báo cáo khoa học the development of the asean trade dispute settlement mechanism from diplomacy to legalism

THE DEVELOPMENT OF THE ASEAN
TRADE DISPUTE SETTLEMENT
MECHANISM: FROM DIPLOMACY
TO LEGALISM KOESRIANTI



THE DEVELOPMENT OF THE ASEAN TRADE DISPUTE
SETTLEMENT MECHANISM: FROM DIPLOMACY TO LEGALISM








KOESRIANTI


A thesis submitted in accordance with the requirements for the award of
the Degree of Doctor of Philosophy,
Faculty of Law, University of New South Wales


2005



II

ABSTRACT


In the late twentieth century international trade moved from a political multi-polar
system based on the nation-state to a system featuring unified regional trading regimes. An
inevitable feature of increased cooperation through bilateral, regional and international
arrangements is the emergence of disputes over the interpretation and implementation of
the agreed upon commitments. Accordingly, reliable mechanisms for the settlement of
trade related disputes have become necessary to ensure the effective and continued
functioning of these arrangements. Over the years these dispute settlement mechanisms
have evolved from the relatively simple, diplomacy based structures called for in the
GATT, to the detailed, legalistic, adjudication based mechanism found in the WTO.
Bilateral and regional initiatives, such as NAFTA and MERCOSUR, as well as the EU,
have similarly adopted dispute settlement mechanisms which adopt, in varying degrees,
legalistic adjudicatory processes. Since 1967 ASEAN has spearheaded the creation of a
regional trading bloc in the South East Asian region. As in other trading blocs, this has
inevitable led to the need to develop effective and workable dispute settlement
mechanisms.
This thesis examines the development of trade dispute settlement mechanisms in
ASEAN tracing its development from a model based on pragmatic diplomacy to a legalistic
adjudicatory system with particular reference to the ASEAN context. It examines the
extent to which the ASEAN context has influenced the content and the adoption of trade
dispute settlement mechanisms in the region, as well as the extent to which the recently
adopted 2004 Enhanced Protocol on Dispute Settlement can adequately address trade
disputes in the region while remaining sensitive and responsive to the ASEAN context.
Based on a comparative examination of dispute settlement mechanisms in other
trade agreements, a range of key procedural issues are identified and examined with a view
to identifying the prospects and challenges which ASEAN faces in the implementation of
its dispute settlement mechanism. The thesis analyses the prospects and challenges of
implementation the 2004 Enhanced Protocol on DSM.

III
Acknowledgements

I acknowledge my gratitude to my supervisors, Associate Professor Rosemary
Rayfuse and Mr Bryan Mercurio for their encouragement, patience and invaluable
guidance. Also, I would like to thank the following: Professor David Dixon, Associate
Dean (Research) and Mr Angus Corbett, Associate Dean (Coursework) of the Law Faculty
the University of New South Wales for their support during the writing of my thesis; Kerry
Daley, Dawesh Chand, Gaha Reef, Annabel Sutherland, Tony Antoniou, and Reg Potter for
their assistance on administrative and IT support: Emily McCarron and Nikki Chong for
their assistance in proof reading this thesis; Mr Smara Dahana for information on ASEAN.
I also thank Mr Machsoen Ali, Dean of the Law Faculty of the Airlangga University
and his staff for their support during my study; my friends, Laylee Tang, Dan Svantesson,
Robin Huang, Marie Ange, Scot Calnan, Cathy Hunter and Cassandra Goldie for making
the Julius Stone PG room like home. I wish to record my gratitude to my friends, including
but not limited to, Umi, Maria and Sony, Diah, Zaafri and Ayu, Made Andi, Srie and
Richard, Nurul and Yudi, and Nestri for their support in making my stay in Sydney as a
PhD student as enjoyable and lively as possible. Thanks also go to my friend Dina
Sunyowati and my sisters and brothers, in particular, my sister Tri Andjarwati for their help
while I was away from home. Finally, special thanks go to my beloved husband, Saiffudin
Zuhri and my inspiring children, Andin and Avi who have supported me throughout my
study. They are everything to me.

IV
ABSTRACT II
ACKNOWLEDGEMENTS III
FIGURES X
FLOWCHART X
APPENDICES X
LIST OF SELECTED ABBREVIATIONS XI
TABLE OF CASES XIII
ASEAN TIME LINES XVI
TABLE OF TREATIES AND DECLARATIONS XVII
INTRODUCTION 1
FORMULATION OF THE PROBLEM 1
THE OBJECTIVE OF THE STUDY 3
THE FRAMEWORK FOR ENQUIRY 4
THE OUTLINE AND SCOPE OF THE STUDY 4
CHAPTER 1 – THE HISTORY, DEVELOPMENT AND STRUCTURE OF ASEAN 7
1.0 Introduction 7
1.1 The ‘South East Asian’ Area 8
1.1.1 Early History 8
1.1.2 The meaning of ‘South East Asia’ 10
1.1.3 The development of a ‘South East Asian’ identity- the SEATO Years 11
1.2. The Formation of ASEAN 13
1.2.1 The early years 13
1.2.2 The Bangkok Declaration, 1967 14
1.2.3. The Bali Summit of 1976 15
1.3 The ASEAN Profile 17
1.4 The Organizational Structure of ASEAN 24

1.4.1 The ASEAN Heads of Government Meeting (ASEAN Summit Meeting) 25
1.4.2 Ministerial Level Meetings 26

V
1.4.3 ASEAN Standing Committee (ASC) 28
1.4.4 ASEAN Secretariat 29
1.4.5 The ASEAN National Secretariats 30
1.4.6 Other Organs 31
1.4.7 ASEAN committees in third countries (‘Dialogue Partners’) 31
1.5 Decision making in ASEAN 32
1.5.1 The musyawarah and muafakat 32
1.5.2 The ASEAN Way: Consensus in ASEAN 34
1.5.3 Implementation of decisions 39
1.6 The legal personality of ASEAN 41
1.7 Conclusion 49
CHAPTER 2 – ASEAN AS A REGIONAL ECONOMIC ORGANIZATION 52
2.0 Introduction 52
2.1. The Beginnings of Trade Liberalization in ASEAN 53
2.1.1 The Bali Concord I 1976 53
2.1.2 ASEAN Industrial Project, the ASEAN Industrial Complementation Scheme and the ASEAN
Industrial Joint Venture 55

2.1.3 ASEAN Preferential Trading Arrangements Agreement 1977 58
2.1.4. Formation of the ASEAN Free Trade Area (AFTA) 61
2.1.5. The ASEAN Industrial Cooperation Scheme (AICO) 66
2.1.6 The ASEAN Investment Area (AIA) 68
2.1.7. The ASEAN Framework Agreement on Services (AFAS) 71
2.2 Development of the ASEAN Economic Region 73
2.2.1 The Asian financial crisis 73
2.2.2 The ASEAN Vision 2020 76

2.2.3 The Hanoi Plan of Action (HPA) (1997-2004) and its succeeding plans 78
2.3 Free Trade Agreements with external countries 85
2.4 Towards an ASEAN Economic Community 87
2.4.1 The Bali Concord II of 2003 87
2.4.2 The ASEAN Security Community (ASC) 88
2.4.3 The ASEAN Socio-Cultural Community (ASCC) 91
2.4.4 The ASEAN Economy Community (AEC) 92
2.4.5 The deadline for the establishment of the ASEAN Community 97
2.5 Conclusion 99
CHAPTER 3 – DISPUTE SETTLEMENT MECHANISMS IN OTHER MAJOR
ECONOMIC ORGANIZATIONS 102
3.0 Introduction 102
3.1 The European Community (EC) 104
3.1.1 Brief Introduction to the organisation and its goals 104
3.1.2 The EC dispute settlement system 106

VI
3.1.3 Permanent vs. ad hoc panels 107
3.1.4 Independence of judicial officers 109
3.1.5 Private party rights to appear 110
3.1.6 The precedential value of decisions 112
3.1.7 The adoption of decisions 113
3.1.8 The enforceability of decisions 114
3.2 The General Agreement on Tariffs and Trade (GATT) 117
3.2.1 Brief introduction to the organisation and its goals 117
3.2.2 The GATT dispute settlement system 119
3.2.3 Permanent vs. ad hoc panels 122
3.2.4 The independence of panellists 123
3.2.5 Private party rights to appear 125
3.2.6 The precedential value of decisions 125

3.2.8 The enforceability of decisions 127
3.3 The World Trade Organization (WTO) 128
3.3.1 Brief introduction to the organisation and its goals 128
3.3.2 The WTO dispute settlement system 129
3.3.3 Permanent vs. ad hoc panels 130
3.3.4 The independence of panellists 132
3.3.5 Private party rights to appear 133
3.3.6 The precedential value of decisions 134
3.3.7 The adoption of decisions 135
3.3.8 The enforceability of decisions 136
3.4 North American Free Trade Agreement (NAFTA) 137
3.4.1 Brief introduction of the organisation and its goals 137
3.4.2 The NAFTA dispute settlement system 138
3.4.3 Permanent vs. ad hoc panels 139
3.4.4 The independence of panellists 141
3.4.5 Private party rights to appear 143
3.4.6 The precedential value of decisions 144
3.4.7 The adoption of decisions 146
3.4.8 The enforceability of decisions 147
3.5 The Mercado Comun del Sur or Common Market of the Southern Cone (MERCOSUR) 148
3.5.1 Brief introduction to the organisation and its goals 148
3.5.2 The MERCOSUR dispute settlement system 149
3.5.3 Permanent vs. ad hoc panels 151
3.5.4 The independence of panellists 152
3.5.5 Private party rights to appear 153
3.5.6 The precedential value of decisions 154
3.5.7 The adoption of the decisions 155
3.5.8 The enforceability of decisions 155
3.6 Conclusion 156
CHAPTER 4 – KEY PROCEDURAL ISSUES OF DISPUTE SETTLEMENT

MECHANISMS: TOWARDS A RELIABLE MECHANISM 158
4.0 Introduction 158
4.1 Diplomatic dispute settlement processes 160

VII
4.1.1 Consultation 160
4.1.2 Good offices, conciliation and mediation 163
4.2 Adjudication Dispute Settlement Processes 164
4.2.1 Ad hoc vs. Permanent Panels 164
4.2.2 Qualifications of panellists 170
4.2.3 The independence of panellists 172
4.3 The Issue of Transparency 174
4.3.1 Transparency in trade organisations 174
4.3.2 Transparency in panel proceedings 176
4.3.3 Transparency and the parties’ submissions 178
4.3.4 Transparency and public meetings 179
4.4 Participation of private individuals 181
4.4.1 As counsel 181
4.4.2 As litigant 183
4.4.3 As amicus curiae 186
4.4.4 As third party intervenor 196
4.5 The Precedential effect of decisions 199
4.5.1 Stare decisis and the Doctrine of Precedence 199
4.5.2 Precedential effect of decisions 201
4.6 The Desirability of appeal processes 203
4.7 Enforceability of Decisions 205
4.7.1 Adoption of decisions 205
4.7.2 The binding effect of decisions 205
4.7.3 Implementation of decisions 210
4.7.4 The effect of non-compliance with decisions 211

4.8 Conclusion 219
CHAPTER 5 – TRADE DISPUTE SETTLEMENT IN ASEAN UP TO AFTA AND
THE 1996 PROTOCOL 222
5.0 Introduction 222
5.1 The Early Approach to Trade Dispute Settlement in ASEAN 223
5.2 Dispute settlement under AFTA 229
5.2.1 The need for trade dispute settlement mechanism 229
5.2.2 The AFTA dispute settlement regime 230
5.2.3. The AFTA dispute settlement machinery 233
5.2.4 An Assessment of the AFTA regime 234
5.3. The 1996 Protocol on Dispute Settlement Mechanism (the 1996 Protocol) 237
5.3.1. Consultations 239
5.3.2 Good Offices, Conciliation and Mediation 241
5.3.3 Panels 241
5.3.4 Appellate Review 245
5.3.5 The Implementation of Recommendations/Rulings and Time Limits 246

VIII
5.3.6 An assessment of the 1996 Protocol 246
5.6 Conclusion 249
CHAPTER 6 – THE ASEAN PROTOCOL ON ENHANCED DISPUTE
SETTLEMENT MECHANISM (THE 2004 PROTOCOL) 250
6.0 Introduction 250
6.1 Dispute resolution under the Bali Concord II 250
6.1.1 ASEAN Legal Unit (Advisory Mechanisms) 252
6.1.2. The ASEAN Consultation to Solve Trade and Investment Issues (ACT) stage (Consultative
mechanisms) 253

6.1.3 The ASEAN Compliance Monitoring Body (ACMB) or the ASEAN Compliance Board (ACB) -
(Compliance mechanisms) 254

6.2 An assessment of the dispute settlement mechanisms under the Bali Concord II 255
6.3 The ASEAN Protocol on Enhanced Dispute Settlement Mechanism (the 2004 Protocol) 256
6.3.1 Consultations 257
6.3.2 The Panel Process 260
6.4 Appeal procedure 267
6.4.1 Appeal review process 269
6.4.2 Adoption of appellate review report 271
6.5 Transparency 272
6.5.1 Written submissions 273
6.5.2 Public meetings 275
6.5.3 Amicus Curiae 276
6.6 Implementation 278
6.6.1 The surveillance of implementation of findings and recommendations 278
6.6.2 Compensation and the suspension of concessions 279
6.6.3 Arbitration 281
6.6.4 Surveillance 281
6.6.5 Fund/Cost 282
6.6.6 Time Frame 283
6.6.8 The independence of the system 284
6.7 Conclusion 285
CHAPTER 7 – CONCLUSION 287
APPENDIX I 301
APPENDIX II 308
APPENDIX III 318

IX
BIBLIOGRAPHIES 335

X
Figures
Figure 1: ASEAN Organization Structure 23
Figure 2: ASEAN Secretariat Organization Structure 29



Flowchart
Flowchart Dispute Settlement Mechanism in ASEAN 247



Appendices
Appendix I: The Bali Concord II - 301
Appendix II: The 1996 Protocol 308
Appendix III: The 2004 Protocol 318

XI
List of selected abbreviations

AC ASEAN Community
ACB ASEAN Compliance Board
ACMB ASEAN Compliance Monitoring Body
ACP African Caribbean Pacific
ACT ASEAN Consultative to Solve Trade and Investment issues
AD/CVD Anti Dumping/Countervailing Duty
ADF ASEAN Development Fund
AEC ASEAN Economic Community
AEM ASEAN Economic Ministers
AFAS ASEAN Framework Agreement on Services
AFMM ASEAN Finance Ministerial Meeting
AFTA ASEAN Free Trade Area
AHG ASEAN Head Government
AIA ASEAN Investment Area
AIC ASEAN Industrial Complementation Scheme

AICO ASEAN Industrial Cooperation Scheme
AIJV ASEAN Industrial Joint Venture
AIP ASEAN Industrial Project
AMM ASEAN Ministerial Meeting
ANZERTA Australia and New Zealand Economic Relations
APT ASEAN Plus Three
ARF ASEAN Regional Forum
ASA Association for Southeast Asia
ASC ASEAN Standing Committee
ASC ASEAN Security Community
ASCC ASEAN Social Cultural Community
ASFOM ASEAN Senior Finance Official Meeting
BBC Brand to Brand Complementation
CEP Closer Economic Partnership
CEPT Common Effective Preferential Tariff Scheme
CFI Court of First Instance
CFSP Common Foreign and Security Policy
CLMV Cambodia, Laos, Myanmar and Vietnam
CMG Common Market Group
DSB Dispute Settlement Body
DSU Dispute Settlement Understanding/Understanding on Rules &
Procedures Governing the Settlement of Dispute
EC European Community
ECC Extraordinary Challenge Committee
ECJ European Court of Justice
ECSC European Coal and Steel Community
EEC European Economic Community
EMU Economic and Monetary Union

XII

EU European Union
EURATOM European Atomic Energy Community
FTAA Free Trade Area of America
GATS General Agreement on Trade and Services
GATT General Agreement on Tariffs and Trade
HLTF High Level Task Force
HPA Hanoi Plan of Action
IAI Initiative for ASEAN Integration
ICJ International Court of Justice
ICSID International Centre fore the Settlement of Investment Dispute
ITO International Trade Organization
JHA Justice and Home Affairs
MAPHILINDO Malaya, Philippines and Indonesia
MERCOSUR Mercado Comun de Sur/Common Market of the Southern Cone
MFN Most Favoured Nation
NAFTA North American Free Trade Agreement
NGOs Non-government Organization
OECD Organization for Economic Cooperation and Development
PTAs Preferential Trading Arrangement
RIA Roadmap for the Integration of ASEAN
SEATO South East Asia Treaty Organization
SEOM Senior Economic Officials Meeting
SOM Senior Official Meeting
TAC Treaty of Amity and Cooperation
UNCITRAL United Nations Commission on International Trade Law
VAP Vientiane Action Program
WTO World Trade Organization

XIII
Table of cases

A. The European Union

C-387/97, Court of Justice of the EC, (4 July 2000) (Directives 75/442/EEC)
C-394/96 [1998] ECR I-4185 (Brown v Rentokil)
Case 106/77, Amministrazione Delle Finanze Dello Stato v Simmenthal SPA, [1978] ECR
629; [1978] 3 CMLR 263
Case 141/78 France v United Kingdom [1979] ECR 2923
Case 25/62, Plaumann v Commission [1963] ECR 106
Case 6/64 (1964) European Court Reports (ECR) 585 at 593
Keck and Mithouard case, Joined cases C-267/91 and C-268//91 [1993] ECR I-6097
Larsson v Fotex Supermarked, case C-400/95 [1997] ECR I-2757
Merck and Others v Primecrown and Others and Beecham and Europharm, joined cases C-
267/95 and C-268/95 [1996] ECR I-6285

Merck v Stephar and Exler, case 187/80 [1981] ECR 2063

B. GATT/WTO

Panel Report, European Communities – Measures Concerning Meat and Meat Products
(Hormones), WT/DS26/R/USA, 18 August 1997; Appellate Body Report, WTO Doc.
WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998; Arbitration Art. 21.3 (c)
WT/DS26/15, WT/DS48/13, 29 May 1998; Recourse to Art. 22.6 Arbitration Report, WTO
Doc. WT/DS26/ARB adopted, 12 July 1999

Brazil-Measures Affecting Patent Protection, WT/DS199/4, 19 July 2001

European Communities- Regime for the Importation, Sale and Distribution of Bananas,
WTO Panel Report, WT/DS27/R/ECU (22 May 1997);Appellate Body Report,
WT/DS27/AB/R, 9 Sept 1997; Arbitration Art 21.3 (c), WT/DS27/15, 7 January 1998;
Arbitration Art 21.5, WT/DS27/RW/EEC and Corr 1, 12 April 1999; Recourse to
Arbitration by the European Communities under Art.22.6, WTO Doc. WT/DS27/ARB, 9
April 1999

European Communities-Measures Affecting Asbestos and Asbestos-Containing Products,
Panel Report, WT/DS135/R, 18 Sep 2000, Appellate Body Report, WTO Doc.
WT/DS135/AB/R, 12 March 2001

European Communities-Trade Description of Sardines, Panel Report, WTO Doc.
WT/DS231/R, 29 May 2002, Report of the Appellate Body, WTO Doc. WT/DS231/AB/R,
26 September 2002

Helms-Burton Case, The US-The Cuban Liberty and Democratic Solidarity Act,
WT/DS38/2/Corr.1 (Oct.14, 1996); the Helms-Burton Act or Cuban Liberty and
Democratic Solidarity Act of 1996, Pub.L.No.104-14, 110 Stat. 785 (1996)

XIV

Japan-Taxes on Alcoholic Beverages, Appellate Body Report, WTO Doc. WT/DS8, 10,
11/AB/R, 4 October 1996

Korea – Definitive Safeguard Measure on Import of Certain Dairy Products, Panel Report,
WTO Doc. WT/DS98/1 (21 June 1999); Appellate Body Report, WT/DS98/R (14
December 1999)

Panel report, Korea-Taxes on Alcoholic Beverages, Panel Report WT/DS75/R,
WT/DS84/R, adopted 17 September 1998, as modified by the Appellate Body Report,
WT/DS75/AB/R, WT/DS84/AB/R, 18 Jan 1999

The Australian Subsidy case (complaint by Chile), Report adopted by the CONTRACTING
PARTIES, Australia-Subsidy on Ammonium Sulphate (Apr 3, 1950) GATT B.I.S.D (2d
Supp, 188 (1952)

The Brazil measures affecting desiccated coconut- Report of the Appellate Body,
WT/DS22/AB/R, 21 Feb 1997

The US-Final Dumping Determination on Softwood Lumber from Canada, WTO Doc.
WT/DS264/R, 22 March 2004 (Report of the Panel), adopted as modified by the Appellate
Body Aug 31, 2004; Arbitration Art 21.5, WTO Doc. WT/DS277/RW, 15 November 2005

United States-Standards for Reformulated and Conventional Gasoline, the WTO Panel
Report WT/DS2/R, 29 January 1996; Appellate Body Report, WT/DS2/AB/R, 29 April
1996

United States-Anti Dumping Duty on DRAMs of One Megabit or Above From Korea, WTO

Doc. WT/DS99/R (29 January 1999); WTO Article 21.5 Panel Report, US- DRAMs,
Recourse to Art 21.5 DSU, WT/DS99/RW (7 November 2000)

US-Shrimp/Turtle, United States- Import Prohibition of Certain Shrimp and Shrimp
Products, WT/DS58/R; WTO Panel Report, US-Shrimp/Turtle, WT/DS58/AB/RW (15 may
1998); WTO Appellate Body Report, US-Shrimp/Turtle, WT/DS58/AB/R (6 November
1998); WTO Article 21.5 Panel Report, US – Shrimp/Turtle Recourse to Article 21.5 of the
DSU by Malaysia, WT/DS58/RW (15 June 2001); WTO Article 21.5 Appellate Body
Report, US – Shrimp/Turtle Recourse to Article 21.5 of the DSU by Malaysia,
WT/DS58/RW (21 November 2001)

WTO Panel Report, United States-Imposition of Countervailing Duties on Certain Hot-
Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom,
WT/DS138/R (23 December 1999); (WT/DS138/R/Corr.2); WTO Appellate Body Report,
US-Lead Bismuth WT/DS138/AB/R (10 May 2000)

WTO Panel Report, Indonesia-Certain Measures Affecting the Automobile Industry,
WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R, (2 July 1998)

XV

Malaysia and Singapore, WTO Documents: WT/DS1/1, request for consultation, 10
January 1995

C. NAFTA

In re High Fructose Corn Syrup from U.S.A., Mex-USA-98-1904-01 (August 3, 2001)
available at

Cross-Border Trucking Services (US v. Mex), Arbitral Panel Established Pursuant to

Chapter 20 of the NAFTA, No. USA-Mex-98-2008-01 (2001), <ta-sec-
alena.org/app/DocRepository/1/Dispute/english/NAFTA_Chapter_20/USA/ub98010e.pdf

Methanex Corporation v United States of America, Decision of the Tribunal on Petitions
from Third Persons to Intervene as ‘Amicus Curiae’ (2001) § 39, at US Dept. of State


United Parcel Service of America Inc. v Government of Canada, Arbitration Under Chapter
11 of the NAFTA, Decision of the Tribunal on Petitions for Intervention and Participation
as Amici Curiae, 17 October 2001

D. International Court of Justice (ICJ)

Advisory Opinion of 11 April 1949, Reparation for Injuries Suffered in the Service of the
UN, I.C. J. Rep (1949) 179

Land, Island and Maritime Frontier Dispute (El Sal. V. Hond.; Nicar., intervening), 1992
ICJ 351 ¶ ¶ 421-24 (Sept.11, 1992)

E. International Commercial Arbitration

Association of Southeast Asian Nations (ASEAN) Arbitral Tribunal: Yaung Chi Oo
Trading PTE LTD v. Government of the Union of Myanmar, May 2003

XVI
ASEAN Time Lines

1967 : ASEAN was established by the ASEAN Declaration 1967
1976 : The 1
st
ASEAN Summit (ASEAN signed the Bali Concord I, the Treaty of
Amity and Cooperation in Southeast Asia/TAC, and established the
Secretariat)
1977 : ASEAN issued the ASEAN Preferential Trade Arrangements (PTAs)
1984 : Brunei Darussalam is formally admitted as the ASEAN Member
1992 : ASEAN formally agreed to establish AFTA
1995 : The signing of ASEAN Framework Agreement on Services (AFAS)
1995 : Viet Nam was admitted as a member of ASEAN
1996 : The ASEAN leaders signed the ASEAN Industrial Cooperation Scheme
(AICO) and the ASEAN Protocol on Dispute Settlement Mechanism (the
ASEAN DSM)
1997 : ASEAN leaders adopted the ASEAN Vision 2020
1997 : Laos and Myanmar were admitted as members of ASEAN
1998 : ASEAN adopted the ASEAN Investment Area (AIA)
1997-1999 : Asian financial crisis
1999 : The ASEAN leaders adopted the Hanoi Plan of Action (HPA) (1999-2004)
1999 : Cambodia was admitted as a member of ASEAN
2000 : The Initiatives for ASEAN Integration (IAI)
2003 : The Roadmap for Integration of ASEAN (RIA)
2003 : The 9

th
ASEAN Summit (the Bali Concord II)
The ASEAN Leaders agreed to establish ASEAN Community (AC)
comprises of ASEAN Security Community (ASC), ASEAN Economic
Community (AEC) and the ASEAN Socio-Cultural Community (ASCC) by
the year 2020
2004 : ASEAN adopted the Vientiane Action Programme (VAP/2004-2008)
2004 : ASEAN signed the ASEAN Protocol on Enhanced Dispute Settlement
Mechanism (the 2004 Protocol)











XVII
Table of Treaties and Declarations

Treaty of Rome establishing the European Economic Community, 25 March 1957, 298
UNTS 11, < >

Treaty establishing the European Atomic Energy Community, 25 March 1957, 298 UNTS
167, <

Treaty of Paris establishing the ECSC, 18 April 1951, 261 UNTS 140;

<

Treaty on EU, done at Maastricht February 7, 1992 and entered into force November 1,
1993, 31 I L M 247 (1992), commonly as the Maastricht Treaty or Treaty on European
Union, <

GATT preamble, < >

Marakesh Agreement establishing the WTO, 15 April 1994, <


DSU Review: Decision on the Application and Review of the Understanding on Rules and
Procedures Governing the Settlement of Disputes, Apr. 15, 1994, 33 I.L.M.1125,1259 or
< >

DSU Review: Ministerial Declaration (Doha Declarations) of 2001, paragraph 30 (dispute
settlement),


NAFTA Documents relating to Dispute Settlement Procedures, December 17, 1992, at 32
ILM 289 (1993) (preamble to chapter 10), 32 ILM 605 (1993) (chapter 10 to Errata table),
reprinted in Ralp H Folson, Michael W Gordon and John A Spanogle, Handbook of NAFTA
Dispute Settlement, (1998)

North American Agreement on Environment Cooperation, Sept 14, 1993, Can-Mex-US, 32
I.L.M. 1480

North American Agreement on Labor Cooperation, Sept 14, 1993, Can-Mex-US, 39 I.L.M
1499

ASEAN Declaration 1967, text at

Treaty of Amity and Cooperation in South East Asia (TAC), signed at the Bali Conference,
1
st
ASEAN Summit, February 24, 1976, see


XVIII
Declaration of ASEAN Concord (Bali Concord I), done at Bali, 24 February 1976, see


Declaration of ASEAN Concord II (Bali Concord II), done at Bali, 10 October 2003 see


Agreement between the Government of Indonesia and ASEAN Relating to the Privileges
and Immunities of the ASEAN Secretariat, 20 January 1979, at


Singapore Declaration of 1992, Jan 28, 1992, see or 31
I.L.M 498 (1992)

The Treaty of Asuncion, Mar. 26, 1991, art 1, (1991) 30 International Legal Materials
1041

Additional Protocol to the Treaty of Asuncion on the Institutional Structure of
MERCOSUR (“Protocol of Ouro Preto”), date of signature, 17 December 1994, entry into
force, 15 December 1995, see, (1995) 34 International Legal Materials 1244.

The Olivos Protocol for the Settlement of Disputes in MERCOSUR, done February 18,

2002, 42 I.L.M.2 (2003)

The Brasilia Protocol for the Settlement of Disputes, 36 I.L.M. 691 (1997

Protocol Colonia and Buenos Aires
< />
1

INTRODUCTION

FORMULATION OF THE PROBLEM
The late twentieth century saw a new wave of regionalism sweep the world, as
international trade moved from a political multi-polar system based on the nation-state to a
system featuring unified regional trading regimes as evidenced in the formation of new
trading blocs around globe, such as the European Union (the EU), the North American Free
Trade Area (NAFTA), the Mercado Comun del Sur (MERCOSUR), and the Association of
South East Asian Nations (ASEAN). This shift followed on from the development of the
multilateral trading system beginning in the years following World War II in the form of
the General Agreement on Tariffs and Trade (GATT) and culminating in the agreement to
establish the World Trade Organization (the WTO) in 1995. But multilateralism has not
worked entirely as anticipated, and increased membership and ‘consensus’ decision-making
has slowed progress and stalled the liberalisation process. Thus, many states begin to
believe that by entering into regional trade blocs as well as international trade agreements
states would be able to increase their competitive advantages as well as their internal and
international market share. While the merits of bilateral and regional trade are still being
debated, it is clear that these agreements share similar objectives to that of the multilateral
system of each other, namely to raise living standards through expanding production and
trade in goods and services.
An inevitable feature of increased cooperation through bilateral, regional and
international arrangements is the emergence of disputes over the interpretation and

implementation of the agreed upon commitments. In particular, disputes have arisen due to
conflicting interests, needs, or opinions of participating states. Accordingly, reliable
mechanisms for the settlement of trade related disputes have become necessary to ensure
the effective and continued functioning of these arrangements. Over the years these dispute
settlement mechanisms have evolved from the relatively simple, diplomacy based
structures called for in the GATT which consisted of a mere two short paragraphs of treaty

2
text and failed to provide any procedural guidance in any regard, to the detailed, legalistic,
adjudication based mechanism found in the twenty seven articles and four appendices
which constitute the WTO Dispute Settlement Understanding (DSU). Recent bilateral and
regional initiatives, such as the NAFTA and MERCOSUR, as well as the customs union
formed by the member states of the EU, have similarly adopted dispute settlement
mechanisms which adopt, in varying degrees, legalistic adjudicatory processes.
For some time, there has also been a move to create a regional trading bloc in the
South East Asian region spearheaded under the auspices of ASEAN. From the early days of
the establishment of the organisation the Member States have entered into a wide range of
agreements designed to promote and liberalise national, intra- and inter-regional trade.
Building on earlier informal agreements ASEAN Member States have, to date, adopted
several declarations and agreements on trade, including the ASEAN Free Trade Area
(AFTA), the ASEAN Framework Agreement on Services (AFAS) and the ASEAN
Investment Area (AIA). Importantly, the move to closer economic integration has been
heightened by the decision, adopted in 2003, to create an ASEAN Economic Community
by 2020.
As in other trading blocs, moves to closer economic integration inevitably meant
that ASEAN would need to develop effective and workable dispute settlement mechanisms.
In the ASEAN context, the development of these mechanisms has been influenced by a
range of historical and cultural factors unique to the region. Traditionally, the emphasis of
ASEAN nations has been placed on the need to settle disputes amicably through political
and diplomatic processes in a manner consistent with the ‘Asian way’. It has been

recognised, however, that such an approach may not be feasible or appropriate in the
context of a modern, workable international agreement. The need for ASEAN to move
beyond these informal dispute settlement mechanisms has been recognised and was
articulated by the ASEAN Secretary –General in his 1999 Report where he called upon
ASEAN Members to “explore the possibility of undertaking more legally binding
agreements to promote cooperation in various fields, such as economic dispute settlement”
in order to better “manage the integrated economy and the problems that transcend national

3
boundaries”.
1
Thus, in recent years, ASEAN has moved to adopt an increasingly legalistic,
adjudicatory, judicial or quasi-judicial mechanism for the settlement of trade disputes.
These efforts culminated in the Protocol on Dispute Settlement Mechanism of 1996
2
; the
first formal mechanism for the resolution of trade disputes and later, in 2004, by adoption
of the ASEAN Protocol on Enhanced Dispute Settlement Mechanism which is, in all major
respects, similar to the WTO DSU. Additionally, the 38
th
joint communiqué of the ASEAN
Economic Ministers, issued at Vientiane on 26 July 2005, supported the effort to
‘strengthen the institutional mechanism of ASEAN, including improvement of the existing
ASEAN dispute settlement mechanism to ensure the expeditious and legally-binding
resolution of any economic disputes.’
3
It further stated that this initiative will ‘facilitate the
realization of the aspirations of ASEAN as a single market and a single production base in
which there is free flow of goods, services and skilled labor, and a freer flow of capital…’
4

This, together with the 2004 Protocol, represents a significant development by ASEAN
away from its traditional informal mechanisms to a formal judicial procedure for the
resolution of trade disputes. However, it remains to be seen whether ASEAN Members will
implement and utilise this procedure as envisaged. It further remains questionable whether
ASEAN is, by essentially transplanting the WTO DSU model to dispute settlement,
adopting a method and process suitable to the conditions and political situation in the
ASEAN.

THE OBJECTIVE OF THE STUDY
The objective of this study is to examine the development of the trade dispute
settlement mechanism in ASEAN from its essentially diplomacy-based origins to its recent
incarnation as a legalistic adjudicatory process with particular reference to the ASEAN
context. In doing so it is intended to examine the extent to which the ASEAN context has

1
Report of the Secretary-General of ASEAN to the 32
nd
ASEAN Ministerial Meeting, Singapore, 22-24 July
1999, see < at 11/07/2005
2
The Protocol on Dispute Settlement Mechanism, done at manila, 20 November 1996, text at
< at 8/03/2005 [hereinafter the 1996 Protocol]
3
Joint Communique of the 38
th
ASEAN Ministerial Meeting, Vientiane, 26 July 2005, with the theme: toward
the harmony, dynamism and integration of ASEAN, text at /> (Accessed
11/08/2005)
4

Ibid.

4
influenced the content and the adoption of trade dispute settlement mechanisms in the
region, as well as the extent to which the 2004 Protocol can adequately address trade
disputes in the region while remaining sensitive and responsive to the ASEAN context.

THE FRAMEWORK FOR ENQUIRY
The framework for the enquiry will be based on three pillars. First, the thesis will
examine the development of ASEAN as a regional trade organisation. Second, the thesis
will examine the development of trade dispute settlement mechanisms in five other major
trade organisations, namely, the (GATT, the WTO, the EU, the North American Free Trade
Agreement (NAFTA), and Southern Common Market or Mercado Comun del Sur
(MERCOSUR). Particular emphasis will be placed on the examination of the WTO DSU
due to the similarity of the ASEAN model with its multilateral equivalent. Importantly, key
procedural issues that have arisen in these dispute settlement mechanisms will be examined
with a view to relating these experiences to the ASEAN context. Key procedural issues to
be explored include: the establishment of permanent or ad hoc panels, the independent of
panellists, private and non-governmental rights to appear, the transparency of the dispute
settlement mechanism, the presence of binding precedent of the panel decisions, and the
enforcement of the decisions. It should be noted that this is not intended to be a
comprehensive comparative study of these five mechanisms. Rather, comparative elements
will be evaluated with a view to examining their possible application in the ASEAN
context. This examination will lay the ground work for the third pillar which is an analysis
of the development of a legalistic adjudicatory trade dispute settlement regime in ASEAN
and its likely efficacy in and sensitivity to the ASEAN context.

THE OUTLINE AND SCOPE OF THE STUDY
Given the above, this study is divided into three parts containing seven chapters.
Part one sets out the history, development, and structure of ASEAN. Chapter one begins

with the early history of ASEAN and the formation of the ASEAN identity, including the
meaning of South East Asia. It then discusses ASEAN’s institutional structure, its decision
making processes, and its legal personality. Chapter two examines the development of

5
ASEAN as a regional economic organization. It discusses the processes of ASEAN
economic liberalization from its early days to the most recent phase, the move towards the
establishment of the ASEAN Economic Community as one pillar of the proposed ASEAN
Community.
Part Two describe and analyses the trade dispute settlement mechanisms in other
international economic organizations. Chapter 3 describes the mechanisms that have been
adopted in the GATT, the WTO, the EU, NAFTA and MERCOSUR while Chapter 4
analyses the key procedural issues that have arisen in common as between these
mechanisms. The categories of issues explored include: the creation of permanent or ad hoc
panels; the independence of panel members; private rights to appear before the panels; the
precedential value of the decisions; the adoption of decisions; and the enforceability of the
decisions.
Part Three consists of the final three chapters which analyze and illustrate the
development of the ASEAN trade dispute settlement mechanism from diplomacy to
legalism. Chapter 5 examines the early approaches to settling trade disputes in ASEAN,
including trade disputes prior AFTA agreement, trade disputes under AFTA Agreement,
and the period after the AFTA agreement. It also discusses and assesses the 1996 ASEAN
dispute settlement mechanism Protocol. Chapter 6 then analyses the 2004 Protocol. Chapter
7 concludes the thesis with an assessment of the 2004 Protocol and it likely efficacy in the
ASEAN context. It examines the 2004 Protocol on the basis of the power-based and rule-
based oriented dichotomy and discusses the relevance of the ASEAN context to the
implementation of the Protocol. It concludes with a discussion of the potential obstacles to
the effective implementation of the Protocol and some suggestions as to how those
obstacles may be overcome.

6












PART I

THE ASEAN CONTEXT