Originally from World Arbitration Reporter (WAR) - 2nd Edition

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I.  INTRODUCTION

The Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding, “DSU”) sets forth the rules and procedures for reviewing disputes between Members of the Word Trade Organization (“WTO”). It is found in Annex 2 to the Marrakesh Agreement Establishing the World Trade Organization (the “WTO Agreement”), which was signed on 15 April 1994 and entered into force on 1 January 1995. Article II: 2 of the WTO Agreement provides that its Annexes 1, 2 and 3 (see Section I.C) below) are integral parts of the WTO Agreement and are binding on all Members. Therefore, all Members are subject to the disciplines of the DSU. 

The WTO organ charged with administering the rules and procedures of the DSU is the Dispute Settlement Body (“DSB”). This organ has the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize, in case of non-implementation, the suspension of concessions and other obligations under the WTO agreements.

A. Historical Background

The WTO is a continuation of the system developed under the General Agreement on Tariffs and Trade, dated 30 October 1947 (“GATT 1947”). The GATT 1947 did not contain any procedural rules governing the settlement of disputes between its contracting parties. It did not even use the term “dispute” in its text, referring instead to “any matter affecting the operation of the Agreement.” The two provisions in GATT 1947 that formed a basis for the future development of dispute settlement of matters covered by the Agreement were Articles XXII and XXIII. Although GATT 1947 has expired, these provisions are still binding in their original wording. This is because the new General Agreement on Tariffs and Trade 1994 (“GATT 1994”) has incorporated the provisions of GATT 1947. Moreover, as provided by Article 3.1 of the DSU, Members of the WTO “affirm their adherence to the principles for the management of disputes heretofore applied under Articles XXII and XXIII of GATT 1947, and the rules and procedures as further elaborated and modified herein.”