Regulation of international trade within the framework of the world trade organization (WTO)
Regulation of International Trade under WTO rules: objectives, functions, principles, structure, decision-making procedure. Issues on market access: tariffs, safeguards, balance-of-payments provisions. Significance of liberalization of trade in services.
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Copyright vs. patent.
No registration in an individual country is necessary to enjoy the protection of copyright, as is the case with patents. No disclosure is required for copyright, as is the case with patent; hence, the secret of the programming can be retained with the author.
The conditions to be satisfied for copyright are less stringent than those for patents. The protection through copyright is weak compared to that through patents. Copyright prohibits the copying of the creative expression, but permits independent creations even though based on the same ideas. Thus, such independent creations can be easily defended against charges of copying.
4. Industrial property
Industrial property includes inventions (patents), trademarks, industrial designs, and geographic indications of source.
The agreement defines what types of signs must be eligible for protection as trademarks, and what the minimum rights conferred on their owners must be. It says that service marks must be protected in the same way as trademarks used for goods. Marks that have become well-known in a particular country enjoy additional protection.
Definition: A trademark is defined as any sign, or any combination of signs, capable of distinguishing the goods and services of one undertaking from those of other undertakings. Such signs include personal names, letters, numerals, figurative elements and combinations of colors as well as any combination of such signs.
Conditions for the registration of trademarks
The basic rule is that such signs must be visually perceptible. Members are free to determine whether to allow the registration of signs that are not visually perceptible (e.g. sound or smell marks).
Where signs are not inherently capable of distinguishing the relevant goods or services, Member countries are allowed to require, as an additional condition for eligibility for registration as a trademark, that distinctiveness be acquired through use.
Members may make registrability depend on use. However, actual use of a trademark shall not be permitted as a condition for filing an application for registration, and at least three years must have passed after that filing date before failure to realize an intent to use is allowed as the ground for refusing the application.
Rights conferred to a trademark.
The owner of a registered trademark must be granted the exclusive right to prevent all third parties not having the owner's consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion must be presumed (Article 16.1).
The TRIPS Agreement contains certain provisions on well-known marks, which supplement the protection required by the Paris Convention, obliges Members to refuse or cancel the registration, and to prohibit the use of a mark conflicting with a mark which is well known.
First, the provisions must be applied also to services.
Second, it is required that knowledge in the relevant sector of the public be taken into account. The knowledge can be acquired not only as a result of the use of the mark but also by other means, including as a result of its promotion.
Furthermore, the protection of registered well-known marks must extend to goods or services which are not similar to those in respect of which the trademark has been registered, provided that its use would indicate a connection between those goods or services and the owner of the registered trademark, and the interests of the owner are likely to be damaged by such use.
Members may provide limited exceptions to the rights conferred by a trademark, such as fair use of descriptive terms, provided that such exceptions take account of the legitimate interests of the owner of the trademark and of third parties.
Initial registration, and each renewal of registration, of a trademark shall be for a term of no less than seven years. The registration of a trademark shall be renewable indefinitely. In other words, there will be no limit to the number of times the trademark is renewed.
Requirement of use.
Cancellation of a mark on the grounds of non-use cannot take place before three years of uninterrupted non-use has elapsed unless valid reasons based on the existence of obstacles to such use are shown by the trademark owner, such as import restrictions or other government restrictions arising independently of the will of the owner of the trademark. Use of a trademark by another person, when is subject to the control of its owner, must be recognized as use of the trademark for the purpose of maintaining the registration.
It is further required that use of the trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form, or use in a manner detrimental to its capability to distinguish the goods or services.
Place names are sometimes used to identify a product. Well-known examples include “Champagne”, “Scotch” whisky, “Tequila” alcoholic liquor, and “Roquefort” cheese. Wine and spirits makers are particularly concerned about the use of place-names to identify products, and the TRIPS agreement contains special provisions for these products. But the issue is also important for other types of goods.
Geographical indications are defined in TRIPs as indications which identify a good as originating in the territory of a Member, or a region or particular place in that territory to which a given quality, reputation or other characteristic of the good are essentially attributable.
Conditions for geographical indication.
The quality, reputation or other characteristics of a good can each be a sufficient basis for eligibility as a geographical indication, where they are essentially attributable to the geographical origin of the good.
Use of geographical indication.
The use of a place name to describe a product in this way -- a “geographical indication” -- usually identifies both its geographical origin and its characteristics. Therefore, using the place name when the product was made elsewhere or when it does not have the usual characteristics can mislead consumers, and it can lead to unfair competition. The TRIPS agreement says countries have to prevent the misuse of place names.
In respect of all geographical indications, interested parties must have legal means to prevent use of indications which mislead the public as to the geographical origin of the good, and to prevent any use which constitutes an act of unfair competition.
The registration of a trademark which uses a geographical indication in a way that misleads the public as to the true place of origin must be refused or invalidated if the legislation so permits or at the request of an interested party.
Geographical indications of wines and spirits.
For wines and spirits, the agreement provides higher levels of protection, i.e. even where there is no danger of the public being misled. An Article in the TRIPs provides that interested parties must have the legal means to prevent the use of a geographical indication identifying wines for wines not originating in the place indicated by the geographical indication. This applies even where the public is not being misled, there is no unfair competition and the true origin of the good is indicated or the true origin is indicated in translations or the geographical indication is accompanied be expressions such as “kind”, “type”, “style”, “imitation” or the like (e.g., champagne-type wine, imitation scotch whisky). Similar protection must be given to geographical indications identifying spirits when used on spirits. Protection against registration of a trademark must be provided accordingly.
Trips contain a number of exceptions to the protection of geographical indications. These exceptions are of particular relevance in respect of the additional protection for geographical indications for wines and spirits. For example, Members are not obliged to bring a geographical indication under protection, where the name is already protected as a trademark or it has become a generic term for describing the product in question. For example, “cheddar” now refers to a particular type of cheese not necessarily made in Cheddar (a place in Britain).
But any country wanting to make an exception for these reasons must be willing to negotiate with the country which wants to protect the individual geographical indication in question. Measures to implement these provisions shall not prejudice prior trademark rights that have been acquired in good faith. Under certain circumstances, continued use of a geographical indication for wines or spirits may be allowed on a scale and nature as before. The agreement provides for further negotiations in the WTO to establish a multilateral system of notification and registration of geographical indications for wines. The exceptions cannot be used to diminish the protection of geographical indications that existed prior to the entry into force of the TRIPS Agreement. The TRIPS Council shall keep under review the application of the provisions on the protection of geographical indications.
Definition: Industrial design refers to the features concerning the look of an article, such as the shape, ornamentation, pattern, configuration, etc.
TRIPs cover only industrial designs, and not utility models, i.e., minor functional modifications.
TRIPS Agreement obliges Members to provide for the protection of independently created industrial designs that are new or original. Members may provide that designs are not new or original if they do not significantly differ from known designs or combinations of known design features. Members may provide that such protection shall not extend to designs dictated essentially by technical or functional considerations.
TRIPs contain a special provision aimed at taking into account the short life cycle and sheer number of new designs in the textile sector: requirements for securing protection of such designs, in particular in regard to any cost, examination or publication, must not unreasonably impair the opportunity to seek and obtain such protection. Members are free to meet this obligation through industrial design law or through copyright law.
Right of industrial design holder.
Members are required to grant the owner of a protected industrial design the right to prevent third parties not having the owner's consent from making, selling or importing articles bearing or embodying a design which is a copy, or substantially a copy, of the protected design, when such acts are undertaken for commercial purposes.
Members are allowed to provide limited exceptions to the protection of industrial designs, provided that such exceptions do not unreasonably conflict with the normal exploitation of protected industrial designs and do not unreasonably prejudice the legitimate interests of the owner of the protected design, taking account of the legitimate interests of third parties.
Under the TRIPS agreement, the duration of protection available of industrial designs shall amount to at least 10 years. The wording “amount to” allows the term to be divided into, for example, two periods of five years.
Patents relate to scientific and technological innovations in various industrial and service sectors and confer certain exclusive rights on the patent-holder regarding the subject of the patent.
The TRIPS Agreement requires Member countries to make patents available for any inventions, whether products or processes, in all fields of technology without discrimination, subject to the normal tests of novelty, inventiveness and industrial applicability.
Conditions for patentability.
Novelty: it should not have been invented by somebody earlier, or at least, should not have been publicly disclosed;
Inventiveness: it should be non-obvious, or that it should be the result of a serious exercise of mind;
Industrial applicability: it should be useful, or that it should not be limited to the thought process, but should be applicable in having a new product or process, or in improving the functioning of an existing product or process.
It is also required that patents be available and patent rights enjoyable without discrimination as to the place of invention and whether products are imported or locally produced. The agreement says patent protection must be available for inventions for at least 20 years. Patent protection must be available for both products and processes, in almost all fields of technology.
Rights of patent-holder.
The exclusive rights that must be conferred by a product patent are the ones of making, using, offering for sale, selling, and importing for these purposes. Process patent protection must give rights not only over use of the process but also over products obtained directly by the process. Other persons must be prevented from getting these rights. Patent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts. Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent-holder, taking account of the legitimate interests of third parties.
Product patent vs process patent: If a patent is issued for a production process, then the rights must extend to the product directly obtained from the process. Under certain conditions alleged infringers may be ordered by a court to prove that they have not used the patented process. It is possible for another innovator to develop the same final product through an alternative process.
In a case of the patent covering a product, another innovator is debarred from producing that product even through any alternative method which this innovator might have developed. Thus, the whole process of further scientific and technological research on obtaining the particular product by various alternative methods is stopped by allowing the patent of the product.
A patent is applicable to each jurisdiction, i.e., the registration for the patent is done in each country and validity is limited to the jurisdiction of that country. Thus, if an innovator wants to have the patent rights in different countries, registrations will have to be obtained in all of them.
Obligation of patent-holder: full disclosure of patentable matter.
Members shall require that an applicant for a patent shall disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art and may require the applicant to indicate the best mode for carrying out the invention known to the inventor at the filing date or, where priority is claimed, at the priority date of the application. This obligation is meant to ensure that the subject of the patent comes within the public domain of knowledge, and does not remain a secret.
Advantages of a disclosure of a patent.
- All interested persons come to know the source of a particular technology;
- Other innovators may be in a position to carry forward further scientific and technological development, and come up with new processes and products based on the existing patented matter, particularly for those in countries that do not have much domestic innovation and wish to encourage it;
- At the expiry of the patent period, it may be possible for all interested persons to use the patented subject freely.
If the subject-matter of a patent is a process for obtaining a product, the judicial authorities shall have the authority to order the defendant to prove that the process to obtain an identical product is different from the patented process, where certain conditions indicating a likelihood that the protected process was used are met.
Patent of plant varieties.
Plant varieties, however, must be protected by patents or by a special system (such as the breeder's rights provided in the conventions of UPOV -- the International Union for the Protection of New Varieties of Plants).
The agreement describes the minimum rights that a patent owner must enjoy.
TRIPs agreement also allows certain exceptions. Governments can refuse to issue a patent for an invention if its commercial exploitation is prohibited for reasons of public order or morality. They can also exclude diagnostic, therapeutic and surgical methods, plants and animals (other than microorganisms), and biological processes for the production of plants or animals (other than microbiological processes).
There are three permissible exceptions to the basic rule on patentability.
One is for inventions contrary to ordre public or morality; this explicitly includes inventions dangerous to human, animal or plant life or health or seriously prejudicial to the environment. The use of this exception is subject to the condition that the commercial exploitation of the invention must also be prevented and this prevention must be necessary for the protection of ordre public or morality.
The second exception is that Members may exclude from patentability diagnostic, therapeutic and surgical methods for the treatment of humans or animals.
The third is that Members may exclude plants and animals other than micro-organisms, e.g., bacteria, viruses, fungi, algae, protozoa, etc., and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, any country excluding plant varieties from patent protection must provide an effective sui generis system of protection.
Furthermore, for countries which wish to encourage domestic innovation, it may be desirable to provide a limited exception that patented matter may be put to experimental use without the authorization of the patent-holder, especially for reverse engineering, i.e., proceeding backwards from the patented product to learn how it has been produced.
Moreover, the whole provision is subject to review four years after entry into force of the Agreement.
A patent-owner could abuse his rights, for example by failing to supply the product on the market. To deal with that possibility, the agreement says governments can issue “compulsory licenses”, allowing a competitor to produce the product or use the process under license. But this can only be done under certain conditions aimed at safeguarding the legitimate interests of the patent-holder.
Compulsory licensing and government use without the authorization of the right holder are allowed, but are made subject to conditions aimed at protecting the legitimate interests of the right holder. The conditions include the obligation, as a general rule, to grant such licenses only if an unsuccessful attempt has been made to acquire a voluntary license on reasonable terms and conditions within a reasonable period of time; the requirement to pay adequate remuneration in the circumstances of each case, taking into account the economic value of the license; and a requirement that decisions be subject to judicial or other independent review by a distinct higher authority. Certain of these conditions are relaxed where compulsory licenses are employed to remedy practices that have been established as anticompetitive by a legal process. These conditions should be read together with the related provisions (Article 27.1) which require that patent rights shall be enjoyable without discrimination as to the field of technology, and whether products are imported or locally produced.
Integrated circuits layout designs.
TRIPS Agreement requires Member countries to protect the layout-designs of integrated circuits in accordance with the provisions of the IPIC Treaty (the Treaty on Intellectual Property in Respect of Integrated Circuits), negotiated under the auspices of WIPO in 1989. These provisions deal with, inter alia, the definitions of “integrated circuit” and “layout-design (topography)”, requirements for protection, exclusive rights, and limitations, as well as exploitation, registration and disclosure. The TRIPS agreement adds a number of provisions: for example, protection must be available for at least 10 years.
An “integrated circuit” means a product, in its final form or an intermediate form, in which the elements, at least one of which is an active element, and some or all of the interconnections are integrally formed in and/or on a piece of material and which is intended to perform an electronic function.
A “layout-design (topography)” is defined as the three-dimensional disposition of the elements, at least one of which is an active element, and of some or all of the interconnections of an integrated circuit, or such a three-dimensional disposition prepared for an integrated circuit intended for manufacture.
Condition for protection.
The obligation to protect layout-designs applies to such layout-designs that are original in the sense that they are the result of their creators' own intellectual effort and are not commonplace among creators of layout-designs and manufacturers of integrated circuits at the time of their creation.
For the purpose of protection, disclosure of the layout design has to be made, such as a copy or a drawing of the layout design, information on the electronic function, etc.
The duration between the first commercial exploitation of the layout design and the date of filing the application cannot be less than two years.
Rights of layout design holder.
The exclusive rights include the right of reproduction and the right of importation, sale and other distribution for commercial purposes. Certain limitations to these rights are provided for.
The exceptions to the scope of protection are the following:
- Acts of reproduction for private purpose;
- Acts of reproduction for the purposes of evaluation, analysis, research or teaching;
- Use of an identical but original layout design created independently by a person other than the right-holder;
The term must be at least 10 years from the date of filling the application for registration, or from the first commercial exploitation in the world.
A Member may provide that the term will lapse 15 years after the creation of the layout design.
Undisclosed information and trade secrets.
Trade secrets and other types of “undisclosed information” which have commercial value must be protected against breach of confidence and other acts contrary to honest commercial practices. But reasonable steps must have been taken to keep the information secret. Test data submitted to governments in order to obtain marketing approval for new pharmaceutical or agricultural chemicals must also be protected against unfair commercial use.
Conditions for protection.
The TRIPS Agreement requires undisclosed information -- trade secrets or know-how -- to benefit from protection. The protection must apply to information that is secret, that has commercial value because it is secret and that has been subject to reasonable steps to keep it secret.
The Agreement does not require undisclosed information to be treated as a form of property, but it does require that a person lawfully in control of such information must have the possibility of preventing it from being disclosed to, acquired by, or used by others without his or her consent in a manner contrary to honest commercial practices. “Manner contrary to honest commercial practices” includes breach of contract, breach of confidence and inducement to breach, as well as the acquisition of undisclosed information by third parties who knew, or were grossly negligent in failing to know, that such practices were involved in the acquisition.
The Agreement also contains provisions on undisclosed test data and other data whose submission is required by governments as a condition of approving the marketing of pharmaceutical or agricultural chemical products which use new chemical entities. In such a situation the Member government concerned must protect the data against unfair commercial use. In addition, Members must protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.
Curbing anti-competitive licensing contracts.
The owner of a copyright, patent or other form of intellectual property right can issue a license for someone else to produce or copy the protected trademark, work, invention, design, etc. The agreement recognizes that the terms of a licensing contract could restrict competition or impede technology transfer. It says that under certain conditions, governments have the right to take action to prevent anti-competitive licensing that abuses intellectual property rights. It also says governments must be prepared to consult each other on controlling anti-competitive licensing.
TRIPS Agreement recognizes that some licensing practices or conditions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology. Member countries may adopt, consistently with the other provisions of the Agreement, appropriate measures to prevent or control practices in the licensing of intellectual property rights which are abusive and anti-competitive. The Agreement provides for a mechanism whereby a country seeking to take action against such practices involving the companies of another Member country can enter into consultations with that other Member and exchange publicly available non-confidential information of relevance to the matter in question and of other information available to that Member, subject to domestic law and to the conclusion of mutually satisfactory agreements concerning the safeguarding of its confidentiality by the requesting Member. Similarly, a country whose companies are subject to such action in another Member can enter into consultations with that Member.
5. Enforcement of IPRs
Having intellectual property laws is not enough. They must be enforceable. WTO Members have to implement the TRIPs agreement through their respective domestic legislation. In the multilateral forum of the WTO, a Member is responsible for the establishment of the necessary administrative and legal framework and for ensuring that the machinery works. The agreement says governments have to ensure that intellectual property rights can be enforced under their laws, and that the penalties for infringement are tough enough to deter further violations. The procedures must be fair and equitable, and not unnecessarily complicated or costly. They must not entail unreasonable time-limits or unwarranted delays. People involved should be able to ask a court to review an administrative decision or to appeal a lower court's ruling.
The agreement describes in some detail how enforcement have to be handled, including rules for obtaining evidence, provisional measures, injunctions, damages and other penalties. It says courts must have the right, under certain conditions, to order the disposal or destruction of pirated or counterfeit goods. Willful trademark counterfeiting or copyright piracy on a commercial scale must be criminal offences. Governments have to make sure that intellectual property rights owners can receive the assistance of customs authorities to prevent imports of counterfeit and pirated goods.
When the WTO agreements took effect on 1 January 1995, developed countries were given one year to ensure that their laws and practices conform with the TRIPS agreement. Developing countries and (under certain conditions) transition economies from centrally planned economy to a market economy are given five years, or 4 years after 1 January 1996. Least developed countries have 11 years, or 10 years from 1 January 1996. Thus, it has to apply it, at the least, by 1 January 2006.
If a developing country did not provide product patent protection in a particular area of technology when the TRIPS Agreement came into force (1 January 1995), it has up to 10 years to introduce the protection. But for pharmaceutical and agricultural chemical products, the country must accept the filing of patent applications from the beginning of the transitional period, though the patent need not be granted until the end of this period. If the government allows the relevant pharmaceutical or agricultural chemical to be marketed during the transition period, it must -- subject to certain conditions -- provide an exclusive marketing right for the product for five years, or until a product patent is granted, whichever is shorter.
Subject to certain exceptions, the general rule is that obligations in the agreement apply to intellectual property rights that exist at the end of a country's transition period, as well as to new ones.
Annex: Other intellectual property conventions incorporated by reference into the TRIPS Agreement. The TRIPS Agreement contains references to the provisions of certain pre-existing intellectual property conventions.
Below is a list of these agreements.
- Paris Convention for the Protection of Industrial Property (1967) (the Stockholm Act of 14 July 1967 of the Paris Convention for the Protection of Industrial Property)
- Berne Convention for the Protection of Literary and Artistic Works (1971) and the Appendix thereto (the Paris Act of 24 July 1971 of the Berne Convention for the Protection of Literary and Artistic Works)
- The Rome Convention: International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations adopted at Rome on 26 October 1961
- Treaty on Intellectual Property in Respect of Integrated Circuits (1989), adopted at Washington on 26 May 1989
1. What is the rationale of protecting intellectual property rights in general? Should IPs be protected under the WTO? Wouldn't the WIPO be sufficient?
2. Think of other legal (under WTO or beyond WTO) grounds for exempting TRIPs obligations as to pharmaceuticals in order to save human lives in poor countries?
3. What would be demerits of expanding the protection of geographical indication?
4. What is the relationship between the TRIPS Agreement and the pre-existing international conventions that it refers to?
5. Which of the following statements is correct? Support your respond with arguments.
a) intellectual property rights are divided into 2 main categories - industrial property rights, and copyrights and related rights
b) Copyrights and related rights include the protection of distinctive signs such as trademarks and geographical indications
c) TRIPS Agreement requires all member's rules on protection of intellectual property to be identical
d) the main principles of the TRIPS agreement are free trade, non-discrimination, MFN and tarification
1. Jackson, The World Trading System, 305-317.
2. Jackson/Davey/Sykes, 844-892, 893-490.
3. WIPO. 2004. WIPO Intellectual Property Handbook: Policy, Law and Use. WIPO Publication No.489 (E). Geneva.
4. Trading into the Future - WTO, 3rd edition, Revised August 2003.
5. Robert H. Folsom, International Trade and Investment in a Nutshell (2nd ed., St. Paul, Minn.: West Pub. Co., 2000).
6. World Bank. 2002-2005. Global Economic Prospects. Washington, DC: World Bank. http://www.worldbank.org/prospects.
7. www.wto.org see Trade topics TRIPS.
Lecture 8. Rules and Procedures Governing the Settlement of Disputes (DSU)
1. WTO Dispute settlement system - main definitions
DSU means the Understanding on Rules and Procedures Governing the Settlement of Disputes which is Annex 2 to the WTO Agreement;
DSB means the Dispute Settlement Body established under Article 2 of the DSU, made up of all member governments, usually represented by ambassadors or equivalent. The DSB has the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings or recommendations of panels or of the Appellate Body and authorize suspension of concessions or other obligations under the covered agreements.
Panels and panelists refer to a team of three or five experts or well-qualified governmental or non-governmental individuals to examine a dispute, giving findings and making recommendations. Panelists are nominated by the Secretariat and agreed by the parties to a dispute or appointed by the Director-General of the WTO where there is no agreement within 20 days after the date of establishment of the panel. Panelists are expected to function in their individual capacities and not as representatives of governments or of any organization.
Standard Terms of Reference refer to the legal responsibilities of the DSB panels, i.e., the examination of the issues raised by the complaining Member, and giving findings which will assist the DSB in making recommendations or in giving its rulings on the issues in question.
Consensus a decision is deemed to be made by consensus if no Member formally objects to it, or there is no consensus against it.
Good offices, conciliation and mediation refer to a procedure of the disputer settlement process in which the Director-General of the WTO assists the parties to settle a dispute in a way satisfactory to both parties of the dispute.
Good offices mean that a third party assists the negotiation or consultation between the two parties to a dispute.
Conciliation means that a dispute is submitted to a committee or an organization who will make findings and recommend solutions satisfactory to both parties.
Mediation means a third party is involved directly in the negotiations of concerned parties of a dispute.
Good offices, conciliation and mediation may be requested by any party to a dispute, but can be effectively undertaken only if both parties to the dispute agree to use this procedure. It may begin and be terminated at any time, and it may even be continued while the panel process is on.
Arbitration refers to an alternative course in the dispute settlement process where the dispute issues are clearly defined by both parties. It will be entered into if the parties to the dispute agree to adopt it. The parties have to agree to abide by the arbitration award, which will be notified to the DSB. The implementation process of the award will be along the same lines as that for the recommendation and ruling of a panel.
Appellate Body refers to the permanent seven-member Appellate Body set up by the Dispute Settlement Body and broadly represents the range of WTO membership. Members of the Appellate Body have four-year terms, and can be renewed once. They have to be individuals with recognized standing in the field of law and international trade, not affiliated with any government.
Division means the three Members of Appellate Body who are selected to serve on any one appeal;
appellant means any party to the dispute that has filed a Notice of Appeal or has filed a submission;
appellee means any party to the dispute that has filed a submission;
third participant means any third party that has filed a written submission; or any third party that appears at the oral hearing, whether or not it makes an oral statement at that hearing;
third party means any WTO Member who has notified the DSB of its substantial interest in the matter before the panel.
2. Dispute settlement system in the WTO - basic concepts
The dispute settlement system of the GATT is generally considered to be one of the cornerstones of the multilateral trade order. The system has already been strengthened and streamlined as a result of reforms agreed following the Mid-Term Review Ministerial Meeting held in Montreal in December 1988. The Uruguay Round Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) further strengthened the existing system significantly, extending the greater automaticity agreed in the Mid-Term Review to the adoption of the panels' and a new Appellate Body's findings. Disputes currently being dealt with by the Council are subject to these new rules, which include greater automaticity in decisions on the establishment, terms of reference and composition of panels, such that these decisions are no longer dependent upon the consent of the parties to a dispute. Moreover, the DSU will establish an integrated system permitting WTO Members to base their claims on any of the multilateral trade agreements included in the Annexes to the Agreement establishing the WTO. For this purpose, a Dispute Settlement Body (DSB) will exercise the authority of the General Council and the Councils and committees of the covered agreements.
Description of dispute settlement process.
The DSU emphasizes the importance of consultations in securing dispute resolution, requiring a Member to enter into consultations within 30 days of a request for consultations from another Member.
If after 60 days from the request for consultations there is no settlement, the complaining party may request the establishment of a panel. Where consultations are denied, the complaining party may move directly to request a panel.
The parties may voluntarily agree to follow alternative means of dispute settlement, including good offices, conciliation, mediation and arbitration.
Where a dispute is not settled through consultations, the DSU requires the establishment of a panel, at the latest, at the meeting of the DSB following that at which a request is made, unless the DSB decides by consensus against establishment. The DSU also sets out specific rules and deadlines for deciding the terms of reference and composition of panels. Standard terms of reference will apply unless the parties agree to special terms within 20 days of the panel's establishment. Where the parties do not agree on the composition of the panel within the same 20 days, this can be decided by the Director-General.
Panels normally consist of three persons of appropriate background and experience from countries not party to the dispute. The Secretariat will maintain a list of experts satisfying the criteria. Panel procedures are set out in detail in the DSU. It is envisaged that a panel will normally complete its work within six months or, in cases of urgency, within three months. Panel reports may be considered by the DSB for adoption 20 days after they are issued to Members. Within 60 days of their issuance, they will be adopted, unless the DSB decides by consensus not to adopt the report or one of the parties notifies the DSB of its intention to appeal.
The concept of appellate review is an important new feature of the DSU. An Appellate Body will be established, composed of seven members, three of whom will serve on any one case. An appeal will be limited to issues of law covered in the panel report and legal interpretations developed by the panel. Appellate proceedings shall not exceed 60 days from the date a party formally notifies its decision to appeal. The resulting report shall be adopted by the DSB and unconditionally accepted by the parties within 30 days following its issuance to Members, unless the DSB decides by consensus against its adoption.
Once the panel report or the Appellate Body report is adopted, the party concerned will have to notify its intentions with respect to implementation of adopted recommendations. If it is impracticable to comply immediately, the party concerned shall be given a reasonable period of time, the latter to be decided either by agreement of the parties and approval by the DSB within 45 days of adoption of the report or through arbitration within 90 days of adoption. In any event, the DSB will keep the implementation under regular surveillance until the issue is resolved.
Further provisions set out rules for compensation or the suspension of concessions in the event of non-implementation. Within a specified time-frame, parties can enter into negotiations to agree on mutually acceptable compensation. Where this has not been agreed, a party to the dispute may request authorization of the DSB to suspend concessions or other obligations to the other party concerned. The DSB will grant such authorization within 30 days of the expiry of the agreed time-frame for implementation.
Disagreements over the proposed level of suspension may be referred to arbitration within 90 days of the date of adoption of the recommendations and rulings. The arbitration will be done by an arbitrator mutually agreed upon by the parties to the dispute. If there is no agreement on who should be the arbitrator within 10 days of the matter being referred to arbitration, the Director-General of the WTO has to appoint an arbitrator within another period of 10 days of consulting the parties. The guideline to the arbitrator will be that the reasonable period of time to implement the panel or Appellate Body recommendation should not exceed 15 months from the date of adoption of the panel or Appellate Body report. If the panel or the Appellate Body has taken additional time, such time will be added to the 15-month period. But in any case, the time shall not exceed 18 months except if the parties to the dispute agree on a longer period in exceptional circumstances.
In principle, the level of suspension will be equivalent to the level of nullification or impairment, i.e., it cannot be higher, and concessions should be suspended in the same sector as that in issue in the panel case. If this is not practicable or effective, the suspension can be made in a different sector of the same agreement (cross-sector suspension). In turn, if this is not effective or practicable and if the circumstances are serious enough, the suspension of concessions may be made under another agreement (cross-agreement suspension), for example, action can be taken on goods for some actions or for some omission to take action in the area of services or IPRs.
One of the central provisions of the DSU reaffirms that Members shall not themselves make determinations of violations or suspend concessions, but shall make use of the dispute settlement rules and procedures of the DSU (multilateral process in dispute settlement).
The DSU contains a number of provisions taking into account the specific interests of the developing and the least-developed countries. It also provides some special rules for the resolution of disputes which do not involve a violation of obligations under a covered agreement but where a Member believes nevertheless that benefits are being nullified or impaired (non-violation nullification or impairment). Special decisions to be adopted by Ministers in 1994 foresee that the Montreal Dispute Settlement Rules, which would otherwise have expired at the time of the April 1994 meeting, are extended until the entry into force of the WTO. Another decision foresees that the new rules and procedures will be reviewed within four years after the entry into force of the WTO.
Coverage of DSU.
The dispute settlement process covers the WTO Agreement (i.e., the Agreement on Establishing the World Trade Organization), GATT 1994, GATS, TRIPs.
Preconditions for resorting to dispute settlement process
· Any benefit accruing to the Member under a particular agreement is being nullified or impaired;
· The attainment of any objective of the agreement is being impeded as a result of the failure of another Member to carry out its obligations under the agreement, or as a result of the application by another Member of any measure which conflicts with the provisions of the agreement.
Nature of cases.
Violation cases: If the nullification or impairment of a benefit is caused by a Member failing to carry out its obligations under the agreement, or applying a measure which conflicts with some provision of the agreement, the situation occurs because of the violation of some provision of the agreement. For example, if a Member impairs the benefit flowing out of its tariff binding by imposing an internal charge on an imported product which it does not apply to the like domestic product, it is violating the provisions of Article III of GATT 1994 (National Treatment).
In these violation cases, the establishment of the following elements is necessary:
· Existence of an obligation in the relevant agreement
· Failure of a Member to carry it out, or
· A Member has taken a measure conflicting with a provision in the relevant agreement.
Particularly, because Members are required to bring their laws and procedures into conformity with the provisions of the WTO agreements, the mere existence of a violating provision in the legislation of a Member would amount to a violation, even when no measure might have been taken in pursuance of the legislation. The market access commitments in the GATT are generally on the conditions of competition for trade and not on the volumes of trade.
Non-violation cases: When a Member applies a measure which does not conflict with the agreement and yet causes the nullification or impairment of benefits, it is doing so without violating the provisions of the agreement. For example, a Member may negotiate tariff concessions with another Member, resulting in the binding of the tariff on a product, but then grant a subsidy to the domestic industry producing a like product within permissible limits, and may thereby affect adversely the prospects of the export of another Member. This may, under certain circumstances, be held to impair the benefit accruing to this Member, though it does not violate the disciplines on subsidies. The reason behind this conclusion is that the exporting Member had no anticipation at the time the negotiation for the tariff concession took place that such a subsidy would be granted.
The main elements in non-violation cases are:
· The existence of a benefit,
· Subsequent action by a Member curtailing the benefit,
· The existence of a reasonable expectation that the competitive conditions would not be upset.
Principles: equitable, fast, effective, mutually acceptable.
Equitable (multilateral settlement).
WTO members have agreed that if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. That means abiding by the agreed procedures, and respecting judgements.
Fast (time limit).
A procedure for settling disputes existed under the old GATT, but it had no fixed timetables, rulings were easier to block, and many cases dragged on for a long time inconclusively. The Uruguay Round agreement introduced a more structured process with more clearly defined stages in the procedure. It introduced greater discipline for the length of time a case should take to be settled, with flexible deadlines set in various stages of the procedure. The agreement emphasizes that prompt settlement is essential if the WTO is to function effectively. It sets out in considerable detail the procedures and the timetable to be followed in resolving disputes. If a case runs its full course to a first ruling, it should not normally take more than about one year -- 15 months if the case is appealed. The agreed time limits are flexible, and if the case is considered urgent (e.g. if perishable goods are involved), then the case should take three months less.
The Uruguay Round agreement also made it impossible for the country losing a case to block the adoption of the ruling. Under the previous GATT procedure, rulings could only be adopted by consensus, meaning that a single objection could block the ruling. Now, rulings are automatically adopted unless there is a consensus to reject a ruling -- any country wanting to block a ruling has to persuade all other WTO members (including its adversary in the case) to share its view.
Mutually acceptable (consultation).
Although much of the procedure does resemble a court or tribunal, the preferred solution is for the countries concerned to discuss their problems and settle the dispute by themselves. The first stage is therefore consultations between the governments concerned, and even when the case has progressed to other stages, consultation and mediation are still always possible.
3. Procedures for dispute settlement process
Settling disputes is the responsibility of the Dispute Settlement Body. The Dispute Settlement Body has the sole authority to establish “panels” of experts to consider the case, and to accept or reject the panels' findings or the results of an appeal. It monitors the implementation of the rulings and recommendations, and has the power to authorize retaliation when a country does not comply with a ruling.
First stage: consultation (up to 60 days). Before taking any other actions, the countries in dispute have to talk to each other to see if they can settle their differences by themselves. If that fails, they can also ask the WTO director-general to mediate or try to help in any other way.
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