FAIT Committee Report

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APPENDIX A
DESCRIPTION OF THE
DISPUTE SETTLEMENT PROCESS

A dispute generally begins when a Member alleges that another Member is not complying with its obligations under a WTO agreement. The dispute settlement process may be divided into four distinct stages: consultations, panel procedures, appeal, and implementation of the decision. The process is overseen by the Dispute Settlement Body (DSB) — essentially the WTO General Council in a different form — which is composed of all Member countries and is responsible for administration of the DSU. Table 1 sets out the approximate time frames for the settlement of a typical dispute.

Table 1: Approximate Time frames for the Settlement of a Typical Dispute

Stage of Dispute Settlement	Time Period
Consultations, mediation, etc.	60 days
Panel set up and appointment of panellists	45 days
Final panel report to parties	6 months
Final panel report to WTO Members	3 weeks
Dispute Settlement Body adopts report (if no appeal)	60 days
TOTAL (without appeal)	1 year
Appellate Body report	60-90 days
Dispute Settlement Body adopts appeals report	30 days
TOTAL (with appeal)	1 year and 3 months

Source: Settling Disputes: The WTO’s ‘most individual contribution,’ available on the WTO Web site at the following address: http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm

1. Consultations

The DSU requires parties to a dispute to first attempt to settle the dispute through consultations with each other. Most disagreements are solved in this manner within the 60-day time frame. If the parties are unable to solve their differences through informal consultations, they may resort to mediation or conciliation, and may ask the WTO Director General to assist them in any way.

2. Panel Procedures

If consultations are unsuccessful, the complaining party may ask the DSB to establish a dispute settlement panel, a process that can take up to 45 days. The process of setting up a panel cannot be blocked unless the DSB decides by consensus against appointing a panel. Member countries with a substantial interest in the dispute may join the process as "third parties" — a status that enables them to make representations before the panel.

Once a panel is established, the parties must agree on its composition. There are generally three panellists, and they may be governmental or non-governmental, but must have significant expertise in the international trade field and are also to be chosen for their independence from the disputing parties. The WTO Secretariat assists in composing the panel, but if the parties are unable to agree on suggested names, either party may request that the Director General make the final decision. Canada has recently asked the Director General to compose the panel for its WTO softwood lumber dispute because agreement on panelists could not be reached with the United States.

The task of the panel is to hear the claims of both parties and issue a ruling stating whether or not a party has violated its WTO obligations. The exact procedures followed by a particular panel may vary from case to case, and are determined by the DSU. For example, the panel may consult scientific or technical experts when dealing with complex issues. The panel hearings are held in private — only the disputing and third parties may attend — and all documentation is confidential. Canada, however, makes its submissions to panels publicly available.

The final report of the panel should normally be completed and presented to the parties within six months. The time frames applicable to the detailed stages of the panel process are set out in Table 2. If the report is not appealed, it is generally adopted by the DSB within 60 days of its distribution, at which point it becomes an official WTO ruling. Only a consensus decision of the DSB can prevent the adoption of a report.

Table 2: Approximate Timetable for Panel Work

Note: This timetable may be changed if there are unforeseen developments. Additional meetings with the parties can be scheduled if required.

Stage of Panel Process	Time Period
Receipt of first written submissions of the parties: 1) Complaining party 2) Party complained against	3-6 weeks 2-3 weeks
Date, time and place of first substantive meeting with the parties; third party session	1-2 weeks
Receipt of written rebuttals of the parties	2-3 weeks
Date, time and place of second substantive meeting with the parties	1-2 weeks
Issuance of descriptive part of the report to the parties	2-4 weeks
Receipt of comments by the parties on the descriptive part of the report	2 weeks
Issuance of the interim report, including the findings and conclusions, to the parties	2-4 weeks
Deadline for party to request review of part(s) of the report	1 week
Period of review by the panel, including possible additional meeting with the parties	2 weeks
Issuance of the final report to the parties to the dispute	2 weeks
Circulation of the final report to all WTO members	3 weeks

Source: WTO Dispute Settlement Understanding, Appendix 3.

3. Appeal

A panel decision may be appealed to the WTO Appellate Body by either or both parties in the 60 days following its release. The Appellate Body is composed of seven independent individuals, each of whom serves a four-year term and is appointed by the DSB based upon the individual’s demonstrated expertise in law, international trade and the WTO agreements. The Appellate Body membership must be broadly representative of the WTO membership.

The appeal is heard by three members and may address only issues of law and legal interpretation, not new evidence or reconsiderations of existing evidence. Appeals are normally completed within 60 days and the DSB will then adopt the Appellate Body report — and the related panel report (with amendments if necessary) — within 30 days of its distribution to DSB members. The disputing parties must unconditionally accept Appellate Body reports, unless the DSB decides by consensus not to adopt the report.

4. Implementation of the Decision

The DSB is responsible for surveillance of implementation of the final recommendations and rulings from panels and the Appellate Body. The process of implementation can take a considerable amount of time.

The party found to be in violation of its WTO obligations must within 30 days of the report’s adoption state its intention to comply with the ruling. The party is ordinarily given a "reasonable period of time" to do so. If nothing is done in this time period, the country must enter into negotiations with the complaining party to agree upon "mutually acceptable compensation." If no agreement is reached within 20 days of the expiry of the reasonable time period, the complaining party may ask the DSB for permission to retaliate by suspending concessions or other WTO obligations to the non-complying party. Such retaliation could take the form of limited trade sanctions, such as raising tariffs or imposing a surtax on imports from the offending state. The imposition of such sanctions is closely monitored by the DSB and must be equivalent to the damage caused by the initial non-compliance.