Talking Law
(17-10-2007)
WTO dispute settlement: where does Viet Nam stand?
by Paolo R Vergano, FRATINI VERGANO – European Lawyers, Brussels, Belgium
The WTO dispute settlement mechanism, dating back to the establishment of the World Trade Organisation in 1995, is a cornerstone of the WTO system. It provides an instrument through which WTO members can police each other and ensure compliance with agreements and commitments.
The WTO dispute settlement system does not confer immediate and direct rights on private operators and traders, but it may ultimately provide them, through their governments’ actions and representation, with a powerful tool to address international trade disputes, regulatory distortions, discriminatory practices, non-tariff barriers and other impediments that have immediate negative effects.
Despite not having a formal and direct role in WTO dispute settlement proceedings, private businesses may play an important role in assisting their governments, providing evidence of unlawful trade barriers, and working with businesses in third-party countries to try and find a mutually satisfactory solution.
The recent (failed) attempt made by a French company before European courts to recover damages incurred as a result of non-compliance by the EU with the WTO decision in the "beef hormones" case stands as a powerful example of private party involvement in the dispute resolution’s implementation phase. This opens a number of potentially explosive questions regarding Viet Nam’s legal system and its apparent commitment to making international obligations under WTO law enforceable by domestic courts.
For example, should private parties be allowed to invoke future WTO dispute settlement decisions before Vietnamese courts to seek compensation for damages after the expiration of a given reasonable period of time for Viet Nam to comply with a possible WTO ruling? Should a debate on direct effect take place within Viet Nam’s legal community and inform the upcoming ways in which WTO dispute settlement will directly or indirectly affect private parties’ commercial interests? Whatever the case, it appears essential that Vietnamese private operators and foreign companies based in or operating in Viet Nam take an active role in fully understanding WTO dispute settlement rules and procedures and their complex relation with the domestic legal and judicial system.
Interested party rights
The underlying rationale of the WTO’s dispute settlement system is to provide WTO Members with a clear legal framework at the multilateral level for solving trade disputes which may arise in the course of implementing WTO agreements and commitments. Mutually agreed solutions between WTO Members are the most desirable way to solve disputes but, where this is not possible, members can ask for panels and eventually even appeal procedures through which the WTO interprets the relevant rules and adjudicates the controversy. Should a WTO Member not comply with a recommendation to bring its laws or practices in line with WTO rules, then trade compensation or sanctions, for example in the form of duty increases or suspension of WTO obligations, may be authorised.
The system has, so far, worked well to solve significant disputes and avoid ‘trade wars’ or recourse to unilateral measures that could trigger an escalating spiral of protectionism and counter-reactions.
The WTO system appears reliable and effective in terms of both speed and efficiency. By providing a multilateral forum for settling disputes, the mechanism also protects weaker WTO Members against unilateral actions by stronger countries or trading blocs. This is evidenced in the increasing recourse to the system by WTO Members, including developing nations such as Viet Nam.
Viet Nam is still in an early phase of its WTO membership. Traditionally, WTO Members do not engage right away in active WTO dispute settlement and have preferred to exhaust diplomatic and political avenues to amicably resolve trade controversies. At most, recently-acceded WTO Members participate in dispute settlement as "interested parties," something Viet Nam has done in two recent disputes.
The first was a challenge brought by Thailand against a number of US measures taken in relation to shrimp imports. In April 2006, Thailand requested consultations with the US concerning anti-dumping measures on imports of "frozen warm-water shrimps". Thailand contested the US practice known as "zeroing" negative dumping margins, arguing that, through its use of "zeroing", the US had failed to make a fair comparison between the export price and normal value and had artificially calculated distorted margins of dumping.
In October 2006, the WTO established a panel. Brazil, Chile, China, the EU, India, Japan, South Korea and Mexico reserved third-party rights. When, in January 2007, the WTO composed a panel, Viet Nam had joined the WTO and also reserved its third-party rights.
The second case in which Viet Nam will participate as an interested party is a complaint brought by the US against India in March 2007 in relation to "additional duties" or "extra additional duties" that India applies to certain imports, which include wines and distilled spirits from the US. A WTO panel was established in June, and Australia, Chile, the EU, Japan and Viet Nam reserved third-party rights.
This early engagement by Viet Nam in WTO dispute settlement is a good sign. Participation as an "interested party" shows the importance given by Viet Nam to the issues at stake and indicates to both its WTO trading partners and domestic constituencies the willingness to find a solution through multilateral processes. — VNS
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