The WTO dispute settlement system and underlying motivating factors for adjudication

The institutionalized international trade law developed since the Second World War is contractual, composed of international agreements between trading countries. The orderly governance of contractual rights and obligations and satisfactory resolution of differences in conducting trade relationships necessitated the creation of a dispute settlement process under the General Agreement on Tariffs and Trade (GATT) in 1947. Its conciliatory and consensus approach of diplomatically negotiated dispute settlement to the mutual satisfaction of the disputant members favoured powerful members who bent the system to their undue advantage at the expense of less powerful members. Rampant unilateralism and defiance of GATT disciplines by powerful members underscored the urgency of overhauling the dispute settlement system. There thus emerged a demonstrated need for a rule-based, adjudicative, and binding form of dispute resolution capable of providing strong multilateral remedies and effective enforcement. Against this backdrop, the eighth round of multilateral trade negotiations within the GATT framework – the Uruguay Round – commenced in 1986 and eventually adopted the Understanding on the Rules and Procedures Governing the Settlement of Disputes (DSU) in 1992, establishing the dispute settlement system (DSS) of the World Trade Organization (WTO). The DSS is the cornerstone of the WTO, providing the normative framework and constitutional guarantees of trading rights and duties of all WTO members, particularly assuring special security to economically disadvantaged members. It is premised on certain proclaimed policy objectives to be pursued to overcome the inadequacies and unfairness of the GATT system. The Uruguay Round Preparatory Committee in its 1986 meetings recognized the existing power asymmetry and need for legal protection for the less powerful by preserving rights over might in the enforcement of assumed commitments and obligations. The Ministerial Declaration of September 1986 launching the Uruguay Round unequivocally set these policy agenda, which are reiterated in DSU provisions. The DSS purports to achieve these goals by being independent, legalistic, adjudicative, and formal. It seeks to promote its credibility and predictability by deciding disputes on their merits and effectiveness by prohibiting infractions, enforcing rules and disciplines, monitoring compliance, and securing specific performance promptly for the benefit of all members. It is these desirable policy goals that generated expectations and euphoria among WTO members, which expressed their fundamental faith in and general consensus on the DSS at the Uruguay Round.