7:12 AM Nov 16, 1993

DISPUTE SETTLEMENT COULD BRING IN SOME RULE OF LAW

Geneva 15 Nov (Chakravarthi Raghavan) -- The Understanding on Dispute Settlement that would come out of the Uruguay Round, if it is successfully concluded, will take the international community a step nearer perhaps to the 'rule of law' in settling trade disputes.

The DSU, whose text was cleared by the informal working group under Julio Lacarte Muro of Uruguay provides and enables cross-retaliation, but subject to some hierarchical procedures and safeguards aimed at reducing its effect or atleast cooling off the cross-retaliation threats of the major powers like the US.

The DSU in effect would ensure that no retaliation or cross-retaliation on trade is undertaken except through the procedures and processes, and with due authorization, and to this extent would render illegal any exercise by the United States of powers under S. 301 of its trade law.

In the DSU, an important change (over the Uruguay Round DFA), and one that the US has now agreed to, provides that the DSU, and its rules and procedures, applies both in respect of the various agreements annexed to the MTO, but also to the MTO and the DSU and any combinations.

This means that any departures and violations of the procedural rights under the MTO and DSU could itself become a matter of dispute. The US and some others have been opposed to this.

The DSU provides for an automaticity, from the time of a cp raising a dispute through consultations, establishment of panels and time-frames for them, to their reporting to the relevant bodies, unless it be decided otherwise by consensus.

A panel report is to be adopted at a meeting of the Dispute Settlement Body within sixty days, unless one of the parties notifies and goes in appeal to an Appellate Review body or the DSB decides by consensus not to adopt the ruling.

An appeal from a panel ruling would be available, for parties to the dispute and not third parties, before an Standing Appellate Body on issues of law and on legal interpretations by the panel.

The report of the appellate body is to be unconditionally accepted by the parties and by the DSB unless it decides otherwise by consensus.

The implementation of the recommendations and rulings are also to be kept under review by the DSB.

Where a party does not implement the recommendation and ruling, the aggrieved party could seek the authority of the DSB to "retaliate" by withdrawing equivalent concessions.

In considering the concession or other obligation to suspend, there is a hierarchy of retaliation provided for -- what some of the developing countries have been calling 'civilized retaliation'.

* suspension or withdrawal of concession should first be sought in the same sector or sectors in which a violation, nullification or impairment was found;

For this purpose, 'sector' for goods means all the goods sectors, for services a 'principal sector' as identified in the current Services Sectoral Classification list, and for TRIPs each of the categories of IPRs covered under the agreement.

* if a party seeking compensation, through withdrawal or suspension of a concession, finds it is not practicable or effective to do so in respect of the sector concerned, and the circumstances are serious enough, it might seek to suspend concessions or other obligations under another covered agreement.

In doing this, the party concerned is to take into account the trade in sector or under the agreement in respect of which the panel has found violation, nullification, or impairment, and the importance of this trade to the party, and the broader economic elements related to nullification or impairment and broader economic consequences of the suspension of concession or other obligations.

No retaliation or suspension of a concession can be made without following all these procedures and without obtaining the authorization of the DSB, and only for the level of the impairment of benefit.

Where there is a dispute about this amount, or about the principles and procedures to be followed before cross-retaliation, it is to be decided by arbitration by the original panel, or if it is not available, by an arbitrator appointed by the DG of the MTO. The arbitrator is not to examine nature of the concessions or the other obligations to be suspended, but only whether the level of suspension is equivalent to the level of nullification or impairment.

The DSB is to authorize suspension of concession or other obligations when the request is consistent with the decision of the arbitrator, unless it decides to reject the request by consensus.

And unless there be a 'miracle' and fast turn around and return to the high growth rates of the world economy and that of the major industrialized powers, the Uruguay Round conclusion (which could come into effect only in 1994 and, even according to its most active promoters would have no effect on the real economy for 2-3 years) would disprove so many of its claimed benefits that it might not long endure either.