The system for the settlement of trade disputes is one of the central pillars of the WTO. Although the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding, DSU) avoids vocabulary that would evoke direct associations with court proceedings – so that disputes are considered not by a 'court' but by dispute settlement 'panels' and the 'Appellate Body', which issue 'reports' to be adopted by the WTO Membership rather than automatically binding 'decisions' or 'judgments' – for all practical purposes, the WTO dispute settlement system is not so different from an international court.
Disputes over WTO Members' measures affecting trades in goods and services are decided by dispute settlements panels composed of three panellists
which are not WTO employees and are engaged for a specific dispute only. Their report, which contains findings of violations of the WTO agreements, may be appealed to the standing Appellate Body which consists of seven members, though each appeal is heard by a division of three Appellate Body members. The Appellate Body does not review the panel's factual findings but only whether the panel correctly understood the law and whether it correctly applied the law to the facts.
To become binding on the parties to the dispute, a panel report (if it was not appealed) or a panel report together with the related Appellate Body report must be adopted by the Dispute Settlement Body (DSB), which consists of representatives of all WTO Members. The adoption, however, is essentially automatic because the decision not to adopt must be taken by consensus
, i.e. including the vote of the winning party ('reverse consensus').
The DSB has adopted
all WTO panel and Appellate Body reports issued to date. Adopted dispute settlement reports, i.e. the panel's findings and recommendations as amended by the Appellate Body report, are binding upon the parties to the dispute. This means, in particular, that a respondent that fails to bring its measure(s) into conformity with WTO law as interpreted and applied by the panel and the Appellate Body may face legal consequences. The complainant may either request the payment of compensation for continued violation, which the respondent may do at its discretion
, or request from the DSB an authorization
to take retaliatory trade measures which is granted by reverse consensus.
Technically speaking, legal interpretations developed by a panel or the Appellate Body do not constitute an authoritative interpretation, i.e. they are not binding on the entire WTO Membership, as the Marrakesh Agreement reserves
to the Ministerial Conference and the General Council the exclusive authority to adopt such interpretations. However, it is only natural that – as it happens in all legal orders, whether or not based on legal precedent – parties to subsequent disputes seek to support their arguments by citing to panel and Appellate Body statements and legal interpretations in previous disputes. Absent clarifications from the Ministerial Conference or the General Council (which have not adopted any legal interpretations to date), the interpretations and pronouncements in dispute settlement reports – in the first place, those of the Appellate Body as the dispute settlement organ of the higher instance – clarify how the specific provisions of WTO law apply to and regulate the many real-life situations which bring the disputing parties to the WTO for a resolution of their dispute.
This is how legal rules come to life. It is often only through a controversy over the meaning of a treaty provision that that provision acquires meaning. The text of the SPS Agreement is one thing. The outcome of application of that text to a set of facts is quite another. WTO law on sanitary and phytosanitary measures is revealed in panel and Appellate Body reports in disputes over WTO Members' SPS measures. This guide will introduce you to WTO SPS law through the panel and Appellate Body jurisprudence which is arguably the only way to understand at depth the legal rules of the SPS Agreement and the rationale behind them.