 MONTHS (WITH APPEAL) FROM ESTABLISHMENT OF PANEL
TO ADOPTION OF REPORT.

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2.13.1 CONSULTATION

Bilateral consultations between the parties are the first stage of formal dispute
settlement. Consultations give the parties an opportunity to discuss the matter and to find
a satisfactory solution without resorting to litigation. Only after 60 days may the
complainant request adjudication by a panel. Always remaining possible for the parties to
find a mutually agreed solution at any later stage of the proceeding.

A majority of disputes so far in the W.T.O. have not proceeded beyond


consultation, either because a satisfactory settlement was found, or because the
complainant decided for other reasons not to pursue the matter further. Together with
good offices, conciliation and mediation, consultations are the key non-judicial,
diplomatic feature of the dispute settlement system of the W.T.O.

Consultations typically take place in Geneva and are confidential. The fact that they
take place behind closed doors also means that their content remains undisclosed to
any panel subsequently assigned the matter.

Unless otherwise agreed, the respondent must reply to the request within ten
days and must enter into consultations in good faith within a period of no more than
30 days after the date of receipt of the request for consultations. In cases of urgency,
including those that concern perishable goods: enter into consultations within a period
of no more than ten days after the date of receipt of the request.

On the involvement of third parties in consultation, procedure provided that the


request must be addressed to the consulting members and the D.S.B. within ten days
after the date of the circulation of the original request of consultations. The
responding member must also agree that the claim of substantial trade interest in
well founded. If the respondent disagrees , there is no recourse through which the
interested invoked substantial trade interest may be (will be a separate dispute
settlement proceeding).

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2.13.2 THE PANEL STAGE

If the consultations have failed to settle the dispute , the complaining party may
request the establishment of a panel to adjudicate the dispute. A request for a panel
must be made in writing and is addressed to the Chairman of the D.S.B. This request
becomes an official document in the dispute in question and is circulated to the entire
WTO membership. In order to be included in the agenda of a D.S.B. meeting, the request
for establishment of a panel must be filed at least 11 days in advance.

It must indicate whether consultations were held, identify the specific


measures at issue, and provide a brief, but sufficiently clear, summary of the legal
basis of the complaint. The content of the request for establishment of the panel is
crucial. Panel have standard terms of reference, unless the parties to the dispute agree
otherwise within 20 days from the establishment of the panel.

In other than standard terms of reference are agreed upon , any member may raise
any point in that respect in the D.S.B. Establishing panel is one of the functions of the
D.S.B. and is one of the three situations in which the decision of the D.S.B. does not
require a consensus.

In order to participate in the panel procedure, third parties must have a


substantial interest in the matter before the panel and they must notify their interest to
the D.S.B., in writing through the W.T.O. Secretariat.

Even after a panel has been established by the D.S.B. panel must be composed
ad hoc for each individual dispute, with the selection of three or five members. Panelists
may be selected from an indicative list of governmental and non-governmental
individual nominated by W.T.O. members, although other name can be considered as
well. Members are prohibited from giving panelists instruction or seeking to influence
them with regard to matters before the panel.

The selected panelists must fulfill their task in full independence. For the selection
of the panelists is it provided to ensure that panels have the relevant specific
expertise in the sector that is the subject of the dispute. Once established and
composed, can start its work. One of the first tasks for the panel is to draw up a

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calendar for the panel s work. In drawing up their working procedures for a specific
dispute, panels sometimes request the parties and third parties to submit executive
summaries of their submissions. To some extent, these summaries are used in drafting
the descriptive part of the panel report.

After the oral hearings are concluded, the panel goes into internal deliberations
to review the matter and to reach conclusions as to the outcome of the dispute
and the reasoning in support of such out-come. The panel’s mandate is to apply
existing W.T.O. law, not to make law. The panel’s deliberations are confidential and
its report is drafted in the absence of the parties.

Parties are invited to make written comments within two weeks.The final
report must contain a reference to the arguments raised by the parties during the
review stage. The panel should submit its final report to the parties to the dispute
within two weeks following conclusion of the review.

Once the report is translated into the other official W.T.O. languages (English,
French and Spanish) it is circulated to all W.T.O. members and becomes a public
document.

Dispute settlement panels operate under strict deadlines, which illustrates the
importance the members attribute to a prompt settlement of W.T.O. disputes. As a
general rule, a panel is required to issue the final report to the parties within six
months from the date when it was composed. In case of urgency, the panel attempts
to issue its report to the parties within three months from the date of its
composition. In practice, however, panel proceedings take an average of 12 months
(timetable panel may be adjusted depending on the circumstances of the case).

Although the panel report contains the findings and conclusions ruling on the
substance of the dispute, it only becomes binding when the D.S.B. has adopted it.
The D.S.B. must adopt the report no earlier than 20 days, but no later than 60
days, after the date of its circulation to the members, unless a party to the
dispute formally notifies the D.S.B. of its decision to appeal or the D.S.B. decides
by consensus not to adopt the report.

In order to be adopted in a D.S.B. meeting, a panel report (which has not been
appealed) must however, be placed on the agenda of a D.S.B. meeting. In there is
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no appeal, the dispute proceeds immediately to the implementation phase after the
D.S.B. has adopted the panel report. The appellant must notify the D.S.B. of its
decision to appeal before the adoption of the panel report. The D.S.U. makes clear
that only the parties to the dispute, not the third parties, can appeal the panel
report.

Appeals are limited to legal questions. They may only address issues of law
covered in the panel report and legal interpretations developed by the panel.

The appeal process begins when a party to the dispute formally notifies the
D.S.B. of its decision to appeal. After the filing of the notice of appeal, the W.T.O.
Secretariat transmits the complete panel record to the Appellate Body Secretariat
pursuant on rule of the working procedures. Approximately 30 to 45 days after the
notice of appeal the Appellate Body division assigned to the case holds an oral
hearing, which is not open to the public. After the oral hearing, the division
exchanges views on the issues raised in the appeal, concludes its deliberations
and drafts the Appellate Body report. After the report is finalized and signed by
the Appellate Body members of the division, it is translated into the two other
official languages of the W.T.O. Finally, the Appellate Body report is circulated to
all W.T.O. members and becomes a public document.

The working procedures permits an appellant to withdraw its appeal at any time.
The possibility of withdrawing an appeal reflects the preference of the D.S.U. for the
parties to find a mutually agreeable solution to their dispute. The D.S.B. must adopt,
and the parties must unconditionally accept, the Appellate Body report.

2.13.3 IMPLEMENTATION- BY THE “LOSING” MEMBER

With the D.S.B. s adoption of the panel and Appellate Body report(s), there is
a recommendation and ruling by the D.S.B. addressed to the losing party to bring
itself into compliance with W.T.O. law or to find a mutually satisfactory adjustment.

The D.S.B. is the W.T.O. body responsible for supervising the


implementation of panel and Appellate Body reports.

23
The first duty of the “losing” member is to inform the D.S.B., at a meeting
within 30 days after validating the report(s), of its intentions to implement the
recommendations and rulings of the D.S.B. In practice, W.T.O. members very often
claim that they cannot immediately comply with the D.S.B. s recommendation and
ruling.It is also true that the member concerned is frequently required to amend
its domestic law in order to achieve implementation. Where legislative changes are
required such changes take time.

The reasonable period of time can be proposed by the member concerned and
approved by consensus by the D.S.B. or mutually agreed by the parties to the dispute
within 45 days after adoption of the report(s) or determined by an arbitrator
(should not exceed 15 months from the date of adoption of the report(s).

Surveillance by the D.S.B. remains on the D.S.B. agenda until the issue is
resolved (the implementation of the recommendations or ruling it has adopted).As
least ten days before each such D.S.B. meeting, the member concerned is required
to provide the D.S.B. with a written status report of its progress in the
implementation.

2.13.4 NON-IMPLEMENTATION

If the losing member fails to bring its measure into conformity with its
(W.T.O.) obligations within the reasonable period of time, the prevailing complainant
is entitled to resort to temporary measures, which can be either compensation or the
suspension of W.T.O. obligations. Neither of these temporary measures is preferred
to full implementation of D.S.B. recommendations and rulings.

If the implementing member does not achieve full compliance by the end of
reasonable period of time it has to enter into negotiations with the complaining party
with a view to agreeing a mutually acceptable compensation. This compensation
does not mean monetary payment the respondent is supposed to offer a benefit, for
example a tariff reduction, which is equivalent to the benefit which the respondent
has nullified or impaired by applying its measure. The parties to the dispute must
agree upon the compensation, which must also be consistent with the covered
agreements.

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CHAPTER 3.

EVALUATION OF THE WORLD TRADE ORGANIZATION

DISPUTE SETTLEMENT SYSTEM

W.T..O members filed eight new disputes in 2011, the lowest number in the
history of the W.T.O. Since the W.T.O. was created in 1995, the most active users
of dispute settlement system have been United States (98), the European Union
(85), Canada (33) and Brazil (25).By the end of 2012, 439 requests for consultations
had been filed by W.T.O. members since the W.T.O. s creation in 1995.

Recent years have seen the increasing participation of developing countries in


the W.T.O. dispute settlement mechanism. In eight of the years in period 2001-
2011, the number of requests for consultations (the first formal step in dispute
settlement proceedings) from developing country members equaled or surpassed those
from developed country members. In fact, relative to their level of trade
(imports/exports), the active participation of some developing countries in the
dispute settlement mechanism exceeds by some margin that of some developed
countries.

This increased participation by developing countries may be due in part to the


presence of the Geneva-based Advisory Centre on W.T.O. Law (A.C.W.L.), which is
completely independent from the W.T.O. The Centre, has assisted developing and least-
developed countries with some 40 W.T.O. disputes since the Centre was established
(2001). The legal benefits of the W.T.O. are shared among all the W.T.O. legal system, in
particular its dispute settlement procedures, and to the realization of the W.T.O. s
development objectives.

If one compares the W.T.O. dispute settlement system with the previous dispute
settlement system of G.A.T.T. 1947, the current system has been far more effective.

25
Compared with other multilateral system of dispute resolution in international
law, the compulsory nature and the enforcement mechanism of the W.T.O. dispute
settlement system certainly stand out.

CHAPTER 4.

WEAKNESSES OF THE DISPUTE SETTLEMENT SYSTEM

The system presents both weaknesses and strengthens. With respect to its
weaknesses, despite the deadlines, a full dispute settlement procedure still take a
considerable amount of time, during which the complainant suffers continued
economic harm if the challenged measure is indeed W.T.O. inconsistent. No provisional
measures are available to protect the economic and trade interests of the successful
complainant during the dispute settlement procedure.

Moreover, even after prevailing in dispute settlement, a successful complainant


will receive no compensation for the harm suffered during the time given to the
respondent to implement the ruling. Nor does the wining party receive any
reimbursement from the other site for its legal expenses.

There is broad consensus that the current W.T.O. dispute settlement system has
worked reasonably well, these also is a widely shared view that improvements
are desirable.

26
GLOSSARY:

APPELLATE BODY (A.B.) A independent seven person body that


considers appeals in W.T.O. disputes.When
one or more parties to the dispute appeals,
the A.B. review the finding in panel reports.

A.S.E.A.N. Association of Southeast Asian Nations, nine


ASEAN members are members of the WTO
(Brunei,Cambodja, Indonezia,Malaysia,
Philippines, Singapore, Thailand Vietnam).

CUSTOMS UNION: Members apply a common external tariff (e.g.


the European Union).

D.S.B. Dispute Settlement Body-when the WTO


General Council meets to settle trade
disputes.

D.S.U. Dispute Settlement Understanding the WTO


agreement that cover dispute settlement-in full-
the Understanding on Rules and Procedures
Governing the Settlement of Disputes.

G.A.T.T. General Agreement on Tariff and Trade,


which has been susperseded as an
international organization by the WTO. An
updated General Agreement is now the WTO
27
agreement governing trade and goods.GATT
1947:The official legal term for the old (pre-
1994) version of the GATT. GATT 1994: The
official legal term for new version of the
General Agreement, incorporated into the
WTO and including GATT 1947.

G.A.T.S. The WTO s General Agreement on Trade in


Services.

INTELLECTUAL PROPERTY

RIGHTS: Owner of ideas, including literary and artistic


works (protected by copyright), inventions
(protected by patents), signs for distiguishing
goods of an enterprise (protected by
trademarks) and other elements of industrial
property.

MINISTERIAL CONFERENCE The top decision-making WTO body.

PANEL In the WTO dispute settlement procedure, an


independent body is established by the
Dispute Settlement Body (DSB) consisting of
three experts, to examine and issue
recommendations on a aprticular dispute in
the light of WTO provisions.

TRIPS: Agreement on Trade Related Aspects of


Intellectual Property Rights.

TARIFFS: Customs duties on merchandise imports. Levied


either on an ad valorem basis (percentage of
value) or on a specific basis (e,g. $ 7 per

28
1000 kgs). Tariffs give price advantage to
similar locally –produced goods and raise
revenue for the government.

URUGUAY ROUND Multilateral trade negociations launched al


Punta del Este, Uruguay in September 1986 and
concluded in Geneva in December 1993.Signed
by Ministers in Marrakesh, Marocco, in April
1994.

TRADE-BALANCING

MEASURE: Requirement that the investor use earnings


from exports to pay imports.

29
CASES STUDIES (C.S)

CASE STUDY No 1. DISPUTE SETTLEMENT U.S.A- ROMANIA

According to the WTO rules the name of this dispute is:

ROMANIA- MEASURES ON MINIMUM IMPORT PRICES

The most important elements of this dispute are:

COMPLAINANT: U.S.A.

REPONDENT: ROMANIA

As there was no Panel established there are no third parties.

AGREEMENTS CITED:* AGRICULTURE: ART.4.2 (mainly in the meaning that no member


takes any measure that might increase the value of the customs duties bound under the WTO);

* G.A.T.T. 1994 : ART.II ( the observance of the schedules of concessions),ART.X ( the


need for consultation and administration of the trade regulation) and ART. XI( general
elimination of the quantitative restrictions);

* TEXTILES AND CLOTHING : ART.2,7(quantitative restrictions);

*CUSTOMS VALUATION (ART.VII of


G.A.T.T.1994,ART.1,2,3,4,5,6,7,12ANNEX 1 (the interdiction of using minimum

prices in order to has been determine the customs value.)

PROCEDURAL ASPECTS:

The request for consultation has been received at the WTO on 30-th May 2000.

Romania accepted the consultations and proposed as venue.

The USA considered that Geneva is more convenient place to meet for consultations.

Consultations took place in several rounds.

30
These led to a mutually agreed solution. On this basis, on October 20,2001, the Dispute
Settlement Body has been informed by USA and Romania that they have reached a mutually
satisfactory solution pursuant to Art.3.6 of the Dispute Settlement Understanding.

SUMMARY OF THE DISPUTE:

On 30 May 2000, the U.S.A. requested consultation with Romania in respect

of Romania s use of minimum import prices for customs valuation purposes.

The measures at issue were the Customs Code (Law no.141/1997), the Ministry of
Finance General Customs Directive (Ordinance no.5,4 August 1998) and other related
statutes and regulations.

The U.S.A. asserted that, pursuant to these measures, Romania has established
arbitrary minimum and maximum import prices for such products as meat, eggs, fruits
and vegetables, clothing, footwear and certain distilled spirits.

The U.S.A. further asserted that Romania has instituted burden some procedures
for investigating import prices when the c.i.f. value falls below the minimum import
price.

The U.S.A. considered that Romania s measures are inconsistent with its
obligations under Art.1 through 7, and 12 of the Customs Valuation Agreement; Art .II, X
and XI of the G.A.T.T. 1994; Art.4.2 of the Agreement on Agriculture and Art. 2 and 7
of the Agreement on Textiles and Clothing.

Romania rejected these allegations and recalled that the Romania legislation regarding
the Customs Code was fully in accordance with its commitments under the WTO and that
during the recent examination under the Customs Valuation Committee (1999), no breachings
were highlighted by any WTO member.

At the end of the consultation the parties reached to a co-operation solution aimed at
ensuring more transparency.

31
CASE STUDY No. 2 DISPUTE SETTLEMENT

U.S.A.- VENEZUELA AND BRAZIL – GASOLINE

COMPLAINANTS: VENEZUELA AND BRAZIL

RESPONDENT: U.S.A.

AGREEMENT: G.A.T.T. ART.III (national treatment); and


ART.XX (general exceptions-exhaustible natural resources)

TIMELINE OF THE DISPUTE:

Establishment of panel: 10 APRIL 1995 (VENEZUELA)

31 MAY 1995 (BRAZIL)

Circulation of panel report: 29 JANUARY 1996

Circulation of Appellate Body report: 29 APRIL 1996

Adoption: 20 MAY 1996

Measure at issue:

The “Gasoline rule” under the U.S.A. Clean Air Act that set out the rules for
establishing baseline figures for gasoline sold on the U.S.A. market (different
methods for domestic and imported gasoline), with the purpose of regulating the
composition and emission effect of gasoline to prevent air pollution.

Product at issue : imported gasoline and domestic gasoline.

32
SUMMARY OF KEY PANEL/APPELLATE BODY FINDINGS:

G.A.T.T. ART.III:4 (national treatment- domestic laws and regulation): The Panel
found that the measure treated imported gasoline “less favourably” than domestic
gasoline in violation of Art.III:4, as imported gasoline effectively experienced less
favourable sales conditions than those afforded to domestic gasoline. In particular,
under the regulation, importers had to adapt to an average standard, i.e. “statutory
baseline”, that had no connection to the particular gasoline imported, while
refiners of domestic gasoline had only to meet a standard linked to their own
product in 1990, i.e. individual refinery baseline.

G.A.T.T. ART.XX(g) (general exceptions- exhaustible natural resources): In respect


of the U.S.A. defence under Art. XX(g), the Appellate Body (A.B.) modified the
Panel s reasoning and found that measure was “related to the “conservation of
exhaustible natural resources” and thus fell within the scope of Art. XX (g).
However, the measure was still not justified by Art. XX because the discriminatory
aspect of the measure constituted “unjustifiable discrimination” and a “disguised
restriction on international trade” under the chapeau of Art. XX.

SUMMARY OF THE DISPUTE:

On 23 January 1995 Venezuela complained to the Dispute Settlement Body


that the U.S.A. was applying rules that discriminated against gasoline imports and
formally requested consultation with the U.S.A. Just over a year later the dispute
panel completed its final report.(By then, Brazil had joined the case, lodging its
own complaint in April 1996. The same panel considered both complaints.)

The U.S.A. appealed.

The Appellate Body completed its resort and the Dispute Settlement Body
adopted the report on 20 May 1996, one year and four months after the
complaint was first lodged.

33
The case arose because the U.S.A. applied stricter rules on the chemical
characteristics of import gasoline that it did for domestically refined gasoline.
Venezuela and later Brazil- said this was unfair because U.S.A. gasoline did not
have to meet the same standards - it violated the “national treatment” principle
and could not be justified under exceptions to normal W.T.O. rules for health and
environmental conservation measures.

The dispute panel agreed with Venezuela and Brazil.

The appeal report upheld the panel s conclusions (making some changes to the
panel s legal interpretation).

The U.S.A. agreed with Venezuela that it would amend its regulations within
15 months and on 26 August 1997 it reported to the Dispute Settlement Body that
a new regulation had been signed on 19 August. End of agreed implementation
period-20 August.

34
CASE STUDY No 3. DISPUTE SETTLEMENTU.S.A-SHRIMP

PARTIES:

COMPLAINANTS: MALAYSIA

INDIA

THAILAND

PAKISTAN

RESPONDENT: U.S.A.

AGREEMENT: G.A.T.T. Art. XI and XX

TIMELINE OF THE DISPUTE:

Establishment of panel: 25 FEBRUARY 1997

Circulation of panel

Report: 15 MAY 1998

Circulation of Appellate Body report: 12 OCTOBER 1998

Adoption: 6 NOVEMBER 1998

Measure at issue:

U.S.A. import prohibition of shrimp and shrimp products from non-certified countries.

Product at issue:

Shrimp and shrimp products from the complainant countries.

35
SUMMARY OF KEY PANEL/APPELLATE BODY FINDING:

G.A.T.T. Art. XI : The Panel found that U.S.A. prohibition, concerning imported
shrimp and shrimp products violated Art. XI. The U.S.A. apparently conceded the
measure’s violation of Art. XI because it did not put forward any defending arguments in
this regard.

G.A.T.T. Art. XX (g): The Appellate Body held that although the U.S.A. import ban
was related to the conservation of exhaustible natural resources and, thus, covered by
Art. XX (g) exception, it could not be justified under Art. XX because the ban
constituted “arbitrary and unjustifiable “ discrimination under the chapeau of Art. XX.

In reaching this conclusion, the Appellate Body reasoned, that in its application
the measure was “ unjustifiably” discriminatory because of its intended and actual
coercive effect on the specific policy indecisions made by foreign governments that
were members of the W.T.O. The measure also constituted “arbitrary” discrimination
because of the rigidity and inflexibility in its application, and the lack of
transparency and procedural fairness in the administration of trade regulation.

What was it all about?

Seven species of sea turtles have been identified . They are distributed around
the world in subtropical and tropical areas. They spend their lives at sea, where
they migrate between their foraging and nesting grounds.

Sea turtles have been adversely affected by human activity, either directly (their
meat, shells and eggs have been exploited), or indirectly (incidental capture in
fisheries, destroyed habitats, polluted oceans).

In early 1997, India, Malaysia, Pakistan and Thailand brought a joint complaint
against a ban imposed by the U.S.A. on importation of certain shrimp and shrimp
products. The protection of sea turtles was at the heart of the ban.

The U.S.A. Endangered Species Act of 1973 listed as endangered or


threatened of five species of sea turtles that occur in U.S.A. waters, and
prohibited their “take” within the U.S.A. in its territorial sea and the high seas.
(“Take” means harassment, hunting, capture, killing or attempting to do any of
these.)
36
Under the act, the U.S.A. required U.S.A. shrimp trawlers to use “turtle
excluder devices” in their net when fishing in areas where there is a significant
likelihood of encountering sea turtles.

The U.S.A. lost the case, not because it sought to protect the environment but
because it discriminated between W.T.O. members. It provided countries in the
western hemisphere -mainly in the Carribean- technical and financial assistance and
longer transition period for their fishermen to start using turtle-excluder devices.

37
CASE STUDY No. 4 DISPUTE SETTLEMENT

U.S.A-MEXICO-TUNA

PARTIES:

COMPLAINANT: MEXICO

RESPONDENT: U.S.A.

AGREEMENT: AGREEMENT ON TECHNICAL

BARRIERS TO TRADE (T.N.T.)

(annex 1.1Art..2.1., 2.2. and 2.4.)

G.A.T.T.(Art. I 1 and III.4)

D.S.U. (Art.11)

TIMELINE OF THE DISPUTE:

Establishment of Panel 20 APRIL 2009

Circulation of Panel report 15 SEPTEMBER 2011

Circulation of Appellate Body report 16 MAY 2012

Adoption 13 JUNE 2012

Measure at issue:

U.S.A. Code regarding “dolphin protection consumer information act Code of


Federal Regulations regarding “dolphin –safe labeling standards and “dolphin-safe
requirements for tuna harvested in the Eastern tropical Pacific ocean by large purse seine
vessels together, these measures set out the conditions under which tuna products
sold in the U.S.A. may be labeled as “dolphin-safe”.

38
Product at issue:

Tuna and tuna products.

SUMMARY OF KEY PANEL/APPELLATE BODY FINDIGS:

T.B.T. (definition of technical regulation –annex 1.1.):

The Appellate Body established that the U.S.A. measure provides a single and
legally mandated set of requirements for making any statement with respect to the
broad subject of “dolphin-safety” of tuna concerning products in the U.S.A.”, Thus,
it upheld the Panel s ruling characterizing the measure at issue as a “technical
regulation” within the meaning of TBT annex 1.

T.B.T. (no less favorable treatment Art.2.1):

According to the Appellate Body , the measure at issue modified the


competitive condition in the U.S.A, market to the detriment of Mexican products
and the U.S.A. did not demonstrate that this stemmed solely from “ legitimate
regulatory distinctions”. The Appellate Body, therefore found that the U.S.A. “dolphin-
safe” labeling measure was inconsistent with Art.2.1. and reversed the Panel‘s contrary
finding.

T.B.T.( more trade-restrictive than necessary-Art.2.2.):

The Appellate Body opposed with the Panel s ruling that the measured issue
was more trade-restrictive than necessary to fulfill U.S.A. legitimate objectives, and
found instead that “the alternative measures proposed by Mexico would contribute
to both the consumer information objective and the dolphin protection objective to a
lesser degree than the measure at issue”. The Appellate Body reversed the Panel s
finding that the measure was inconsistent with Art.2.2.

T.B.T.(relevant international standard-Art.2.4.):

The Appellate Body modified the Panel s conclusion and ruled that the “dolphin-
safe” definition and certification did not constitute a “relevant international standard”
within the meaning at Art.2.4.

D.S.U.Art.11 and G.A.T.T. Art .I 1 and III 4 (exercise economy by the panel):

39
The Appellate Body decided that the Panel engaged in “false judicial economy” and
acted inconsistently with D.S.U.art.11. The Appellate Body rejected the U.S.A. claims
in this respect.

40
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41
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