CHAPTER 2 : GENERAL DIFFERENTIAL TREATMENT GRANTED TO DEVELOPING COUNTRIES UNDER THE WTO DISPUTE SETTLEMENT SYTEM.

This chapter will provide a critical description and analysis of the special treatment afforded to developing countries in the WTO dispute settlement system, with reference to the WTO case law and practice. We will exclude the question of the implementation of decisions which will be the subject of chapter III.

Section 1 : Existence and affirmation of a differential treatment.

Paragraph 1 : The WTO understanding on rules and procedures governing the settlement of disputes.

GATT “acquis” and innovations.

As K.O. Kufuor notes[131], the WTO DSU is “a mix of the codification of past measures on dispute settlement, institutional reform and new stipulations [emphasis added] ” through which the developing countries’ interests have been extensively dealt with.

Most commentators take the view that the WTO DSU constitutes a significant improvement compared to the GATT system [132]. From the perspective of developing countries, two major developments are particularly relevant : the relative judicialisation of the procedure and the definite WTO position against unilateralism and in favour of multilateralism [133]. In addition, the WTO DSU reiterated and reinforced the need to provide special and differential treatment in favour of developing countries.

It must be first noted that the major improvement brought about by the Uruguay Round from the viewpoint of developing countries was the judicialisation of the DSM [134], providing more security and predictability in the settlement of disputes [135]. This was first achieved through the creation of two permanent bodies, the Dispute Settlement Body (DSB) and the Appellate Body (AB) [136] and further through the improvement of the procedure itself [137]. The latter mainly refers to the negative consensus rule and the provision of precise time frames at every stage of the procedure [138].

The WTO legal position against unilateralism is particularly essential for developing members [139] whose fear of unilateral determination of violations or suspension of concessions was somewhat alleviated [140].

Although the differential treatment provided for DCs in the DSU can be criticised on many grounds, one must admit that the overall improvement of the procedure has had a positive impact on the DCs' participation in the DSM. The first four years of the existence of WTO saw an increase of about thirty percent of the total complaints by DCs, as compared with their overall participation in the GATT history [141].

The differential treatment presently granted to DCs consists in the codification of past measures, a few new provisions and the 1966 Procedures.

Particular treatment for the “least developed countries”.

This further distinction among developing countries had already been recognised during the Tokyo Round. The least-developed countries’ campaign for special treatment during the Uruguay Round led to a materialisation of this distinction under the WTO DSU [142]. The crucial question remains of the definition of the term itself. No serious effort was made during the Uruguay Round to determine criteria in this regard, despite the fact that least-developed countries raised this question during the negotiations [143]. Accordingly, the United Nations' list of least developed countries will be referred to in order to give effect to the special treatment granted by the WTO DSU [144]. This UN list contains today forty-eight countries, thirty of which belong to the WTO [145]. Their identification is based on general (GDP per capita, the share of industries in the GDP and the illiteracy rate) and more specific criteria [146].

Their situation as to the WTO DSM is dealt with in Articles 24(1) and 24(2) of the DSU. As a general principle, least developed countries should be given special consideration  “at all stages of the determination of the causes of a dispute and of dispute settlement procedure [emphasis added] ”. In addition, “members shall exercise due restraint in raising matters under these procedures involving a least-developed country Member [emphasis added] ”  or “in asking for compensation or seeking authorisation to suspend the application of concessions or other obligations pursuant to these procedures [emphasis added] ”. Finally, paragraph 2 provides for the possibility for least-developed countries to benefit from the Director-General or the Chairman of the DSB “good offices, conciliation and mediation with a view to assisting the parties to settle the dispute [emphasis added] ”.

It must be noted that to date, no least-developed country has been involved in a WTO dispute neither as a respondent nor as a complainant [147].

Paragraph 2 : General improvements concerning all members but having a bearing on developing countries’ use of the dispute settlement system.

Negative consensus rule.

A consensus-based approach still prevails over the WTO [148]. However, “[…] a negative consensus approach will apply [to the WTO DSM]: a consensus will be needed in order to halt the proceedings from advancing at any stage of the formal dispute settlement procedures [emphasis added] ” [149]. This is a major improvement since the need to reach a consensus at every stage of the procedure was a major impediment in the use of the DSM, above all for developing countries [150]. The direct consequence of this development  is the practical automaticity of the procedure : the possibility to reach a consensus against the establishment of a panel (DSU Article 6), the adoption of the report (DSU Article 16.4) or the authorisation to suspend concessions (DSU Article 22.6) is de facto impossible [151]. Thus no blockage can hinder the procedure [152].

This possibility to frustrate the procedure was a major concern for developing countries and was one of the main elements that explained the developing countries’ lack of trust in the system. Although this development benefits any contracting party, it has a great impact on the situation of complainant developing countries: the automaticity of the procedure and the adoption of panels give them more weight in the negotiation process, even against developed countries.

Stricter time frames.

Although efforts had been made throughout the GATT history  in order to establish efficient time limits, they often lacked precision and as we observed, the procedure could last indefinitely, endangering the situation of complainant developing countries, since the procedure did not have any suspensory effect. The WTO DSU provides for tight and precise time limits at every stage of the procedure [153]. It must be noted that, according to Article 3.12 of the DSU, DCs are granted the right to invoke the 1966 procedures when involved in a dispute as a complainant against a developed country. This notably entails the right to benefit from the tight time limit of sixty days for the panel to issue the report (1966 procedures paragraph 7). However, Article 3.12 further states that with the agreement of the complainant party, that time frame may be extended by the panel if it felt that this time frame is insufficient [154].

The overall procedure cannot last more than two years and a half, this may seem very long but this constitutes a considerable improvement [155].

Third party rights.

As seen previously, third parties rights had been addressed in the 1979 Understanding which provided that any WTO member having a substantial interest in a dispute could ask to be heard by the panel. The WTO DSU extended this right following suggestions made by certain developing countries [156]. Their interests in such provisions are twofold. First, granting to third parties rights as to the DSM amounts to foster transparency in the treatment of disputes [157]. Second, this indeed ensures that third parties’ interests are preserved. In general, involving third parties in the DSM encourages multilateralism and thus the judicialisation of the system.

Pursuant to the WTO DSU (article 10): “the interests of the parties to a dispute […] shall be fully taken into account during the panel process [emphasis added] ” and  “Any Member having a substantial interest in a matter before a panel […] shall have an opportunity to be heard by the panel and to make written submissions to the panel. [emphasis added]”.

However, we will observe further that third parties’ interests have not been comprehensively dealt with and that the WTO DSU does not add much to the GATT system in this regard.

Possible recourse to arbitration.

Article 25 of the DSU provides for the possibility to have recourse to arbitration as an alternative mode of dispute settlement, subject to the agreement of the parties which must be notified to the Contracting Parties. It is difficult to assess the significance of this provision for developing countries. On the one hand, one can consider that this possible recourse to arbitration serves their interests because this procedure leads to a legally binding solution [158]. As we previously stated, this is of crucial importance for developing countries since the legal significance of panel reports is still dubious under the WTO DSU. One the other hand, as E. Canal-Forges points out [159], it is difficult to assess whether this summary procedure would be attractive in practice for WTO members mainly because of its lack of precision and its generality.

However, the fact that this procedure is legally binding is a crucial asset for developing countries. In addition, as G. Burdeau argues [160], political and commercial consideration may interfere with the conciliation procedure under the DSM that are less likely to play a role in an arbitration process. For this reason, we believe that the arbitration procedure could be of interest for developing countries.

Terms of reference.

The WTO DSU formalised a practice developed under the GATT whereby panels used standard terms of reference to settle disputes [161]. However, as a prerequisite, parties could object and issue responses before the terms of reference were adopted and this could delay the whole DS process to the detriment of developing countries.

In order to break up with this practice, the WTO DSU virtually imposes terms of reference on parties to the disputes (Article 7.1 - annex p.23.) unless all the parties agree on different terms of reference.

Paragraph 3 : Description of the differential treatment at the different stages of the procedure.

Legal assistance to developing countries.

Under Article 27 of the DSU ( see annex p.48), the secretariat is responsible for assisting Members in general in respect of dispute settlement at their request, but this article further states that “there may also be a need to provide additional legal advice and assistance in respect of dispute settlement to developing country Members.  To this end, the Secretariat shall make available a qualified legal expert from the WTO technical cooperation services to any developing country Member which so requests. This expert shall assist the developing country Member in a manner ensuring the continued impartiality of the Secretariat [emphasis added]”. This legal assistance has been practically supplied by two former counsellors of the GATT WTO legal Affairs Division, on a part-time basis [162]. The recent creation of the Advisory Centre on WTO Law under the WTO auspices may bring about new developments in this area.

Possible recourse to the 1966 Procedures.

The first aspect of the special treatment granted to DCs is the possibility to opt for the 1966 procedures [163] as an alternative to the provisions contained in Article 4,5,6 and 12 of the WTO Understanding (see annex p.19/21/22/28.) in the event a complaint is brought by a DC member against a developed member. (Article 3.12 - annex p.18.). This possible alternative was added at the insistence of DCs which argued that rolling back this concession would be inappropriate [164].

In the following description of the DCs’ special treatment as regards the DSM, we will make constant reference to this possible option, bearing in mind that, as Article 3.12 states in fine, in the event of a conflict between the rules and procedures of article 1, 5, 6 and 12 of the DSU and the corresponding rules of the 1966 procedures, the latter take precedence [165].

Consultation phase.

At this stage, Article 4.10 of the DSU (see annex p.20.) states that special attention should be given to the particular problems and interests of developing countries. This provision gave rise to a complaint from Chile against the European Communities during a DSB meeting, on the ground that its request for consultations with the European Communities ”had been disregarded by the Communities thus discriminating and impairing chile’s interests [...] [emphasis added]” [166]

Specific provisions grant special treatment to LDCs at the consultation phase (as seen earlier).

Opting for the 1966 Procedures entails the right to call on the good offices of the director General, acting ex officio as mediator/conciliator where consultations following a complaint by a DC had an unsuccessful outcome [167]. This right had been used five times under GATT law and only from 1977 [168].

Another provision that deals with DCs ‘special rights at this stage is Article 12.10 that regards timeframes for consultations. This Article allows the parties to the dispute to agree to extend the timeframes for consultations as set out in Articles 4.7 and 4.8 of the DSU. However, this is limited to the case where a DC is defendant. It is also provided for the possibility for the Chairman of the DSB to step in and decide on any further time extension in the case the relevant time has elapsed and the parties to the dispute cannot agree on whether the consultations have concluded [169].

Panels phase.

As seen earlier, panels are established quasi automatically and according to precise timeframes : this amounts to a provision in favour of developing countries.

First, as regards the composition of panels, DCs are granted the right to be heard by a panel where at least one of the three members is from a DC, in the case a dispute is raised between a DC and a developed country (DSU Article 8.10) [170].

Second, “[…] in examining a complaint against a developing country Member, the panel shall accord sufficient time for the developing country Member to prepare and present its argumentation [emphasis added]”. (article 12.10), in the interests of a due process and fairness [171]. In the EC-Banana III case [172] ACP countries acting as third parties argued that they had not been given enough time to prepare their argumentation, notably in breach of Article 12.10. However the panel did not address the issue as this Article is specifically concerned with cases wherein a DC is defendant and not third party [173].

This provision gave ground to a complaint on the part of India against the United States [174]. India requested that it be granted additional time to prepare its first written submission on the ground of several factual elements related to a recent change of government [175] but the United States opposed this request. However, the Panel agreed to grant a ten-day extension of time, with regard to the administrative reorganisation taking place in India at the time of the dispute [176].

Finally, pursuant to Article 12.11, in a dispute involving a DC, either as respondent or complainant, the panel’s report must explicitly indicate the form in which account has been taken of relevant provisions on special treatment. Generally, this provision has been complied with to the extent that whenever a DC Member has invoked a provision relevant to their special treatment, the panel’s response is made in the report [177].

In the case a DC is complainant, the option for the 1966 Procedures implies that if the parties to the dispute fail to settle their dispute through the good offices of the Director General after a period of two months, the latter shall submit a report on action taken by him, together with all background information to the WTO members (paragraph 5 of the 1966 Procedures) [178]. As M.E. Footer notes, this amounts to the establishment of a panel by the Contracting Parties [179].

It must be noted that no differential treatment is granted for the appeal phase.

We will study the differential treatment accorded to DCs as regards the implementation of panels and AB reports in chapter III.

Section 2 : Critical analysis of the WTO DSM from the perspective of developing countries.

Paragraph 1 : Conservative approach : differential treatment mainly resting upon on 1966 procedure.

Aside from the general improvements and innovations of the system evoked earlier, the novelty of the special treatment granted to DCs must be questioned. As P.E Kuruvila points out [180], the WTO DSU provisions in this regard are a mere reiteration of the 1966 Procedures and 1979 Understanding (see table next page [181]).

We may add that the WTO Understanding also restates some of the provisions of the 1989 improvements [182]. The table[183] illustrates in a striking way the clear stagnation of the special treatment accorded to DCs. 

DEVELOPING COUNTRIES' SPECIAL TREATMENT THROUGHOUT THE GATT/WTO HISTORY

Paragraph 2 : Governments as filters [184].

Under the WTO DSM, only governments have legal standing and accordingly, industries must petition their government if they wish to have their interests defended [185]. This is particularly problematic from the viewpoint of DCs.

The relative weakness of their economy makes them more dependent on foreign trading partners and there is a need for governments to monitor trade relationships – and private industries’ complaints – in a manner that is beneficial for the whole nation. Consequently, it is felt that bringing private claims may endanger their economy and even have detrimental consequences in non-trade areas [186].

However, certain scholars take the view that DCs should claim the right for direct participation by private parties in the DS process [187]. From the strict perspective of DCs, K.O. Kufuor puts forward two reasons why private parties should be allowed to take part in the DSM [188]. This author first argues that private participation could help challenge protectionist policies in industrialised countries since developing states may not be willing to do so for the reasons exposed above. Second, providing private parties with the right to bring claims before the WTO would “depoliticize” minor trade disputes, as the latter are more likely to involve the smallest countries.

Other scholars such as Levy and Srinivasa [189] take the view that the governmental filter is beneficial on the whole and that the privatisation of the WTO DSS would endanger national welfare in DCs for the reasons exposed above.

Paragraph 3: Lack of financial and human resources.

“[...] [I]t is worrisome that [DCs] feel that resource and monetary constraints preclude their full use of the system. As long as they feel that way, the long-term credibility of the WTO is at risk. The system will survive and flourish only if all (or at least a vast majority) of its Members feel that they have the ability to adequately protect their WTO rights.[emphasis added]” [190]

One must not underestimate the importance of the cost as a major impediment to the developing countries’ access to the WTO DSS [191]. As A. Mukerji notes [192], finding the necessary financial resources is a real challenge for developing countries : only a few WTO DSU specialists are present in developing countries and the cost of hiring specialists [193] abroad is prohibitive. Scarcity of national administrative resources to identify and prepare cases is also a major constraint [194].

As seen above, Art. 27.2 of the DSU provides for technical assistance to DCs in the context of the DSM. However, as P. C. Mavroidis and H. Horn demonstrate [195] the technical assistance granted is both quantitatively and qualitatively inadequate. First, the staff dedicated to this task (two experts in the field working part time and two junior staff members) is by far insufficient compared to the number of disputes. This forces them to resort to costly private expertise. A second important defect of the system of assistance is the fact that it can only be supplied after a WTO Member has decided to submit a dispute to the DSM [196], although the finding of the violation or the impairing practice itself requires as much legal expertise as the procedure itself.

It is interesting to note that certain law firms based in Geneva, being aware of these problems, offer free initial assistance to developing countries. In January 2000 a law firm “launched a free advice service for LDCs under which individual countries can receive up to 40 hours a year of free advice on WTO issues [emphasis added]. ” [197]. The practice in industrialised countries whereby the costs of the dispute are met either directly by the affected industry or through a complex form of subsidies to the government concerned [198] cannot be followed in developing countries. This is self evidently because of the lack of resources of the affected industries which are in most cases composed of small and medium undertakings.

The cost problem is indeed more serious where a dispute is raised between a developing country and an industrialised power [199]. There would necessarily be a disequilibrium in the legal expertise that can be afforded by the parties to the dispute [200].

As part of the question of the cost of hiring foreign legal experts, the question of the co-ordination with such lawyers remains. A few of them are familiar with “the nuances of general policies and practices of many developing countries [emphasis added]. ” [201]. As we will see, this calls both for the development of in-house expertise and for adapted legal assistance to developing countries. The recent establishment of the Advisory Centre on WTO law is, in this regard, a remarkable initiative.

Finally developing countries face the problem of the lack of resources to transfer to the WTO DSM as an institution [202]. As C.C. Parlin shows, this undermines the efficiency and the credibility of the system [203]

Paragraph 4 : Inefficacy of the treatment of Least Developed Countries.

The differential treatment granted to LDCs may be considered as the only genuine innovation under the WTO DSU [204]. However, one can question the efficacy of this regime.

Least developed countries, among developing countries are self evidently more likely to suffer from their feeble position in the dispute settlement and the WTO’s willingness to provide them with special rights in this regard is an important improvement. However, we take the view that this special treatment is not likely to offer least-developed counties a more favourable position in practice.

As a matter of fact no LDCs have had recourse to the WTO DSM so far [205]. It is thus difficult to have a practical view on the question. However, this special treatment can be criticised on two main grounds. First, it is difficult to imagine how developed countries will practically have to comply with their obligations under article 24(1) as no precision is provided for regarding the due restraint they shall exercise. Their obligations are laid down in such a vague way that it will be difficult to assess their compliance

Second, Article 24(2) does not add anything to the situation of least-developed countries that is not already granted to all members as a general principle : Article 5 of the DSU (annex p.21) states that “Good offices, conciliation or mediation may be requested at any time by any party to a dispute [emphasis added]”. Article 24(2) actually grants least-developed countries a right that any party is afforded. The impact of such provision is thus extremely limited.

Paragraph 5 : The adjudicative nature of  the DSM in question.

Under the present WTO DSM, does, as certain commentators suggest, “right perseveres over might [emphasis added] ?” [206]. With the shift from the GATT's diplomatic model of dispute settlement to the WTO's judicial model [207], developing-country Members have, for the first time, begun to use the dispute settlement process regularly.” [208] As C.C Parlin observes, “[t]he smaller countries are participating, both voluntarily as complainant and involuntarily as respondent, in a way that was not imaginable prior to the Uruguay Round [emphasis added] ” [209].

However, although one must admit that the WTO DSM follows a judicial model, one can raise the question as to whether the WTO DSM is actually a judicial procedure. Several authors take the view that the present system was not fully conceived as a judicial model, because of the lack of political will on the developed countries’ part [210]. Consequently, this system has been described as a “quasi-adjudicative system” [211]. Although the procedure itself officially constrains disputants, the significance of the procedure and especially of the panel ruling remains unclear [212].

The special treatment afforded to DCs has been the subject of criticisms in this regard. Most provisions are actually difficult to enforce because of their lack of precision. They have been described as hortatory in nature [213]. It is particularly interesting to note that many provisions related to the differential treatment have not been used by DCs. This shows the DCs' lack of trust in the legal significance and in the practical impact these provisions may have. To date, for example, no recourse has been made of the 1966 Procedures under the WTO. Similarly, DCs have not resorted to Article 4.10 (special attention during consultations) because of its declaratory nature and the absence of implementation modalities [214].

The most obvious evidence of the ambiguity of the legal significance of panels and AB rulings is the idea of judicial restraint [215] present in the DSU as laid down notably in Article 3.12 (annex p.18) which states “Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreement [emphasis added]” The judicial restraint echoes the underlying diplomatic origins of the WTO DSM and considerably limits the possible impact and legal reasoning of panels’ rulings. For instance, J.H. Jackson notes that the AB seems to demonstrate considerable deference to national governments’ decision making [216]. Besides this limitation, the legal reasoning and the scope of the law are somewhat affected by the fact that judicial restraint implies that questions are tackled by panels and AB as far as they are strictly necessary for bringing the dispute to a positive conclusion [217].

This judicial restraint does not affect the DSM procedure itself since the latter is dominated by a formal adjudicative approach. Yet, it may limit the scope of legal reasoning and as we will see, the remaining diplomatic approach considerably affects the condition of enforcement of panels’ rulings.

FOOTNOTES