Thursday, April 26, 2012

WTO dispute settlement - Justice delayed is justice denied?

The Dispute Settlement Mechanism of the WTO has been heralded as one of the cornerstones of the multilateral trading system ushering in a rule based system of international trade law governance. Rachel Brewster in this article in the  George Washington Law Review interestingly discusses the limitations of the DSM of the WTO so far as it relates to the inefficiencies of obtaining a quick and sufficient remedy. The article explains in detail the lengthy process of DSM adjudication involving delays as well as the remedy gap in terms of the remedy not being retrospective and unconditional.
"Member states understand that they can violate WTO rules without facing any trade consequences so long as they withdraw the measure at the end of the adjudication process.  Even when the member state does not simply intend to withdraw the measure once the issue is litigated, the remedy gap produces odd incentives. Trade retaliation, once applied, is only prospective. As a result, a respondent state has an incentive to drag out dispute resolution for as long as possible to lower the overall sanctions it will bear from a breach."
The remedy gap has serious implications for the WTO's effectiveness as an arbiter of trade disputes in a predictable manner. The author suggests three amendments to the existing procedures:

1. Retrospective and unconditional retaliation
2. Preliminary Injunction
3. Sequencing the remedy arbitration parallelly with the compliance arbitration

I found the conclusion rather pertinent int he context of the increasing use of the DSM as a tool by countries to further their legitimate domestic interests. 
"The WTO Dispute Settlement Understanding was born out of a compromise between states with different goals for the institution. A number of states wanted a system of arbitration that would quickly hear complaints and authorize trade retaliation. Others were less interested in establishing a rigorous adjudicatory system than in fashioning a multilateral settlement system as a means of curbing unilateral adjudication and enforcement of trade rules. The current remedy regime reflects these mixed motives. The DSU provides for retaliation only if the violation is not cured by the end of the dispute resolution process, and then only prospectively. While this design limits trade retaliation, it also creates a de facto escape clause that permits states to violate trade rules.

The remedy gap has significant detrimental effects. Most obviously, it creates a loophole in trade obligations. States can maintain policies that violate trade rules for several years without facing any retaliation. In addition, the remedy gap has a counterproductive effect on settlement negotiations because it gives respondent states an incentive to drag out dispute resolution as long as possible. It can also encourage complaining states to act outside of the WTO framework. States that are dissatisfied with the available remedies may resort to unilateral sanctioning and thereby undermine the authority of the institution. This last issue is of growing importance as the dispute resolution process at the WTO grows progressively longer. States’willingness to continue using the DSU as the exclusive means of dispute resolution in trade law depends on the institution’s ability to offer prompt and effective resolution of complaints. The greater the remedy gap becomes, the greater the pressure to act outside the WTO framework. A preliminary injunction is the most suitable remedy for closing this gap because it targets the  current government in the respondent state and maintains the link between retaliation and government noncompliance with WTO rulings."
With growing integration into the global economy, more developing countries will start using the DSM to seek legitimate rights under the multilateral trading system. It is absolutely essential for the adjudicating system to redress grievances in a timely, efficacious and just manner. National judicial systems the world over are plagued with considerable delay in completion of adjudication processes. Similar delays in the international trade arena can spell doom for a rule based system. Delays in settling disputes can be detrimental to the overall growth of trade with reliance on a rule based system wavering and unilateral decisions gaining prominence. This would not augur well for the system as a whole.

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