The WTO dispute settlement mechanism, which came into being with the creation of the World Trade Organisation in 1995, is one of the cornerstones of the Organisation. It gives all Members of the WTO confidence that the agreements negotiated and agreed will be respected. It does not impose new obligations, but it does enforce those already agreed.
The rationale behind the Dispute Settlement Understanding (DSU) of the WTO is to provide Members with a clear legal framework for solving disputes which may arise in the course of implementing WTO agreements. Clearly, agreed solutions between Members are the most desirable way of solving disputes. However, if this is not possible, Members can ask for panels followed by appeal procedures whereas the panel or the Appellate Body, by interpreting the rules, solves the dispute. If a Member does not comply with WTO recommendations and rulings on bringing its measures in line with WTO rules, then trade compensation or sanctions, for example in the form of duty increases or suspension of WTO obligations may follow.
WTO Members, including the EU, are consistently making use of the dispute settlement mechanism (see: cases involving the EU). However, the EU never initiates a dispute settlement case before exhausting all other ways of finding solutions. The system has, so far, worked well to solve very important disputes and avoiding 'trade wars'. For this reason, the EU considers that, overall, the system is functioning well and has helped to ensure real market-opening. Moreover, it compares extremely well with other international dispute settlement systems in terms of speed and efficiency. By providing a multilateral forum for settling disputes, the mechanism guards weaker Members against unilateral action by the strongest.
Current talks about improving the system
The Doha Ministerial Declaration mandates for negotiations on improvements and clarification of the system. The EU is fully committed to making the system even more effective, predictable and transparent.
The EU would like to reinforce the system concerning issues such as:
Improving panel composition procedures
Clarification of the DSU provisions on implementation. This covers notably:
2. The arbitration procedure on the level of suspension of concessions
3. The establishment of a procedure to lift suspension of concessions once a losing party has implemented changes
Speeding up the process whenever this is feasible and justified;
Greater transparency, which is needed to secure continued public support and confidence in the WTO system, while preserving its intergovernmental character.
The dispute settlement system and developing countries
The EU recognises the difficulties that developing countries face in participating actively in the dispute settlement system. Within the framework of the negotiations on the Dispute Settlement Understanding, the EU is in favour of initiatives aimed at granting to developing countries a better access to the system and providing them with the necessary training and technical assistance.