Overview

With the establishment of the WTO and adoption of the Dispute Settlement Understanding, resolution of international trade disputes has entered a new and, in the context of international trade law, a highly legalistic era. Under GATT, dispute settlement often was called “conciliation,” a term reflecting GATT's diplomatic heritage and its indifference, if not hostility, to legalism. The early GATT process was very much a diplomatic process, seeking to reconcile the conflicting views of the parties, sometimes ending in stalemate if this could not be accomplished. Gradually, GATT dispute settlement became more legalistic in form, but it remained largely diplomatic and, in the view of many, of limited effectiveness, particularly because the losing party could prevent consensus and, therefore, could prevent adoption of an adverse report of a GATT dispute settlement panel. While this did not happen in most instances, it happened often enough to cause dissatisfaction and was an always present threat that, by itself, might have discouraged resort to dispute settlement.

Under the WTO, the GATT consensus requirement is reversed: consensus in the WTO is required to reject, rather than to adopt, a report. This has resulted in a far more juridical system. Although the Dispute Settlement Body offers “good offices, conciliation and mediation” if the parties so desire, and although the WTO Members, acting collectively as the DSB, continue to have the last word as a formal matter, in a practical sense the last legal word really now lies with the panels and the Appellate Body.