World Trade Organization (WTO)
Canada and the WTO
Dispute Settlement
Update on Canada's Participation in the WTO DSU Negotiations
September 2006
1. Background
At the Fourth WTO Ministerial Conference held in Doha in November
2001, ministers agreed to begin negotiations aimed at improving
and clarifying the Understanding on Rules and Procedures Governing
the Settlement of Disputes (DSU). Ministers further agreed that
these negotiations should be based on work carried out in an earlier
DSU Review that took place in 1998-1999, as well as on new proposals
submitted by WTO members. Agreement on improvements and clarifications
to the DSU is not formally tied to the so-called "single undertaking"
that will result from the broader round of multilateral trade negotiations
taking place at the WTO. In other words, a stand-alone package of
improvements to the DSU is theoretically possible as an outcome
of the DSU negotiations.
The DSU negotiations commenced on an informal basis in March 2002,
and the first formal meeting was held on April 16, 2002. Progress
in the negotiations has been slow. After a second deadline for their
conclusion was missed in May 2004, the negotiations were further
extended and no new deadline has been set. Despite the slow pace,
the work to date has been useful in identifying areas where improvements
to the DSU can and should be made.
2. Canada and the DSU
The DSU sets out rules and procedures for resolving disputes that
arise between WTO members concerning the interpretation and application
of the WTO Agreement. The members of the WTO, sitting as the Dispute
Settlement Body (DSB), administer the rules and procedures of the
DSU.
The DSU is based on the rule of law. It gives all WTO members,
regardless of their size or power, the ability to enforce their
rights under the WTO Agreement. By providing fair and effective
procedures for settling trade disputes between WTO members, the
DSU sustains the credibility of a rules-based multilateral trading
system under the WTO Agreement.
3. Key Issues
Canada welcomed the creation of the DSU in 1995 as one of the crowning
achievements of the Uruguay Round of multilateral trade negotiations.
However, based on its dispute settlement experience and the advice
of Canadians, Canada believes that there are significant benefits
to be gained by improving and clarifying the DSU to address a number
of issues. These issues include what is known as the "sequencing"
issue; enhanced third party rights; rules and procedures governing
participation by amicus curiae; improvements targeted to greater
efficiency in the dispute settlement process; enhanced surveillance
of implementation procedures; post-retaliation procedures; effective
and viable alternatives to retaliation; transparency of the dispute
settlement process; and the protection of business confidential
information. Many of these issues have been the subject of proposals
tabled by Canada and the other WTO members in these negotiations.
Resolving the "sequencing" issue
There is a need to clarify the DSU to ensure that no WTO member
can seek to engage in trade retaliation until there has been a multilateral
determination that the defending party has failed to comply with
its WTO obligations. Resolving this "sequencing" problem
became a key focus of attention in the course of the DSU Review
conducted in 1998-1999 when Canada tabled the first informal proposal
to resolve this critical systemic issue. Members continued to discuss
the issue after the Review ended in July 1999. Canada, along with
a number of other WTO Members, subsequently co-sponsored a formal
proposal at the 1999 Seattle Ministerial Conference to amend the
DSU in a manner that would resolve the sequencing issue. Canada
and a number of other WTO members tabled a similar proposal at the
Doha Ministerial Conference in 2001.
The sequencing proposals that have been submitted by WTO members
during the current negotiations reflect the proposals tabled by
Canada and other members at Seattle and Doha. Canada supports these
proposals and will continue to work toward amendments to the DSU
to resolve this issue.
Enhancing third party rights
While any WTO member can participate as a third party in a dispute,
the DSU currently circumscribes effective third party participation
at both the panel and Appellate Body stage. For example, third parties
only receive the disputing parties' first submissions to the panel;
and while third parties are permitted to make an oral statement
at the panel's first meeting with the disputing parties, they may
not be present for the disputing parties' oral statements, nor may
they attend or participate in subsequent panel meetings with the
parties.
Canada supports proposals to enhance third party rights in panel
and in Appellate Body proceedings. Canada believes that at both
the panel and Appellate Body level, third parties to a dispute should
receive copies of all submissions and should have the right to attend
all substantive meetings related to that dispute. Such enhanced
third party rights, however, would be subject to procedures governing
the treatment of confidential information. In addition, Canada supports
proposed changes to the DSU that would permit a member to notify
its third party interest in the appellate level proceedings of a
dispute even if that member was not a third party during the earlier
panel proceedings.
Participation by amicus curiae
Canada supports proposals to clarify and improve the DSU to assist
panels and the Appellate Body in their consideration of unsolicited
amicus curiae ("friends of the court") briefs.
In Canada's view, the DSU should explicitly recognize the right
of panels and the Appellate Body to accept unsolicited amicus curiae
briefs. Members should also agree on specific rules and procedures
applicable to amicus curiae participation in disputes. Any such
rules and procedures, for example, those associated with timelines
for filing amicus curiae submissions, must protect the rights of
the disputing parties to due process and a timely resolution of
the dispute. These negotiations provide WTO members with an opportunity
to replace the current ad hoc approach to amicus curiae participation
in WTO dispute settlement proceedings with a more predictable process
endorsed by the Membership.
Improving the efficiency of dispute settlement procedures
Beyond its proposal to streamline the selection of panelists, Canada
supports proposals aimed at improving the efficiency of the dispute
settlement process. For example, on occasion, the Appellate Body
has declined to rule on certain issues due to the absence on the
record of sufficient findings by the panel. In such a situation,
the complainant can be left without a decision that resolves the
matter in dispute, and may need to commence an entirely new set
of proceedings. Canada therefore supports proposed amendments to
the DSU that would provide the Appellate Body with the “remand”
authority to refer factual or legal issues back to the original
panel to address issues not covered earlier or to re-examine factual
findings.
Enhancing the surveillance function of the DSB
Article 21.6 of the DSU currently provides that the issue of a
member's implementation of DSB recommendations or rulings is to
be placed on the DSB agenda after a fixed period of time and the
Member concerned must provide the DSB with written status reports
of its progress in respect of implementation. Experience suggests
that both these status reports and the corresponding DSB surveillance
of implementation have become pro forma. Several WTO members have
proposed amendments to Article 21.6 aimed at enhancing the surveillance
function of the DSB.
These proposals reflect the amendments to Article 21.6 earlier
tabled by Canada and other WTO members at Seattle and Doha. Canada
supports these proposals. However, Canada believes that further
improvements to Article 21.6 are desirable. In particular, Canada
would encourage members to consider providing for a special DSB
meeting to be held at six-month intervals during which members would
engage in a detailed discussion in respect of all outstanding instances
where members have failed to comply with DSB recommendations and
rulings within the prescribed compliance period. These meetings
would provide an opportunity for the DSB to review the history of
a case, revisit the relevant recommendations and rulings and recall
the period of time within which the member was to effect compliance.
The defending member would be invited to explain its continued failure
to fulfill its obligation to comply. A record of these proceedings
would be made available to the public and instances of non-compliance
would be identified each year in the DSB's Annual Report. Likewise,
they would form part of a member's Trade Policy Review (TPR) process
and the Annual Report of the WTO Director-General.
Establishing clear post-retaliation procedures
A defending party that has failed to comply with the recommendations
and rulings of the DSB may face retaliatory measures by a complaining
party. Currently, the DSU does not make explicit the procedures
that should govern situations where a defending party subsequently
asserts that it has now complied and that the retaliatory measures
should be lifted. Canada and other WTO members believe that this
should be addressed, and are working on proposals to that end.
Finding effective and viable alternatives to retaliation
Where a member has not implemented a DSB ruling, the DSB may authorize
retaliation through the suspension of concessions or other obligations.
Although intended to encourage compliance, trade retaliation has
widely-recognized shortcomings: it is inherently at odds with the
objectives of trade liberalization; it does not benefit the injured
parties; it can cause commercial hardship for business of the retaliating
member; and it is least effective in the hands of smaller economies.
Accordingly, some WTO members have proposed revisions to the DSU
to make compensation a more viable alternative to retaliation for
encouraging compliance with DSB recommendations and rulings. Canada
continues to examine options that would provide a more viable and
effective alternative to retaliation.
4. Canada's Proposal
Since 1994, Canada and a number of other developed and developing-country
members have worked together to develop new proposals on sequencing,
remand procedures, third party rights and post-retaliation procedures.
Canada itself has made proposals on:
- the protection of business confidential information;
- the streamlining of the panel selection process; and
- transparency of the process in the form of hearings open to
the public and publicly-available submissions.
These previous proposals can be found here.
As these negotiations proceed, Canada will continue to play an
active role, working with other WTO members to achieve meaningful
improvements and clarifications to the DSU.
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