The Differences between the WTO anh the GATT 1947 dispute settlement systems

CONTENTS

SITUATION..............................................................................................................2
MAIN CONTENT.....................................................................................................2
1. The GATT dispute settlement system..........................................................2
2. The WTO dispute settlement system: the DSU and the WTO...................4
3. The Differences between the WTO anh the GATT 1947 dispute
settlement systems................................................................................................5
CONCLUSION.........................................................................................................7
REFERENCES..........................................................................................................8


SITUATION
Over the past 20 years, nearly 500 disputes have been brought the WTO.
About half of these were resolved dring bilateral discussions while the other half
proceeded to a panel process, which in recent years generally take about 14
months. Appeals are considered by the WTO’s Appellate Body and – excluding
exceptionally busy periods – are completed within three months. This makes the
WTO’s

dispute

system

one

of

the

fastest

in

the

world.

The following article will highlight the difference between the WTO and
GATT dispute settlement system.
MAIN CONTENT
1. The GATT dispute settlement system
Before evaluating the changes in dispute settlement that were agreed upon
during the Uruguay Round and those currenctly proposed in the context of the
reform of the DSU, we must cast a look at the system as it existed and evolved in
the context of the GATT. Only this retrospective vision will allow us to fully
understand and judge the DSU as it stands now and the proposed changes forward.
Back in 1948, the Havana Charter for an International Trade Organization
(the "Havana Charter" of the "ITO") included provisions on the settlement of
disputes that were similar in the main to GATT Articles XXII and XXIII, although
they also contained the possibility of having recourse to the International Court of
Justice for advisory opinions.1 As we know, the Havana Charter never entered into
force and GATT - which had been negotiated just previously to the Havana
Conference by the Preparatory Committee of 23 countries and which was to have
1 Articles 92 through 97 of the Havana Charter for an International Trade Organization, Final Act and

Related Documents, United Nations Conference on Trade and Employment, April 1948, New York, Pp.
49-50.


been incorporated into the ITO through Chapter IV of the Charter - came to have a

life of its own as a stripped down version of the failed ITO.2
In its 1947 published analysis of the GATT, the Department of State of the
United States simply said that, as it was impossible to foresee and provide in detail
for all possible measures which might affect the commercial relations between
nations, Articles XXII and XXIII of the GATT provided for consultations and for
procedures to be followed in cases of nullification or impairment of benefits. 3 Both
provisions, and particularly Article XXIII:1, address two causes of action for a
contracting party to initiate dispute settlement proceedings under the GATT:
- Nullification or impairment of benefits accruing to it from GATT:
- impediment of the attainment of any objective of GATT.
These causes of action could be as a result of:
- (a) measures inconsistent with GATT provisions;
- (b) measures not inconsistent with GATT provisions;
- (c) other possible situations.
Articles XXII and XIII are a deviation from the standard rules on State
responsibility, based mainly in the illegality of wrongful acts, to address similar
adverse effects caused, not only by illicit trade measures, but also by "licit" trade
measures. This type of provisions followed the practice of the United States in the
negotiation of bilateral agreements during the 20's and 30's."4
2 Given this institutional failure, the term "GATT" received dual nature: on the one hand as the General

Agreement on Tariffs and Trade containing rights and obligations of the contracting parties thereof; on the
other, as the de facto organisation administering the provisions of the General Agreement on Tariffs and
Trade.

3 Department of State, Analysis of the General Agreement on Tariffs and Trade, Washington DC,
Publication 2983, Commercial Policy Series 109, November 1947.
4As Professor Hudec states, "[both the form and substance of the General Agreement on Tariffs and Trade
draw heavily from the bilateral trade agreements of the 1920s States trade agreements negotiated in the
decade after 1935." He also refers to the Agreement Between the United States of America and Mexico of

23 December 1942, as the one that has been compared the most often with the GATT. R.E. Hudec, The
GATT Legal System: A Diplomat's Jurisprudence, in: Essays on the Nature of International Trade Law,
(Cameron May, 1999), p.18. Article XIV of that Agreement states that: "[i]f the Government of the United


2. The WTO dispute settlement system: the DSU and the WTO
When the Uruguay Round participants determined that they had to jump
forward to a more sophisticated dispute settlement mechanism, they also had to
move from the reigning system with its strongly-embedded emphasis on negotiated
solutions to one that would be of a more judicial nature.
This explains the criticism that is often voiced in respect of the DSU, to the
effect that it is in reality only of a quasi-judicial nature. But, in terms of what had
occurred in the past, this was the most that a rational observer, aware of the
political background prevailing, could have expected at the time.
In passing, we might remark that the Ministerial Decision determining that a
full review of the DSU should take place within four years of the entry into force
of the WTO Agreement also provides that at that time a decision should be made as
to whether to continue, modify or terminate it.5 Once again, typical GATT caution
prevailed, although it is indeed difficult to imagine the WTO membership
modifying radically, let alone terminating, the DSU after almost ten years of
practical experience in its application.
The DSU represents an important transitional accomplishment that broke
with the past on some issues we will now address and put the WTO on the
threshhold of fully introducing the rule of law into its dispute settlement
proceedings.

States of America or the Government of the United Mexican States should consider that any measure
adopted by the other Government, even though it does not conflict with the terms of this Agreement, has
the effect of nullifying or impairing any object of the Agreement, such other Government shall give
sympathetic consideration to such written representations or proposals as may be made with a view to

effecting a mutually satisfactory adjustment of the matter." United States Government Printing Office,
Reciprocal Trade, Agreement Between the United States of America and Mexico, Executive Agreement
Series 311, Washington DC, 1943, p.16.

5 Decision on the Application and Review of the Understanding on Rules and Procedures Governing the Settlement
of Disputes, adopted 15 December 1993.


It will come as no surprise that governments wanted to maintain the
accumulated experience of GATT. Article XVI:1 of the WTO Agreement states that
except as otherwise provided under the WTO Agreement or the Multilateral Trade
Agreements annexed thereto, the WTO shall be guided by the decisions,
procedures and customary practices followed by the CONTRACTING PARTIES to
GATT 1947 . In particular regarding the DSU, Members reaffirm in Article 3 their
adherence to the principles for the management of disputes heretofore applied
under Articles XXII and XXIII of GATT 1947, and the rules and procedures as
further elaborated and modified in the DSU.
This blanket pronouncement, combined with Article XVI of the WTO
Agreement, ensured the preservation of the GATT "acquis" extending over nearly a
half century.6
A detailed commentary on the background, negotiating process and intended
purpose of all the changes that the DSU has brought to the GATT 1947 system
would exceed by far the scope of this paper. Therefore, we limit ourselves to
painting in with broad strokes those innovations that stand out as being most
prominent and deserving of special attention.
3. The Differences between the WTO anh the GATT 1947 dispute
settlement systems
The differences between the WTO and GATT dispute settlement systems are
as follows:
First, with the enactment of the DSU, the WTO has introduced a common

legal order for the whole process of dispute settlement, thereby ensuring that the

6 29 Thus, the Appellate Body in Japan - Taxes on Alcoholic Beverages has considered in this context for
instance that "[a]dopted panel reports are an important part of the GATT acquis". Appellate Body Report,
Japan - Taxes on Alcoholic Beverages, adopted 1 November 1996, WT/DS8/AB/R, WT/DS 10/AB/R.
WT/DS11/AB/R.


WTO dispute settlement procedures are unified, linked, An automatic sequence
takes place easily in high feasibility.
Second, the principle of consensus understood in the GATT 1947 meaning
has been replaced by the "reciprocal" principle of the WTO. The revision of the
consensus principle is considered one of the biggest advances in the WTO dispute
settlement system. With this principle, DSB's entire process of decision-making in
general and speaking is fast and convenient, thus ensuring time for the dispute
resolution process.
Third, regarding the impartiality, fairness and qualifications of panel
members, the DSU has set a series of criteria for panel members, prescribing cases
where jurors are not allowed. . Moreover, the DSU also stipulates the responsibility
of jurors to inform all benefits, their relationships may be related to the dispute, as
well as to inform issues that may create suspicion. doubt about his impartiality.
With WTO rules, it has overcome this weakness that exists in GATT.
Fourth, recommendations, conclusions of the Panel and Appellate Body
after settlement of the case were approved by the DSB. Once adopted, they will
become the general provisions of the DSB/WTO binding on the enforcement
responsibilities of all parties involved. In order to ensure compliance with the
implementation, the DSU stipulates that the DSB will directly implement this
responsibility. Thus, with the above provision, the DSU is both a decision-making
body and a supervisory body that enforces the decision.
Fifth, the issue of retaliation is effectively used in the WTO's dispute

settlement system, with the provision that: if within a certain time, the losing party
fails to comply with the recommendations of the DSB, then the party winning a
case has the right to ask the DSB for permission to take retaliatory measures. Upon
receipt of the request for retaliation against DSB, decisions will be passed allowing
the prevailing party to take retaliatory measures. This provision makes retaliation


immediately, if the losing party fails to enforce the DSB's decision. In fact,
retaliation is quite effective in the WTO dispute settlement system.
In summary, the WTO's Dispute Settlement Mechanism is a combination
of WTO legal provisions on dispute settlement bodies (DSB), and procedural rules,
dispute resolution (DSU), and Other specific provisions relating to dispute
resolution in the areas of specific adjustment of each WTO agreement. The WTO's
dispute settlement system has substantially differentiated the weaknesses existing
in the dispute settlement system in GATT 1947.
CONCLUSION
The regular use of the WTO’s dispute settlement system by both developing
and developed members is a clear indication that the system is working and that
WTO menbers continue to have trust in it. The system plays a cruial role in
enduring that WTO agreements are espected. This in turn leads to more
harmonious trade relation between members and promotes economic growth


REFERENCES
1. Textbook international Tradeand Business Law - Hanoi Law University - The
People’s Public Security Publishing Househanoi – 2012
2. Textbook international trade anh business law- Hanoi Law University – 2018
3. Dispute Settlement Understanding - legal text
4. GATT 1947
5. Department of State, Analysis of the General Agreement on Tariffs and Trade,

Washington DC, Publication 2983, Commercial Policy Series 109, November
1947.
6. Appellate Body Report, Japan - Taxes on Alcoholic Beverages, adopted 1
November 1996, WT/DS8/AB/R, WT/DS 10/AB/R. WT/DS11/AB/R.