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THE WTO DISPUTE SETTLEMENT

IMPLEMENTATION PROCEDURES: A SYSTEM IN

NEED OF REFORM
CAROLYN

B.

GLEASON*

I.

&

PAMELA

D.

WALTHER**

OVERVIEW

When the World Trade Organization (WTO) Agreement was signed

in Marrakesh in 1994, its new procedures for implementing dispute
settlement rulings were widely praised as a decisive improvement over
the procedures codified and practiced under the General Agreement
on Tariffs and Trade (GATT). The U.S. Statement of Administrative
Action (SAA) accompanying the transmittal of the Uruguay Round
Agreements Act (URAA) to the U.S. Congress characterized those
improvements as follows:
[C] ountries that bring successful challenges will be authorized
to withdraw Uruguay Round trade benefits from the offending
country if, after a reasonable period following adoption of the
panel or Appellate Body report, the matter cannot be settled in
a mutually satisfactory manner. These changes mean that when
the United States brings a successful challenge against another
government under the DSU, the United States will have improved leverage to insist that the defending government remedy its violation.'
Today, as the WTO concludes its fifth year of operation, its dispute
settlement implementation procedures (and the SAA assessment of
them) are still being tested and debated. Thus far, only 26 of the 185
cases, or 14% of the total case load, that have gone to WTO dispute
settlement 2 have even reached the point where the implementation
procedures established under the Understanding on Rules and Proce* Carolyn B. Gleason is a partner with McDermott, Will & Emery. She is a member of the U.S.
Agricultural Policy Advisory Committee and has served as private sector counsel in numerous
dispute settlement proceedings under the GATT and WTO.
** Pamela D. Walther is a partner with McDermott, Will & Emery. She practices in the area of
international trade with a specialty in agriculture.
1. URUGUAY ROUND TRADE AGREEMENTS, H.R. Doc. No. 103-316, at 1034 (1994).
2. See World Trade Organization, Overview of the State-of-play of WTO Disputes: Implementation
Status of Adopted Reports, at 2 (last modified Feb. 1, 2000) <http://www.wto.org/wto/dispute/
bulletin.htm> [hereinafter Overview of WTO Disputes]; see also Appellate Body and Panel Reports
Adopted Since 1January 2000, Overview of WTO Disputes, supra, at 5. The 26 cases are WTO cases that
have reached implementation as ofJanuary 17, 2000.

LAW & POLICY IN INTERNATIONAL BUSINESS

dures Governing the Settlement of Disputes (DSU) apply.3 In fourteen

of those, the offending member either fully implemented or agreed to

implement in a manner acceptable to the winning party.4 Six have led

to non-compliance procedures, 5 and the remaining six are still awaiting

either final implementation, 6 or the establishment or expiration of

3. See Understanding on Rules and Procedures Governing the Settlement of Disputes, Apr.
15, 1994, arts. 21-22, Marrakesh Agreement Establishing the World Trade Organization [hereinafter WTO Agreement], Annex 2, in RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE
NEGOTIATIONS 1 (1994) [hereinafter RESULTS OF THE URUGUAY RoUND] 404, 420-25 (1994), 3
I.L.M. 1226, 1238-41 [hereinafter DSU].
4. Of the 14 cases that have been implemented by the offending member, 5 cases were
against the United States. See United States-Standards for Reformulated and Conventional
Gasoline, WT/DS2; United States-Restrictions on Imports of Cotton and Man-Made Fibre
Underwear, WT/DS24; United States-Measure Affecting Imports of Woven Wool Shirts and
Blouses, WT/DS33; United States-Anti-Dumping Duty on Dynamic Random Access Memory
Semiconductors (DRAMS) of One Megabit or Above From Korea, WT/DS99; United StatesImport Prohibition of Certain Shrimp and Shrimp Products, WT/DS58 [hereinafter ShrimpTurtle]; see also Overview of WTO Disputes, supra note 2. Three cases were against India. See
India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50;
India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS79;
India-Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products,
WT/DS90; see also Overview of WTO Diputes,supra note 2. Two cases were against Canada. See CanadaCertain Measures Concerning Periodicals, WT/DS31; Canada-Measures Affecting the Importation of
Milk and Exportation of Dairy Products, WT/DS103; see also Overview of W/O Disputes,supra note 2. Two
cases were againstJapan. SeeJapan-Taxes on Alcoholic Beverages, WI/DS8, W/DS10, WT/DSll;
Japan-Measures Affecting Agricultural Products, WI/DS76; see also Overview of WTODisputes, supra note
2. The remaining two cases were against two different WTO members, Argentina and Indonesia. See
Argentina-Certain Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items,
WT/DS56; Indonesia-Certain Measures Affecting the Automobile Industry, WT/DS54, Wr/DS55,
WT/DS59, WT/DS64; see also Overview of WTODisputes, supranote 2. Post-implementation problems may
yet arise in at least some of these. For example, in India-Patent Protection for Pharmaceuticaland
AgriculturalChemicalPrductsduring the DSB meeting at which India stipulated it was in full compliance,
the United States stated that it was concerned about the WTO-consistency of the compulsory licensing
arrangements adopted by India and reserved its right to take subsequent action. In addition, in the
Shrimp-Turtlecase, certain complaining parties have noted that the measures taken by the United States
to implement the rulings and recommendations, including revising U.S. guidelines for implementing
the Shimp-Turtlelaw, are insufficient. On December 22,1999, Malaysia and the United States reached an
agreement on procedures to follow in the event that Malaysia determines at some future date to initiate
proceedings under Article 21.5 and Article 22 of the DSU. See United States--Import Prohibition of
Certain Shrimp and Shrimp Products, Understanding Between Malaysia and the United States Regarding Possible Proceedings Under Articles 21 and 22 of the DSU, WT/DS58/16 (Jan. 12, 2000).
5. See discussion of the six cases, infra Part II.B.
6. See WTO Panel Report, European Communities-Measures Affecting Importation of
Certain Poultry Products, WT/DS69/R (Mar. 12, 1998). The reasonable period of time for
EC-PoultryProducts expired on March 31, 1999, but there has been no formal indication from
either party that full implementation has occurred.

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WFO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

their "reasonable period of time" for implementation. v

Because W'TO rulings have been implemented to the satisfaction of
the winning parties more often than not under the new WTO procedures, some may insist, on the basis of that record, that the implementation procedures function in an effective manner. The instances of
non-compliance over the last year, however, have been divisive and
well-publicized. Consequently, they have substantially undermined that
view and raised questions about the adequacy of the current implementation rules and procedures.
The disputes over non-compliance that have cast doubt on the
system are principally those that have led to formal non-compliance
8 EC-Beef Horaction, which thus far have included EC-Bananas,
1 Brazil-ExportFinancmones,9 Australia-Salmon,0OAustralia-Leather,"
12
ing Programmefor Aircraft, and Canada-MeasuresAffecting the Export of
CivilianAircraft.13 Because these more contentious cases have required
fullest recourse to the new WTO implementation procedures, they
7. There are currently five cases awaiting establishment or expiration of their "reasonable
period of time" for implementation. See Korea-Taxes on Alcoholic Beverages, WT/DS75,
WT/DS84; Turkey-Restrictions on Imports of Textile and Clothing Products, WT/DS34; ChileTaxes on Alcoholic Beverages, WT/DS87, WT/DSI 10; Korea-Definitive Safeguard Measure on
Imports of Certain Dairy Products, WT/DS98; Argentina-Safeguard Measures on Imports of
Footwear, Wr/DS121; see also Overview of WTODisputes, supranote 2, at 4-6. The reasonable period
of time for Korea-Taxes on Alcohol Beverages expired on Jan. 31, 2000, and the period for
Turkey-Restrictions on Imports of Textile and Clothing Products expired on Feb. 19, 2000. The
periods for the remaining three cases have not yet been established.
8. See WTO Panel Report, European Communities-Regime for the Importation, Sale and
Distribution of Bananas, Complaint by the United States, WT/DS27/R (May 22, 1997) [hereinafter EC-Bananas]; WTO Appellate Body Report, European Communities-Regime for the
Importation, Sale and Distribution of Bananas, WT/DS27/AB/R (Sept. 9, 1997).
9. See WTO Panel Report, EC Measures Concerning Meat and Meat Products (Hormones),
Complaint by the United States, WT/DS26/R/USA (Aug. 18, 1997); WTO Panel Report, EC
Measures Concerning Meat and Meat Products (Hormones), Complaint by Canada, WT/DS48/
R/CAN (Aug. 18, 1997); WTO Appellate Body Report, EC Measures Concerning Meat and Meat
Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R (Jan. 16, 1998).
10.

See WTO Panel Report, Australia-Measures Affecting Importation of Salmon, WT/

DS18/R (June 12, 1998); WTO Appellate Body Report, Australia-Measures Affecting Importation of Salmon, WT/DS18/AB/R (Oct. 20, 1998).
11. See WTO Panel Report, Australia-Subsidies Provided to Producers and Exporters of
Automotive Leather, WT/DS126/R (May 25, 1999).
12. See WTO Panel Report, Brazil-Export Financing Program for Aircraft, WT/DS46/R
(Apr. 14, 1999); WTO Appellate Body Report, Brazil-Export Financing Program for Aircraft,
WT/DS46/AB/R (Aug. 2, 1999).
13. See WTO Panel Report, Canada-Measures Affecting the Export of Civilian Aircraft,
WT/DS70/R (Apr. 14, 1999); WTO Appellate Body Report, Canada-Measures Affecting the
Export of Civilian Aircraft, WT/DS70/AB/R (Aug. 2, 1999).

2000]

LAW & POLICY IN INTERNATIONAL BUSINESS

offer the best barometer of what has worked under that system and
what has not.
Among the several lessons that can be derived from the noncompliance cases, one is that the existing DSU text contains obvious
ambiguities and drafting oversights that need to be corrected. Another
is that its implementation procedures, when used to their fullest extent,
create an undesirably long timetable for the injured party. Still another
is that improved incentives or sanctions are needed under the DSU to
help achieve the WTO's implementation objective of "prompt compliance."'

14

Beyond the reform guidance they offer, the non-conformity cases

also raise more challenging questions about the future of the WTO
system. They pose, in particular, the issue of whether the European
Community (EC), the largest WTO member, will ever properly implement dispute settlement rulings, especially in the area of agriculture,
and what it will imply for the system if it does not. More broadly still, the
cases pose the question of whether the WTO, faced with a growing
array of challenging cases-from U.S.-Foreign Sales Corporations,15 to
recurring challenges of U.S. trade laws, to potential cases involving
genetically altered foods and the practices of new members, such as
China-will be able to resolve those challenges without undue controversy and maintain its credibility as a system premised on the effective
implementation of its disciplines and rulings.
This Article will review the implementation procedures that have
given rise to debate and concern; discuss in detail the cases that have
shaped that debate; and explore the systemic changes that would
improve the existing implementation procedures and help reduce the
incidence, or at least length, of WTO non-compliance. It will close with
a discussion of the ongoing multilateral review of the DSU 16 and other

14. DSU, supra note 3, art. 21(1), at 420, 33 I.L.M. at 1238 (providing that "[p]rompt
compliance with recommendations or rulings of the DSB is essential in order to ensure effective
resolution of disputes to the benefit of all Members").
15. See WTO Panel Report, United States-Tax Treatment for "Foreign Sales Corporations,"
WT/DS108/R (Oct. 8, 1999).
16. The Decision on the Application and Review of the Understanding on Rules and
Procedures Governing the Settlement of Disputes invited the Ministerial Conference to complete
a full review of dispute settlement rules and procedures under the WTO within four years after
entry into force of the WTO and to make a decision after the completion of the review whether to
continue, modify, or terminate the dispute settlement rules and procedures. See Decision on the
Application and Review of the Understanding on Rules and Procedures Governing the Settlement
of Disputes, Apr. 15, 1994, Ministerial Decisions and Declarations, in RESULTS OF THE URUGUAY
ROUND, supra note 3, at 465, 33 I.L.M. at 1259. The review that has been undertaken, called the

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WTO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

developments that are likely to have a bearing on the effectiveness and
credibility of the WTO implementation procedures going into the new
millennium.
II.

THE

DSU

IMPLEMENTATION PROCEDURES AND THE CONCERNS

THEY HAVE RAISED

The DSU rules governing the implementation of WTO rulings were

intended to correct the most common criticism of the prior, ineffective
GATT procedures-that losing GATT parties could permanently evade
compliance without fear of adverse consequences. 1 7 The rules have
addressed that criticism through three discretely different procedures.
The first are the procedures and guidelines for establishing a compliance deadline, or "reasonable period of time," for coming into compliance. The second are the "compliance review" procedures to be used
when there is a disagreement over whether the losing member had
complied with the DSU ruling. The third are the procedures for the
suspension of concessions if the losing party failed to implement the
WTO rulings or otherwise satisfy the winning party by its implementation deadline.
In their application, all three procedures have encountered significant interpretive issues and concerns. The tensions over the "reasonable period of time" have centered on the length of that period and
what is required of the losing party while it is underway. 18 The compliance review controversy has related to all aspects of that review, from
when it should be undertaken to what procedures it should entail. The
procedures governing the suspension of concessions have sparked an
interrelated controversy over when retaliation authority may be requested if there is a disagreement over compliance.
Of the three, the latter two procedures-compliance review and the
request to suspend concessions-have been, by far, the most contentious and disruptive to the WTO system, threatening in one instance to

"DSU Review," has yet to be officially wrapped up, although a draft decision has been prepared for
consideration by the members. See Decision Regarding the Understanding on Rules and Procedures
Governing the Settlement of Disputes, WT/MIN(99) (draft) (Dec. 2, 1999) (on file with author)
[hereinafter DraftDecision Regardingthe DSU].
17. See, e.g., EC Failure to Comply with WTO Rulings on EC Banana Regime: U.S. Position, at
2 (Jan. 1999) (U.S. paper circulated to the DSB on file with author).
18. Article 21(3)(c) provides that "[a] guideline for the arbitrator should be that the
reasonable period of time ... should not exceed 15 months from the date of adoption of a panel
or Appellate Body report. However, that time may be shorter or longer, depending upon the
particular circumstances." DSU, supra note 3, art. 21(3) (c), at 421, 33 I.L.M. at 1238.

2000]

LAW & POLICY IN INTERNATIONAL BUSINESS

shut down the operation of the DSB. Whereas the "reasonable period
of time" issues are being addressed in at least a limited way through the
progressive jurisprudence of arbitral rulings, the textual shortcomings
and inconsistencies contained in the compliance review and retaliation
provisions have thus far only been addressed through awkward, ad hoc
arrangements among the affected parties. Pervasive dissatisfaction over
these provisions has dominated the DSU Review, leading to a number
of proposed textual changes in this area.
The evolution of the concerns surrounding each of the three implementation procedures, and the cases that have helped drive those
concerns, are detailed below.
A.

The "ReasonablePeriodof Time to Implement"

1. The Current Text

In order to ensure that losing parties would not have the open-ended
timeframe to comply that they had under GATT, the DSU has established procedures for fixing the losing party's deadline for implementing dispute settlement rulings and recommendations. Article 21 of the
DSU governing those procedures opens with an ambitious statement of
preference for "prompt compliance" on the part of the losing party, a
preference it describes as "essential in order to ensure effective resolution of disputes to the benefit of all Members." 19 It goes on to
recognize, however, that immediate compliance may be impracticable.
In those circumstances, Article 21 permits members to have a "reasonable period of time" to implement the rulings.20
Under the terms of Article 21.3, the reasonable period can be set in
one of three ways: (1) the losing party can propose a period that the
DSB would thereafter approve; (2) the winning and losing parties can
agree on an implementation period within forty-five days following
adoption of the ruling; or (3) if neither of the first two methods are
achievable, the period can be set by binding arbitration, to be completed within ninety days following adoption of the ruling.
Article 21 does not precisely define the phrase "reasonable period."
Apart from stating that "prompt compliance" is essential, the only
other interpretive guidance provided by that Article is the suggestion
that the reasonable period should not exceed fifteen months from the
be shorter or longer, depending
date the ruling was adopted, but "may
21
circumstances."
particular
upon the
19. Id. art. 21 (1), at 420, 33 I.L.M. at 1238.
20. See id. art. 21 (3), at 420-21, 33 I.L.M. at 1238.
21. Id. arts. 21(1), 21(3) (c), at 420, 421, 33 I.L.M. at 1238.

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WTO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

Once the reasonable period is underway, the DSB is required to keep

the losing party "under surveillance." 22 To help the DSB fulfill that
responsibility, Article 21 provides that six months into each losing
member's implementation period, that member must begin providing
regular "status reports" at all scheduled DSB meetings. Nothing more
than these reports are required of the losing member during its
compliance period.
2. The Establishment of the Reasonable Period
Of the twenty-six WTO cases that thus far have reached the stage of
establishing a reasonable period of time to implement, nine set that
period by mutual agreement, six were forced into arbitration to set the
period, three were subsidies cases in which the period was set by the
panel, four were settled (obviating the need for any implementation
period), and the remaining four cases are still awaiting the establishment of a reasonable period of time. Although both the reasonable
periods set by arbitration and those set by agreement have followed a
gradual trend towards shorter implementation periods, it has been the
arbitral rulings that have primarily driven that trend.
In the early reasonable-period awards, the arbitrators uniformly
established fifteen-month periods, fostering a widespread concern that
losing parties were automatically entitled to a compliance period of
fifteen months. This outcome struck many as contrary to the "prompt
compliance" standard of Article 21 and an unfair extension of the
dispute settlement process, which, even prior to the implementation
period, could entail up to two years of litigation in complex cases.
The first of the fifteen-month rulings was issued in Japan-Taxes on
Alcohol. In that case, the United States argued that Japan could fully
comply within five months on the basis that compliance only entailed a
simple tariff change, which could be effectuated under Japan's legal
system within a minimum period of five months. 3 Japan countered by
requesting a five-year implementation period. 24 The arbitrator summarily rejected the United States' request for the shortest period
possible, setting the period instead at fifteen months. His only explanation was that he was "not persuaded that the 'particular circumstances'
advanced by Japan and the United States justifi[ied] a departure from
the fifteen-month 'guideline.' "25
22. Id. art. 21 (6), at 422, 33 I.L.M. at 1239.
23. See WTO Arbitrator's Report, Japan-Taxes on Alcoholic Beverages, WT/DS8/15,
14 (Feb. 14,1997).
WT/DS10/15, WT/DS11/13,
24. See id.

25. Id.

2000]

27.

8, 23.

LAW & POLICY IN INTERNATIONAL BUSINESS

The second of the fifteen-month rulings, occurring in EC-Bananas,

was only marginally more expansive in explaining why an implementation period of fifteen months plus one week was appropriate. 2 6 There,
the complaining parties sought recourse to arbitration almost entirely
because the EC refused to confirm that it intended to use the reasonable period in order to implement the DSB rulings. They argued that,
because the reasonable period was a limited right arising only for the
purpose of implementation, the EC should not be entitled to such a
period. The EC responded by reluctantly stating at the oral hearing for
the first time that it did intend to comply and requested fifteen months
plus one week to do so. The EC defended its request primarily based on
the difficulty it had striking a balance between its obligations under the
WTO and Lom6 Convention, and the complexity of its legislative
procedures. The arbitrator accepted the EC's requested period, giving
dispositive weight to the complexity of the EC's implementation process.2 7
Although the third arbitral decision in EC-Beef Hormones did not
deviate from the fifteen-month guideline of Article 21, its reasoning
began to establish the analytical framework for shorter periods in
future awards. Contrary to the arbitral outcome in Japan-Taxes on
Alcohol, the Hormone ruling established the principle that "the reasonable period of time, as determined under Article 21.3 (c), should be the
shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB." 28 It further made
clear that "the shortest period possible" cannot be used by the losing
party as a second chance to develop additional justifications for its
inconsistent measures. Having enunciated this new standard, however,
the arbitrator reaffirmed the reasoning in EC-Bananasthat an important "particular circumstance" to consider in setting the reasonable
period is the complexity of the administrative process the member
must follow to implement the ruling. The arbitrator determined that,
in the case of the beef hormone ban, the EC's "co-decision" procedures that were required to change its legislation justified a fifteenmonth period. 9
The first of the arbitral decisions to award a reasonable period of less

26. See WTO Arbitrator's Report, European Communities-Regime for the Importation,
Sale, and Distribution of Bananas, WT/DS27/15 (Jan. 7, 1998).

27. See id. 119.

28. WTO Arbitrator's Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/15, WT/DS48/13,
26, (May 29, 1998), 37 I.L.M. 1247 (1998) (emphasis
added) [hereinafter EC-Hormnes].
29. See id. 48.

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WTO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

than fifteen months was the Indonesia-Automobiles case. 30 There, the

arbitrator established a reasonable period of twelve months by adjusting the "shortest period possible" standard to the special circumstances of Indonesia. Although Indonesia's internal procedures enabled it to conform within six months, the arbitrator placed heavy
reliance on the instruction of DSU Article 21.2 to pay "particular
attention ... to matters affecting the interests of developing country
Members with respect to measures which have been subject to dispute
settlement." The arbitrator accordingly gave "full weight" to the fact
that Indonesia's economy was "near collapse" in authorizing an additional six months to come into compliance.
The shortest reasonable period awarded thus far in arbitration
occurred in Australia-Salmon, where the arbitrator established an
implementation period of eight months. Consistent with prior awards,
the arbitrator sought to determine the shortest period required under
the member's legal processes to effectuate compliance. Because Australia could lift the ban through "administrative procedures," the arbitrator was persuaded to set 32
an implementation period of "significantly
less" than fifteen months.
The most recent case to undergo reasonable-period arbitration was
Korea-Alcoholic Beverages, which awarded a period of eleven months

and two weeks. That arbitrator reaffirmed that "the shortest period
possible" standard was "the most important factor in establishing the
length of the reasonable period of time.",3 3 In establishing the period,
the arbitrator noted that the requirement to choose the "shortest
period" within the legal system "does not require a member ...

to

utilize an extraordinarylegislative procedure, rather than the normal

legislative procedure .... ,3 He added that "choosing the means of

implementation is, and should be, the prerogative of the implementing

member, as long as the means chosen are consistent with the recommendations and rulings of the DSB and the provisions of the covered
agreements.",5

30. See WTO Arbitrator's Report, Indonesia--Certain Measures Affecting the Automobile
Industry, WT/DS54/15, WT/DS55/14, WT/DS59/13, WT/DS64/12 (Dec. 7, 1998).
31. See id. 26.
32. See WTO Arbitrator's Report, Australia-Measures Affecting Importation of Salmon,
WT/DS18/9, 1 38,39 (Feb. 23, 1999) [hereinafterAustralia-Salmon].
33. WTO Arbitrator's Report, Korea-Taxes on Alcoholic Beverages, WT/DS75/16, WT/
DS84/14, 41 (June 1999).
34. Id. 46.
35. Id.
49 (citing the awards of the Arbitrator in E--Hormones, supra note 28, and
Australia-Salmon,supranote 32).

2000]

LAW & POLICY IN INTERNATIONAL BUSINESS

This jurisprudence, which has progressively defined the reasonable

period to be based not on a 15-month norm, but on the "shortest
period possible," adjusted to the "particular circumstances" of the
case, has indirectly affected the reasonable periods set by agreement.
Whereas the early reasonable-period agreements reached in U.S.37
Reformulated Gasoline,3 6 Canada-Periodicals
and India-PatentProtection for Pharmaceuticaland Agricultural Chemical Products38 consistently

embraced fifteen months, the agreements struck after the "shortest

period possible" standard was enunciated in EC-Beef Hormones were
for shorter periods. 39 The latter agreements include, among others,
the Argentina-Footwearagreement for 242 days (8 months),40 the
U.S.-DRAMS agreement for 8 months,4 1 the EC-Poultry agreement
for 8 months and 8 days, 4 2 the Japan-AgriculturalProducts agreement
for 9 months and 12 days, 43 and the U.S.-Shrimp-Turtle agreement for
13 months. 44
Thus, despite the widespread concern of little more than a year ago
that the WTO's new "reasonable period" rules conferred an unintended, automatic fifteen-month grace period to the losing party, the
arbitral rulings since then, and the agreements they have influenced,
have helped allay that concern. Even with this trend towards shorter
periods, however, the continuing reference in the DSU text to a
fifteen-month "guideline" is likely to keep alive the issue of whether
losing parties should be entitled to any extended grace period following adoption of a WTO ruling.

36. See United States-Standards for Reformulated and Conventional Gasoline, Status
Report by the United States, WT/DS2/10 (Jan. 10, 1997).

37. See Canada-Certain Measures Concerning Periodicals, Status Report by Canada,

WT/DS31/9 (Mar. 13, 1998).
38. See India-Patent Protection for Pharmaceutical and Agricultural Chemical Products,
Status Report by India, WT/DS50/10 (Nov. 12, 1998).
39. See EC-Hormones,supranote 28,

26.

40. See Argentina-Measures Affecting Imports of Footwear, Textiles, Apparel and Other
Items, Communication from Argentina, WT/DS56/14 (July 7, 1998) (reporting Argentina's

agreement to conform its specific duties on textiles and apparel within 180 days and its statistical
tax within 242 days).
41. See Overview of WTO Disputes, supra note 2, at 2.

42. See European Communities-Measures Affecting the Importation of Certain Poultry

Products, Communication from the European Communities and Brazil, WT/DS69/9 (Oct. 23,
1998).
43. SeeJapan-Measures Affecting Agricultural Products, Agreement Under 21.3(b) of the
DSU, WT/DS76/9 (June 18,1999).
44. See United States-Import Prohibition of Certain Shrimp and Shrimp Products, Status
Report by the United States, WT/DS58/15, 1 (July 15, 1999).

[Vol. 31

WTO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

3.

"Surveillance" During the Reasonable Period

Under the current terms of DSU Article 21, between the time the
losing member must "inform the DSB of its intentions in respect' of
45
implementation of the recommendations and rulings of the DSB
and the time the member's reasonable period expires many months
later, surprisingly few interim requirements are imposed upon that
member. The member is not required to identify the measures it will
seek to remove or implement, nor is it required to specify any sort of
implementation schedule. It need not even consult with a winning
party who may be concerned about whether the implementation
period is being used in good faith. Apart from the ultimate requirement that the member come into full compliance at the conclusion of
the reasonable period, the only intervening obligation of the losing
member is that it provide a "status report" at regular intervals, beginning six months into the reasonable period. That report, which can be
as specific or vague as the losing member elects to make it, is all the
DSB can insist upon for purposes of fulfilling its obligation to "keep
under surveillance the implementation of adopted recommendations
or rulings."4 6
Despite the minimalist requirements imposed upon losing members
during the reasonable period, nothing in the DSU prevents those
members from consulting closely with the winning party during that
period. This was the approach taken in both U.S.-Reformulated
Gasoline47and in U.S.-Restrictions on Imports of Cotton and Man-Made
48
in which the United States voluntarily elected to
Fibre Underwear,

45. DSU, supra note 3, art. 21.3, at 420-21, 33 I.L.M. at 1238. This provision requires that the
Member concerned inform the DSB of its intentions regarding implementation at a DSB meeting

held within 30 days after the date of adoption of the panel or Appellate Body report.
46. Id. art. 21.6, at 422, 33 I.L.M. at 1239.
47. See United States--Standards for Reformulated and Conventional Gasoline, Status

Report by the United States, WT/DS2/10/Add.1 (Feb. 14, 1997); United States-Standards for
Reformulated and Conventional Gasoline, Status Report by the United States, WT/DS2/10/Add.2

(Mar. 10, 1997); United States-Standards for Reformulated and Conventional Gasoline, Status
Report by the United States, WT/DS2/10/Add.3 (Apr. 18, 1997); United States-Standards for

Reformulated and Conventional Gasoline, Status Report by the United States, WT/DS2/10/Add.4
(May 13, 1997); United States--Standards for Reformulated and Conventional Gasoline, Status
Report by the United States, WT/DS2/10/Add.5 (June 12, 1997); United States-Standards for
Reformulated and Conventional Gasoline, Status Report by the United States, WT/DS2/10/Add.6
(July 18, 1997); United States-Standards for Reformulated and Conventional Gasoline, Status
Report by the United States, Wr/DS2/10/Add.7 (Aug. 26, 1997).
48. See United States-Restrictions on Imports of Cotton and Man-Made Fibre Underwear,
WT/DS24.

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LAW & POLICY IN INTERNATIONAL BUSINESS

travel to the winning members' capitals to provide assurances on either

the compliance procedures to be followed or the final measures to be
taken.
On the other hand, if a less compliant losing member wishes to use
its reasonable period merely as a tool for buying several months of
additional time to evade its obligations, nothing in the DSU text
prevents this result either. The two WTO cases that have thus far been
brought against the EC best illustrate the permissiveness of the current
rules in this area.
In EG-Bananas,the EC, from the outset, refused to be specific about
its implementation plans when called upon to state its implementation
intentions.4 9 Moreover, it repeatedly showed a reluctance to correct the
violations identified in the report. Four months into its reasonable
period, after refusing several entreaties by the complaining parties to
consult, the EC issued a new banana proposal that, in obvious ways,
perpetuated the discrimination of the original regime. Thereafter,
despite repeated representations by the complaining parties that the
new proposal would not constitute compliance,50 the EC insisted that
no substantive changes could be made to that proposal. Six months
before its reasonable period had expired, the Commission succeeded
in pushing its proposal through to adoption over the strong objection
of the original complaining parties to that WTO action.5 While all of
this was underway, the EC's status reports to the DSB noted simply that
"significant progress" was being made towards implementation.5 2
Similarly, in EC-BeefHormones, the EC showed, from the very start of
its reasonable period, a clear reluctance to lift its ban. The reasonable
period arbitrator appeared to anticipate that resistance when it cautioned that "it would not be in keeping with the requirement of prompt
compliance to include in the reasonable period of time, time to
conduct studies or to consult experts to demonstrate
the consistency of a
53
measure already judged to be inconsistent."
Yet, the EC's first status report to the DSB noted only that the

49. The EC spoke only vaguely about meeting its "international obligations" and declined to
use the word "implementation" in efforts to negotiate a reasonable period of time.
50. Those representations were made at the DSB meetings on January 22,1998, February 12,
1998, March 25, 1998, April 22, 1998,June 22, 1998,July 23, 1998, September 22, 1998, October
21, 1998, and November 25, 1998.
51. The complaining parties in the WTO action were Ecuador, Guatemala, Honduras,
Mexico, and the United States.
52. See, e.g., European Communities-Regime for the Importation, Sale and Distribution of
Bananas, Status Report by the European Communities, WT/DS27/17, 1 1 (July 13, 1998).
53. EC-Hormones, supranote 28, 139 (emphasis added).

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WTO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

Community had decided to launch a number of scientific studies "with

a view to assessing the implications thereof for the Community's import
prohibition. 54 The possibility of lifting the ban was never mentioned
in that report; indeed, Commission officials informally stated at the
same time that their ban was certain to be maintained. The official EC
status reports in subsequent months continued to note only that the
scientific studies were still underway. 55 At the close of its reasonable
period, to the surprise of no one, the EC's report finally and officially
confessed that the Community was not in a position to lift its ban and
would continue to study its scientific results in more depth "to consider
what steps may be necessary.',6
Thus, as these non-compliance cases make clear, irrespective of
whether the implementation period is being used in good faith, the
losing party is free to use its grace period with little in the way of DSB
oversight and no interim recourse available to the winning party. This is
so even if there is strong evidence of non-compliance well before the
expiration of the reasonable period.
B.

The Conflict Between DSUArticles 21.5 and 22

As important as these "reasonable period" and related surveillance

concerns have been, they have not come close to stimulating the kind
of multilateral debate that erupted in late 1998 over DSU Articles 21.5
and 22. With these latter provisions, what began as a textual dispute
over the interpretation of, and relationship between, compliance review and the suspension of concessions, evolved into a near-constitutional crisis over the systemic implications of the issues involved.
It was the EC-Bananascase that created the eruption and caused
the conflict to become a priority for resolution in the DSU Review.
Pending the outcome of that Review, most of the non-compliance cases
that have arisen after EC-Bananas have been forced to proceed
54. European Communities-Measures Concerning Meat and Meat Products, Status Report
by the European Communities, WT/DS26/17, WT/DS48/15, 4 (Jan. 14, 1999).
55. European Communities-Measures Concerning Meat and Meat Products, Status Report
by the European Communities, WT/DS26/17/Add.1, WT/DS48/15/Add.1 (Feb. 5, 1999);
European Communities-Measures Concerning Meat and Meat Products, Status Report by the
European Communities, WT/DS26/17/Add.2, WT/DS48/15/Add.2 (Mar. 9, 1999);. European
Communities-Measures Concerning Meat and Meat Products, Status Report by the European
Communities, WT/DS26/17/Add.1, WT/DS48/15/Add.1 (Feb. 5, 1999); European Communities-Measures Concerning Meat and Meat Products, Status Report by the European Communities, WT/DS26/17/Add.3, WT/DS48/15/Add.3 (Apr. 16, 1999).
56. European Communities-Measures Concerning Meat and Meat Products, Status Report
by the European Communities, WT/DS26/17/Add.4, WT/DS48/15/Add.4 (May 11, 1999).

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LAW & POLICY IN INTERNATIONAL BUSINESS

through voluntary understandings to find their way around the shortcomings of the DSU text.
1. The Current Text
The current DSU provides for two possible procedural recourses if
the losing party fails to come into full compliance, but fails to specify
the relationship between those two procedures.
The first of the procedures is set forth in DSU Article 21.5, which
provides that "[w] here there is disagreement as to the existence or
consistency with a covered agreement of measures taken to comply with
the recommendations and rulings such dispute shall be decided through
recourse to these dispute settlement procedures, including wherever possible
resort to the original panel.",5 7 Other than to call upon the panel to
circulate its report within ninety days (unless the panel determines that
that timeframe is not feasible), the DSU provides no other explanation
of (i) precisely what the phrase "these dispute settlement procedures"
entails, (ii) when those procedures may or must be invoked, and (iii)
who may invoke them.
The second of the non-compliance procedures is set forth in Article
22, which stipulates the consequences if the losing party has neither
implemented the WTO ruling within the compliance period nor
negotiated mutually acceptable compensation within twenty days after
the "reasonable period" expires. Article 22.6" provides that, under
those circumstances, "the DSB, upon request, shallgrantauthorization to
suspend concessions or other obligations within 30 days of the expiry of the
reasonableperiod," unless there is a consensus otherwise or the losing
party refers the requested suspension amount to arbitration.58 If the
amount is referred to 'arbitration, Article 22 instructs the original
panel, if available, to determine whether the request is "equivalent to
the level of nullification or impairment" 59 and to issue its determination within sixty days after the expiration of the reasonable period.60
Upon issuance of the arbitrators' decision, the DSB, upon request,
must authorize a suspension of concessions consistent with that decision. 6' Hence, as written, Article 22 makes allowance for the "negative
consensus" rule only in accordance with a specifically delineated
timetable. How the DSU drafters intended that timetable to be recon57.
58.
59.
60.
61.

DSU, supra note 3, art. 21.5, at 421, 33 I.L.M. at 1238 (emphasis added).
See id. art. 22.6, at 424, 33 I.L.M. at 1240.
Id. art. 22.7, at 424-25, 33 I.L.M. at 1240-41.
See id. art. 22.6, at 424, 33 I.L.M. at 1240.
See id. art. 22.7, at 424-25, 33 I.L.M. at 1240-41.

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WTO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

ciled with the timetable of a potentially protracted compliance review
pursuant to Article 21.5 is not clarified in the text.
2.

EC-Bananas

The conflict between Articles 21.5 and 22 that occurred in ECBananasarose against a backdrop of already tense circumstances. Chief
among them was the residual U.S. frustration over years of EC noncompliance in the EC-Bananas dispute and in agricultural cases
generally. 62 The WTO ruling in EC-Bananaswas seen by many as the
first test of whether the EC was prepared to begin honoring agricultural dispute settlement rulings under the WTO.6 3 Hence, when the EC
approved WTO-inconsistent banana "reforms" six months before its
reasonable period expired, the United States was concerned about
what that non-compliance would imply for the system and moved
quickly to try to prevent the new EC measures from taking effect.
In an effort to work within Article 21.5, the United States proposed
that the parties resolve their disagreement over the WTO-compatibility
of the new measures by returning immediately to the original panel
under Article 21.5 procedures. 64 For several months, the EC rejected
that request and others like it, 6 5 insisting that an Article 21.5 compliance review could not be undertaken until the EC's reasonable period
had fully expired. It further suggested that, even upon expiration of the
reasonable period, Article 21.5 would require the United States to
recommence normal WTO dispute settlement procedures in order to
challenge the new measures (i.e., consultations, request for a panel, a
62. Twice before under GATr 1947, the EC had blocked adverse GATT rulings regarding its
banana regime. See GATT Panel Report, EEC-Member States' Import Regimes for Bananas,DS32/R
(june 3,1993) (unadopted); GATT Panel Report, EEC-ImportRegime for Bananas,DS38/R (Feb.
11, 1994) (unadopted) (on file with author). The EC has refused to comply with other adverse
GATT panel rulings regarding its agricultural policies. See GATT Panel Report, European
Community-Tariff Treatment on Imports of Citrus Products from Certain Countries in the
Mediterranean Region, L/5776, (Feb. 7, 1985) (unadopted); GATT Panel Report, Brazil: Refunds
on Exports of Sugar, L/5011 (Oct. 7, 1980); European Economic Community-Payments and
Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins,
L/6627 (Dec. 14, 1989). For a discussion of the EC's reluctance to accept the GATT decisions, see
ROBERT E. HUDEC, ENFORCING INTERNATIONAL TRADE LAw 474,475,494, 498,504, 559 (1993).
63. EC-Bananaswas the first adverse ruling against the EC under the WTO and the first to
8.1, 9.1.
find against the EC's Common Agricultural Policy. See EC-Bananas,supra note 8,
64. Letter from Charlene Barshefsky, United States Trade Representative to Sir Leon Brittan,
Vice President of the European Commission (July 13, 1998) (on file with author).
65. See EC Record of Delay,July-November 1998. Attachment to Rebuttal Submission of the
United States, European Communities-Regime for the Importation, Sale and Distribution of
Bananas (DS27) Arbitration under Article 22.6 of the DSU(Feb. 18, 1999) (on file with author).

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LAW & POLICY IN INTERNATIONAL BUSINESS

ninety-day panel review consistent with the one specific requirement of

Article 21.5, an Appellate Body review, and another reasonable period).
The United States responded by making clear through its internal
procedures that, irrespective of whether an Article 21.5 review was
taken, it nevertheless planned to go forward with a request to suspend
concessions immediately upon the close of the reasonable period.6 6
The EC thereafter began reluctantly entertaining the notion of a
United
compliance review, but continued to insist upon terms that the 67
States believed would impair the exercise of its Article 22 rights.

In an effort to undermine the United States' anticipated Article 22

request, the EC made several procedural efforts to force its interpretation of Article 21.5. Because Ecuador, one of the original complaining
parties in EC-Bananas,had broken from the other complainants and
filed a request for a compliance review of the new EC banana policy
under Article 21.5,68 the EC filed a motion with the panel asking that it
require the remaining complaining parties tojoin in that action. When
that effort met with resistance from both the panel and parties, the EC
took the further extraordinary step of requesting an Article 21.5
non-compliance review of its own measures and petitioned the panel to
force the participation of the complaining parties in that proceeding. 69
That, too, met with a U.S. refusal to be entrapped in any review that
would prevent the timely exercise of its Article 22 rights.
When the EC's reasonable period expired, the United States accordingly felt procedurally unconstrained to request DSB authorization to
suspend concessions. What followed was a bitter debate that played out
as much in the international media 70 as it did in the DSB, with both
66. See Implementation of WTO Recommendations Concerning the European Communities' Regime for the Importation, Sale and Distribution of Bananas, 63 Fed. Reg. 56,687 (1998)
(proposed Oct. 22, 1998); Implementation of WTO Recommendations Concerning the European
Communities' Regime for the Importation, Sale and Distribution of Bananas, 63 Fed. Reg. 63,099
(1998) (proposed Nov. 10, 1998); Implementation of WTO Recommendations Concerning the
European Communities' Regime for the Importation, Sale and Distribution of Bananas, 63 Fed.
Reg. 71,665 (1998) (proposed Nov. 10, 1998).
67. The EC was not willing to change its view that the suspension timetable mandated under
Article 22 must be waived, nor was it willing to commit to a firm closing date to the panel review.
68. See European Communities-Regime for the Importation, Sale and Distribution of
Bananas, Recourse to Article 21.5 of the DSU, WT/DS27/41 (Dec. 18, 1998) (communication
from the Permanent Mission of Ecuador).
69. See European Communities-Regime for the Importation, Sale and Distribution of
Bananas, Request for the Establishment of a Panel by the European Communities, WT/DS27/40
(Dec. 15, 1998).
70. See, e.g., BananaWar, WASH. PosT, Dec. 24, 1998, atA16; Banana Wars, N.Y. TIMEs, Dec. 22,

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WTO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

parties accusing the other of an intention to destroy the multilateral

system.
The EC vocally insisted that, by seeking authorization to suspend
concessions, the United States was ignoring the explicit mandate of
Article 21.5, which provides that any disagreement over compliance
"shall be decided through recourse to these dispute settlement procedures." 71 The invocation of Article 22 rights, it said, was conditioned
upon this requirement. 72 The EC emphasized that, if the U.S. request
for authorization was approved, "the consequences for the multilateral
dispute settlement would be grave, since the entire system is built on
the premise that Members will refrain from such unilateral determinations [of non-compliance]. '
The United States countered that, under the clear language of
Article 22, the only legally guaranteed way for the United States to
receive authorization to suspend concessions under the negativeconsensus rule was if it made that suspension request within twenty days
following the end of the compliance period. 4 It argued further that
the EC's interpretation, if accepted, could lead to another compliance
period after the first review was concluded, followed by additional
minor changes and yet another review, another compliance period,
and so on, ad infinitum.7 5 That was a formula, it said, for an absurd,
"endless loop" of litigation that would undermine respect for the
WTO. It insisted that, having already engaged in nearly three years of
have to wait any longer to exercise its
WTO procedures, it should not
76
right to suspend concessions.
When the U.S. authorization request came before the DSB in early
1999, the interpretive dispute had become so polarized that the EC

1998, at A30; Raj Bhala, Banana Case Threatens Rule of Law, J. CoM, Jan. 4, 1999, at 5A; Gone
Bananas,This is More Than a Simple Food Fight,DALLAS MORNING NEWS, Dec. 6, 1998, at 2J; The Great
Banana War, PROVIDENCE J., Jan. 1, 1999, at 16A; Christopher Meyer, Trying to Explain the Banana
Crisis,J. CoM.Jan. 21, 1999, at 7A; Trade Going Bananas , CHRISTIAN Scd. MoNrrOR, Dec. 29, 1998, at
8; Michael M. Weinstein, The Banana War Between the United States and Europeis More Than a Trivial

Trade Spat, N.Y. TIMES, Dec. 24, 1998, at C2; WFO at RiskJ. CoM.,Jan. 26, 1999, at 8A.
71. European Community, U.S. Threat of UnilateralAction on Bananasputs MultilateralDispute
Settlement System at Risk (Oct. 29, 1998) (EC memorandum circulated to the DSB) (on file with

author).
72. See id. 6.
73. Id. 12.

74. See EC Failure to Comply with WTO Rulings on EC Banana Regime: U.S. Position, supra
note 17.

75. See id.

76. See id.

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LAW & POLICY IN INTERNATIONAL BUSINESS

resorted to blocking approval for several days of the DSB agenda,

effectively shutting down the operation of the DSB. With the DSB in a
state of near-crisis, the EC ultimately agreed under multilateral pressure to release the agenda for approval. It immediately thereafter
requested Article 22 arbitration of the requested suspension amount
and, together with the United States, acceded to the DSB Chairman's
statement that Ecuador's Article 21.5 panel and the Article 22 arbitra77
tors, being the same individuals, would "find a logical way forward.
The "logical way forward" chosen by the Article 22 arbitrators (and
Article 21.5 panelists) was to compress a review of the EC's new
measures into their analysis of whether the U.S. request amount was
equivalent to the level of nullification or impairment. 78 The arbitrators
reasoned that they could not fulfill their Article 22 task of assessing the
equivalence between the proposed suspension and the nullification or
impairment at issue without reaching a view on whether the revised EC
regime was WTO-consistent. 79 Accordingly, within three and a half
months of the expiration of the EC's reasonable period of time (i.e., a
little over one month beyond the DSU's deadline for the arbitral
ruling), the arbitrators issued tandem decisions in the Article 21.5 and
Article 22 proceedings, confirming in both that the EC's new measures
continued to remain out of conformity.8 The United States was further
authorized in the Article 22 proceeding to suspend concessions in the
amount of $191.4 million. 8 Since the new banana measures had
officially been deemed WTO-inconsistent, the EC at that point had no
basis for objecting in the DSB to the authorized level of sanctions.
Hence, after months of systemic disruption, this fragile, improvised
solution to a significant textual conflict was found. The WTO membership, exhausted by the debate, quickly sought to avoid further controversy over the non-compliance provisions by referring the interpretive
dispute to the ongoing DSU Review for resolution.

77. WTO Arbitrator's Report, European Communities--Regime for the Importation, Sale
and Distribution of Bananas, Recourse to Arbitration by the European Communities under
Article 22.6 of the DSU, WT/DS27/ARB,

4.9 (Apr. 9, 1999) (citing to DSB Chairman's statement

ofJanuary 29, 1999) [hereinafter EC-BananasArbitrator'sReport].

78. See id.
79. See id.

4.3, 4.8, 4.9.

4.8.

80. See id.; w'TO Panel Report, European Communities-Regime for the Importation, Sale
and Distribution of Bananas, Recourse to Article 21.5 by Ecuador, WT/DS27/RW/ECU (Apr. 12,
1999). These decisions brought the number of adverse multilateral rulings against the EC's
banana policy to seven.

81. See EC-BananasArbitrator'sReport, supranote 77,

8.1.

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WFO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

3.

Subsequent Applications of the Non-compliance Provisions

Because the DSU Review remained unfinished throughout 1999,

other cases that became ripe for formal non-compliance action during
the balance of that year were forced to find equally improvised procedural solutions for moving forward. As of this writing, all of those
non-compliance proceedings are still underway.
In the first case, Australia--Salmon, the parties agreed to initiate
concurrent procedures under Article 21.5 and Article 22.6. Since then,
the arbitrators have indicated that their review will not produce a
ruling until seven months after the expiration of the reasonable period
of time.8 2 Thus, if Canada (the complaining party) prevails, and a
satisfactory settlement has not separately been reached by that time,
Canada will have accepted, at least for the purposes of this case, a delay
in its right to suspend concessions well beyond the timetable currently
laid down in Article 22.
In three other instances, the parties have voluntarily agreed to
undertake an Article 21.5 review prior to initiating procedures to
suspend concessions, thereby entirely waiving the Article 22 timetable
for negative-consensus approval. A condition of those understandings
was that, if non-compliance were found, the losing party would not
object to a suspension request, but could reserve its right to contest the
level of that suspension.
The first of these voluntary agreements, arising in Australia-Leather,
involved the United States, which, only months before, had so publicly
fought the EC-Bananas non-compliance conflict.8

The EC mocked

the U.S. decision to proceed to Article 21.5 before going to Article 22,
stating that "we're happy the United States has not only recognized the
existence of Article 21.5 but also agreed to extend the time periods to
which it was so much attached earlier this year."' 84 The United States
countered that here, unlike in EG-Bananas,an acceptable voluntary
agreement had been possible and insisted that it was not departing
from its basic position that the DSU allows a party5 to request authority
to retaliate before seeking an Article 21.5 review.

82. SeeAustralia-Measures Affecting the Importation of Salmon, Recourse to Article 21.5 of

the DSU by Canada, Communication from the Chairman of the Panel, WT/DS18/17 (Dec. 13,
1999).
83. See Australia-Subsidies Provided to Producers and Exporters of Automotive Leather,
Recourse by the United States to Article 21.5 of the DSU, WT/DS126/8 (Oct. 4, 1999).
84. WTO Backs U.S. Bid for Panel to Check Australian Compliance with Leather Ruling,DAILY REP.
FOR Exrc., Oct. 15, 1999, at A-1.
85. See id.

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LAW & POLICY IN INTERNATIONAL BUSINESS

The remaining two voluntary agreements occurred in the parallel

87
Because Canada and
cases of Brazil-Aircraft6 and Canada-Aircraft.
Brazil mutually accused the other of non-compliance, they jointly
agreed to submit both allegations to Article 21.5 proceedings with the
objective of obtaining rulings within sixty days. 88
EC-Beef Hormones was the only non-compliance case thus far that
involved an admission on the part of the losing party that it had failed
to come into compliance. That admission enabled the United States to
proceed directly to Article 22, following the expiration of the reasonable period of time.
As the foregoing cases make clear, the current non-compliance
procedures can only be applied without fear of conflict or recourse to
self-help arrangements in that rare situation where the winning and
losing parties are in full agreement that the DSB rulings and recommendations have not been implemented. Few, if any, consider acceptable
this degree of unpredictability surrounding the WTO's primary implementation procedures.
III.

THE NEED FOR REFORM

Given the WVTO cases now pending or on the horizon, the occasion
for disagreement over issues of implementation will, if anything, accelerate in the months and years ahead.
In the case of disputes against the EC, Europe has done nothing thus
far to engender confidence that it will begin to implement properly
future adverse rulings. To the contrary, after several months of substantial U.S. retaliation in Beef Hormones and EC-Bananas,the EC continues to resist compliance in both of those cases. If the current implementation procedures cannot induce EC compliance in these relatively
modest commercial disputes, many doubt whether the system will
succeed in resolving the more challenging trade disputes that looms
over issues such as genetically modified foods.
Although the United States, by contrast, has consistently come into
compliance with adverse WTO rulings, 9 most of its more challenging
86. See Brazil-Export Financing Programme for Aircraft, Recourse by Canada to Article 21.5
of the DSU, WT/DS46/13 (Nov. 26, 1999).
87. See Canada-Measures Affecting the Export of Civilian Aircraft, Recourse by Brazil to Art.
21.5 of the DSU, WT/DS70/9, Annex (Nov. 23, 1999).
88. See id.; Brazil-Export Financing Programme for Aircraft, Recourse by Canada to Art.
21.5 of the DSU, supra note 86.
89. See WTO Appellate Body Report, United States-Standards for Reformulated and
Conventional Gasoline, WT/DS2/AB/R (Apr. 29, 1996); WTO Appellate Body Report, United

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WFO DISPUTE SETTLEMENT IMPLEMENTATION PROCEDURES

implementation obligations still lie ahead. Among other disputes, the

U.S.-ForeignSales Corporationcase and several pending challenges to U.S.
import relief laws9" have the potential of marring the United States'
impressive record of compliance thus far.
As these and other trade disputes cut progressively deeper into local
policies and politics and as new members enter the WTO, the WTO's
implementation procedures will be challenged even more. China, in
particular, with its sprawling, developing economy and a long tradition
of non-transparent trade regulations, will be a special challenge for the
system. A Chinese trade diplomat was quoted recently, fretting that if
pressure from the WTO did not push Europe to change its treatment of
banana imports, there would be little hope that Chinese domestic
interests would have the resolve to comply with WTO decisions. 9 '
These are near-term implementation challenges for the system, not
distant ones. As currently drafted, the reasonable period, compliance
review, and suspension of concession procedures are not sufficiently
effective to be able to navigate successfully that burden.
The reforms needed to fortify these procedures can be broadly
organized into two: first, the ambiguities between Articles 21.5 and 22
need to be clarified, and; second, the procedural tools for scrutinizing,
inducing, and hastening compliance need to be strengthened. While
the still-ongoing DSU Review is expected to resolve the former, it shows
little prospect of materially affecting the latter.
A.

Clarifyingthe Conflict Between Articles 21.5 and 22

The textual conflict between Articles 21.5 and 22 has become the
dominant focus of the DSU Review and is well on its way to resolution
States-Restrictions on Imports of Cotton and Man-Made Fibre Underwear, WT/DS24/AB/R
(Feb. 10, 1997); WTO Appellate Body Report, United States-Measure Affecting Imports of
Woven Wool Shirts and Blouses from India, WT/DS33/AB/R (Apr. 25, 1997); WTO Panel Report,
United States-Anti-Dumping Duty on Dynamic Random Access Memory Semiconductors
(DRAMS) of One Megabit or Above From Korea, WT/DS99/R (Jan. 29, 1999); WTO Appellate
Body Report, United States-Import Prohibition of Certain Shrimp and Shrimp Products,
WT/DS58/AB/R (Oct. 12, 1998). See also Overview of WTO Disputes, supra note 2.
90. See, e.g., United States-Safeguard Measure on Imports of Lamb Meat from Australia,
Wr/DS177, WT/DS178; United States-Imposition of Countervailing Duties on Certain HotRolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138;
United States-Anti-Dumping Act of 1916, WT/DS136; United States-Anti-Dumping Measures
on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea, WT/DS179;
United States-Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan,
WT/DS184; see also Overview of WvTO Disputes, supranote 2.
91. See Bhushan Bahree, IntegratingChina sEconomy is Complex Task, WALL ST.J. EUR., Nov. 17,
1999, at 2.

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LAW & POLICY IN INTERNATIONAL BUSINESS

in that exercise. Although the draft DSU Review amendments regarding those provisions are still awaiting approval and remain the subject
of some controversy, they, nevertheless, provide a useful window on the
changes likely to come.9 2
Those draft amendments would mandate that Article 21.5 procedures be concluded prior to requesting an Article 22 authorization to
suspend concessions, but would carefully delimit the Article 21.5 review
to entail substantially less than "normal" dispute settlement procedures.93 The amendments would specifically require that, in the case of
a compliance disagreement, the complaining party must request a
review within ten to twenty days prior to the expiry of the reasonable
period of time; 94 ten days thereafter the panel would be established;
ninety days beyond that, the panel report would be circulated, and; ten
days later it would be adopted.95 Under the draft amendments, on the
day the panel report is adopted, the complaining party, if it prevails,
may go forward under Article 22 to request authorization to suspend
concessions. If arbitration is requested, which will virtually always be
the case, the arbitral decision on damages would need to be rendered
within forty-five days of referral. 9 6
Thus, in lieu of the present Article 22 timetable that requires an
arbitral decision on damages within two months after the date of expiry
of the reasonable period, the new amendments, if approved, would
now require that decision on damages within approximately five months
following the conclusion of the reasonable period. In exchange for that
delay, the United States would be guaranteed that an Article 21.5
review would not lead to an "endless loop" of litigation, while the EC
would be assured that a "unilateral" determination of non-compliance
would not be made by the winning party prior to seeking Article 22
recourse.

92. See Draft Decision Regarding the DSU, supra note 16; Annex, Amendment to the
on Rules and Procedures Governing the Settlement of Disputes,
WT/MIN(99)/8/rev (Dec. 2, 1999) (draft) (on file with author) [hereinafter Annex, Amendment
Understanding

to the Understanding]. Those drafts have the express support of 29 members, who would like to see

them adopted by April 2000.

93. See Annex, Amendment to the Understanding, supranote 92, 11 1-8.

94. Under the proposed Decision, a complaining party may request a compliance panel if (i)
the losing party does not request a reasonable period (an unlikely scenario), (ii) upon submission
by the losing party of its notification of compliance (which must be made no later than 20 days
before the expiry of the reasonable period), or (iii) 10 days before the expiry of that period. See id.

at 13-4.
95. See id.

4.

96. See id.

6.

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B.

Improving the Tools to Scrutinize, Induce, and Hasten Compliance

The second of the large implementation problems-i.e., inadequate

safety checks, incentives, or sanctions to encourage the promptestpossible, good-faith implementation-is at least as important as the first
problem for purposes of ensuring an effective WTO system, but has
received curiously little attention in the DSU Review.
Examples of the second problem run throughout the implementation procedures. As demonstrated in Beef Hormones and EC-Bananas,
the losing party under the current DSU may be entitled to an extended
implementation grace period (be it for fifteen months or something
less), even if it is virtually certain from the start of that period that the
losing party does not intend to comply. Moreover, because Article 22
suspension rights are only accorded on a prospective basis following
the expiration of the reasonable period, the losing party has every
incentive to seek the longest possible grace period permitted under the
system. During that grace period, the winning party has no right to
initiate a compliance review, even if it becomes obvious well before the
expiration of the reasonable period that the losing party will be out of
compliance by its deadline. When that deadline arrives, and the losing
party is subsequently found to be out of compliance, the DSU applies
no penalty for that party's bad-faith application of the grace period,
even though that period was intended to be used exclusively to ensure
full implementation. Hence, in fundamental ways, the system works in
conflict with the stated Article 21.1 objective of "prompt compliance"
by facilitating, rather than discouraging, prolonged periods of noncompliance.
For some, this permissive treatment towards the losing party may be a
virtue in that it helps to reinforce each Member's sovereign right under
the WTO to opt out of compliance if it so chooses. DSU Article 22.1
envisions, however, that this right to opt out of compliance should only
be "temporary" and, in any case, should be discouraged relative to
"full implementation." 97 Article 22 explicitly favors compliance over

97. DSU Article 22.1 provides that

[c]ompensation and the suspension of concessions or other obligations are temporary
measures available in the event that the recommendations and rulings are not implemented within a reasonable period of time. However, neither compensation nor the
suspension of concessions or other obligations is preferred to full implementation of a
recommendation to bring a measure into conformity with the covered agreements.
DSU, supra note 3,art. 22.1, at 422, 33 I.L.M. at 1239.

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LAW & POLICY IN INTERNATIONAL BUSINESS

non-compliance for the obvious reason that, if the latter were to

become the norm-whether on the part of a single prominent member
or within the WTO procedures generally-the system would lose its
credibility as a tool for relief. The system's procedures must accordingly
be designed to minimize the occasion and duration of non-compliance, an objective the current rules fall short of achieving.
Despite the clear need for reforms, the proposed DSU Review
amendments do not contemplate significant improvements in this
area. To the contrary, the system, in some ways, may become more
generous towards the losing party if those amendments are approved.
The draft amendments would do nothing, for example, to alter the
DSU's stated reasonable period "guideline" of fifteen months, and
would thereafter require the winning party to wait up to an additional
five months to withdraw concessions in cases of non-compliance (as
opposed to the two month wait now reflected in Article 22) .9 Because
Article 22 recourse would continue to apply prospectively upon the
conclusion of this long period, the losing party would be under no
improved incentive to comply faster than required by this newly
extended timeline. Although the amendments would give the complaining party a clarified right to seek consultations during the implementation period, 99 they would, at the same time, explicitly deprive that party
of any right to a compliance review prior to the expiration of the
reasonable period. Moreover, while the losing party under the draft
amendments would now need to state specifically its intention to
implement the DSB rulings to avoid immediate recourse to Article
22,100 it would still be at liberty to renege on that intention at the end of
its long implementation period without fear of penalty.
To ease the way even further for the losing party, the draft amendments would accord to members subject to WTO-sanctioned retaliation
a new right to invoke the proposed Article 21.5 accelerated review
procedures (rather than pursue normal procedures) in order to try to
discontinue those sanctions. 10 1 Because there is a reasonable risk that
losing parties that have resisted compliance to the point of retaliation
98. See Annex, Amendment to the Understanding, supranote 92, 11 4, 6. The proposed DSU
amendments to the "normal" panel procedures (i.e., a shortened consultation period, the
establishment of a panel upon request, the consolidation of the panel's "descriptive portion" with
the interim report, and the elimination of the panel hearing on the interim report) are only
anticipated to save on average about 30 days, and thus are not likely to offset the timeline
extensions to the implementation procedures that are called for under these amendments.

99. See id.

100. See id.

2.
5.

101. See id. 8.

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may continue to try to circumvent their compliance obligations, that
new right to accelerated procedures may prove especially prejudicial to
the winning party. Certain losing parties (having become smarter by
virtue of the WTO ruling) may be inclined to put into effect new
non-compliant measures that are more subtle and complex than the
original ones that were found to be out of compliance. The detailed
evidence needed to demonstrate that those new, more subtle measures
continued to be WTO-inconsistent may not be available to the complaining party in the compressed timetable of an accelerated review. Thus,
the proposed amendment has the potential of enabling a losing party,
who time would show remained out of compliance, to walk free.
Moreover, as that amendment is now drafted, even if evidence of
non-compliance were to become available shortly after the accelerated
review was concluded, the winning party would have no recourse at that
point, other than to recommence normal dispute settlement procedures.
In still another example of proposed leniency towards the losing
party, the EC has insisted upon an amendment in the DSU Review that
would preclude the winning party from substantively changing its
retaliation measures, even if those measures proved ineffective at
inducing compliance after an extended period of time. 10 2 While the
United States is resisting this amendment, it demonstrates the pressure
being applied by the EC, within the WTO, to avoid strengthening any
inducements upon the losing party to comply as promptly as possible.
This further reinforces the growing concern over that member's future
compliance intentions.
With the DSU Review still unfinished, and the possibility that further
DSU improvements could be pursued in a new trade round, these
various amendments need not represent the end of the DSU reform
efforts. Continuing efforts can and should be made to strengthen the
existing rules in several specific ways to help minimize the duration, if
not incidence, of non-compliance.
As several have suggested, the optimal way of ensuring timely compliance would be to require compliance, compensation, or the withdrawal
of concessions on or around the date of the WTO ruling, rather than

102. See id. n.11. This amendment was in response to a Congressional bill, which passed the
Senate in late 1999, that would require the U.S. government to change periodically any
WrO-approved retaliation measures against a losing party if that party remained out of compliance. See Trade and Development Act of 1999 (Engrossed Senate Amendment), H.R. 434, 106th
Cong. (1999) (this amended version of the House bill includes Senate amendment S.AMDT.2360,
which is the legislation to which the EC is responding).

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LAW & POLICY IN INTERNATIONAL BUSINESS

providing the losing party with an extensive "reasonable period" to

come into compliance, as is now the case under the DSU.10 3 While
contrary to the general GATT/WTO practice, this approach finds
some support in the GATT 1947 antidumping and countervailing duty
context, where panels have previously recommended retroactive relief.10 4 It is an approach that, likewise, has been shown to work in the
North American Free Trade Agreement (NAFTA), under which the
winning party is entitled to rebalance interests if there is no satisfactory
settlement
reached within thirty days of a NAFrA dispute settlement
5
0

ruling.1

Even if this method of ensuring prompt compliance cannot garner

support among the WTO membership, more modest revisions that
discourage unneeded implementation delay and bad-faith compliance
should still be possible. The reasonable-period guideline, for example,
need not be expressed as fifteen months, but should be stated instead
as the "shortest possible implementation period," adjusted to the
"particular circumstances" of the case (thereby codifying the recent
arbitral findings in this area). Moreover, during the implementation
period, the complaining party should be entitled to commence a
compliance review if measures are taken before the period's expiration
that make it obvious that the losing party will not be in compliance by
its deadline. This would address the circumstances in EC-Bananas,
where the EC approved new measures six months before the expiration
of its period, but repeatedly blocked a compliance review from being
taken at that time. Finally, if the losing party insists on an implementation period, but fails to use that period for purposes of full implementation or compensation, that party should be subject to double or treble
damages for at least the first year in which concessions are withdrawn.
This would discourage the use of the reasonable period for purposes
other than full implementation and would help rebalance that addi-

103. See, e.g., Serge Frechette et al., Comments: Performanceof the System III: Appellate Body, 32
INr'L LAw. 747, 750 (1998); Peter Lichtenbaum, ProceduralIssues in WTO Dispute Resolution, 19

MICH.J. INT'L L. 1195, 1259 (1998).

104. See GATI Panel Report, New Zealand-Imports of Electrical Transformers from Finland, GATr, 32 B.I S.D. 55 (1985); GATT Panel Report, Canada-Imposition of Countervailing
Duties on Imports of Manufactured Beef from the EEC, SCM/85 (Oct. 13, 1987); GATr Panel
Report, United States-Imposition of Antidumping Duties on Seamless Stainless Steel Hollow
Products from Sweden, ADP/47 (Aug. 20, 1990) (unadopted); GATT Panel Report, United
States-Countervailing Duties on Fresh, Chilled and Frozen Pork from Canada, 38 B.I.S.D. 30
(1991); GATT Panel Report, United States-Measures Affecting Imports of Softwood Lumber
from Canada, 40 B.I.S.D. 358 (1993).
105. See North American Free Trade Agreement, H.R. Doc. No. 103-159, at 1274 (1993).

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tional year or more of needless injury that the losing member had
elected to inflict upon the winning party. Because these several changes
would not unduly modify the architecture of the current DSU, but
would help ensure that the reasonable period is applied, as intended,
to effectuate promptest-possible and full compliance, they are changes
that should be achievable.
IV.

CONCLUSION

As the costs and benefits of the WTO are subjected to growing

scrutiny, 106 WTO advocates will find themselves constrained in their
ability to defend the benefits of that system if one of its principal
features-the dispute settlement implementation procedures-is perceived to be flawed or ineffective. Thus far, those procedures have
induced compliance more often than not, but the incidence of noncompliance is on the rise and gaining in public attention. In the U.S.
Congress, recently proposed measures that would mandate retaliation
rotations 107 and deliver tariff revenue from retaliation to the injured
U.S. parties 0 8 are clear manifestations of growing concern within the
United States over whether those implementation procedures are
functioning as they should.
While no amount of DSU refinements will be enough if the political
will to comply is missing, effective procedural tools can help influence
that equation. Even modest procedural changes that would discourage
undue delay and bad-faith use of the reasonable period are likely to
reduce the occurrence and duration of non-compliance.
These improvements logically should find favor with the United
States and EC, both of which use the dispute settlement procedures
more than any other members, and do so most often in a complainant
capacity. 0 9 A majority of the developing countries, long skeptical of
their ability to force compliance in cases against developed members,
would stand to benefit from these changes.

106. That scrutiny includes a statutorily required five-year review by the U.S. Congress in the
spring of 2000 to assess the cost and benefits of the WTO to U.S. interests, which may lead to a
Congressional vote on whether the United States should continue participating in the WTO. See
Uruguay Round Agreements Act, H.R. Doc. No. 103-316, at 47 (1994).
107. See S. 1619, 106th Cong. (1999); see H.R. 2991, 106th Cong. (1999). As of the end of
1999, the House bill had 70 co-sponsors and the Senate bill had 30.
108. See S. 1099, 106th Cong. (1999).
109. As of the end of 1999, the United States has been a complainant in the WTO 56 times
and a respondent 37 times. The EC has been a complainant 46 times and a respondent 25 times.
See Overview of WFO Disputes, supra note 2.

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In short, the implementation reforms discussed above deserve more

comprehensive attention and priority than they have been given to
date. As the WTO stands poised to begin a new round of negotiations
and accept China into its membership, the time is right to reconsider
these issues. However far-reaching the WTO may become in scope and
membership, that system will only be as good as the procedures
established to enforce them.

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