Thursday, July 12, 2012

China "blocks" dispute panel constitution

The recent Dispute Settlement Body (DSB) meeting had an interesting development regarding China's "blocking" of the request by the U.S. and the EU for establishment of a panel in the "rare earths" export restriction case. Bloomberg Businessweek reported it here. The U.S. and EU had requested for setting up a Dispute Settlement Panel under the DSU against China. 

As reported in the WTO website:
"China, at the Dispute Settlement Body (DSB) meeting on 10 July 2012, said it was not in a position to accept the establishment of a panel requested by the United States, the European Union and Japan regarding its measures related to the exportation of rare earths, tungsten and molybdenum.
China said that its policies in question are aimed at protecting natural resources and achieving sustainable economic development. It said it was puzzled by the complainants’ initiation of the panel process as it has no intention of protecting its domestic industry through means that would distort trade. It added that at the present meeting, it was not in a position to accept the establishment of a panel.
The DSB deferred the establishment of a panel."
I was intrigued by the "blocking" of the request for setting up of a panel? Can a request for setting up of a panel be blocked at all? What are the preconditions for setting up of a panel? The "blocking" sounds similar to "maintainability" of a domestic judicial petition where jurisdiction or competence of the Court itself is questioned without going into the merits of the case.

The Agreement on  Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) deals with this issue.

Article 6 of the DSU states:
"  Article 6: Establishment of Panels 
1.         If the complaining party so requests, a panel shall be established at the latest at the DSB meeting following that at which the request first appears as an item on the DSB's agenda, unless at that meeting the DSB decides by consensus not to establish a panel.
2.         The request for the establishment of a panel shall be made in writing.  It shall indicate whether consultations were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly.  In case the applicant requests the establishment of a panel with other than standard terms of reference, the written request shall include the proposed text of special terms of reference."
A simple reading of this provision indicates that a panel "shall" be establishment at the DSB unless the DSB decides by consensus not to establish a panel. The other requirement is that of consultations. Read with Article 4 of the DSU, after a request for consultations and the process of consultations, a member can seek for establishment of a panel. Is China arguing on the merits of the case at the stage of initiation of the establishment of the panel? is it just another example of China innovatively interpreting the WTO rules to further its national interest? Is China's stand of non-establishment of a panel legally tenable? Is it just a matter of time before the panel is established? Are not constitutions of panels (after consultation) a non-contestable matter, unless it is decided so by consensus?

Will await the next meeting of the DSB in this matter. 


Anonymous said...


They are blocking the first Panel Request which is permitted under 6.1 of the DSU (and is standard practice).


Srikar said...

Thanks for sharing this T. I was only raising the issue that a plain reading of the provisions do not allow it. I was not aware that deferring a decision of establishment of a panel was standard practice.

Anonymous said...

I should have been clearer about my reading of 6.1 of the DSB.

6.1 requires compulsory panel establishment at the DSB meeting "following that at which the request first appears". By implication, 6.1 does not require panel establishment at the first DSB meeting where the panel request appears - i.e., it only requires it at the "following" meeting.

So, under 6.1, China can block the first panel request but can't block the second panel request.


Jayant Raghu Ram said...

The blocking of the establishment of the panel at the first meeting seems to be a remnant of the dispute settlement system during the GATT days. Since WTO DSS still emphasizes on settlement of disputes by diplomatic means at the outset before moving the battle to the adjudicatory forum, I understand the blocking stage is to give the disputing parties one last chance to settle the dispute amicably (diplomatically) before having the matter heard by a panel.

Srikar said...

Thanks Jayant. Looks like it is a mere formality.