1.

Introduction

The best international agreement is not worth very much if its obligations cannot be enforced
when one of the signatories fails to comply with such obligations. An effective mechanism to
settle disputes thus increases the practical value of the commitments the signatories undertake
in an international agreement. The fact that the Members of the (WTO) established the
current dispute settlement system during the Uruguay Round of Multilateral Trade
Negotiations underscores the high importance they attach to compliance by all Members with
their obligations under the WTO Agreement.

Settling disputes in a timely and structured manner is important. It helps to prevent the
detrimental effects of unresolved international trade conflicts and to mitigate the imbalances
between stronger and weaker players by having their disputes settled on the basis of rules
rather than having power determine the outcome. Most people consider the WTO dispute
settlement system to be one of the major results of the Uruguay Round. After the entry into
force of the WTO Agreement in 1995, the dispute settlement system soon gained practical
importance as Members frequently resorted to using this system.

2. The Dispute Settlement Understanding

The current dispute settlement system was created as part of the WTO Agreement during the
Uruguay Round. It is embodied in the Understanding on Rules and Procedures Governing the
Settlement of Disputes, commonly referred to as the Dispute Settlement Understanding and
abbreviated “DSU” (referred to as such in this guide). The DSU, which constitutes Annex 2
of the WTO Agreement, sets out the procedures and rules that define today’s dispute
settlement system. It should however be noted that, to a large degree, the current dispute
settlement system is the result of the evolution of rules, procedures and practices developed
over almost half a century under the GATT 1947.

3. Objectives:
3.1 Providing security and predictability to the multilateral trading system
A central objective of the (WTO) dispute settlement system is to provide security and
predictability to the multilateral trading system (Article 3.2 of the DSU). Although
international trade is understood in the WTO as the flow of goods and services
between Members, such trade is typically not conducted by States, but rather by
private economic operators. These market participants need stability and predictability
in the government laws, rules and regulations applying to their commercial activity,
especially when they conduct trade on the basis of long-term transactions. In light of
this, the DSU aims to provide a fast, efficient, dependable and rule-oriented system to
resolve disputes about the application of the provisions of the WTO Agreement. By
reinforcing the rule of law, the dispute settlement system makes the trading system
more secure and predictable. Where non-compliance with the WTO Agreement has
been alleged by a WTO Member, the dispute settlement system provides for a
relatively rapid resolution of the matter through an independent ruling that must be
 implemented promptly, or the non-implementing Member will face possible trade
sanctions.
3.2 Preserving the rights and obligations of WTO Members back to top
Typically, a dispute arises when one WTO Member adopts a trade policy measure that
one or more other Members consider to be inconsistent with the obligations set out in
the WTO Agreement. In such a case, any Member that feels aggrieved is entitled to
invoke the procedures and provisions of the dispute settlement system in order to
challenge that measure.

4. The Dispute Settlement Body

Panel
- Panels are the quasi-judicial bodies, in a way tribunals, in charge of adjudicating
disputes between Members in the first instance. They are normally composed of three,
and exceptionally five, experts selected on an ad hoc basis.1 This means that there is
no permanent panel at the (WTO); rather, a different panel is composed for each
dispute. Anyone who is well-qualified and independent (Articles 8.1 and 8.2 of the
DSU) can serve as panelist
- The panel composed for a specific dispute must review the factual and legal aspects of
the case and submit a report to the DSB in which it expresses its conclusions as to
whether the claims of the complainant are well founded and the measures or actions
being challenged are WTO-inconsistent. If the panel finds that the claims are indeed
well founded and that there have been breaches by a Member of WTO obligations, it
makes a recommendation for implementation by the respondent (Articles 11 and 19 of
the DSU).

Appellate Body
- Unlike panels, the Appellate Body is a permanent body of seven members entrusted
with the task of reviewing the legal aspects of the reports issued by panels. The
Appellate Body is thus the second and final stage in the adjudicatory part of the
dispute settlement system. As it did not exist in the old dispute settlement system
under GATT 1947, the addition of this second adjudicatory stage was one of the major
innovations of the Uruguay Round of Multilateral Trade Negotiations.
- Appellate Body members must be persons of recognized authority, with demonstrated
expertise in law, international trade and the subject matter of the covered agreements
generally, and they must not be affiliated with any government (Article 17.3 of the
DSU). Most Appellate Body members have so far been university professors,
practising lawyers, past government officials or senior judges.

Arbitrators
- In addition to panels and the Appellate Body, arbitrators, either as individuals or as
groups, can be called to adjudicate certain questions at several stages of the dispute
settlement process. Arbitration is available as an alternative to dispute resolution by
panels and the Appellate Body (Article 25 of the DSU), although it is a possibility that
 has so far very rarely been used.1 Arbitration results are not appealable but can be
enforced through the DSU (Articles 21 and 22 of the DSU).

Experts
- Disputes often involve complex factual questions of a technical or scientific nature,
for instance when the existence or degree of a health risk related to a certain product
is the subject of contention between the parties. Because panelists are experts in
international trade but not necessarily in those scientific fields, the DSU gives panels
the right to seek information and technical advice from experts. They may seek
information from any relevant source, but before seeking information from any
individual or body within the jurisdiction of a Member, the panel must inform that
Member (Article 13.1 of the DSU).
- Where a panel considers it necessary to consult experts in order to discharge its duty
to make an objective assessment of the facts, it may consult either individual experts
or appoint an expert review group to prepare an advisory report (Article 13.2 of the
DSU).