International dispute resolution mechanism on trade defense

The World Trade Organization (WTO) was officially established on January 1, 1995 as a result of the Uruguay Round (1986-1995) with its predecessor being the General Agreement on Tariffs and Trade (GATT 1947). The WTO is considered a special success in the development of trade and law in the late 20th century with a massive system of agreements, arrangements, and tariff concessions regulating the trade rights and obligations of member countries. With the ambitious goals of promoting the process of global trade liberalization, improving the living standards of people in member countries and resolving differences in interests between countries within the framework of the multilateral trading system, the operation of the WTO has and will have a huge impact on the long-term future of the world economy as well as the economies of each country. It is estimated that over 95% of the world's trade activities are currently regulated by the Agreements of this Organization.

To ensure the full and serious implementation of the provisions of the Agreements, prevent trade measures that violate the Agreements, and contribute to the implementation of the great goals of the WTO, a dispute settlement mechanism within the framework of this organization has been established. This mechanism is the realization of the trend of legalizing the process of resolving international trade disputes today, gradually replacing political and diplomatic dispute settlement methods in this field.

Vietnam is a member of the WTO, so it can use this mechanism for possible trade disputes with other WTO members. This mechanism will be an important lifeline to protect our trade interests in international trade relations. Currently, considering this dispute resolution mechanism along with its massive system of case law has great practical significance not only in accurately understanding the provisions of the Trade Agreement but also contributing to protecting Vietnam's legitimate interests in the process of implementing the Trade Agreement because the Trade Agreement is built mainly on the international trade rules currently in effect in the WTO.

1. Some general concepts

WTO dispute settlement mechanism

WTO dispute settlement mechanism is the method and process of the WTO through which trade disputes between WTO members are resolved, in order to ensure full and serious implementation of the provisions of the Agreement, prevent trade measures that violate the Agreements, resolve and eliminate disputes that have arisen, and protect the legitimate rights and interests of members.

The WTO dispute settlement mechanism was formed on the legal foundation of the Dispute Settlement Understanding (DSU), one of the most important results of the Uruguay Round. Learning from the shortcomings of the old mechanism of GATT 1947, a number of fundamental procedural improvements have been included in the new mechanism, contributing to enhancing the adjudicative nature of this procedure as well as strengthening the binding nature of dispute settlement decisions.[1] The unique aspect of the WTO dispute settlement mechanism, unlike other international mechanisms, is that it has a mandatory and binding adjudication process. Currently, the WTO Mechanism is considered one of the best dispute settlement mechanisms, contributing to ensuring the full and serious implementation of the Agreements.

b. Dispute Settlement Body

The WTO Dispute Settlement Body (DSB) is the body responsible for conducting the procedures of the dispute settlement process under the WTO. The DSB has two levels, including the Panel and the Appellate Body (AB).[2] The DSB does not directly participate in the dispute settlement process but is only the body that passes decisions in dispute settlement at the WTO. The Panel and the Appellate Body act as legal institutions to assess the legal aspects of the dispute.

The DSB is essentially the WTO General Council, including representatives of all members. The DSB has the power to establish panels, adopt panel and Appellate Body reports, monitor the implementation of decisions, recommend dispute settlement, authorize the suspension of obligations and concessions (retaliation).[3] DSB decisions are adopted by consensus.[4] This is a new principle according to which a decision is not adopted only when all DSB members vote against it. This means that DSB decisions are almost automatically adopted. This principle overcomes the fundamental weakness of the dispute settlement mechanism in GATT 1947, which applied the traditional consensus principle - all decisions were only adopted when all members voted in favor (each member had the right to veto the decision) - a barrier to the adoption of decisions by the dispute settlement body.

To date, 607 dispute settlement cases have been brought to the WTO. For Vietnam, since joining the WTO (2007), Vietnam has participated in the WTO dispute settlement mechanism as a plaintiff in 5 cases (DS404, DS429 related to the US applying anti-dumping measures on frozen warm-water shrimp products from Vietnam; DS496 related to Indonesia applying safeguard measures on non-alloy steel coil products; DS536 related to the US applying anti-dumping measures on pangasius and basa fish products; and DS540 related to the US applying sanitary and phytosanitary measures on pangasius and basa fish products) and as a third party in 36 cases.

2. Role and Functions of the WTO Dispute Settlement Mechanism and the WTO Dispute Settlement Body

a. Role and Functions of the WTO Dispute Settlement Mechanism

The WTO dispute settlement mechanism plays a central role in clarifying and ensuring the implementation of the obligations set out in various WTO agreements.[5] The objective of the WTO in establishing the dispute settlement mechanism (DSM) is “to achieve a positive solution to disputes between member countries” (Article 3.7 of the DSU). Through this mechanism, WTO members can ensure that their rights under the WTO Agreements are enforced. This enables each member to initiate proceedings against any other member that violates its trade policies in order to force those members to comply with their obligations under the commitments in the WTO agreements. Participation in the DSM allows member countries to protect their trade policies, measures and interests, and fight against violations by other WTO members. The effective use of the DSM is both a manifestation and a condition to ensure a country's full and effective participation and integration into the WTO's multilateral trading system.

Much has been done to ensure the credibility of the WTO Dispute Settlement System, such as the Panel and the Appellate Body being built/established to be independent, not subject to influence or pressure from any WTO member as well as from the Secretariat.

Therefore, the WTO Dispute Settlement Mechanism is currently considered the most effective dispute settlement mechanism in the international legal system.[6] This mechanism not only plays the role of a judicial body but also as a dispute prevention mechanism, helping to balance the rights and obligations of WTO members. It performs three main functions: (i) ensuring the safe and predictable operation of the multilateral trading system by strengthening and enforcing the rule of law[7]; (ii) ensure the rights and obligations of WTO members[8]; and (iii) clarifying these rights and obligations through the interpretation of the WTO Agreement in accordance with customary rules of interpretation of public international law.[9]

b. Role and functions of the WTO Dispute Settlement Body (DSB)

A mechanism that is fully implemented in practice requires an effective enforcement body. The DSB is not only the place to issue decisions on dispute settlement, but also plays a role in maintaining the monitoring and implementation of these decisions and recommendations.

Article 2.1 of the DSU provides that “The Dispute Settlement Body is established to implement the rules and procedures of this understanding and the consultation and dispute settlement provisions of the covered agreements, unless otherwise provided in the covered agreements. coherent, the DSB shall have the authority to establish panels and an Appellate Body, adopt the reports of panels and the Appellate Body, maintain surveillance and implement the rulings and recommendations, and authorize the suspension of the application of concessions and other obligations under the covered agreements”.

Thus, it can be understood that the functions of the DSB include: (i) bringing a dispute to trial through the establishment of a panel; (ii) adopting the report of the panel and the Appellate Body, making the report legally binding on the parties concerned to implement; (iii) supervising the implementation of the ruling on the dispute; (iv) allows “retaliation” when a member fails to comply with the ruling.

3. Procedures and principles of the WTO dispute settlement mechanism (DSM)

Basic principles of the WTO dispute settlement mechanism

As a mechanism of the WTO, the DSM must first of all comply with the WTO's consistent principles, which are the principles of non-discrimination, the principle of increasingly free trade through negotiation, the principle of creating a fair competitive environment and predictability[10].

In addition to the above general principles, the WTO dispute settlement mechanism is also based on the following principles:

(i) The principle of equality between disputing member countries[11];

(ii) The principle of negative consensus[12];

(iii) The principle of preferential treatment for developing and least developed countries[13].

b. Procedures of the WTO Dispute Settlement Mechanism

The WTO dispute settlement mechanism typically consists of four main stages: (i) consultation procedures[14]; (ii) dispute settlement by the Panel; (iii) dispute settlement by the Appellate Body in the event of an appeal[15]; and (iv) the enforcement stage, which includes the possibility of retaliatory measures in the event that the losing party fails to enforce the ruling[16]. However, not all disputes go through all four stages, and can stop at any stage based on the agreement of the parties.

All disputes at the WTO begin with a request for consultations by the parties, during which the parties find a satisfactory solution that is consistent with the relevant agreements. However, if the dispute cannot be resolved through consultations, the parties may submit a request for the establishment of a Panel to the DSB. This body will vote to decide on the establishment of the Panel. Once established, the Panel is responsible for carrying out the necessary procedures to hear the case and issue a Final Report on the case to the DSB for adoption. The parties may appeal the legal issues in the Panel Report (appeal request) to the WTO Appellate Body in writing. The Appellate Body's Final Report may uphold, modify or eliminate the legal issues and conclusions of the Panel, and will be sent to the DSB for adoption. During the implementation phase, the recommendations and rulings of the DSB are binding and enforceable. In all of the above stages, the DSB's decisions are adopted by consensus, according to which a decision is not adopted only when all DSB members vote against it. Specifically:

Consultations (Article 4 DSU)

When a WTO member wishes to formally initiate a complaint against another member under the WTO dispute settlement mechanism, the complaining party must first notify the other members and the WTO as a whole of the nature of the complaint, including the measures at issue and any alleged WTO violations that may be the subject of the complaint. The notification of the complaint sets in motion a mandatory 60-day consultation period, during which the complainant and the respondent are required to seek a positive solution to the dispute.[17]

Consultations are a procedure that takes place between the Parties. The DSB is notified of the procedure and is responsible for notifying members of the request for consultations, but it does not participate directly in the consultations.[18] Other Members may request to participate in these consultations if the consulted Party acknowledges that these Members have a “significant commercial interest” in these consultations.[19] Therefore, although consultations are often considered one of the last bilateral actions before formal dispute settlement, there are times when they are subject to at least some degree of multilateral supervision.

Normally, Members try to resolve disagreements at the consultation stage in order to minimize the damage to the interests of all parties, while ensuring the confidentiality of information related to the dispute.

ii. Dispute settlement by Panel

In case the parties cannot find a mutually satisfactory solution during the consultation stage, the complaining party may submit a request for the establishment of a Panel and has the right to present the complaint before a Panel of 03 people. Based on the complaints and arguments of the complainant, the responses and counter-arguments of the respondent, the Panel will make findings of fact and law to assist the parties in resolving the dispute. If the Panel concludes that there is a violation of the WTO, the Panel will make recommendations to the respondent to change the disputed measures to bring them into conformity with the WTO.

Establishment of a Panel

A request for the establishment of a Panel must be made in writing and submitted to the DSB, which will decide on the establishment of a Panel. Thanks to the principle of consensus, the complainant's right to resolve the dispute by means of a panel is virtually guaranteed.[20]

To assist the parties in selecting panel members, the Secretariat maintains a list of experts (governmental or non-governmental) who meet the qualifications required to serve on the Panel. WTO members may periodically nominate candidates for this list, together with relevant information on their expertise in the field of international trade, and the DSB shall decide whether to add them to the list. The list shall specify the area of ​​expertise or experience in which the candidate has experience.[21]

In disputes between developing and developed members, the panel must include at least one developing member if the developing member so requests (Article 8.10 DSU).

Panel members, if not appointed by the parties within 20 days of the decision to establish a panel, shall be appointed by the Director-General of the WTO from among government officials or recognized experts in the field of international trade law and policy.[22] The difficulty in reaching consensus on the composition of a panel is partly due to the fact that Article 8.3 of the DSU stipulates that nationals of the parties to the dispute and Third Parties may not serve as panel members in the dispute unless the parties to the dispute agree[23], while in practice the experts with the most experience in dispute settlement are often nationals of the countries that are involved in dispute settlement cases. Therefore, the pool of suitable panelists is very limited, especially in the context of increasing disputes and increasing number of third parties.

In cases where several members request the establishment of a panel to examine the same issue (for example, a trade measure of a member is opposed by many other members), the DSB may consider establishing a joint panel. If separate panels must be established in this case, these panels may have the same members and the timetable will be determined in a harmonized manner so that these members can function most effectively.[24]

Panel proceedings and decisions

Panel procedures are provided for in Article 12 of the DSU. The Panel, after consulting the Parties concerned, shall determine a specific timetable for the first hearing.[25] In this hearing, the Parties to the dispute present written explanations of the case and related arguments, and the members participating as third parties also present their views on the case. Then, in the second hearing, the Parties to the dispute present their opinions and answer the Panel's questions (oral hearings), this session does not have the participation of third parties. After the second hearing, the Panel drafts and sends the Summary of the Dispute part of the report to the Parties for their comments within a certain period of time. Based on these comments, the Panel issues an Interim Report (describing the case, the Panel's arguments, and conclusions). The Parties comment on this Report. If requested, the Panel may hold an additional meeting to review the overall issues involved. The Panel then drafts the Official Report. Usually, the content of the Official Report is not much different from the Interim Report. The formal report is first sent to the parties to the dispute (usually in English), then translated into French and Spanish, circulated to all WTO members, and forwarded to the DSB for adoption.[26]

Adoption of the Panel Report

The Panel Report is circulated to all WTO Members and adopted by the DSB within 60 days[27] from the date of circulation of the Report to the Members, unless a disputing Party decides to appeal or the DSB unanimously vetoes the Report (the disputing Parties and other WTO Members have the right to make written objections to the Panel Report, with reasons, no later than 10 days before the DSB meets to adopt the Report).[28]

The Panel Report is in writing and must include the following: a description of the facts of the case, a report on the application of WTO provisions in the relevant matters, conclusions and recommendations, and the grounds for such conclusions and recommendations.[29]

The period from the establishment of the Panel to the DSB's consideration and issuance of the Report shall not exceed 9 months. In the event that the Panel is granted an extension of the time limit for completing the Final Report, the extension (not exceeding 3 months) will be added to the above-mentioned time limit.[30]

iii. Appeal procedure

Once the Panel has issued its Report, the complainant and the respondent in the case may appeal part or all of the Panel Report to the Appellate Body (about 2/3 of all WTO dispute settlement cases reach this stage).[31] Since the subject of appeal in this appeal procedure is the Panel Report, a disputing party may be both the complainant and the respondent at this stage. For example, in the Panel Report, which raises 10 legal issues, disputing party A may appeal issues 1, 2, 3 and become the complainant in the appeal of these 3 issues, then disputing party B becomes the respondent in the appeal of these 3 issues. However, at the same time, disputing party B can also appeal issues 4, 5, 6 in the Panel Report, in which case party B is the plaintiff and party A is the defendant in the appeal of issues 4, 5, 6. Thus, in the appeal procedure, party A and party B are both plaintiff and defendant.

Unlike disputing parties, members participating as third parties in the case do not have the right to appeal under the appeal procedure. However, during the working process of the Appellate Body, third parties also have the right to submit written opinions or make oral presentations at the meeting of this body like disputing parties.[32]

The Appellate Body only considers the legal issues raised in the Panel Report and the legal interpretations developed by the Panel. The Appellate Body consists of 7 Members. According to Article 17.2 of the DSU, each case will be considered by 3 out of 7 Members. The members of the Appellate Body are elected by the DSB on the basis of consensus. The Appellate Body operates on the principle of “collectivity”, which is reflected in the fact that the appeal of each case will be discussed by all members of the Appellate Body before the establishment of the Panel (3 Members) to consider the case and the Panel will consult with all members of the Appellate Body before making a report. The Appellate Body shall issue its Report within 60 days from the date of the appeal (in case of request for extension, it can be extended by another 30 days but the DSB must be informed of the reasons).[33] This Report may uphold, modify or reverse the issues and legal conclusions of the Panel, but may not do anything else.[34] The Parties have no right to object to this Report. The Appellate Body report is submitted to the DSB in the form of a joint report, with individual independent opinions of the Member hearing the case (if any) included in the report, but it is rare for the members of the Appellate Body to have different opinions. The DSB adopts the Appellate Body report within 30 days of its circulation to all members unless the DSB unanimously vetoes it. [35] Currently, the WTO Appellate Body is “frozen” in its activities due to the expiration of the term of its Members and the United States blocking the appointment of Appellate Body members, arguing that some related issues need to be reformed.

iv. Implementation of the ruling

Once the Panel Report or, in the case of an appeal, the Appellate Body Report is adopted by the DSB, the dispute moves to the implementation stage by the parties under the supervision of the DSB. Normally, the WTO Member whose measure is found to be inconsistent with the WTO will be given a “reasonable period of time” to implement the recommendations and conclusions of the Panel and the Appellate Body [36].

If the respondent implements the ruling and the implementation is challenged by the complainant, an implementation panel composed of the members of the original panel will be established to determine whether the implementation is WTO-consistent. If the respondent fails to implement, the complainant may apply reparations or countermeasures. However, these measures do not terminate the obligation of the non-compliance Party to implement the recommendations.[37]

If the Parties fail to reach agreement on the appropriate level of compensation or retaliation, the level shall be determined by the original Panel members acting as arbitrators.