Abstract

The Dispute Settlement Understanding has been under continuous review since its inception. The WTO members confirmed in the current negotiations on the DSU, as set out in the Framework Agreements agreed at the end of July 2004 (the so-called July Package) and in the Hong Kong Ministerial Declaration that the review process should continue and be successfully concluded by the end of 2006, but this did not happen. This chapter intends to give an overview over the reform debate and its history, and comment on current developments of the reform process under the Doha Development Agenda. The reasons for review and the main issues of the debate shall be identified, and possible results of the continuing negotiation process assessed. It will be shown that the intrinsic tension in the dispute settlement mechanism between a legal model and a diplomatic model of settling disputes not only featured at the inception of the review process, but still is decisive for the tabled proposals. This fragile equilibrium between adjudication and diplomatic flexibility will colour the outcome, and is worth maintaining. However, the proposals on improving compliance like introducing financial compensations or collective retaliation that are in the particular interest of developing countries, should be considered more strongly.

Introduction

The Dispute Settlement Understanding (DSU) is a legally binding agreement committing WTO members to settle their disputes in an orderly and rule-oriented fashion. It is one of the most significant achievements of the Uruguay Round, as it is the first system for the binding settlement of trade disputes between states vested with an unprecedented degree of power, and a key component for the effective operation of the WTO.