Jean Monnet Center at NYU School of Law


I. Introduction

No other area of the World Trade Organization (WTO)1 has received more attention than its Dispute Settlement procedures, arguably the most important systemic outcome of the Uruguay Round.2 This is not surprising from the perspective of the WTO itself. The Dispute Settlement Understanding (DSU)3 was, it is argued,4 part of a Marrakech "historical deal"-fundamental to the entire outcome of the Uruguay Round. Moreover, the provisions for multilateral dispute resolution are horizontal in nature, extending to all dimensions of the covered agreements.5 It is not surprising, too, from the perspective of the academic community of WTO watchers: it is becoming increasingly difficult (though some still make the claim) to be a true specialist in all areas of substantive law covered by the agreements. But everyone interested in the WTO is a supposed specialist on dispute settlement-and this includes the sprinkling of political scientists who have come to appreciate the profound importance of the WTO, the many economists and political economists who have appreciated it for years and the rapidly growing number of trade lawyers (many of whom have sniffed the colour of money6). The five-year official Review7 of the process, one of the many casualties of Seattle, brought all this attention into sharp focus.8

Much of the reflection on Dispute Settlement has focused, one way or another, on the "juridification" of the WTO.9 It has been pointed out, ad-nauseum, that prior GATT third party dispute resolution required the consent of the disputants both to begin the process and to accept its results, two features which, it could be cogently argued, compromised foundational principles of the rule of law and chilled the utility of dispute resolution, especially for the meek and economically and politically unequal. Imagine, after all, a domestic legal dispute under municipal law in which the defending party has to give its consent not only to "go to law" but also to accept the results of the legal process-heads I win, tails you lose.

Inevitably, then, with ever increasing sophistication,10 the WTO legal paradigm shift occasioned by the acceptance of compulsory adjudication11 with binding outcomes12 has attracted most comment. And with good empirical justification. Measured in quantitative terms, Panel and the Appellate Body activity under the new DSU can be described as frenetic.13 Equally inevitably WTO dispute settlement in general and the Appellate Body and its jurisprudence in particular are taking their rightful place as objects of reflections alongside other major transnational and international courts.14

Consequent on all the above, the issue of legitimacy, part of the standard vocabulary of court watching, has now become an essential part of this field too. This brief essay is meant as a footnote to the theme of legitimacy explored in the work of luminaries such as Hudec, Howse and others.15

My interest is primarily in the internal organizational features of dispute settlement and its impact on the grander external contexts. By internal I refer to the world of the WTO itself and its principal institutional actors: The Delegates and delegations, the Secretariat, the Panels, and even the Appellate Body among others. By external I refer to the universe outside the formal Organization: The "Real World" of States and their constitutional organs such as Parliaments, Governments and Courts as well as the world of multinational corporations, of NGOs, of the media and of citizens.

My article has two intertwined threads and may be stated simply enough. Under the first thread of my article I suggest the existence of an asynchronous development in the transition from the GATT to WTO. Despite the undisputed and much vaunted shift in legal paradigm of WTO dispute settlement, there has been a considerable lag in the internal appreciation and internalisation of the new architecture, a lag reflected in both the attitude of the Delegates, Secretariat and other internal players as well as in many of the actual dispute settlement practices and procedures. The diplomatic ethos which developed in the context of the old GATT dispute settlement tenaciously persists despite the much transformed juridified WTO.

Under the second thread of my article I argue that one explanation for the lag, alongside personal16 and institutional inertia, was and is the need for internal legitimation of the new WTO dispute settlement: The persistent diplomatic ethos and the accompanying practices which support it are reassuring to the internal players and make the legal revolution more palatable and easy to digest. In some ways they even camouflage the extent of the legal revolution. And yet, at times this internal legitimation is being bought at a high price: It accounts for some serious dysfunctions of dispute settlement as well as contributing to an undermining of the external legitimation of the very same process.

Whether the shift in legal paradigm has been a victory for the Rule of Law or merely a victory for the rule of lawyers is a very serious matter on which the jury is still out. There are some very thoughtful actors and observers who are seriously wondering whether the "historical deal" has truly been beneficial to some of the deeper objectives of the WTO such as establishing stability and "peaceful economic relations". But given that for now, and the foreseeable future the shift of paradigm has taken place, the persistence of diplomatic practices and habits in the context of a juridical framework might end up undermining the very rule of law and some of the benefits that the new DSU was meant to produce.

1 See Marrakech Agreement Establishing the World Trade Organization, 15 April 1994, Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations (hereinafter WTO Agreement), Legal Instruments-Results of the Uruguay Round (hereinafter Results of the Uruguay Round), 6, 6-18; 33 I.L.M. 1140, 1144-1153 (1994). For a historical background of the creation of the WTO, see generally World Trade: Toward Fair and Free Trade in the Twenty-First Century (Marie Griesgraber & Bernhard G. Gunter eds, 1997).

2 For a general understanding of the new WTO dispute settlement system, see Edwin Vermulst & Bart Driessen, An Overview of the WTO Dispute Settlement System and its Relationship with the Uruguay Round Agreements, 29-J.W.T.131, p. 136 (1995); Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settlement System: International Law, International Organizations and Dispute Settlement (1997); Dispute Resolution in the World Trade Organization (James Cameron et al. eds, 1998); David Palmeter & Petros C. Mavroidis, Dispute Settlement in the World Trade Organization: Practice and Procedure (1999).

3 Understanding on Rules and Procedures Governing the Settlement of Disputes, Annex 2 of the WTO Agreement, as note 1, above, at art. 26 (hereinafter DSU).

4 See United States-Sections 301-310 of the Trade Act of 1974, Second Submission of the European Communities paras. 2-3 (16 July 1999) ("the historical deal that was struck in Marrakech between the US on the one hand, and the other Uruguay Round participants, among them its major trading partners like the EC and the developing countries, on the other hand").

5 United States-Sections 301-310 of the Trade Act of 1974, Panel Report adopted 27 January 2000, WTO Document WT/DS152/R, p. 7.94.

"The more effective and quasi-automatic dispute settlement system under the WTO has often been heralded as one of the fundamental changes and major achievements of the Uruguay Round agreements. Because of that, the relevance of Article 23 obligations for individuals and the market-place is particularly important since they radiate on to all substantive obligations under the WTO." (emphasis added).

6 In the Banana III case (1997), the Appellate Body held that governments could be represented by private lawyers. European Communities-Regime for the Importation, Slaw and Distribution of Bananas, Appellate Body Report adopted on 17 November 1997, WTO Document WT/DS27/AB/R, paras 10-12 (hereinafter Banana III). For the factors inducing lawyer involvement, Cf. Anne Marie Slaughter Burley & Walter Mattli, Europe before the Court: A Political Theory of Legal Integration 47 Int. Org. 41 (1993), pp. 58-62 (arguing that "self-interest" is the glue binding supra- and sub national actors and that "opportunities" offered by the community legal system provide personal incentives for individual litigants and their lawyers).

7 See Decision on the Application and Review of the Understanding on Rules and Procedures Governing the Settlement of Disputes, 15 April 1994, Ministerial Decisions and Declarations, in Results of the Uruguay Round, as note 1, above, at p. 465; 33 I.L.M. 1140, 1259 (1994) ("Invite the Ministerial Conference to complete a full review of dispute settlement rules and procedures under the World Trade Organization within four years after the entry into force of the Agreement Establishing the World Trade Organization, and to take a decision on the occasion of its first meeting after the completion of the review, whether to continue, modify or terminate such dispute settlement rules and procedures.").

8 The legal mandate for the review expired on 31 July 1999 without any conclusion. See the Official Website of the 3rd WTO Ministerial Meeting (Seattle, 30 November-3 December 1999), <>. Nonetheless, major Member States have submitted their own DSU reform proposals. See e.g., Preliminary Views of the United States Regarding Review of the DSU, the Official USTR Website, <>; Discussion Paper from the European Communities: Review of the Dispute Settlement Understanding (DSU), Brussels, 21 October 1998, the Official E.U. Website, <>.

9 See, Arie Reich, From Diplomacy to Law: The Juridicization of International Trade Relations, 17 Nw. J. Int'l L. & Bus. 775 (1996-1997), p. 776.

"The trade agreements, to the extent they existed, were limited in their contents and were less binding in their nature. Many governments saw these agreements not as a binding legal regime but as a diplomatic-political framework which could provide a `basis for negotiation between States for the purpose of attaining a balance between benefits and obligations'. In recent years, however, there is a growing demand by States to regulate their trade relations by using norms and enforcement procedures that are legal in character, ...".

10 See e.g. Palmeter & Mavroidis, as note 1, above.

11 DSU, as note 3, above, art. 1.

12 DSU, as note 3, above, arts 16, 17.

13 According to Hudec et al., 207 complaints were filed under GATT 1947 framework from 1948 to 1989. Robert E. Hudec et al., A Statistical Profile of GATT Dispute Settlement Cases: 1948-1989, 2 Minn. J. Global Trade 1 (1993), at p. 4. Under the new WTO system in the first five years alone, from January 1995 to November 2000, 210 complaints were notified to the WTO. See WTO, "Dispute Settlement: Overview of the State-of-Play of WTO Disputes", <>.

14 See e.g. Andrea Kupfer Schneider, Getting Along: The Evolution of Dispute Resolution Regimes in International Trade Organizations, 20 Mich. J. Int'l L. 697 (1999); Alec Stone Sweet, Judicialization and the Construction of Governance, 31 Comp. Pol. Stud. (1999).

15 See e.g., Robert E. Hudec, Essays on the Nature of International Trade Law (see ch. 2: "Concepts of Fairness in International Trade Law") (1999); Robert Howse, "Adjudicative Legitimacy and Treaty Interpretation in International Trade Law: The Early Years of WTO Jurisprudence" in Joseph H. H. Weiler ed., The EU, the WTO and the NAFTA: Towards a Common Law of International Trade (2000), p. 35; Ernst-Ulrich Petersmann, Constitutionalism and International Organizations, 17 Nw. J. Int'l L. & Bus. 398 (1996-1997).

16 The personal is never to be dismissed. It is said that American and British car manufacturers continued to produce cars with wooden outside panels and other structural features so long as they employed the carpenters who had spent a life time making those parts. The WTO has radically changed compared to the previous GATT 47 but much of the personnel in the organization and the delegations are the same.



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