Index

Expert Opinion: Reforming the DSU

By Welber Barral

At the end of the Uruguay Round, the Dispute Settlement Understanding (DSU) was seen as an enhanced mechanism for guaranteeing predictability in the world trading system. The DSU eliminated the unstable, consensusbased enforcement provisions in the General Agreement on Tariffs and Trade (GATT); thus, the expectations about its capability to make the system more rule-oriented and stable were high.

A decade later, opinions as to the success of the DSU are mixed. The DSU created the most used international court in human history and contributed remarkably to the legitimacy and legal security of the World Trade Organization (WTO). Furthermore, the evolution of case law contributed to international law in general by facing complex issues and raising the interest for legal aspects of international relations; indeed, a remarkable contribution in times of chronic unilateralism.

The glass-half-empty critics, however, recall that most developing countries have never used this mechanism and accuse its pro-trade bias of eclipsing other development concerns. Political criticisms abound: governments have accused panels and the Appellate Body of judicial activism, of being a threat to sovereignty, of adopting extended interpretations that lead to deadlocks.

Most of these criticisms disregard the fact that any mechanism for dispute resolution is derived from a limited political commitment. As a consequence, WTO panels and the Appellate Body are constantly treading a fine line: they must bring a solution to the dispute using the literal interpretation of pro-trade, purposely ambiguous, compromise language, while respecting the rights and obligations of WTO Members.

In any case, some of these shortcomings were implicitly recognized in Doha. Hence, the Ministerial Declaration dedicates a paragraph to the reform of the DSU (Paragraph 30). Reform would not be linked to the negotiations and should have been completed by May 2003.

That deadline proved unrealistically optimistic, for the reform of the DSU is stuck in the mud of mistrust that has pervaded Geneva since 2001. DSU reform became an element in the customary trade-offs in trade negotiations and its result, consequently, will most certainly follow the destiny of the overall negotiations. The proposals advanced so far have the potential to solve procedural flaws (like the “sequencing” problem); other proposals could reinforce special and differential treatment for developing countries and make effective the hortatory provisions in the DSU.

WTO Members, however, are skeptical about bringing any proposal to reform the DSU that could be specifically directed at sustainable development. Such an omission is politically understandable. On the one hand, it derives from the apprehension of developing countries that any mention of concerns other than trade could legitimate protectionist devices. On the other hand, this omission is based on the reasoning that sustainable development, if and when taken into account in the WTO, should be considered in substantive provisions, such as in the exceptions provisions set out in GATT Article XX or the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS). Moreover, the argument follows, substantive results should be negotiated in the Committee on Trade and Environment if it moves beyond the rhetorical phrases that have plagued its meetings so far.

Undeniably, changing the WTO agreements is the best option to address environmental concerns. Nevertheless, procedural rules may bring considerable implications for the interpretation of these texts, as demonstrated by cases such as U.S.-Reformulated Gasoline and EU-Beef Hormones. One idea to improve the decisions in this sense involves giving more leeway for the system to consider development, including sustainable development, as a criterion for interpreting WTO commitments. That involves changes in the way these commitments are construed by panels. In jurisprudential terms, this proposal involves the acceptance of principles of international public policy as valid hermeneutical tools. In practical terms, it could be achieved by reforming DSU Articles 1 and 7 in order to mandate a legal interpretation integrated with the corpus of international development law.

Such a move would clarify the relevance of multilateral environmental agreements and other pro-development multilateral commitments (such as the United Nations Millennium Development Goals) in the interpretation of obligations under the multilateral trading system. Another practical proposal would be to rephrase DSU Article 11 in order to allow panels to take international environmental commitments into account whenever evaluating domestic trade policies.

Evidently, the proposals above are dangerously generic, and any language that intends to improve interpretative rules should be carefully crafted. Otherwise, negative political effects—in terms of legal uncertainty and loss of legitimacy—will certainly occur. In addition, any proposed change should consider the mistrust from developing countries (as to the risk of protectionism) and from developed countries (as to the risk of judicial activism).

In conclusion, a decade of experience with the DSU has shown that the system tends to a literal identification of commitments expressed in the WTO agreements. The insertion of development- related language in the agreements is consequently the first thought whenever the world trading system is mentioned. Nevertheless, procedural changes in the DSU may become equally relevant. Dispute settlement is not only a technical device for calming two litigating parties, but also a political tool for bringing stability and legitimacy to the system. Changes in procedural aspects, especially those related to legal interpretation, may move development concerns (including sustainable development) to center stage. Presenting politically acceptable proposals is therefore the complex task faced by those concerned with sustainable development.

Welber Barral, from Brazil, is a professor of law at the Federal University of Santa Catarina, Florianópolis, Brazil.