Agreement Establishing the World Trade Organization
Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes
Members hereby agree as follows:
Article 1: Coverage and Application
1. The rules and procedures of this Understanding shall apply
to disputes brought pursuant to the consultation and dispute settlement
provisions of the agreements listed in Appendix 1 to this Understanding
(referred to in this Understanding as the "covered agreements").
The rules and procedures of this Understanding shall also apply
to consultations and the settlement of disputes between Members
concerning their rights and obligations under the provisions of
the Agreement Establishing the World Trade Organization (referred
to in this Understanding as the "WTO Agreement") and
of this Understanding taken in isolation or in combination with
any other covered agreement.
2. The rules and procedures of this Understanding shall apply
subject to such special or additional rules and procedures on
dispute settlement contained in the covered agreements as are
identified in Appendix 2 to this Understanding. To the extent
that there is a difference between the rules and procedures of
this Understanding and the special or additional rules and procedures
set forth in Appendix 2, the special or additional rules and procedures
in Appendix 2 shall prevail. In disputes involving rules and procedures
under more than one covered agreement, if there is a conflict
between special or additional rules and procedures of such agreements
under review, and where the parties to the dispute cannot agree
on rules and procedures within 20 days of the establishment of
the panel, the Chairman of the Dispute Settlement Body provided
for in paragraph 1 of Article 2 (referred to in this Understanding
as the "DSB"), in consultation with the parties to the
dispute, shall determine the rules and procedures to be followed
within 10 days after a request by either Member. The Chairman
shall be guided by the principle that special or additional rules
and procedures should be used where possible, and the rules and
procedures set out in this Understanding should be used to the
extent necessary to avoid conflict.
Article 2: Administration
1. The Dispute Settlement Body is hereby established to administer
these rules and procedures and, except as otherwise provided in
a covered agreement, the consultation and dispute settlement provisions
of the covered agreements. Accordingly, the DSB shall have the
authority to establish panels, adopt panel and Appellate Body
reports, maintain surveillance of implementation of rulings and
recommendations, and authorize suspension of concessions and other
obligations under the covered agreements. With respect to disputes
arising under a covered agreement which is a Plurilateral Trade
Agreement, the term "Member" as used herein shall refer
only to those Members that are parties to the relevant Plurilateral
Trade Agreement. Where the DSB administers the dispute settlement
provisions of a Plurilateral Trade Agreement, only those Members
that are parties to that Agreement may participate in decisions
or actions taken by the DSB with respect to that dispute.
2. The DSB shall inform the relevant WTO Councils and Committees
of any developments in disputes related to provisions of the respective
3. The DSB shall meet as often as necessary to carry out its functions
within the time-frames provided in this Understanding.
4. Where the rules and procedures of this Understanding provide
for the DSB to take a decision, it shall do so by consensus. 2
Article 3: General Provisions
1. Members affirm their adherence to the principles for the management
of disputes heretofore applied under Articles XXII and XXIII of
GATT 1947, and the rules and procedures as further elaborated
and modified herein.
2. The dispute settlement system of the WTO is a central element
in providing security and predictability to the multilateral trading
system. The Members recognize that it serves to preserve the rights
and obligations of Members under the covered agreements, and to
clarify the existing provisions of those agreements in accordance
with customary rules of interpretation of public international
law. Recommendations and rulings of the DSB cannot add to or diminish
the rights and obligations provided in the covered agreements.
3. The prompt settlement of situations in which a Member considers
that any benefits accruing to it directly or indirectly under
the covered agreements are being impaired by measures taken by
another Member is essential to the effective functioning of the
WTO and the maintenance of a proper balance between the rights
and obligations of Members.
4. Recommendations or rulings made by the DSB shall be aimed at
achieving a satisfactory settlement of the matter in accordance
with the rights and obligations under this Understanding and
under the covered agreements.
5. All solutions to matters formally raised under the consultation
and dispute settlement provisions of the covered agreements, including
arbitration awards, shall be consistent with those agreements
and shall not nullify or impair benefits accruing to any Member
under those agreements, nor impede the attainment of any objective
of those agreements.
6. Mutually agreed solutions to matters formally raised under
the consultation and dispute settlement provisions of the covered
agreements shall be notified to the DSB and the relevant Councils
and Committees, where any Member may raise any point relating
7. Before bringing a case, a Member shall exercise its judgement
as to whether action under these procedures would be fruitful.
The aim of the dispute settlement mechanism is to secure a positive
solution to a dispute. A solution mutually acceptable to the parties
to a dispute and consistent with the covered agreements is clearly
to be preferred. In the absence of a mutually agreed solution,
the first objective of the dispute settlement mechanism is usually
to secure the withdrawal of the measures concerned if these are
found to be inconsistent with the provisions of any of the covered
agreements. The provision of compensation should be resorted to
only if the immediate withdrawal of the measure is impracticable
and as a temporary measure pending the withdrawal of the measure
which is inconsistent with a covered agreement. The last resort
which this Understanding provides to the Member invoking the dispute
settlement procedures is the possibility of suspending the application
of concessions or other obligations under the covered agreements
on a discriminatory basis vis-à-vis the other Member, subject
to authorization by the DSB of such measures.
8. In cases where there is an infringement of the obligations
assumed under a covered agreement, the action is considered prima
facie to constitute a case of nullification or impairment.
This means that there is normally a presumption that a breach
of the rules has an adverse impact on other Members parties to
that covered agreement, and in such cases, it shall be up to the
Member against whom the complaint has been brought to rebut the
9. The provisions of this Understanding are without prejudice
to the rights of Members to seek authoritative interpretation
of provisions of a covered agreement through decision-making under
the WTO Agreement or a covered agreement which is a Plurilateral
10. It is understood that requests for conciliation and the use
of the dispute settlement procedures should not be intended or
considered as contentious acts and that, if a dispute arises,
all Members will engage in these procedures in good faith in an
effort to resolve the dispute. It is also understood that complaints
and counter-complaints in regard to distinct matters should not
11. This Understanding shall be applied only with respect to new
requests for consultations under the consultation provisions of
the covered agreements made on or after the date of entry into
force of the WTO Agreement. With respect to disputes for which
the request for consultations was made under GATT 1947 or under
any other predecessor agreement to the covered agreements before
the date of entry into force of the WTO Agreement, the relevant
dispute settlement rules and procedures in effect immediately
prior to the date of entry into force of the WTO Agreement shall
continue to apply. 3
12. Notwithstanding paragraph 11, if a complaint based on any
of the covered agreements is brought by a developing country Member
against a developed country Member, the complaining party shall
have the right to invoke, as an alternative to the provisions
contained in Articles 4, 5, 6 and 12 of this Understanding, the
corresponding provisions of the Decision of 5 April 1966 (BISD
14S/18), except that where the Panel considers that the time-frame
provided for in paragraph 7 of that Decision is insufficient to
provide its report and with the agreement of the complaining party,
that time-frame may be extended. To the extent that there is a
difference between the rules and procedures of Articles 4, 5,
6 and 12 and the corresponding rules and procedures of the Decision,
the latter shall prevail.
Article 4: Consultations
1. Members affirm their resolve to strengthen and improve the
effectiveness of the consultation procedures employed by Members.
2. Each Member undertakes to accord sympathetic consideration
to and afford adequate opportunity for consultation regarding
any representations made by another Member concerning measures
affecting the operation of any covered agreement taken within
the territory of the former. 4
3. If a request for consultations is made pursuant to a covered
agreement, the Member to which the request is made shall, unless
otherwise mutually agreed, reply to the request within 10 days
after the date of its receipt and shall enter into consultations
in good faith within a period of no more than 30 days after the
date of receipt of the request, with a view to reaching a mutually
satisfactory solution. If the Member does not respond within 10
days after the date of receipt of the request, or does not enter
into consultations within a period of no more than 30 days, or
a period otherwise mutually agreed, after the date of receipt
of the request, then the Member that requested the holding of
consultations may proceed directly to request the establishment
of a panel.
4. All such requests for consultations shall be notified to the
DSB and the relevant Councils and Committees by the Member which
requests consultations. Any request for consultations shall be
submitted in writing and shall give the reasons for the request,
including identification of the measures at issue and an indication
of the legal basis for the complaint.
5. In the course of consultations in accordance with the provisions
of a covered agreement, before resorting to further action under
this Understanding, Members should attempt to obtain satisfactory
adjustment of the matter.
6. Consultations shall be confidential, and without prejudice
to the rights of any Member in any further proceedings.
7. If the consultations fail to settle a dispute within 60 days
after the date of receipt of the request for consultations, the
complaining party may request the establishment of a panel. The
complaining party may request a panel during the 60-day period
if the consulting parties jointly consider that consultations
have failed to settle the dispute.
8. In cases of urgency, including those which concern perishable
goods, Members shall enter into consultations within a period
of no more than 10 days after the date of receipt of the request.
If the consultations have failed to settle the dispute within
a period of 20 days after the date of receipt of the request,
the complaining party may request the establishment of a panel.
9. In cases of urgency, including those which concern perishable
goods, the parties to the dispute, panels and the Appellate Body
shall make every effort to accelerate the proceedings to the greatest
10. During consultations Members should give special attention
to the particular problems and interests of developing country
11. Whenever a Member other than the consulting Members considers
that it has a substantial trade interest in consultations being
held pursuant to paragraph 1 of Article XXII of GATT 1994, paragraph
1 of Article XXII of GATS, or the corresponding provisions in
other covered agreements, 5 such Member may notify the consulting
Members and the DSB, within 10 days after the date of the circulation
of the request for consultations under said Article, of its desire
to be joined in the consultations. Such Member shall be joined
in the consultations, provided that the Member to which the request
for consultations was addressed agrees that the claim of substantial
interest is well-founded. In that event they shall so inform the
DSB. If the request to be joined in the consultations is not accepted,
the applicant Member shall be free to request consultations under
paragraph 1 of Article XXII or paragraph 1 of Article XXIII of
GATT 1994, paragraph 1 of Article XXII or paragraph 1 of Article
XXIII of GATS, or the corresponding provisions in other covered
Article 5: Good Offices, Conciliation and Mediation
1. Good offices, conciliation and mediation are procedures that
are undertaken voluntarily if the parties to the dispute so agree.
2. Proceedings involving good offices, conciliation and mediation,
and in particular positions taken by the parties to the dispute
during these proceedings, shall be confidential, and without prejudice
to the rights of either party in any further proceedings under
3. Good offices, conciliation or mediation may be requested at
any time by any party to a dispute. They may begin at any time
and be terminated at any time. Once procedures for good offices,
conciliation or mediation are terminated, a complaining party
may then proceed with a request for the establishment of a panel.
4. When good offices, conciliation or mediation are entered into
within 60 days after the date of receipt of a request for consultations,
the complaining party must allow a period of 60 days after the
date of receipt of the request for consultations before requesting
the establishment of a panel. The complaining party may request
the establishment of a panel during the 60-day period if the parties
to the dispute jointly consider that the good offices, conciliation
or mediation process has failed to settle the dispute.
5. If the parties to a dispute agree, procedures for good offices,
conciliation or mediation may continue while the panel process
6. The Director-General may, acting in an ex officio capacity,
offer good offices, conciliation or mediation with the view to
assisting Members to settle a dispute.
Article 6: Establishment of Panels
1. If the complaining party so requests, a panel shall be established
at the latest at the DSB meeting following that at which the request
first appears as an item on the DSB's agenda, unless at that meeting
the DSB decides by consensus not to establish a panel. 6
2. The request for the establishment of a panel shall be made
in writing. It shall indicate whether consultations were held,
identify the specific measures at issue and provide a brief summary
of the legal basis of the complaint sufficient to present the
problem clearly. In case the applicant requests the establishment
of a panel with other than standard terms of reference, the written
request shall include the proposed text of special terms of reference.
Article 7: Terms of Reference of Panels
1. Panels shall have the following terms of reference unless
the parties to the dispute agree otherwise within 20 days from
the establishment of the panel:
"To examine, in the light of the relevant provisions in
(name of the covered agreement(s) cited by the parties to the
dispute), the matter referred to the DSB by (name of party) in
document ... and to make such findings as will assist the DSB
in making the recommendations or in giving the rulings provided
for in that/those agreement(s)."
2. Panels shall address the relevant provisions in any covered
agreement or agreements cited by the parties to the dispute.
3. In establishing a panel, the DSB may authorize its Chairman
to draw up the terms of reference of the panel in consultation
with the parties to the dispute, subject to the provisions of
paragraph 1. The terms of reference thus drawn up shall be circulated
to all Members. If other than standard terms of reference are
agreed upon, any Member may raise any point relating thereto in
Article 8: Composition of Panels
1. Panels shall be composed of well-qualified governmental and/or
non-governmental individuals, including persons who have served
on or presented a case to a panel, served as a representative
of a Member or of a contracting party to GATT 1947 or as a representative
to the Council or Committee of any covered agreement or its predecessor
agreement, or in the Secretariat, taught or published on international
trade law or policy, or served as a senior trade policy official
of a Member.
2. Panel members should be selected with a view to ensuring the
independence of the members, a sufficiently diverse background
and a wide spectrum of experience.
3. Citizens of Members whose governments 7 are parties to
the dispute or third parties as defined in paragraph 2 of Article
10 shall not serve on a panel concerned with that dispute, unless
the parties to the dispute agree otherwise.
4. To assist in the selection of panelists, the Secretariat shall
maintain an indicative list of governmental and non-governmental
individuals possessing the qualifications outlined in paragraph
1, from which panelists may be drawn as appropriate. That list
shall include the roster of non-governmental panelists established
on 30 November 1984 (BISD 31S/9), and other rosters and indicative
lists established under any of the covered agreements, and shall
retain the names of persons on those rosters and indicative lists
at the time of entry into force of the WTO Agreement. Members
may periodically suggest names of governmental and non-governmental
individuals for inclusion on the indicative list, providing relevant
information on their knowledge of international trade and of the
sectors or subject matter of the covered agreements, and those
names shall be added to the list upon approval by the DSB. For
each of the individuals on the list, the list shall indicate specific
areas of experience or expertise of the individuals in the sectors
or subject matter of the covered agreements.
5. Panels shall be composed of three panelists unless the parties
to the dispute agree, within 10 days from the establishment of
the panel, to a panel composed of five panelists. Members shall
be informed promptly of the composition of the panel.
6. The Secretariat shall propose nominations for the panel to
the parties to the dispute. The parties to the dispute shall not
oppose nominations except for compelling reasons.
7. If there is no agreement on the panelists within 20 days after
the date of the establishment of a panel, at the request of either
party, the Director-General, in consultation with the Chairman
of the DSB and the Chairman of the relevant Council or Committee,
shall determine the composition of the panel by appointing the
panelists whom the Director-General considers most appropriate
in accordance with any relevant special or additional rules or
procedures of the covered agreement or covered agreements which
are at issue in the dispute, after consulting with the parties
to the dispute. The Chairman of the DSB shall inform the Members
of the composition of the panel thus formed no later than 10 days
after the date the Chairman receives such a request.
8. Members shall undertake, as a general rule, to permit their
officials to serve as panelists.
9. Panelists shall serve in their individual capacities and not
as government representatives, nor as representatives of any organization.
Members shall therefore not give them instructions nor seek to
influence them as individuals with regard to matters before a
10. When a dispute is between a developing country Member and
a developed country Member the panel shall, if the developing
country Member so requests, include at least one panelist from
a developing country Member.
11. Panelists' expenses, including travel and subsistence allowance,
shall be met from the WTO budget in accordance with criteria to
be adopted by the General Council, based on recommendations of
the Committee on Budget, Finance and Administration.
Continue with Annex 2
Understanding on Rules and Procedures Governing the Settlement of Disputes
2 The DSB shall be deemed to have decided by consensus on
a matter submitted for its consideration, if no Member, present at the meeting of the DSB when the decision is taken, formally objects to the proposed decision.
3 This paragraph shall also be applied to disputes on
which panel reports have not been adopted or fully implemented.
4 Where the provisions of any other covered agreement
concerning measures taken by regional or local governments or authorities within the territory of
a Member contain provisions different from the provisions of this paragraph, the provisions
of such other covered agreement shall prevail.
5 The corresponding consultation provisions in the covered
agreements are listed hereunder:
Agreement on Agriculture, Article 19: Agreement on the Application of Sanitary and Phytosanitary Measures, paragraph 1 of Article 11: Agreement on Textiles and Clothing, paragraph 4 of Article
8: Agreement on Technical Barriers to Trade, paragraph 1 of Article 14: Agreement on Trade-Related Investment Measures, Article 8: Agreement on Implementation of Article VI of GATT 1994, paragraph
2 of Article 17: Agreement on Implementation of Article VII of GATT 1994, paragraph 2 of Article 19: Agreement on Preshipment Inspection, Article 7: Agreement on Rules of Origin, Article 7:
Agreement on Import Licensing Procedures, Article 6: Agreement on Subsidies and Countervailing Measures, Article 30: Agreement on Safeguards, Article 14: Agreement on Trade-Related Aspects
of Intellectual Property Rights, Article 64.1; and any corresponding consultation provisions in Plurilateral Trade Agreements as determined by the competent bodies of each Agreement and as
notified to the
6 If the complaining party so requests, a meeting of the
DSB shall be convened for this purpose within 15 days of the request,
provided that at least 10 days' advance notice of the meeting
7 In the case where customs unions or common markets are
parties to a dispute, this provision applies to citizens of all
member countries of the customs unions or common markets.