Agreement Establishing the World Trade Organization
(Continued)
Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes
Article 20: Time-frame for DSB Decisions
Unless otherwise agreed to by the parties to the dispute, the
period from the date of establishment of the panel by the DSB
until the date the DSB considers the panel or appellate report
for adoption shall as a general rule not exceed nine months where
the panel report is not appealed or 12 months where the report
is appealed. Where either the panel or the Appellate Body has
acted, pursuant to paragraph 9 of Article 12 or paragraph 5 of
Article 17, to extend the time for providing its report, the additional
time taken shall be added to the above periods.
Article 21: Surveillance of Implementation of Recommendations
and Rulings
1. Prompt compliance with recommendations or rulings of the DSB
is essential in order to ensure effective resolution of disputes
to the benefit of all Members.
2. Particular attention should be paid to matters affecting the
interests of developing country Members with respect to measures
which have been subject to dispute settlement.
3. At a DSB meeting held within 30 days 12 after the date of
adoption of the panel or Appellate Body report, the Member concerned
shall inform the DSB of its intentions in respect of implementation
of the recommendations and rulings of the DSB. If it is impracticable
to comply immediately with the recommendations and rulings, the
Member concerned shall have a reasonable period of time in which
to do so. The reasonable period of time shall be:
(a) the period of time proposed by the Member concerned, provided
that such period is approved by the DSB: or, in the absence of such approval,
(b) a period of time mutually agreed by the parties to the dispute
within 45 days after the date of adoption of the recommendations
and rulings; or, in the absence of such agreement,
(c) a period of time determined through binding arbitration
within 90 days after the date of adoption of the recommendations
and rulings. 13 In such arbitration, a guideline for the arbitrator 14
should be that the reasonable period of time to implement panel
or Appellate Body recommendations should not exceed 15 months
from the date of adoption of a panel or Appellate Body report.
However, that time may be shorter or longer, depending upon the
particular circumstances.
4. Except where the panel or the Appellate Body has extended,
pursuant to paragraph 9 of Article 12 or paragraph 5 of Article
17, the time of providing its report, the period from the date
of establishment of the panel by the DSB until the date of determination
of the reasonable period of time shall not exceed 15 months unless
the parties to the dispute agree otherwise. Where either the panel
or the Appellate Body has acted to extend the time of providing
its report, the additional time taken shall be added to the 15-month
period; provided that unless the parties to the dispute agree
that there are exceptional circumstances, the total time shall
not exceed 18 months.
5. Where there is disagreement as to the existence or consistency
with a covered agreement of measures taken to comply with the
recommendations and rulings such dispute shall be decided through
recourse to these dispute settlement procedures, including wherever
possible resort to the original panel. The panel shall circulate
its report within 90 days after the date of referral of the matter
to it. When the panel considers that it cannot provide its report
within this time frame, it shall inform the DSB in writing of
the reasons for the delay together with an estimate of the period
within which it will submit its report.
6. The DSB shall keep under surveillance the implementation of
adopted recommendations or rulings. The issue of implementation
of the recommendations or rulings may be raised at the DSB by
any Member at any time following their adoption. Unless the DSB
decides otherwise, the issue of implementation of the recommendations
or rulings shall be placed on the agenda of the DSB meeting after
six months following the date of establishment of the reasonable
period of time pursuant to paragraph 3 and shall remain on the
DSB's agenda until the issue is resolved. At least 10 days prior
to each such DSB meeting, the Member concerned shall provide the
DSB with a status report in writing of its progress in the implementation
of the recommendations or rulings.
7. If the matter is one which has been raised by a developing
country Member, the DSB shall consider what further action it
might take which would be appropriate to the circumstances.
8. If the case is one brought by a developing country Member,
in considering what appropriate action might be taken, the DSB
shall take into account not only the trade coverage of measures
complained of, but also their impact on the economy of developing
country Members concerned.
Article 22: Compensation and the Suspension of Concessions
1. Compensation and the suspension of concessions or other obligations
are temporary measures available in the event that the recommendations
and rulings are not implemented within a reasonable period of
time. However, neither compensation nor the suspension of concessions
or other obligations is preferred to full implementation of a
recommendation to bring a measure into conformity with the covered
agreements. Compensation is voluntary and, if granted, shall be
consistent with the covered agreements.
2. If the Member concerned fails to bring the measure found to
be inconsistent with a covered agreement into compliance therewith
or otherwise comply with the recommendations and rulings within
the reasonable period of time determined pursuant to paragraph
3 of Article 21, such Member shall, if so requested, and no later
than the expiry of the reasonable period of time, enter into negotiations
with any party having invoked the dispute settlement procedures,
with a view to developing mutually acceptable compensation. If
no satisfactory compensation has been agreed within 20 days after
the date of expiry of the reasonable period of time, any party
having invoked the dispute settlement procedures may request authorization
from the DSB to suspend the application to the Member concerned
of concessions or other obligations under the covered agreements.
3. In considering what concessions or other obligations to suspend,
the complaining party shall apply the following principles and
procedures:
(a) the general principle is that the complaining party should
first seek to suspend concessions or other obligations with respect
to the same sector(s) as that in which the panel or Appellate
Body has found a violation or other nullification or impairment;
(b) if that party considers that it is not practicable or effective
to suspend concessions or other obligations with respect to the
same sector(s), it may seek to suspend concessions or other obligations
in other sectors under the same agreement;
(c) if that party considers that it is not practicable or effective
to suspend concessions or other obligations with respect to other
sectors under the same agreement, and that the circumstances are
serious enough, it may seek to suspend concessions or other obligations
under another covered agreement;
(d) in applying the above principles, that party shall take into
account:
(i) the trade in the sector or under the agreement under which
the panel or Appellate Body has found a violation or other nullification
or impairment, and the importance of such trade to that party;
(ii) the broader economic elements related to the nullification
or impairment and the broader economic consequences of the suspension
of concessions or other obligations;
(e) if that party decides to request authorization to suspend
concessions or other obligations pursuant to subparagraphs (b)
or (c), it shall state the reasons therefor in its request. At
the same time as the request is forwarded to the DSB, it also
shall be forwarded to the relevant Councils and also, in the
case of a request pursuant to subparagraph (b), the relevant sectoral
bodies;
(f) for purposes of this paragraph, "sector" means:
(i) with respect to goods, all goods;
(ii) with respect to services, a principal sector as identified
in the current "Services Sectoral Classification List"
which identifies such sectors; 15
(iii) with respect to trade-related intellectual property rights,
each of the categories of intellectual property rights covered
in Section 1, or Section 2, or Section 3, or Section 4, or Section
5, or Section 6, or Section 7 of Part II, or the obligations under
Part III, or Part IV of the Agreement on TRIPS;
(g) for purposes of this paragraph, "agreement" means:
(i) with respect to goods, the agreements listed in Annex 1A
of the WTO Agreement, taken as a whole as well as the Plurilateral
Trade Agreements in so far as the relevant parties to the dispute
are parties to these agreements;
(ii) with respect to services, the GATS;
(iii) with respect to intellectual property rights, the Agreement on TRIPS.
4. The level of the suspension of concessions or other obligations
authorized by the DSB shall be equivalent to the level of the
nullification or impairment.
5. The DSB shall not authorize suspension of concessions or other
obligations if a covered agreement prohibits such suspension.
6. When the situation described in paragraph 2 occurs, the DSB,
upon request, shall grant authorization to suspend concessions
or other obligations within 30 days of the expiry of the reasonable
period of time unless the DSB decides by consensus to reject the
request. However, if the Member concerned objects to the level
of suspension proposed, or claims that the principles and procedures
set forth in paragraph 3 have not been followed where a complaining
party has requested authorization to suspend concessions or other
obligations pursuant to paragraph 3(b) or (c), the matter shall
be referred to arbitration. Such arbitration shall be carried
out by the original panel, if members are available, or by an
arbitrator 16 appointed by the Director-General
and shall be completed within 60 days after the date of expiry of the reasonable
period of time. Concessions or other obligations shall not be
suspended during the course of the arbitration.
7. The arbitrator 17 acting pursuant to paragraph 6 shall not examine the nature of the concessions or other obligations to
be suspended but shall determine whether the level of such suspension
is equivalent to the level of nullification or impairment. The
arbitrator may also determine if the proposed suspension of concessions or other obligations is allowed under the covered agreement. However, if the matter referred to arbitration
includes a claim that the principles and procedures set forth
in paragraph 3 have not been followed, the arbitrator shall examine
that claim. In the event the arbitrator determines that those
principles and procedures have not been followed, the complaining
party shall apply them consistent with paragraph 3. The parties
shall accept the arbitrator's decision as final and the parties
concerned shall not seek a second arbitration. The DSB shall be
informed promptly of the decision of the arbitrator and shall
upon request, grant authorization to suspend concessions or other
obligations where the request is consistent with the decision
of the arbitrator, unless the DSB decides by consensus to reject the request.
8. The suspension of concessions or other obligations shall be
temporary and shall only be applied until such time as the measure
found to be inconsistent with a covered agreement has been removed,
or the Member that must implement recommendations or rulings provides
a solution to the nullification or impairment of benefits, or
a mutually satisfactory solution is reached. In accordance with
paragraph 6 of Article 21, the DSB shall continue to keep under
surveillance the implementation of adopted recommendations or
rulings, including those cases where compensation has been provided
or concessions or other obligations have been suspended but the
recommendations to bring a measure into conformity with the covered
agreements have not been implemented.
9. The dispute settlement provisions of the covered agreements
may be invoked in respect of measures affecting their observance
taken by regional or local governments or authorities within the
territory of a Member. When the DSB has ruled that a provision
of a covered agreement has not been observed, the responsible
Member shall take such reasonable measures as may be available
to it to ensure its observance. The provisions of the covered
agreements and this Understanding relating to compensation and
suspension of concessions or other obligations apply in cases
where it has not been possible to secure such observance.
18
Article 23: Strengthening of the Multilateral System
1. When Members seek the redress of a violation of obligations
or other nullification or impairment of benefits under the covered
agreements or an impediment to the attainment of any objective
of the covered agreements, they shall have recourse to, and abide
by, the rules and procedures of this Understanding.
2. In such cases, Members shall:
(a) not make a determination to the effect that a violation
has occurred, that benefits have been nullified or impaired or
that the attainment of any objective of the covered agreements
has been impeded, except through recourse to dispute settlement
in accordance with the rules and procedures of this Understanding,
and shall make any such determination consistent with the findings
contained in the panel or Appellate Body report adopted by the
DSB or an arbitration award rendered under this Understanding;
(b) follow the procedures set forth in Article 21 to determine the reasonable period of
time for the Member concerned to implement the recommendations and rulings; and
(c) follow the procedures set forth in Article 22 to determine
the level of suspension of concessions or other obligations and
obtain DSB authorization in accordance with those procedures before
suspending concessions or other obligations under the covered
agreements in response to the failure of the Member concerned
to implement the recommendations and rulings within that reasonable
period of time.
Article 24: Special Procedures Involving Least-Developed
Country Members
1. At all stages of the determination of the causes of a dispute
and of dispute settlement procedures involving a least-developed
country Member, particular consideration shall be given to the
special situation of least-developed country Members. In this
regard, Members shall exercise due restraint in raising matters
under these procedures involving a least-developed country Member.
If nullification or impairment is found to result from a measure
taken by a least-developed country Member, complaining parties
shall exercise due restraint in asking for compensation or seeking
authorization to suspend the application of concessions or other
obligations pursuant to these procedures.
2. In dispute settlement cases involving a least-developed country
Member, where a satisfactory solution has not been found in the
course of consultations the Director-General or the Chairman of
the DSB shall, upon request by a least-developed country Member
offer their good offices, conciliation and mediation with a view
to assisting the parties to settle the dispute, before a request
for a panel is made. The Director-General or the Chairman of the
DSB, in providing the above assistance, may consult any source
which either deems appropriate.
Article 25: Arbitration
1. Expeditious arbitration within the WTO as an alternative means
of dispute settlement can facilitate the solution of certain disputes
that concern issues that are clearly defined by both parties.
2. Except as otherwise provided in this Understanding, resort
to arbitration shall be subject to mutual agreement of the parties
which shall agree on the procedures to be followed. Agreements
to resort to arbitration shall be notified to all Members sufficiently
in advance of the actual commencement of the arbitration process.
3. Other Members may become party to an arbitration proceeding
only upon the agreement of the parties which have agreed to have
recourse to arbitration. The parties to the proceeding shall agree
to abide by the arbitration award. Arbitration awards shall be
notified to the DSB and the Council or Committee of any relevant
agreement where any Member may raise any point relating thereto.
4. Articles 21 and 22 of this Understanding shall apply mutatis
mutandis to arbitration awards.
Continue with Annex 2 Understanding on Rules and Procedures
Governing the Settlement of Disputes
12
If a meeting of the DSB is not scheduled during this period, such a meeting of the DSB shall
be held for this purpose.
13 If the parties cannot agree on an arbitrator within 10 days after referring the matter to arbitration, the arbitrator
shall be appointed by the Director-General within 10 days, after consulting the parties.
14 The expression "arbitrator" shall be interpreted as referring either to an individual or a group.
15 The list in document MTN.GNS/W/120 identifies 11 sectors.
16 The expression"arbitrator" shall be interpreted as referring either to an individual or a group.
17 The expression "arbitrator" shall be interpreted as referring either to an individual or a group or to the members
of the original panel when serving in the capacity of arbitrator.
18 Where the provisions of any covered agreement concerning measures taken by regional or local governments or authorities
within the territory of a Member contain provisions different from the provisions of this
paragraph, the provisions of such covered agreement shall prevail.
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