Dispute Settlement · Ongoing disputes at the WTO · Recent Updates · Trade and Environment · Western World

Is the WTO Dispute Settlement system in danger?

So there’s recently a lot of talk going around in trade law circles about the supposedly  “grossly illegitimate” ruling in the long-standing Tuna/Dolphin dispute at the WTO. Some of you may already be aware of the problem underlying the case. It involves a complaint by Mexico against the United States regarding certain requirements that the latter mandated concerning labelling tuna and tuna products as “dolphin safe”. Such an eco-friendly label obviously results in a  positive effect on products that are granted such a tag. This is because of a change in consumer perception leading a the attachment of a “desirable” to the product. But at the same time, in market/consumer interfaces, the absence of such a label can drive away consumers from the product in a given market leading losses to the supplier. The issue in the Tuna-Dolphin case relates to a very core idea of trade law – that the effect of a measure will largely be gauged on the basis of the reaction it creates with respect to the perspective of a consumer. In other words, the core of a country’s complaint against a supposedly WTO-inconsistent measure is usually based on (and judged on) the allegedly negative repercussions it has (or would have) on the sale of that country’s product in the imposing country’s market. This is often referred to as the “competitive conditions” test and we will talk about this in more detail in a bit.

The problem of labelling fish becomes one of trade law also because as a body of law it primarily seeks to prevent measures which are discriminatory i.e. designed to (not “having the effect of” – we’ll talk about the “requiem for an aims and effects test” in a later post) unfairly prejudice the products of a particular country or a group of country, solely on the basis of their origin. ‘Non-discrimination’ as such is therefore a very central pillar of international economic law understanding and forms the basis of much of trade law discourse. In the instant case, Mexico’s complaint was precisely this – that the US measure (i.e. regulatory stipulations) required tuna products of Mexican origin to demonstrate  higher levels of safety than their other (US) counterparts. Thus the essence of the complaint, much like many other WTO cases, is discrimination.

Now the case itself is rather complex, both factually and legally. The reason for choosing to talk about it right now is more than just regular academic or intellectual satiation. Though the “original” case goes back to 2009 when the “original” panel was established, the current controversy regarding the case has to do with a type of litigation very particular (not to mention peculiar) to the WTO dispute settlement system. Though we’ll talk about this in greater detail in the next post, it is sufficient to mention that Article 21.5 of the DSU authorises the initiation of “compliance proceedings” wherein the winner of a WTO dispute brings the losing party to the DS process again, this time challenging the implementation of the decision. This subsequent litigation allows winning parties to really give life to the award that they have received from the DS process. The WTO DS is special in this way because unlike other international dispute settlement forums where (lack of) enforcement is usually the focal point of criticism, the WTO allows a member a way (through Article 21.5) to ensure that the favourable judgement it is actually brought to life.

You see, if the panel (or AB subsequently) rules that a certain member’s measure is WTO-inconstant, it suggests what the member can do to bring it into compliance without pronouncing any (let’s say) “financial” awards. (Damages are anyway not strictly monetary in the WTO, anyway. They relate to retaliatory steps like reciprocal hiking of tariffs, or in extreme cases – sanctions) The aim of a ruling therefore is usually regulatory compliance with WTO rules. The “losing” party is then given a set period of time to abide by the panel’s ruling. But if at the expiry of the given time, the winner of the original dispute is unsatisfied with the progress made by the losing party, it can ask for Article 21.5 proceedings. Here, another panel (usually the original panel in terms of composition) looks into the changes brought by the losing party in order to follow the panel’s dicta or decision. Though this acts as a much required safety-valve for enforcement, the possibility of abuse is obvious. In fact, both winning and losing parties can abuse the provision, leading to a vicious-cycle of litigation. Needless to say, this is a big problem.

In any case, what I propose to do is to (hopefully) take on the entire issue of the Tuna/Dolphin matter, explaining a lot of things as they relate to the case and as they present themselves in trade law generally. The eventual discussion will probably be centred on the allegedly disastrous ruling by the AB in the Article 21.5 matter but to fully understand the problem some background, comprising (but not limited to) of the original case and the issues found therein, is vital. This will probably take two to three (more) posts and I will try to bring out the complete picture. What was the case about? How did the panel and AB deal with it in the first go? What were the issues there? What did academicians and practitioners of the field have to say? How and why did the case come into the Article 21.5 stage of WTO litigation? (What is the Article 21.5 stage really?) And finally – why is there an outcry against the AB’s ruling during this phase? Professor Rob Howse of NYU is (at least as of now) the most critical of the decision and has a very detailed post over at Simon Lester’s IELP Blog. Lester himself has posted about it a couple of times but he doesn’t seem to be so critical of the ruling. The concern that he raises is one often found in the field. In an article some months back, Gregory Shaffer (University of California), Manfred Elsig (World Trade Institute) and Sergio Puig (University of Arizona) argued that the authority of the WTO AB is extensive yet fragile. The fragility largely rises on account of incorrect or illogical rulings arising from the body, undermining the entire system. Professor Howse’s fear is exactly that. So the question is: is the WTO DS really in danger? Or: is the 21.5 ruling in Tuna/Dolphin really that disastrous?

In any case, it would be a fantastic exercise to undertake, from a writing as well as explorative perspective.

Something fishy does seems to be going on in the WTO DS, and it sure is worth to find out the whats and the whys.

[Picture credits: http://www.redbubble.com/people/hagen/works/180550-dolphin-and-tuna%5D

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