CONCLUSION

Even though the binding nature of public international law is always a debated issue,

the institutionalisation of GATT into WTO with a strong judicial apparatus has

undoubtedly proved that in respect of the law of international trade and commerce, the

debate is no more valid. The existence of a strong judicial mechanism contained in the

Understanding on the Rules and Procedures Governing the Settlement of Disputes,

has accentuated the pace of legalisation in international trade relations. This study,

which sought to analyse the implications of the decisions of WTO dispute settlement

mechanism, intended to answer the following research questions:

1. whether WTO' s judicial mechanism is qualitatively superior to that of GATT;

2. whether the judicialisation of international trade is h a m h l to the developing

countries;

3. to analyse the WTO' s dispute settlement mechanism' s decisions on the

municipal laws of the nations;

4. whether the existence of an effective dispute settlement mechanism is successful

in multilaterising intellectual property law.

The work sought to answer these questions by taking TRIPS related disputes lodged

before the WTO as a case study.

Chapter-wise summun

The work intended to analyse the rapid pace of legalisation that is taking place in

public intemat~onal trade law due to the existence of a powerful judicial mechanism,

is divided into six chapters.

The first chapter briefly introduces the concept of 'legalisation'. It defines legalisation

as a form of institutionalisation that represents the imposition of international legal

constraints on governments It explains nations' willingness to impose restraints on

their sovereignty by an extraterritorial organisation in matters relating to international

trade and commerce. This was accomplished by by the institutionalistion of GATT

into WTO with a strong judicial apparatus, whose judgements are binding on all

signatories, irrespective of their economic or political position in the comity of

nations. Consequently, these judgements are perceived as international legal

obligations. This judicialisation of international trade is hailed as a victory for

legalists. In the subsequent chapters a close and careful examination of this

supranational phenon~enon is made.

The second chapter gives a brief historical sketch of the pre-WTO dispute settlement

systems, i.e.> dispute settlement systems envisaged under International Trade

Organisation(IT0) and the GATT. Eventhough there were innumerable dispute

settlement provisions that could establish a full-fledged dispute settlement system, the

[TO could not materialise because the Havana Charter was stillborn. This is because

the Charter failed to receive requisite ratification by the United States. The Charter

enumerated innumerable provisions for dispute settlement that stretched from

consultation and arbitration to recourse to the International Court of Justice for legal

advice. In fact, the dispute settlement provided under the Havana Charter perceived a

three-tier structure having an Executive Board, a Plenary Conference and a provision

to appeal to the International Court of Justice at the final stage. But GATT was a

temporary arrangement and its judicial experiment was based on the panel system,

which was not statutorily created, but evolved. Albeit, it had two articles- Article

XXIl and XXIII- that provided for judicial machinery. It was not a lawyer' s creation;

instead its jurisprudence relied on well-developed consensus and diplomacy in

international trade law. It insisted upon flexible application of rules that would permit

law to be used as a diplomatic instrument. After the Tokyo Round (1970-79), this

pragmatism eventually paved the way for legalism. Consequently, multiple dispute-

settlement systems for different "Understandings" were created. Critics argue that this

has resulted in the "balkanisation" of judicial process.

But the WTO Charter that has come into force on 1 January 1995 after the Uruguay

Round called for a single judicial apparatus. This judicial apparatus legally termed as

Dispute Settlernenl Board (DSB), would adjudicate on disputes related to trade in

services and TRIPS as well besides trade in goods(GATT' s purview was confined to

goods sector alone)

The const~tutional framework of WTO' s dispute settlement mechanism is given in

chapter three. Its framework is contained in Annex 2 of WTO Charter, i.e., and

'Understanding on the Rules and Procedures Governing the Settlement of Disputes'.

The DSU has 27 Articles intended to secure a positive solution to the dispute. The

dispute settlement process starts with consultations. For a proper expedition of

dispute, the Director-General can offer his good offices, consultations and mediation.

However, i f these efforts fail, the complainant could request for the establishment of a

panel. The panel should compose of well-qualified individuals having expertise in WTO

law. The panel, after making several deliberations with the disputants, submits its report

to the DSB. However, the losing party could appeal before the AB to review the panel

decision. This panel/AB process has to be completed within a stipulated time frame. The

period from the date of establishment of the panel by the DSB shall not exceed nine

months where the panel report is not appealed or 12 months if the report is appealed.

AAer thls time frame. the DSB adopts the panel/AB report.

If the concerned member does not adopt the report, the complaining party could request

authorisation for retaliation/suspension of concession from the DSB. Thus in the absence

of a mutually agreed solution, the first objective of dispute settlement mechanism is to

seek a withdrawal of measures inconsistent with the provisions of any of the covered

agreements. And the last resort is the suspension of the application of concessions or

other obligation under the covered agreement. The suspension of concessions shall be

brought to an end when the member concerned conforms to the WTO provisions. This

implies that ageement with the covered agreement is the final solution that is sought.

The fourth chapter gives a statistical survey of the complaints that were filed before the

WTO during the first five years, i.e. from 1 January 1995 to 31 December 1999. As per

the statistics 185 requests for consultations were filed as of 1 January 2000 of which 54

reached the panel stage. Thus fifty-four panels were established to adjudicate on these

issues. Of the fifty-four cases, 33 were appealed. A close perusal of these disputes

indicates that the complaints filed during the first five years involved subjects that

covered all the WTO agreements-trade in goods, GATS and TRIPS. The first case that

reached the panel state (the AB stage too) was the United States -gasoline case. This

case, brought by Venezuela and Brazil, has been described as the "triumph of south", for

the US was defeated i n this case by the developing countries. It also demonstrated that

the WTO judiciary would be guided solely by the principles of free trade as contained in

WTO agreements, and it would not be reluctant to ovemde national sovereignty of its

members in seeing the implementation of its avowed objectives. This principle is

reflected in the subsequent rulings of WTO paneVAB as well.

However, a survey of the top most litigants unravels-a gruesome picture as well. Among

the first five litigants (as complainant and defendant), only one developing nation figures

i.e., lndia. The ranking in the descending order is as follows - the United States ranks

first with 99 cases (60 as complainant 39 as respondent) followed by EEC (75 cases - 46

as complainant. 29 as respondent), Canada (25 cases - 16 as complainant, 9 as

respondent), lndia (22 cases - 9 as complainant and 13 as respondent) and Japan (20

cases - 12 as complainant and 8 as respondent). But what is astonishing to note is that

the top ten litigants filed as many as 166 complainants out of the 185 requests for

consultations. Out of these ten litigants there were five developing countries, which

included lndia, Brazil, Korea, Mexico and Argentina. The participation of the rest of the

Members was confined to just nineteen cases! A study of these nineteen cases revealed

that the participation of the least developing countries was absolutely nil. Most of them

did not even have the financial wherewithal to finance the stationing of a delegation in

Geneva. Naturally, their participation in WTO is only a matter of privilege rather than

any meaningful exercise.

In the fifth chapter all the twenty TRIPS cases that came up for dispute adjudication

were exclusively dealt with for the reasons we have cited above. It shows that disputes

pertained to TRPS Ageement obviously had been a rich man's affair. All the

complaints were filed by advanced nations alone. Only in five disputes, developing

nations figure (India, Pakistan, Indonesia and Argentina) -every time as respondent.

Among the seven categories of TRIPS, the provisions related to patent category were

invoked the most. This was followed by copyrights, enforcement of intellectual property

rights, trademarks and geogaphical indications. The complaints on developing countries

related to the implementation of exclusive marketing rights (EMRs) mostly (except that

of Indonesia that related to trademark). All the nations whose IPR laws were found

inconsistent with TRIPS Agreement were asked to make modifications in their

municipal laws in accordance with WTO paneVAB judgements. This in effect has

globalised international patent regime.

Implementation of WTO judgements by Indian Parliament is provided as a case study in

Chapter V1. India lost both the cases on patents in WTO. The cases were brought by the

US (DS 50) and the EEC (DS 79). The EEC and US contended that India failed to

provide EMRs to its pharmaceutical companies and it did not establish a "mail box

system" which should be created in a developing nation receiving transitional benefits of

TRIPS Agreement. Accordingly, to comply with the WTO ruling, Indian Parliament

passed the Patents (Amendment) Act, 1999 (No. 17 of 1999). This act significantly

altered the domestic patent law of India. If a nation failed to comply with the WTO

panelIAB judgement the agpeved party could ask for retaliation. This chapter also

gives the successful attempt of retaliation by a developing nation against a powerful

developed nation using TRIF'S as the tool. Thus, the decision of WTO Arbitration

regarding European communities' non-implementation of DSB's decision in the banana

dispute and Ecuador' s attempt to cross- retaliate is explained. This decision not only

proves that a developed nation has to implement a WTO' s DSB' s decision, but also

reveals that WTO' s TRIPS in an effective weapon in the Third World arrnoury to

ensure compliance with WTO rulings by the developed world. This case beyond doubt

demonstrates that the dispute agreement of WTO is a nice platform for the third world to

address their issues by locking horns with the developed world.

Answers to Research Questions

Research Question # I Whether WTO' s judicial mechanism is qualitatively superior to

that of GATT

This study undoubtedly concluded that the WTO dispute settlement mechanism by

virtue of its constitutional machinery, institutional approach to settle disputes, detailed

,&icles for adjudication, well-written paneVAB, reports, absence of the possibility of

blockage of adoption of paneVAB report is successful in ensuring greater predictability

in international trade relations. This is adduced by the quantum leap in the number of

requests for consultation being filed at WTO' s dispute settlement mechmsm and

buoyancy among member states to invoke DSU to settle trade disputes. Provision for

compensation/ suspension of concession and cross retaliation has virtually strengthened

the implementation of WTO judgements - which is imperative for the successful

performance of any judicial system. DSB' s continued surveillance of the paneWN3

rulings and recommendations add more teeth to the rule-adjudication mechanism.

GATT, envisaged as a temporary treaty arrangement, instead relied on diplomatic tools

based on pragmatism for dispute settlement because it was based on "diplomats

jurisprudence" with a greater leniency towards negotiation for dispute adjudication.

Since promotion of ti-iendly relations among members was given precedence over the

achievement of compliance with GATT rules, GATT was never harsh on violators. The

result was great delay in dispute settlement, absence of stipulated time frame and

blockage of the adoption of a panel report. The initiation of the Uruguay Round and

consequent formation of WTO overcame these institutional infirmities to a considerable

extent.

Research Question # 2: Whether the yudicialisation ' of international trade initiated by

WTO is harmful to the developing countries

Opinions differ on this question. But a close examination of GATTIWTO paneVAB

reports clearly demonstrate that the developing countries have been able to assert their

voice louder with the advent of WTO for WTO's dispute settlement mechanism

provided them with a fora to address trade issues. The Uruguay recourse to Article

XXIII' in 1963 clearly indicated that GATT, despite its pronouncements showing

leniency to the cause of developing countries, had been ineffective to protect their

interests. Of course, it was very flexible in its approach to developing countries, but it

was flexible to the developed world too, as a result of which developing countries had

not been able to gain considerable vantage over the developed world. Moreover,

because of the fear of trade retaliation by the developed countries on non-trade fronts,

the developing nations were scared to pursue a litigation before the GATT dispute

settlement machinery vigorously.

But the past experience, even though short, shows that through WTO' s dispute

settlement mechanism, the developing nations have been able to alter the domestic

policies of the developed countries that are detrimental to international trade. For

- - ~- ~ -

GATT, The U r u g u ~ ~ j Recourse to Article XYIII, Report o f the Panel (July 1963) adopted on 3 March1965. G.41T Doc. L/2074 - 13335.

instance, through the WTO' s rulings, Venezuela and Brazil in the US gasoline case

were able to alter the US environmental policies. The WTO ruling in this case has

been hailed as the "triumph of south". There are rulings that went against the

developing nations as well for following WTO-inconsistent measures. But by strictly

following the principles set forth in WTO charter and the rules of WTO agreement,

the WTO dispute settlement mechanism has been able to ensure greater predictability

in international trade relations and has dispassionately relied on the principles of free

trade for adjudication.

There is an awesome aspect as well. Majority of the developing nations has not been

able to ensure their effective participation in the dispute settlement mechanism

apparently because of the paucity of financial resources. Most of them do not even

have a well-informed delegation in Geneva. Nor do the delegation enjoy good support

from the capital. In 1996 the average number of meetings in the WTO had risen to

fourty-six a week. Even for large delegations, such hectic schedules were observed to

be a strain. For small delegations of only two or three persons, who had to cover

WTO, UNCTAD, ILO and other Geneva-based organizations, it was an impossible

burden. Of the twenty-eight developing country members of the WTO, only ten had

permanent misslons in Geneva - that too of one or two persons. Rest of the eighteen

survived out of London. Brussels or national capitals. These figures clearly

demonstrated that effective participation by the developing world was not taking

place in WTO.

Still, if any of the developing nations decides to pursue a case before the WTO

dispute settlement mechanism, their interests could be protected because of proper

judicial process and time-led implementation of judgements. The case of Ecuador

shows that the developing countries wield considerable power to retaliate against the

developed nations by denying TRIPS protection to them. This contention centres

round the presumption that a stringent implementation of TRIPS diminishes the

economic welfare of the developing countries and IPR rights are mostly owned by

foreign companies. Consequently denial of TRIPS protection to these companies

would enable them to increase their econmic welfare.

Research Questrun # 3 Whether WTO judgements has altered the municipal laws of

its memhecc

This study which has made a perusal of the disputes lodged before the WTO's dispute

settlement mechanism during the first five years of its operation has come to the

conclusion that the dispute settlement mechanism of WTO has been powerful enough

to alter the municipal laws of its Members. The study throughout its course has

provided ample evidence to substantiate this contention. Thus the United States was

obliged to make changes in its environmental policy due to the rulings made by the

WTO paneVAB. Venezuela and Brazil succeeded in altering the US clean air law that

required imported gasoline to conform to certain preset standards, which were regarded

as detrimental to free trade. Similarly, a complaint by Thailand, Philippines, Malaysia

and some other nations forced the US to make amendments in its laws that were

intended to protect migatory sea turtles. In this case, the complainants argued that the

US environmental policy, which was intended to protect aquatic life and reduce oceanic

pollution, was a barrier to trade. In another case, the US was asked to amend parts of the

Mammal Protection Act. The US is still facing litigation that have greater ramifications

in its environmental law. The US writers lament that WTO crippled their nation's

sovereignty. Indian attempt to alter its popular Patent Law, 1970 despite stiff opposition

from all quarters by passing Patent Amendment Act in 1999 was provided as a case

study. This Bill was presented in accordance with the judgement of WTO in DS 50 and

79.While presenting his voice of dissent in the Lok Sabha, S. Jaipal Reddy from the

Congress (I) lamented:

. . . this is a Bill which is being enacted by the House against the heart of the

House.. It is almost an unmixed evil, an unmixed curse and we are prepared to

swallow this bitter medicine as a nation. That is what is agonising. When the

hon. Minister talks of provision of compulsory licensing, I would call this a

piece of compulsory legislation We are compelled to legislate. Can there be

anything more humiliating than that?

But the bill was passed. Such instances were galore regarding other members too,

Research Questio~r # 4 : Whether the existence of an effective dispute settlement

mechanism is successful in multilaterising the ZPR law.

Until the incorporation of TRIPS into GATT agreements, administration of international

intellectual property regime was primarily a WIPO-affair. WIPO administers about

twenty-three treaties on intellectual property rights, which include Beme Convention for

the protection of Literary and Artistic Works and Paris Convention for the Protection of

Industrial Property. But in WIPO-administered treaties, a judicial mechanism, whose

decisions were binding, was absent. This prompted United States and other developed

nations to include TRIPS Ageement in the WTO agreements. Thus Arhcle 64 of TRIPS

Agreement stipulates that the provisions of DSU shall apply to TRIPS disputes as well.

Consequently. enforcement of TRIPS became mandatory for all WTO members. Like

other WTO agreements, the WTO with its strong dispute settlement mechanism has been

successful in globalising intellectual property rights by prescribing certain minimum

standards. Even though the call for a strong international patent regime is as old as the

WIPO, by including the TRIPS under the WTO in the Uruguay Round, the advanced

nations have succeeded in the globalising the IPR laws for the first time. WIPO's

ineffectiveness in dealing with the "free riding" issue especially in the developing

nations was cited as the reason for this inclusion. The Patents (Amendment) Act, 1999

passed by the Indian Parliament clearly shows the effect of WTO' s judgement in

globalising intellectual property laws. Through this amendment India was forced to alter

its popular 1970 Patent Act to remove its TRIPS-inconsistency. Even though it was

widely acknowledged that a strong patent regime is dehimental to the indigenous

industrial growth of a developing nation, it has helped them to use TRIPS as an effective

retaliatory weapon against the developed nations for maintaining WTO inconsistent

measures. WTO's dispute settlement mechanism, by deleting disparities in municipal

IPR laws, succeeded in maintaining minimum standards globally. All these clearly

indicate that WTO's dispute settlement mechanism has became a very powerful

international phenomenon, making the WTO, a de facto world government in trade and

commerce.

Trends

However, the initial buoyancy in invoking dispute settlement procedures

frequently seems dissipating of late. The last few years has shown a downward slide in

the use of WTO's dispute settlement mechanism. (See diagram. It clearly indicates that

the use of dispute settlement mechanism is showing a southward trend).

Number of request for consultations

50 5

0 1 . - -- 7--T-------- 1

1995 1996 1997 1998 1999 2000 2001

Year

Only by ensuring effective and meaningful participation of rest of the members,

most of them being developing/ least developed countries, this process of downward

slide could be reversed. It should be recalled that out of 185 requests for consultations,

166 were fled by just ten Members. Of course WTO has not at all been hesitant to boost

the participation of developing countries by providing them techn~cal and legal

assistance. But such efforts have to be multiplied and their effectiveness strengthened by

siphoning more resources to this end.

Future challenge.^

The successful completion of the Uruguay Round has considerably extended the

mandate of the WTO. Apart fiom rules related to trade-in-goods, new substantive areas

that deal with trade-in-services and trade-in-intellectual property rights were included.

Unlike its predecessor GATT, the WTO is guided by a new paradigm - "Rule of

Lawyers and the Culture of Law" instead of the reliance on diplomacy. Consequently the

passionate verve among the Member states to use the dispute settlement mechanism has

made traditional tools of diplomacy redundant. Tit-for-tat retaliation becomes the new

buzzword for nation to settle scores against each other on trade issues. For instance the

United States, even though it did not actually produce any bananas for exports has

brought a solid WTO case against EU: "the story is familiar: solid WTO case; EU

recalcitrance; US recalcitrance through trade sanction; much anger all around. Stung the

EU searched for any case it could bring in response. The result was the FSC case."

Consequently, the conduct of international trade relations become law-laden and is

'~udicialised".

Equally worrisome is the absence of effective and meaningful participation of the

chunk of WTO membership, especially the developing country members. This study

which used TRlPS Agreement as the case study has incontrovertibly proved that dispute

settlement in this area is primarily a rich man's affair. This could, to a considerable

extent, attributed to the provisions relating to transitional arrangements for developing

country Members that cease to exist after December 3 1,2004. However, after this period

there would be an upsurge in TRIPS-complaints against developing countries because

the developed nations are likely to prioritise the concerns of MNCs at the expense of sick

people in developing countries. For instance, the South African Parliament's

promulgation of the Medicines and Related Substances Control Amendment Act in

1997, which permits parallel importation of pharmaceuticals in times of public health

crisis and the utilisatlon of compulsory licensing as well as the insistence of Brazilian

Industrial Property Law, 1 997 on foreign manufacturers to produce at least a part of their

produce("local working" requirement) in Brazil have raised the eyebrows of MNCs. It

should be noted that, both these nations initiated these measures to enable their citizens

suffering from AIDS and infected with HIV to receive low cost drug treatment. Yielding

to the pressure of pharmaceutical companies, the US has lodged a complaint against

Brazil before WTO in February 2001. However, after a UN conference on HIVIAIDS

problem the IJS withdrew its complaint. Similarly, the Pretorian administration faced a

lawsuit in its High Court. The Pharmaceutical Manufacturers' Association of South

Africa brought it against the Medicines Act. m l e the dispute was pending, several

companies themselves announced price-cuts in HIVIAIDS medicines. These examples

show that stringent implementation of TRIPS provisions in developing countries is likely

to foment a public health crisis owing to the absence of sufficient purchasing power

among the bulk of its populace to buy costly medicines produced by the multinational

pharmaceutical companies. Consequently, a liberal interpretation of the provisions

regarding compulsory licensing (Article 31 of TRIPS) vis-a-vis developing countries

becomes extremely imperative. Else, the intemational community would accuse WTO of

conflicting with the objectives of another UN organisation, WHO (World Health

Organisation) that strives to attain highest possible levels of health .for all people. In fact,

the Doha summit, 2001 addressed some of the issues associated with health.

To sum up, the objective of WTO becomes clear: to reform the GATT system, weed out

the consensus-based political aspects of its predecessor and 'legalise' dispute resolution

by 'judicialisation' of the dispute settlement process. A transparent regime of conflict

adjudication exposes national legislation to a procedure, which ensures security and

predictability. An improved examination process by an impartial body of legal experts is

assumed through the operation of paneVAB. This degree of close and careful

examination of national legislation and national measures is unparalled in the vast

history of intemational relations. In this study we explained this new supranational

phenomenon - the WTO' s dispute settlement mechanism, a by-product of GATT' s

institutional infirmities The metamorphosis from power-oriented conflict resolution to

law-oriented dispute- settlement is reflected in the Understanding of Rules and

Procedures Governing the Settlement of Disputes (DSU) of WTO Charter. The

innumerable procedures, the institutional structure, the existence of an Appellate Body

contained in DSU is in contrast to the GATT 1947, that provided outlines of dispute

settlement mechanism in just two articles-Article XXIl and XXIII. Nevertheless, the

DSU, as part of the WTO Charter, is based on decades of experiment and practice in the

GATT and has integrated various dispute settlement procedures of GATT 1947 as well

as the Tokyo Round codes into a unified and coherent mechanism.. Anybody making an

objective analysis of the judicial systems of GATT and WTO could conclude that the

WTO dispute settlement mechanism is qualitatively superior to that of GATT by virtue

of its constitutional machinery, institutionalized approach, detailed articles for

adjudication of disputes, well-written panel and appellate body reports, absence of the

possibility of' 'blockage', and more than that ensuring greater 'predictability' in

intemational trade relations. The performance of WTO' s dispute settlement mechanism

indicates that the Member states have affirmed their faith in WTO judiciary. This is in

sharp contrast to the attitude they had vis-A-vis GATT 's judicial apparatus. The

Understanding on Rules and Procedures Governing the Settlement of Disputes @SU)

incorporated in W 7 ' 0 Agreement is responsible for this 'ansformation kom

"pragmatisn~" to "legalism" and it has often been referred as "quantum leap" in the

history of ~nternational trade law.

But no other agreement received as much resistance as the Agreement on Trade-Related

Aspects of intellectual Property Rights (TRIPS) did. The trading world was polarised

into two hostile camps during Uruguay Round negotiations - the first world led by the

United States aggressively pursuing the incorporation of TRIPS into the WTO agenda

for they were so much womed about the "free-riding" issue in the developing countries;

and the third world led by India and Brazil opposing incorporation of TRIPS in WTO

Agreement apparently because of two reasons(a)the developing countries were net

importers of intellectual property, relying heavily on the technology transfer from the

first world for technological development and prefer a relatively low level of protection

of intellectual property(b)since most of the developing countries did not have a strong

intellectual property regime in their domestic legal systems, bringing TRIPS into the

WTO Agreement would drag them into frequent litigation by the first world before the

WTO dispute settlement system not only for deficiencies in domestic legislation but also

for absence of strong enforcement measures.But finally developing countries succumbed

to pressure of first world and acquiesced to incorporate the TRIPS Agreement under

GATT purvleu

The powers, which the WTO's dispute settlement mechanism wields are so sweeping,

because there is no legislative checks or balances in WTO's dispute resolution process.

As Allan W.M. Wolff, former Deputy US Trade Representative stated:

We have really significant risks, because this WTO system has no checks and balances. Yes,

there is an appellate review panel; but if the panel goes off the tracks and it is not corrected

by the appellate body, it is going to be nearly impossible to get the members of the WTO to

correct it because everyone has to agree.

Still over the past few years, the WTO has succeeded not only in establishing itself as a

de facto world government in trade and commerce but also in giving a legal justification

to the process of liberalisation through its dispute settlement mechanism.