State-to-State and
Private Dispute Resolution Mechanisms
under the WTO Documents
ALBERTAS ŠEKŠTELO, FCIArb 20 March 2014
Content of this presentation
• Legal framework of the WTO Dispute Settlement System;
• Main features of the WTO Dispute Settlement System;
• Defense of the private interest under WTO documents:
○ Influence on the government and representation;
○ Amicus curiae briefs
○ Direct effect of WTO Agreement in the member states;
• Protection under Bilateral Investment Treaties:
○ Main features;
○ Main differences between WTO Dispute Settlement System and
dispute settlement mechanism in the Bilateral Investment Treaties;
• Conclusions
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Legal framework of WTO Dispute Settlement System
• Dispute Settlement Understanding (DSU) defines the rules and
procedures of the dispute settlement system in the WTO.
• The DSU applies to most of the disputes brought under the WTO
Agreements, including the DSU itself and the Agreement establishing WTO
(Article II of the WTO Agreement; Appendix 1 of the DSU).
• DSU is applicable in a uniform manner to disputes under all the WTO
Agreements (Article II of the WTO Agreement; Appendix 1 of the DSU).
• In some instances, there are so-called “special and additional rules and
procedures” on dispute settlement contained in the covered agreements
(cf. Appendix 2 of the DSU).
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Dispute Settlement System in the WTO
Main objectives of the dispute settlement system are:
• Providing security and predictability to the multilateral trading system (Article 3.2 of the DSU);
• Preserving the rights and obligations of WTO Members (Article 3.2 of the DSU);
• Clarification of rights and obligations through interpretation (Articles 3.2, 17.6 of the DSU; Articles 30-33 of
the Vienna Convention on the Law of Treaties as “customary international law”, see Appellate Body
Report, US Gasoline DSR 1996:I, 3 at p 23);
○ But only Ministerial Conference and the General Council have exclusive power of to adopt
“authoritative” interpretations that are of general validity for all WTO Members (Article IX:2 of the
WTO Agreement; Article 3.9 of the DSU);
• “Mutually Agreed Solutions” as “Preferred Solution” (Articles 3.7, 11 of the DSU);
• Prompt settlement of disputes (e.g. Articles 3.3, 4.3, 4.9, 6.1, 12.8, 20 of the DSU);
• Exclusive jurisdiction (Article 23 of the DSU).
WTO dispute settlement process consists of three broad stages:
• Consultations (Article 4 of the DSU);
• Panel (Articles 6-8, 11-16 of the DSU) and, if requested, Appelate Body review (Article 17 of the DSU);
and
• If needed, implementation (Articles 21-23 of the DSU) See flow chart (next page)
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Dispute Settlement System in the WTO (2)
Participants in the dispute settlement system:
• As dispute settlement proceedings are confidential (see, e.g. Articles 4.6,
5.2, 14, 17.10, 18.2 of the DSU), and sometimes on without prejudice
basis (see, e.g. Article 4.6 of the DSU), he only participants are the
Member governments of the WTO, which can take part either as parties
or as third parties.
• The WTO Secretariat, WTO observer countries, other international
organizations, and regional or local governments are not entitled to initiate
dispute settlement proceedings.
• Private individuals or companies do not have direct access to the
dispute settlement system under WTO documents.
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Defending private interest
Private individuals or companies are usually most directly and
adversely affected by the measures allegedly violating WTO Agreement.
Although private individuals do not have direct access to dispute settlement
system under WTO documents, there are ways to defend their interests:
• Influence on the government and representation (A);
• Amicus curiae submissions to DSB Panels and Appellate Bodies (B);
• Direct effect (use) of WTO Agreement in the EU member states (C);
• Using protection under bilateral investment treaties (D).
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(A) Influence on the government
Organizations, private individuals or companies (non-state actors) may
exert influence or even pressure on the government with respect to the
triggering of a dispute.
In many respects, non-state actors serve as “resource enhancers” to the
members whose support they need to defend their strategic interests,
whether of a commercial or public nature.
Non-state actors may also advice Governments on independent legal
representatives that could assisting the Member state in drafting submissions
and / or appear in Panel and Appellate Body proceedings (e.g., in EC – Bananas III,
one party challenged the right of parties or third parties to have independent private legal counsel (i.e.
barristers/solicitors/attorneys) as their representatives, even if these individuals are professionals who
had been hired for that specific purpose and were not permanently employed by the government. The
practice under GATT 1947 (where private legal counsel was not allowed) was invoked in support of
denying such a possibility. The Appellate Body, however, made clear that nothing in the WTO
Agreement or in general international law prevents a WTO Member from determining for itself the
composition of its delegation in WTO dispute settlement proceedings; Appellate Body Report, EC –
Bananas III, para. 10).
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(A) Influencing the Government to Trigger the Dispute (2)
Some WTO Members have formally adopted internal legislation under which
private parties can petition their governments to bring a WTO dispute.
•
U.S. Trade Act of 1974
Sections 301-310 provide a means by which U.S. citizens may petition
the United States government to investigate and act against potential
violations of international trade agreements
•
EU Trade barriers regulation
Article 4(1) stipulates that among other subjects „any enterprise, or any
association, having or not legal personality, acting behalf of one or
more enterprises“ is able to bring an action under the TBR, which
means that a complaint from a private person may lead to dispute in
WTO
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(B) Amicus Curiae Submissions
Amicus Curiae “friend of the court” submissions are submissions from
entities, non-governmental organizations, or university professors.
Theoretical side of the issue:
• If the briefs are attached to the submission of a participant of the dispute,
•
•
•
for instance as exhibits, it is considered to be an integral part of the
submission (Appellate Body Report, US – Shrimp, pp. 89 and 91).
Under DSU Panels are permitted to accept and consider or to reject
information and advice, even if submitted in an unsolicited fashion
(Appellate Body Report, US – Shrimp, pp. 105–108).
When the unsolicited briefs are received directly from an amicus curiae,
the entity filing the brief has no right to have it considered (Appellate
Body Report, US – Lead and Bismuth II, pp. 40–41).
The Appellate Body is entitled to adopt additional procedure pursuant to
Rule 16.1 of the Working Procedures allowing amicus curiae briefs
(Appellate Body Report, EC – Asbestos, p. 52).
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(B) Amicus Curiae Submissions (2)
Practical side of the issue:
• Many Members are of the strong view that the DSU does not allow
panels to accept
submissions.
and
consider
non-requested
amicus
curiae
• Panels have no obligation whatsoever to accept and consider these
briefs.
• Interested entities, which are neither parties nor third parties to the
dispute, have no legal right to be heard by a panel.
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(C) Effect of WTO Agreements in the EU
European Court of Justice (ECJ) has stated that WTO agreement is not
capable of having direct effect in the EU.
However, a private individual may invoke WTO Agreement bejore ECJ
(European Court of Justice) in four ways:
1. An action for annulment under 263 TFEU according to which an
individual may request the ECJ to review the legality of an act of Union
institutions if the act is of direct and individual concern to them.
2. An action for failure to act under 265 TFEU against inaction by EU
institutions if an individual can establish that EU institution has failed to
address to him any act other than recommendation or opinion.
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(C) Effect of WTO Law in the EU (2)
3. An action for damages under article 340(2) TFEU which states:
„In the case of non-contractual liability, the Union shall, in accordance with
the general principles common to the laws of the Member States, make good
any damage caused by its institutions or by its servants in the performance
of their duties.”
4. Raise the question of the validity of acts of Union institutions before the
national court which will then, under article 267 TFEU, request the ECJ to
give a preliminary ruling on that subject.
In article 263 TFEU, it is stated that the ECJ shall review legality on grounds of
lack of competence, infringement of an essential procedural requirement,
infringement of the Treaties or of any rule of law relating to their application, or
misuse of powers.
Individuals who seek to invoke the provisions of the WTO Agreement may benefit
from these four procedural routes only if the WTO Agreement is among the rules
in the light of which the ECJ reviews the legality of acts of the Union institutions.
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(C) Direct Effect of the WTO Agreement in the Russian Federation (3)
• Under Russian law, international treaties to which the Russian
Federation is a party are deemed an integral part of the Russian legal
system.
• Therefore, the WTO agreements to which Russia has joined have
direct effect on the Russian Federation.
• Russia’s obligatory WTO commitments are limited by those described in
paragraph 1450 of the Report.
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(D) Bilateral Investment Treaty (BIT)
Bilateral Investment Treaty - an agreement made between two
countries containing reciprocal undertakings for the promotion and
protection of private investments made by nationals of the signatories
in each other's territories.
BITs establish the terms and conditions under which nationals of one
country invest in the other, including their rights and protections.
BITs provide protection against nationalization and expropriation of
foreign assets and other actions by a signatory of the BIT that may
undermine the ownership or economic interest of a national of the
other signatory.
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(D) Bilateral Investment Treaty (BIT) (2)
As BITs are negotiated agreements between the signatory parties,
their terms vary. However, they generally include such rights and
protections as:
• National treatment;
• Most-favored-nation treatment;
• Fair and equitable treatment;
• Compensation in the event of expropriation.
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(D) Dispute Settlement between Investors and Host States (3)
One of the main protections under a BIT is that it allows foreign
investors to submit claims for breach of the BIT to arbitration under
ad hoc or institutional arbitration provided in the BIT rather than to
local courts.
Two methods of private dispute settlement in BITs:
• Investor-State consultation and negotiation (which may be
prerequisite to proceed to an arbitration „cooling-off“ period);
• Investor-State arbitration.
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(D) BIT vs. WTO Dispute settlement (4)
BIT and WTO dispute settlements supplements each other, however,
has these main differences:
• Goals:
○ WTO - to bring a country member in compliance with its
obligations vis-à-vis other members under the WTO agreements;
○ BIT – enables private actors to bring an action against a state in
an international forum;
• Form:
○ WTO – special settlement mechanism;
○ BIT – mainly arbitration. Usually, the investor has several options
for appropriate forum provided in the BIT
• Primary remedies:
○ WTO – In terms of Article 3.7 of the DSU the primary objective of
the dispute settlement mechanism is to secure the withdrawal of
measures found to be inconsistent with the WTO agreements.
Compensation is available as a temporary measure and only if the
immediate withdrawal of the measure is impracticable;
○ BIT – compensation award (Hull formula: prompt, adequate and
effective compensation).
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Conclusions
• WTO Dispute Settlement Mechanism designed for State-to-State
disputes regarding WTO Agreements. Therefore, private persons
can have only indirect impact of the course of proceedings.
• By contrast, one of the main purpose of the BITs is to provide
private Investor-to-State dispute mechanism and seek
compensation.
• These two mechanisms supplements each other as relevant State
can commence WTO Dispute Settlement and aggrieved private
investors can start relevant proceedings provided by the BIT.
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Albertas Šekštelo, FCIArb
Senior Associate
albertas.sekstelo@tgslegal.com