THIRD PARTY INTERVENTION IN THE WTO DISPUTE SETTLEMENT INTERNATIONAL EXPERIENCES AND LESSONS FOR VIETNAM

LIST OF ABBREVIATIONS 1 WTO World Trade Organization 2 GATT General Agreement on Tariffs and Trade 3 DSM Dispute Settlement Mechanism 4 DSU Dispute Settlement Understanding 5 ICJ Interna

MINISTRY OF EDUCATION AND TRAINING

FOREIGN TRADE UNIVERSITY

DISSERTATION

THIRD PARTY INTERVENTION IN THE WTO DISPUTE SETTLEMENT: INTERNATIONAL EXPERIENCES AND LESSONS

FOR VIETNAM

Major: International Trade Policy and Law

Full name: Hoang Hai Van

MINISTRY OF EDUCATION AND TRAINING

FOREIGN TRADE UNIVERSITY

DISSERTATION

Third party intervention in the WTO dispute settlement: International experiences and lessons for Vietnam

Major: International Trade Policy and Law

Full Name: Hoang Hai Van

Supervisor: A Prof Ho Thuy Ngoc

Ha Noi - 2016

DECLARATION OF AUTHORSHIP

I, Hoang Hai Van declare that the dissertation with the title below and the work presented in it are my own and has been generated by me as the result of my own original research with the supervision of A Prof Ho Thuy Ngoc:

Third party intervention in the WTO dispute settlement: International experiences and lessons for Vietnam

- Where I have consulted the published work of others, this is always clearly attributed;

- Where I have quoted from the work of others, the source is always given With the exception of such quotations, this thesis is entirely my own work;

- I have acknowledged all main sources of help;

- Where the thesis is based on work done by myself jointly with others, I have made clear exactly what was done by others and what I have contributed myself;

TABLE OF CONTENTS

CHAPTER 1- INTRODUCTION 1

CHAPTER 2 – LITERATURE REVIEW 6

2.1 Overview of WTO Dispute Settlement mechanism in general and with the participation of third party 6

2.1.1 WTO Dispute Settlement Mechanism in general 6

2.1.1.1 General Facts 6

2.1.1.2 The principles of WTO Dispute Settlement 15

2.1.1.3 The process of WTO Dispute Settlement 17

2.1.2 WTO Dispute Mechanism with the participation of third party 24

2.1.2.1 The procedure to become a third party and the rights of third party in DSM 24

2.1.2.2 The participation of developed countries, developing countries and least developing countries as third parties in WTO DSU 25

2.2 The advantages and disadvantages when joining as a third party in WTO Dispute Settlement 32

2.2.1 The Advantages of joining as a third party in WTO Dispute Settlement 32 2.2.2 The Disadvantages of joining as a third party in WTO Dispute Settlement 34

2.3 The influence of the third party invention on WTO Dispute Settlement Mechanism 35

2.3.1 Lower the possibility of early settlement and raising the cost of settlement 36

2.3.2 Decrease the discriminatory settlement between complainants and defendants 37

2.3.3 Lower the winner's pay-off and raising the loser's payoff 38

2.4 International Experiences of active countries in joining WTO Dispute Settlement as a third party 40

2.4.1 China experiences 41

2.4.1.1 Economy and international policy characteristics 41

2.4.1.2 China and WTO Dispute Settlement 44

2.4.1.3 The participation of China in WTO as third party 47

2.4.2 Thailand experiences 50

2.4.2.1 Economy and international policy characteristics 50

2.4.2.2 Thailand and WTO Dispute Settlement 53

2.4.2.3 The participation of Thailand in WTO Dispute Settlement as Third Party 56

2.4.3 India experiences 57

2.4.3.1 Economy and international policy characteristics 57

2.4.3.2 India and WTO Dispute Settlement 61

2.4.3.3 The participation of India in WTO as third party 62

CHAPTER 3 – FINDINGS 67

3.1 The participation of Vietnam in WTO Dispute Settlement as a third party 67

3.2 Impacts on Vietnam when joining WTO Dispute Settlement as a third party 70

3.2.1 Positive impacts on Vietnam when joining WTO Dispute Settlement as the third party 70

3.2.1.1 Enhance the legal capacity of the country 70

3.2.1.2 Gain public benefits under the principles of Most-Favored-Nation 71 3.2.2 Negative impacts on Vietnam when joining WTO Dispute Settlement as the third party 73

3.2.2.1 Possible Trade Cross-Retaliation 73

3.2.2.2 Resource requirements 73

3.3 Lessons for Vietnam when joining WTO Dispute Settlement as a third party 74

3.3.1 Government perspectives on the active participation as a third party 74 3.3.2 Develop human resource and ad hoc agencies devoting to WTO Dispute

3.3.4 Enhance the cooperation between governmental department and private

sectors 78

3.3.5 Mobilize the resources outside the country 80

CHAPTER 4 – CONCLUSION 81

ANNEX A 84

ANNEX B 91

ANNEX C 93

ANNEX D 95

BIBLIOGRAPHY 101

LIST OF TABLES

Table 1: WTO members involved in disputes, 1995 to 2015 8

Table 2: Request for consultations in 2015 9

Table 3: Active appeals and panels as of 31 December 2015 13

Table 4: Time Frame of WTO Dispute Settlement Process 22

Table 5: China Economy Data 42

Table 6: Cases involving as a third party, 1995-2015 45

Table 7: Dispute cases involving China 1995 – 2016 47

Table 8: Indicators of Thailand, from 2011-2014 52

Table 9: Dispute Settlement involving Thailand 54

Table 10: Cases involving Thailand as the complainants, 1995-2015 55

Table 11 : Cases involving Thailand as defendants, 1995-2015 56

Table 12: Economic Facts of India 59

Table 13: Dispute cases involving India 63

Table 14: Disputes involving Vietnam as third Party 68

LIST OF FIGURES Figure 1: WTO agreements referred to in requests for consultations, 1995-2005 (number of times) 10

Figure 2: Dispute Settlement Procedure 23

Figure 3: Participation of Advanced Economies 28

Figure 4: Participation of developing countries as third parties 30

Figure 5: The participation of least developed countries as third parties 31

Figure 6: The most active members involving in WTO dispute settlement, 1995-2015 40

LIST OF ABBREVIATIONS

1 WTO World Trade Organization

2 GATT General Agreement on Tariffs and Trade

3 DSM Dispute Settlement Mechanism

4 DSU Dispute Settlement Understanding

5 ICJ International Court of Justice

6 The UN The United Nation

7 TRIPS The Agreement on Trade-Related Aspects of

Intellectual Property Rights

8 GATS The General Agreement on Trade in Services

11 IMF International Monetary Fund

12 FDI Foreign Direct Investment

13 ACWL Advisory Centre on WTO Law

CHAPTER 1- INTRODUCTION

Overview

World Trade Organization (WTO) was officially established after the date of January 1st 1995 as a result of the Uruguay Round (1986 to 1995) with the predecessor the General Agreement on Tariffs and Trade (GATT 1947) WTO is considered as a significant success in the development of legal framework in international trade of the twentieth century with a massive system of treaties and agreements, the list of tariff concessions which regulate the commercial rights and obligations of the member states With the ambition of accelerating the process of international trade liberalization and settling all the conflicts among member states

of multilateral trade, the operation of WTO has had a huge effect on the long-term future of the world economy As calculated, around 95% of commercial activities

in the world nowadays are governed by the Agreement of this Organization

To ensure the full implementation of the Agreement, WTO dispute settlement mechanism (DSM) was established This mechanism is the realization of the legal trend of the dispute settlement in international trade today, gradually replacing the old dispute resolution method which was effected by politics and diplomacy This dispute settlement was the successor to the provisions on dispute settlements which had been promoting positive effects in 50 years of the history of the GATT 1947 Learning from the shortcomings of the old mechanism, some basic improvements in procedures have been included in the new mechanism, a significant contribution in improving the judicial nature of this procedure as well as enhancing the binding decisions of the dispute resolution

One of countries the positive changes of the DSM of the WTO is a more active involvement of developing countries (Nguyen Tien Vinh, Foreign experience and the enhancing of the effective participation of Vietnam in the Dispute Settlement Mechanism of the World Trade Organization, 2012) Within 47 years of existence

the statistics of WTO, by the end of 2015, 185 out of more than 500 requests for consultations were conducted by developing countries, equivalent to 37% of all requests At first glance, this figure shows that the difference does not really matter compared to the previous situation of GATT However, if the analysis in each divided stage, probably we will see more clearly its significant meaning In particular, in the first 5 years of the WTO, from 1995 to 2001, on a total of 219 requests for consultations, there were 56 requests made by developing countries, accounting for 25.6% In the next 5 years, from 2001 to 2006, in the context of the total number of disputes dropped to 116 cases, the number of lawsuits started by developing countries was 59, equivalent to 50.9% In the last 10 years, from 2006 to

2010, when the total number of disputes continues to drop to 83 cases, the number

of cases this kind of country was still 42, equals to 50.6% (WTO, Annual Report 2015) The figure of this more than 50% proportion is significantly encouraging

In other aspect, the dispute settlement is usually known as the legal discussion between two parties, the defendant and plaintiff However there is a fact that these two parties seldom negotiate alone, there exists the participation of one or several other members who are willing to be involved and influence the outcome of the resolution (Marc L Busch and Eric Reinhardt, Three is a Crowd, 2006) Until the 1970’s, in the dispute United Kingdom—Dollar Area Quotas, third parties first participated in the panel procedure instigated by GATT Council However it was not officially noticed until the insurance of the Understanding on Notification, Consultation, Dispute Settlement and Surveillance (hereinafter “1979 Understanding”) From then, this kind of dispute resolution has took three-fifth of the whole number of dispute settlement, which proves that the popularity of third parties’ participation on WTO

After 9 years of WTO membership, Vietnam had an important beginning in using the dispute settlement mechanism of the WTO to protect the rights and interests of its enterprises in international trade: On the day of the 1st of February

2010, the Government of Vietnam set a very first step in its WTO mission by sending a request for consultations to the US government related to the anti-dumping measures on products frozen warm water shrimp imported from Vietnam

From then, Vietnam seemed to realize the importance of using WTO Dispute Settlement Mechanism as an effective measures to protect the interests of Vietnam

in international trade relations On the other hand, the use of this mechanism as a ddefendant or plaintiff requires an abundance of human resources, experiences as well as financial support Meanwhile the participation as a third party is very noticeable because it will be an opportunity to learn and accumulate lessons and experience in how to take part in a WTO dispute settlement Moreover, although not directly involved in the settlement, Vietnam can gain some benefits from the outcomes of a settlement thanks to the non-discrimination principle of Most Favoured Nation

Rationale of the topic

It cannot be denied that being a developing country, as well as the fact that compared with many other members of WTO, Vietnam is rather weak and short in dispute settlement experience, it is necessary for Vietnam to pay more attention in enhancing the ability and capability in disputing a settlement, and joining as a third party in WTO dispute settlement is one of them

Therefore, the purpose of this paper is that, through the analysis about WTO DSM in general and third party intervention in WTO DSM in particular, in addition

to consider the experiences of some countries, identify and withdraw the lessons for Vietnam in how to be more effective in using DSM and protecting its benefits

Research questions

In alignment with my interest in studying lessons for Vietnam in joining as a third party in WTO dispute resolution, this paper contributes to the research by answering the following research questions

The first question which should be answered is what the WTO DSM is and how a third party can intervene in this mechanism To exactly understand this issue, WTO Agreements and Dispute Settlement Understanding are the most reliable information sources to know how the DSM works as well as the rights and

With the participation of the third party, the outcome of the dispute settlement

is more likely to change compared with the time there are only two parties in the resolutions Moreover, by intervening the settlement, a third party holds an opportunity to enjoy several benefits in both public and private concession Understanding more about these issues is the second point which will be discussed

in this paper

More than 20 years of operation must have seen the success of many countries

in using DSM to protect their rights and interests in international trade China, Thailand and India, which have the similar conditions as Vietnam, are all very active in this kind of settlement and worth being considered as examples for Vietnam This paper also analyses these countries to see what make them so successful in WTO DSM

After considering examples of other countries, parallel with the factual situation of Vietnam, the most essential question which should be withdrawn from this paper is the lessons for Vietnam to have more efficiency in raising capacity in WTO dispute settlement

Methodology

Any analysis of this paper will have to take account of two main methodology First, the factual record of dispute cases (Who was involved, who began each case and against whom? Who participated as the third party and what were the results?)

as well as the previous researches around the major issues of WTO DSM This kind

of methodology which is called Desk Research will help us have the basic understanding about DSM and give us the foundation for withdrawing findings for the case of Vietnam Second, although the invention of third party is not so fresh, not so many public research discussing about it At this time, opinions and comments of several professors who gained a lot of experiences in WTO for comments and opinions are very essential This paper will use them as the reliable reference to analyse this topic It means that Expert Methodology will be used in this paper

Scope of Research

This paper will discuss around the overview information of the WTO as well

as its dispute settlement such as the general facts about WTO, the principles and process of WTO DSM However, it will analyse more detailed about third party intervention in WTO settlement Talking about this intervention, the paper will analyse the procedures to become a third party and the rights of third party in the dispute proceedings, the advantages and disadvantages of joining DSM as a third party Moreover, the influence of third party intervention on WTO DSM is also an important aspect to research in this paper

To access the practical view on third party intervention in DSM, this paper will consider some international experiences It picks up only 3 examples to research for this issue which are China, Thailand and India The reasons of choosing these members are that they are one of the most active members in joining WTO DSM as third party, besides they hold the similarities in trade policy as well as the economic characteristics as Vietnam

After going through all above research, the paper will withdraw several findings implicating to Vietnam situation and lessons for Vietnam to have more effective involvement in DSM as third party

Structure of the paper

With all of the above reasons and background, this paper will be divided into three major parts as below:

Chapter 1: Introduction

Chapter 2: Literature review

Chapter 3: Findings

Chapter 4: Conclusions

CHAPTER 2 – LITERATURE REVIEW

2.1 Overview of WTO Dispute Settlement mechanism in general and with the participation of third party

2.1.1 WTO Dispute Settlement Mechanism in general

2.1.1.1 General Facts

Formed on the basic of Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding – DSU), the dispute settlement mechanism is one of the major successes of the Uruguay Round which led

to the birth of World Trade Organization Until now, Dispute settlement is the central pillar of the multilateral trading system, and the WTO’s unique contribution to the stability of the global economy Joining the DSM allows the member states to protect their policies and measures and commercial interests, fight against the principle violation made by other WTO member countries That the DSM be used effectively is the expression as well as conditions for ensuring the full participation, integration and efficiency of a country into the multilateral trading system of the WTO

In fact, the complexity of the rules, procedures and legal processes which is more and more increasingly strengthen the mechanisms, especially the existence of many of the provisions which are detrimental to the developing countries, least developing countries, small countries and new entrants are and will continue to be the significant obstacle to the participation of these countries (Nguyen Tien Vinh, 2012) Currently, besides the more active participation and the effectiveness of a humble number of developing countries, the majority of developing and least developing countries remained outside the WTO DSM

A study showed that from 1995 to the end of 2015, The total of 500 disputes over the 20-year history of the WTO contrasts with the total of 300 disputes brought under the dispute settlement system of the General Agreement on Tariffs and Trade (GATT) — the predecessor to the WTO — over a period of 47 years (WTO, Annual Report 2015) “There is no doubt that the WTO dispute settlement system has served the membership extremely well,” said Director-General Roberto Azevêdo “It is a

system recognized the world over for providing fair, high quality results that respond

to both developing and developed members” Table 1 provides further information on the complainants and respondents involved in disputes since 1995

Developing country members initiated seven of the 13 new requests for consultations, the first stage in the disputes process, filed in 2015, compared with six requests initiated by developed countries Developing country members were the respondents in nine disputes and developed countries in four disputes Among the developing country members initiating disputes, Chinese Taipei initiated two dispute settlement proceedings during 2015 In one of the disputes, it has requested consultations with Indonesia regarding a safeguard measure imposed on imports of certain flat-rolled iron or steel products In a second dispute, it has requested consultations with India regarding anti-dumping duties imposed on imports of USB flash drives originating in Chinese Taipei Pakistan has requested consultations with South Africa regarding provisional anti-dumping duties on imports of Portland cement products from Pakistan Indonesia has commenced consultations with the United States over concerns about the imposition of anti-dumping and countervailing measures on certain coated paper products from Indonesia Also in

2015, Viet Nam requested consultations with Indonesia regarding a safeguard measure on imports of certain flat-rolled iron or steel products from Viet Nam Other active WTO members during 2015 included Japan, Russia and the United States, which have each initiated two disputes in areas ranging from measures imposed by Brazil that affect taxation and charges in the automotive sector and the electronics and technology industry (complaint by Japan) to measures adopted by Korea in the wake of the accident at the Fukushima Daiichi nuclear power plant Tables 2 and 3 provide further information on the complainants and respondents participating in consultations and on the active panels and appeals at the end of 2015

Table 1: WTO members involved in disputes, 1995 to 2015

Source: WTO Annual Report 2016

Table 2: Request for consultations in 2015

Source: WTO Annual Report 2016

The disputes at the WTO so far mainly relating to the traditional trade sectors (WTO, Annual Report 2015) Specifically, out of 500 requests for consultations carried out, up to 398 requests relating to the GATT, 112 requests relating to Anti-dumping Agreement and 108 requests relating to Subsidies and Countervailing Measures agreements at government level Along with the expansion of multilateral adjustment for the commercial sector from GATT to WTO, the WTO disputes arising becoming more and more diverse By the end of 2015, with the total number

number of disputes around these two agreements was not a large percentage, but they tended to be on the increase (see Figure 1)

Figure 1: WTO agreements referred to in requests for consultations, 1995-2005

(number of times)

Source: WTO, Annual Report 2015

Regular usage and obvious efficiency of WTO DSM, in comparison with GATT and other dispute settlement mechanisms (Nguyen Thi Thu Trang, Dispute Settlement Mechanism, 2010), can be explained by some major reasons:

Firstly, since it was founded in 1995 to present, WTO has become one of the global international institutions with the participation of almost all the countries in the world Looking back to the end of the GATT period, with 128 member countries

signed, the current number of WTO members are 164 countries with the more diversity of political systems, economic development levels The change in the number and composition of the Member States had a certain contribution to the increase in the disputes at the WTO in comparison to the previous period

Secondly, the process of trade liberalization since the Uruguay Round which led to the establishment of the WTO has made strides Besides the traditional areas

of trade in goods in GATT, the WTO had extended its area to the field of trade in services, intellectual property-related trade Even in the field of trade in goods, the WTO had also added important subjects such as trade in agricultural products, textiles and clothing into the multilateral framework Currently, about 30 agreements of all kinds, a series of decisions and thousands of page documents containing the commitment of Member States, we can say that the scope the WTO

is extremely large, referring to all aspects of trade activities of the country In particular, the birth of the WTO was marked as a shift in the quality of international trade legal framework: international regulations moved from being mentioned only the trade measures applied at the country border, to a deeper intervention on “non-border” policies and measures of the member states; from prohibiting the Member States to make a number of acts, specific trade measures, to asking the countries issuing policies, regulations and implementation of national trade measures in line with the WTO regulations It was the expansion of the scope, adjustment field and the change in the approach of the multilateral trade provisions had an important contribution to the increase in the number of disputes at the WTO

Thirdly, since coming into operation, the WTO DSM had been evaluated as a mechanism for resolving international disputes with many outstanding advantages not only when being compared to the GATT but also with others mechanisms Institutionally, the most important improvement was the creation of a permanent Appellate Body to review the legal issues which had been resolved by a Panel in case of Appellate request In terms of procedure, the order and stage, procedural

resolution process The changes of the DSU contributed mainly to the strengthening

of the legal element of the WTO DSM compared with the mechanism which mainly based on negotiation and diplomacy of GATT DSM successfully built up the trust

of the member countries, especially small and developing countries in proactively using DSM

Fourthly, in fact, the trend of a rapid increase in international trade disputes appeared immediately at the same time with Uruguay Round Since the WTO was established, this trend has continued to confirm that fact After several years of operation, even though the number of disputes tended to fall, however, if compared

to the GATT, it was still high DSM has been used as an alternative to solve the impasse between the Member States Moreover, some countries also want to take the dispute to be dealt with at the WTO to pressure, to influence the process of the Doha Negotiation Round In this context, the increase in WTO disputes tend to turn

it head to an increase

Table 3: Active appeals and panels as of 31 December 2015

Source: WTO, Annual Report 2015

2.1.1.2 The principles of WTO Dispute Settlement

WTO DSM was established based on 4 major principles: equitable, fast,

effective, and mutually acceptable (World Trade Organization, Understanding the

WTO, Chapter 3: Dispute Settlement) Disputes in the WTO are essentially about broken promises WTO members have agreed that if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally That means abiding by the agreed procedures, and respecting judgments

Equitable

The outcome of the dispute resolution process is the decision and recommendations of the Dispute Settlement Body Under the provisions of the DSU, recommendations and decisions must not increase or decrease the rights and obligations of the parties which are regulated in the relevant agreements (Clause 2, Article 3 of the DSU) At the same time the decision on the dispute must not resolved eliminate or reduce the benefits that any Member may hold in the relevant agreement (Clause 5, Article 3 of the DSU)

Article 3.2 of the DSU: “The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system The Members recognize that it serves to preserve the rights and obligations

of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements”

Article 3.5 of the DSU: “All solutions to matters formally raised under the consultation and dispute settlement provisions of the covered agreements, including arbitration awards, shall be consistent with those agreements and shall not nullify

or impair benefits accruing to any Member under those agreements, nor impede the

Fast

Essential issues for the effective implementation of the WTO functions and maintenance of the appropriate balance between the rights and obligations of Members lies in the quick resolution of disputes (Article 3.3 of the DSU) So that once the benefits directly or indirectly of Members under the provisions of the relevant agreement are violated, the benefits needs to be protected quickly

Article 3.3: “The prompt settlement of situations in which a Member considers that any benefits accruing to it directly or indirectly under the covered agreements are being impaired by measures taken by another Member is essential

to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members”

(Source: Understanding on Rules and Procedures Governing the Settlement of Disputes)

Effective

To protect the rights of the parties to the dispute, Members should express their determination to enhance the effectiveness in resolving the dispute This view was confirmed in Article 4.1 of the DSU, according to which the effectiveness is defined in the consultation stage, the first procedure in the process of dispute resolution

Article 4.1: “Members affirm their resolve to strengthen and improve the effectiveness of the consultation procedures employed by Members”

(Source: Understanding on Rules and Procedures Governing the Settlement of Disputes)

Mutually acceptable

Before requesting a dispute, the plaintiff need to review the conditions of whether their complaints can come into an agreement or not Because "a solution where the disputing parties can accept and conform to the relevant agreements will prevail" (Article 3.7 of the DSU DSU)

Article 3.7: “Before bringing a case, a Member shall exercise its judgement

as to whether action under these procedures would be fruitful The aim of the dispute settlement mechanism is to secure a positive solution to a dispute A solution mutually acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be preferred In the absence of a mutually agreed solution, the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements The provision of compensation should be resorted to only if the immediate withdrawal of the measure is impracticable and as a temporary measure pending the withdrawal of the measure which is inconsistent with a covered agreement The last resort which this Understanding provides to the Member invoking the dispute settlement procedures

is the possibility of suspending the application of concessions or other obligations under the covered agreements on a discriminatory basis vis-à-vis the other Member, subject to authorization by the DSB of such measures”

(Source: Understanding on Rules and Procedures Governing the Settlement of

Disputes)

In addition, WTO still accepts GATT 1947’s principle in settling the disputes such as: maintenance of proper balance between the rights and obligations, settlement disputes in good faith, prohibit unilateral application of retaliatory measures without the permission of the WTO, the most essential principles for the

existence of international trade (Nguyen Thi Thu Trang, Dispute Settlement Mechanism, 2010) However, these principles do not prevent the members from

unilaterally redressing the violation of other member under WTO laws Knowing this point, many advanced countries like US, EU still some private law such as Super 301 in US Commercial Law, or 384/96 regulation of EU to retaliate other members

Dispute Settlement Body has the sole authority to establish “panels” of experts to consider the case, and to accept or reject the panels’ findings or the results of an appeal (World Trade Organization, Understanding the WTO, Chapter 3: Dispute Settlement) It monitors the implementation of the rulings and recommendations, and has the power to authorize retaliation when a country does not comply with a ruling The WTO Dispute Settlement has four major stages:

1 First stage: Consultation (up to 60 days) Before taking any other actions

the countries in dispute have to talk to each other to see if they can settle their differences by themselves If that fails, they can also ask the WTO director-general

to mediate or try to help in any other way

2 Second stage: Panel proceedings (up to 45 days for a panel to be

appointed, plus 6 months for the panel to conclude) If consultations fail, the complaining country can ask for a panel to be appointed The country “in the dock” can block the creation of a panel once, but when the Dispute Settlement Body meets for a second time, the appointment can no longer be blocked (unless there is a consensus against appointing the panel)

Officially, the panel is helping the Dispute Settlement Body make rulings or recommendations But because the panel’s report can only be rejected by consensus

in the Dispute Settlement Body, its conclusions are difficult to overturn The panel’s findings have to be based on the agreements cited The panel’s final report should normally be given to the parties to the dispute within six months In cases of urgency, including those concerning perishable goods, the deadline is shortened to three months

The agreement describes in some detail how the panels are to work The main stages are:

• Before the first hearing: each side in the dispute presents its case in writing

to the panel

• First hearing: the case for the complaining country: the complaining

country (or countries), the responding country, and those that have announced they have an interest in the dispute, make their case at the panel’s first hearing

• Rebuttals: the countries involved submit written rebuttals and present oral

arguments at the panel’s second meeting

• Experts: if one side raises scientific or other technical matters, the panel may

consult experts or appoint an expert review group to prepare an advisory report

• First draft: the panel submits the descriptive (factual and argument) sections

of its report to the two sides, giving them two weeks to comment This report does not include findings and conclusions

• Interim report: The panel then submits an interim report, including its findings

and conclusions, to the two sides, giving them one week to ask for a review

• Review: The period of review must not exceed two weeks During that time,

the panel may hold additional meetings with the two sides

• Final report: A final report is submitted to the two sides and three weeks

later, it is circulated to all WTO members If the panel decides that the disputed trade measure does break a WTO agreement or an obligation, it recommends that the measure be made to conform to WTO rules The panel may suggest how this could be done

• The report becomes a ruling: The report becomes the Dispute Settlement

Body’s ruling or recommendation within 60 days unless a consensus rejects it Both sides can appeal the report (and in some cases both sides do)

3 Third stage: Appellate review proceedings Either side can appeal a

panel’s ruling Sometimes both sides do so Appeals have to be based on points of law such as legal interpretation — they cannot re-examine existing evidence or examine new issues Each appeal is heard by three members of a permanent seven-member Appellate Body set up by the Dispute Settlement Body and broadly representing the range of WTO membership Members of the Appellate Body have four-year terms They have to be individuals with recognized standing in the field

maximum of 90 days The Dispute Settlement Body has to accept or reject the appeals report within 30 day or/and rejection is only possible by consensus

4 Forth stage: Implementation and enforcement

If a country has done something wrong, it should swiftly correct its fault And

if it continues to break an agreement, it should offer compensation or suffer a suitable penalty that has some bite

Even once the case has been decided, there is more to do before trade sanctions (the conventional form of penalty) are imposed The priority at this stage

is for the losing “defendant” to bring its policy into line with the ruling or recommendations The dispute settlement agreement stresses that “prompt compliance with recommendations or rulings of the DSB [Dispute Settlement Body] is essential in order to ensure effective resolution of disputes to the benefit of all Members” If the country that is the target of the complaint loses, it must follow the recommendations of the panel report or the appeal report It must state its intention to do so at a Dispute Settlement Body meeting held within 30 days of the report’s adoption

If complying with the recommendation immediately proves impractical, the member will be given a “reasonable period of time” to do so If it fails to act within this period, it has to enter into negotiations with the complaining country (or countries) in order to determine mutually-acceptable compensation — for instance, tariff reductions in areas of particular interest to the complaining side

If after 20 days, no satisfactory compensation is agreed, the complaining side may ask the Dispute Settlement Body for permission to impose limited trade sanctions (“suspend concessions or obligations”) against the other side The Dispute Settlement Body must grant this authorization within 30 days of the expiry of the

“reasonable period of time” unless there is a consensus against the request

In principle, the sanctions should be imposed in the same sector as the dispute

If this is not practical or if it would not be effective, the sanctions can be imposed in a different sector of the same agreement In turn, if this is not effective or practicable and if the circumstances are serious enough, the action can be taken under another

agreement The objective is to minimize the chances of actions spilling over into unrelated sectors while at the same time allowing the actions to be effective In any case, the Dispute Settlement Body monitors how adopted rulings are implemented Any outstanding case remains on its agenda until the issue is resolved

The various stages a dispute can go through in the WTO At all stages, countries in dispute are encouraged to consult each other in order to settle “out of court” At all stages, the WTO director-general is available to offer his good offices,

to mediate or to help achieve a conciliation Figure 2 describes precisely about how

a dispute is settled in WTO

The most striking features of the WTO dispute settlement system is the Short Time Frame within which the proceedings of both panels and Appellate Body must

be completed The time frame for consultations and implementation are also strictly regulated As per that time frame the panel proceedings should be completed within Nine months (Article 19 of the DSU) In effect, panel proceedings often exceed this time limit On an average, panel proceedings extend approximately to twelve months Appellate Body proceedings shall not exceed ninety days In practice, Appellate Body keeps this time limit No other international court or tribunal operates under severe time limits These time limits have been severely criticized as being, too short and demanding for both the parties to the dispute and the Appellate Body (see table 4)

Table 4: Time Frame of WTO Dispute Settlement Process

60 days Consultation, Mediation etc

45 days Panel set up and Panellists’ appointment

6 months Final Panel report to parties

3 weeks Final Panel report to WTO Members

60 days Dispute Settlement Body reports (if no

appeal) Total 1 year (without appeal)

60-90 days Appeal report

Total 1 year 3 months (with appeal)

30 days Dispute Settlement Body adopts appeal

report Total 1 year 3 months (with appeal)

15 months Time to implement (Maximum without

appeal)

Up to 18 months With appeal

Total = 2 year 6

Source: WTO Publication

Figure 2: Dispute Settlement Procedure

Source: WTO Publication

2.1.2 WTO Dispute Mechanism with the participation of third party

2.1.2.1 The procedure to become a third party and the rights of third party in DSM

As mentioned above, WTO dispute settlement starts when a party make a request for consultations, in which the complainant brings a case to defend a trade measure of another country, the defendant which they consider as a violation of WTO DSU These parties firstly are encouraged to use the negotiation method to reach a mutual agreement 51 percent of the cases are successful at this stage If a consultation does not work, the complainants can request a legal judgment which will be adjudicated by a “panel” composed of three, exceptionally five experts selected on an ad hoc basis If the decision of the Panel cannot satisfy either of the parties, the case can be appealed by one of them, yielding a ruling by WTO Appellate Body (Xiaoming Pan, Developing Countries Participating As Third Parties in the WTO Dispute Settlement, 2011)

The third party can originally take part in the dispute settlement process starting from consultation stage under article 4.11 of DSU, which gives rights to the parties which have substantial trade interest in the matter by notifying consulting members and the Dispute Settlement Body within 10 days since the request of consultation being made Article 10.2 states, “Any [WTO] member having a substantial interest in a matter before a panel and having notified its interest to the DSB shall have an opportunity to be heard by the panel and to make written submissions to the panel These submissions shall also be given to the parties to the dispute and shall be reflected in the panel report.”

The member should submit the request for consultation in writing and if the consulting member has an objection of such joining, it has to revert back in 7 days However even after 10 days, a request may still be considered If the request to join the dispute settlement proceeding is accepted, the third party will be granted the rights to:

- Be present in all substantive meetings

- Make written submissions prior to first substantive meeting

- Make oral statement and respond questions in first/each substantive meetings

- Be granted additional rights after agreements by parties in the settlement

If the case comes into the appeal stage, the DSU Article 17 gives third parties the reserved rights at the panel stage similar access to proceedings before the panel However, provisions for third party rights at the Appellate stage is very limited Article 17.4 mentions that third party doesn’t have rights to appeal and only the parties who took part in the previous panel stage therein can have right to join in Appellate Body proceeding According to the same article, a third party who are interested in joining in Appellate Body should notify its interests no later than 21 days of the filing of the Appeal And as the result, the third party still remains the right to be heard and to make written submission during Appellate stage There are only three types of third parties which can take part in in Appellate stage, the only difference is that whether those members file a written submission or notify the Secretariat of their intent to appear in the oral hearing and whether they want to affect the outcomes of the Appellate proceedings The first type is the countries who want to “actively” influence the result of the appellate review They need to provide all the legal and factual arguments in writing to support to their intent This kind of third party has to make an oral statement and/or respond the questions addressed to them The second type is the member who notifies the Secretariat of its intent to

“passively” appear at the oral hearing (Article 24.2 of the DSU) This kind of third party is free to decide whether it wishes to make oral statement or not The third kind is the one who takes neither of the above actions, but nontheless wishes to appear at the oral hearing

2.1.2.2 The participation of developed countries, developing countries and least developing countries as third parties in WTO DSU

The Participation of the Advanced Economies as Third Parties

Countries in Figure 3 are displayed in descending order of their frequency of

disputes as a complainant and 15 disputes as a respondent Third party participation covers a vast majority (78.2%) of its practice in the DSB This could be interpreted

as an evolution of the Japan’s “aggressive legalism” which described Japan’s strategies in the dispute settlement system of the GATT/WTO shifted to a more aggressive attitude towards using dispute settlement in late 1980s and 1990s (Saadia

M Pekkanen, Aggressive Legalism: The Rules of the WTO and Japan’s Emerging Trade Strategy,2002)

The EU is a frequent user in the DSB in terms of both participating as parties and third parties It has been present in a significant number of disputes and ranks No.2 of the total number of participations The EU is one of the most active third parties with a record of 104 disputes—the same with Japan In its absence as a complainant or respondent, nearly 85% of the cases, the EU was present as a third party Meanwhile, in contrast to Japan, the EU’s is evenly distributed Third party participation covers only 40.7 % of its practice

The US, as the most frequent user of the dispute settlement mechanism, has participated in 296 disputes—almost all the disputes going to the panel procedures The US participated in 97 disputes as a complainant, 113 disputes as a respondent and 86 as a third party Data has shown that in 99% cases where it was not parties, the US was a third party Also, interestingly, the same as the EU, utilization of the three forms of participation is more or less even: To file a case in the DSB, to defend its policies or measures and reserve rights of third parties in a dispute are free options It is true that appearing as a defendant is not a choice, but defending itself in the DSM seems available

The other countries, like Hungary, Poland and so on had very little experience

in the DSB prior to their joining the EU Except Hungary and Poland, the rest of countries were almost silent in the DSB

The participation of Developing countries as Third Parties

Developing countries in the WTO cover a wide range of countries that are at different development levels and thus have different legal capacities to participate in the DSB ((Xiaoming Pan, Developing Countries Participating As Third Parties in

the WTO Dispute Settlement, 2011) Figure 4 listed 78 developing countries in descending order of the number of cases where they participated as third parties Indicated by Figure 4, some of developing countries seem to share similar frequencies of presenting as third parties and also similar distribution between the choices of participating as parties and third parties Therefore, analyses will be adopted by dividing developing countries into several groups These groups include: Group1: China, Brazil, India and Mexico; Group 2: Thailand, Turkey, Argentina, Colombia and Chile; Group 3: Guatemala, Venezuela, Costa Rica, Honduras, Paraguay, Cuba, Ecuador, El Salvador, Nicaragua, Peru and Jamaica and Vietnam; Group 4: Pakistan, Philippines, Panama, and Indonesia; Group 5: Mauritius, Barbados, Cote d’Ivoire, Dominican Republic, Egypt, Saudi Arabia, Belize, Dominica, Fiji, Guyana, Kenya, Saint Kitts and Nevis, Saint Lucia, Sri Lanka, Swaziland, Trinidad and Tobago and Malaysia; Group 6: Bolivia, Cameroon, Ghana, Grenada, Kingdom of Bahrain, Kuwait, Saint Vincent& the Grenadines, Suriname and Zimbabwe Group 7: the other countries

The participation of Developing countries as Third Parties

Developing countries in the WTO cover a wide range of countries that are at different development levels and thus have different legal capacities to participate in the DSB Figure 4 listed 78 developing countries in descending order of the number

of cases where they participated as third parties Indicated by Figure 4, some of developing countries seem to share similar frequencies of presenting as third parties and also similar distribution between the choices of participating as parties and third parties Therefore, analyses will be adopted by dividing developing countries into several groups These groups include: Group1: China, Brazil, India and Mexico; Group 2: Thailand, Turkey, Argentina, Colombia and Chile; Group 3: Guatemala, Venezuela, Costa Rica, Honduras, Paraguay, Cuba, Ecuador, El Salvador, Nicaragua, Peru and Jamaica and Vietnam; Group 4: Pakistan, Philippines, Panama, and Indonesia; Group 5: Mauritius, Barbados, Cote d’Ivoire, Dominican Republic, Egypt, Saudi Arabia, Belize, Dominica, Fiji, Guyana, Kenya, Saint Kitts and Nevis,

Figure 3: Participation of Advanced Economies

Group 1 contains three of the “BRICs” plus Mexico and demonstrates large developing countries’ practice in the DSB These four countries have been active players among developing countries in terms of participating both as parties and third parties Among them, despite the fact that China is a new comer to the WTO,

78 disputes with third party participation is the same as India, ranking No.1 It covers 72.9% of its all participation This could partly explain its litigation strategies in the WTO (Andrew L Stoler, China’s Role in World Trade Organization and the Doha Round of Multilateral Trade Negotiations, 2006) Unlike China, India has been a more active complainant in the DSB Its third party participation covers 61.7% of all The cases where India participated as a third party indicate a wide spectrum: the respondents were various developed countries and developing countries Close to the amount of India’s third party participation, Brazil

has reserved its third party rights in 64 cases, taking up 62.15% of the total However, different from India, its third party participation focused on the cases where the US, the EU and China were respondents Plausibly, Brazil pays more attention to the trade policies of large trade participants even though its direct interests are not injured In addition to resorting to third party participation, Brazil has been the most active complainant among the four large developing countries and all other developing countries Although it participated in fewer disputes than the other three countries as a whole, Mexico has been an undoubtedly frequent user

of third party Its third party participation takes 61.1% of the total—close to the participation level of India and Brazil Its third party participation concentrates on the disputes where developed countries were respondents, even though it also shows keen interest in a few cases whose respondents were Chile, China and Philippines Group 2 comprises five countries that are not economically as large as the countries in Group 1 They have participated in similar numbers of disputes as a whole But Thailand, Turkey, and Colombia participated less as parties and have a high proportion of third party participation, 75%, 77.8% and 78.4% respectively Third party participation is a critical means for these countries to protect their interests In detail, Thailand has intended to join the disputes that challenged trade remedies and custom measures of developed countries, especially the US Concerning Turkey, it was interested in the cases related to TRIPs and trade remedy, whomever the respondent is Similar to Turkey, Columbia’s third party participation also demonstrated its interest in TRIPs and agriculture without targeting any particular respondent countries However, in contrast, the participation

of Argentina and Chile exhibited a more balanced strategy between joining as parties and third parties Third party participation covers 48.4% of Argentina and 53.1% of Chile’s total participation While Argentina seems interested in the disputes related to trade remedies and customs involving the US, the EU and China, Chile would claim third party rights in antidumping and agricultural

Figure 4: Participation of developing countries as third parties

The participation of least developed countries as third parties

Figure 5 manifests the situation of least developed countries in using the dispute settlement Among 32 countries, only 7 countries had experience in the DSB Bangladesh marked itself as the first and so far the only one of least developed countries to bring a case to the DSB The other 6 countries, such as Madagascar, Malawi, Tanzania, Senegal, Benin and Chad only participated in a few disputes as third parties The other countries in this group remain silent in the DSM

In the same box with small developing countries, LDCs are marginalized in the dispute settlement system

Figure 5: The participation of least developed countries as third parties

To be brief, the large trading Members, no matter whether they are in the advanced economy group or the developing country group, rank higher in terms of participation both as parties and third parties Although their rankings in third party

It shows that the less they participate in the DSB in the aggregate, the higher portion of third party participation For most of the small developing countries, acting as third parties has been the only way for them to participate effectively in the DSB The extreme case relates to least developed countries Taking up more than one fifths of the entire Membership of the WTO, the least developed countries group has been almost silent in the DSB It is true that there have been courageous attempts of LDCs to join as third parties

2.2 The advantages and disadvantages when joining as a third party in WTO Dispute Settlement

2.2.1 The Advantages of joining as a third party in WTO Dispute Settlement

Third party participation is considered nearly costless (Leslie Johns and Krzysztof J Pelcz, Overcrowding in WTO Dispute Settlement, 2011) If a country

is willing to take part in a dispute settlement process, it just needs to claim a substantial interest in the matter at the conflict topic, and then will be granted the rights to join in both consultation and litigation stages without bearing any expenses

of filing the documents and following complex procedures Moreover, a third party does not have to suffer from any financial pressure when following the disputes Compared with the defendant and the complainant, when a case actually starts, countries involved need to ensure the cost of gathering the evidence, filing the lawsuit, all the expenses in the consultation stage, the Dispute Settlement Body revision stage, and may be the Appellate Stage as well as all other procedures governed by DSU Finally, even if the dispute is resolved by a report by the Dispute Settlement Body, an important cost to control and evaluate the implementation of the report must be taken into account According to a calculation, from the time of

an official start, to the time of dispute settlement report is adopted, a WTO lawsuit may cost a party 500,000 US dollars This figure may be much higher, depending

on the complexity of the case, on the duration and the procedural stages a case has

to go through When evaluating the financial challenges in using DSM, many empirical studies have shown that there exist many countries who may waive the opportunities of using DSM, accept the existence of violated measures of other