WTO and WIPO dispute settlement systems: Success stories- Analysis

29/12/2014 12:00 - 598 Views

The World Trade Organization (WTO) is probably one of the best-known international institutions, certainly when compared with its nearest counterparts, the IMF and WB. It was tasked with providing a level playing field so that countries would be able to conduct trade under common rules. However, in the eyes of its members the importance of belonging to WTO is as much political as economic.

The WTO is criticized in many circles or not keeping pace with the changes affecting world trade. The global economy has been put into a state of flux by the shifting levels of cross-border flows of goods, services, know-how, investment and people – supply-chain trade, in economic jargon. Therefore, the WTO is facing a difficult dilemma: whether to keep on fulfilling its original mission or address the new and emerging realities of the 21st century.

Its lack of response to new challenges has made the WTO appear to be in the grip of a chronic malaise. For instance, developing and industrial countries have been caught up in an acrimonious conflict over tariffs and agricultural barriers since the beginning of the Doha Development Round in 2001, despite its mission to be a mediator in such conflicts. However, two apparatuses within the WTO have performed extremely well: the Dispute Settlement Body and The World Intellectual Property Organization (WIPO) Arbitration and Mediation Centre.

The World Trade Organization (WTO) dispute settlement system is a vital element in the maintenance of international trade and the enforcement of WTO rules. Established in 1995, it has an impressive compliance rate (over 80%), particularly when compared to other international state-to-state dispute settlement mechanisms. It addresses a wide range of trade-related topics: from trade in goods and services to intellectual property (IP) rights. WTO success in regulating international trade over the past 15 years is in no small way attributable to its dispute settlement mechanism.

This work is undertaken by WTO’s Dispute Settlement Body (DSB), a political body composed of representatives from all WTO member states. Decisions to initiate dispute proceedings and adopt reports from one of the two WTO dispute instances (Panel and Appellate Body) are taken by “reverse consensus” or “consensus against” – if at least one member agrees, the decision is adopted. This unique feature, not present under the old GATT (1947-1994), has transformed the WTO dispute settlement system into both an automatic and a compulsory mechanism.

Despite the relatively large number of cases dealt with, many disputes are resolved merely through consultations between the parties concerned: of the 482 consultation requests made so far by WTO members, less than half (46%) of disputes have progressed to the Panel hearing stage. In turn, approximately 70% of Panel reports have been appealed against, and in the vast majority (88%) of cases, one or more violations of substantive WTO obligations have been found by Panels or the Appellate Body. Finally, in only 19 cases has the WTO authorized trade sanctions or the suspension of WTO concessions, the measure of last resort in the event a WTO member fails to implement adverse rulings within a reasonable timeframe.

In 2009, after a decade-long dispute, Brazil was authorized to “retaliate” against U.S. products as a result of WTO-inconsistent subsidies granted to U.S. cotton producers. There was an added twist, though: Brazil was also authorized to impose sanctions on IP rights held by U.S. companies. This so-called “cross retaliation” has been authorized by the WTO in only three cases so far, and Brazil seems to be the only country actually preparing to take such measures. Yet, in 2010, Brazilian retaliatory measures were suspended thanks to a U.S.-Brazil agreement (the U.S. agreed to pay the Brazilian cotton industry $147.3 million annually, in monthly installments), which managed, at least temporarily, to defuse a major trade dispute. However, for budgetary reasons, the Obama Administration put an end to those payments in October 2013. In January 2014, Brazil threatened again to take retaliatory measures against a wide variety of U.S. goods and intellectual property rights.

The World Intellectual Property Organization (WIPO) Arbitration and Mediation Centre, created in 1994, is another ‘success story’. It aims to resolve commercial intellectual property disputes between private parties. It has heard over 320 mediation and arbitration cases, dealing mainly with patents (44%), IT and telecom (17%), trademark (9%) and copyright (7%) issues. Common users of the WIPO Centre’s services include collecting societies, artists, inventors, producers and universities. The WIPO Centre also offers internet domain name resolution dispute, having conducted almost 18,000 proceedings under the Uniform Domain Resolution Policy. These proceedings, which involve primarily .com, .org, and .net domains, enable trademark-holders to challenge bad faith registration and use of domain names associated with their trademarks. Thanks to this mechanism, pop stars including Madonna and Sting successfully reclaimed websites or domain names carrying their name.

WIPO and WTO dispute settlement mechanisms are used by different parties (only states, not private parties, have standing at the WTO), and are governed by different rules: WIPO applies WIPO treaties, and WTO applies WTO agreements. There is a point of overlap, however, in that the WTO can also deal with IP disputes between states under the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS), and, as noted above in the U.S.-cotton subsidies case, authorization to “retaliate” can also affect IP rights.

Three interesting developments are worth noting in this respect. Firstly, the TRIPS Agreement has rarely been invoked, in fact in only around 3% of total WTO disputes. Second, developing countries are not the main parties involved in IP dispute proceedings. On the contrary, the EU (as respondent) and the U.S. (as complainant) are the two parties most involved in IP disputes. Finally, Panels and the Appellate Body have never authorized trade sanctions in other WTO covered areas (“cross-retaliation”) to enhance TRIPS enforcement, a major fear held by developing countries when the TRIPS Agreement was adopted. Actually, and rather ironically, the WTO has authorized developing countries to cross-retaliate in IP to enforce goods and services-related rulings against the EU and U.S. WTO panels and the Appellate Body have been able to deal with complex IP issues in the few TRIPS disputes by working closely with WIPO and reinforcing the mutual cooperation of these two organizations.

In sum, both the WTO and the WIPO Centre offer unique and broadly successful means of peacefully settling disputes using international rule of law. This being so, they provide possible templates for the future development of WTO as a whole.

Source: G20 Summit Magazine