Lesson 3: SPS Agreement Principles

Topic 8: Dispute Settlement

When trading partners do not agree on the interpretation or application of provisions in the SPS Agreement, they may request resolution by an outside body. In this topic, you will learn about the process known as dispute settlement.

Objectives:

  • Describe situations when dispute settlement is necessary
  • Explain the steps involved in dispute settlement
  • Describe the types of dispute settlement outcomes

The SPS Agreement provides the basis for SPS requirements and the guidance for challenges to those requirements. While a country is free to establish legislation it regards necessary to protect itself, an SPS requirement can be challenged by another country on the grounds that scientific evidence does not support the need for the trade restriction.

Article 11, Consultations and Dispute Settlement. From the SPS Agreement:

  1. The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply to consultations and the settlement of disputes under this Agreement, except as otherwise specifically provided herein.
  2. In a dispute under this Agreement involving scientific or technical issues, a panel should seek advice from experts chosen by the panel in consultation with the parties to the dispute. To this end, the panel may, when it deems it appropriate, establish an advisory technical experts group, or consult the relevant international organizations, at the request of either party to the dispute or on its own initiative.
  3. Nothing in this Agreement shall impair the rights of Members under other international agreements, including the right to resort to the good offices or dispute settlement mechanisms of other international organizations or established under any international agreement.

Agreement on the Application of Sanitary and Phytosanitary Measures.

Dispute Consultation

Consultation is a key component to the resolution of SPS disputes. Consultation means that the trading partners meet and discuss the issues and negotiate a resolution that is acceptable to all parties and that is consistent with the terms of the SPS agreement. If trading partners disagree with one another, consultations should be used to arrive at a solution. When consultations do not produce a solution, trading partners may choose to engage in a formal dispute. A dispute arises when one member government believes another member government is violating an agreement or a commitment that it has made in the WTO.

Dispute Settlement Body and the Dispute Panel

Ultimate responsibility for settling disputes also lies with member governments, through the Dispute Settlement Body (DSB). The DSB is made up of all member governments, which are usually represented by ambassadors or the equivalent. The DSB has the sole authority to establish panels of experts to consider the case and to accept or reject the finding of the panel or the results of an appeal. It monitors the implementation of the rulings and recommendations, and has the power to authorize retaliation when a country does not comply with a ruling.

The panel works to understand the entire issue and may engage a wide variety of resources to provide background information, scientific evidence, or interpretation of an issue. Officially, the panel helps the DSB make rulings or recommendations, but because the panel’s report can only be rejected by consensus in the DSB, its conclusions are difficult to overturn. Although much of the dispute process resembles a court or tribunal, the preferred solution is for the countries to discuss their problems and settle the dispute by themselves. The first stage is consultation between the governments concerned, and even when the case has progressed to other stages, consultation and mediation are still possible.

Dispute Settlement:
  • The same single unified process covers all WTO agreements
  • The steps in the process are automatic
  • Each step has clearly defined time-periods
    • Stage 1 – Bilateral consultations between the two parties (2 months)
    • Stage 2 – Legal examination: a panel of three legal experts approved by the disputing governments (6 to 9 months)
    • Stage 3 – An appellate stage (2 to 3 months)
    • Stage 4 – Implementation of the rulings (subject to negotiation between the parties)
  • The appellate body is comprised of seven internationally recognized trade law judges
  • There is a surveillance mechanism that monitors the implementation of rulings
  • There is a possibility of multilaterally authorized sanctions (compensation)

The following video will help illustrate the concept of Dispute Settlement.

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course_01/lesson_03/topic_08/asset_001

In this topic, you learned how countries that disagree with each other can have their issues resolved. This is called the dispute settlement process. You learned that dispute rulings are binding for Members. Compensation for current losses can be authorized if a Member who is ruled against refuses to comply with SPS measures.

To continue, select Topic 9 from the Topics menu above or click here.