Bargaining in the Shadow of the Law: Early Settlement in GATT/WTO Disputes notes

Introduction to GATT/WTO Disputes

• Dispute settlement is characterized as the backbone of the multilateral trading system according to Mike Moore, Director General of WTO.

• Importance of dispute settlement as an institutional goal is emphasized, shown by data indicating that a significant proportion of disputes conclude prior to official rulings.

Overview of the Essay

• The essay proceeds in four parts:

  • Part I: Quantitative analysis of GATT/WTO disputes from 1948 to 1999.

  • Part II: Theoretical framework on settlement bargaining in a non-enforcement context.

  • Part III: Discussion of the effects of dispute settlement reforms (1989 and 1995) and their implications for the settlement process.

  • Part IV: Future reform suggestions focusing on transparency and participation of developing countries.

Patterns of Dispute Escalation

Escalation Stages

• Majority of disputes (approximately 55%) do not proceed to the establishment of a panel.

• The small percentage of disputes that reach panel rulings often do so without significant outcomes favoring either party.

• Key statistics include:

  • Initiated Disputes: 620 total disputes from 1948-1999.

  • Panel Established: 276 (44.5%), with variations across different time periods.

  • Panel Ruling Issued: 233 (37.6%), indicating that a sizeable number of disputes end without formal rulings.

Observations from Data

• A consistent observation across periods is that many disputes are settled early, often without formal adjudication.

• Disputants often prefer settlements prior to a ruling, reinforcing the idea of informal resolutions dominating the process.

Dispute Settlement Process

Mechanisms of Early Settlement

• Emphasis on the role of consultations as a critical stage in dispute resolutions, where early settlements are most frequently achieved.

• The dynamics of negotiation can shift based on the potential outcome of rulings, leading to more concessions prior to formal adjudication.

Influence of Legal Norms

The Role of Weak Enforcement

• GATT/WTO operates as an entity with limited enforcement capabilities, leading to reliance on negotiated settlements.

• A judicial ruling is more potent as a normative statement rather than as an enforcible decree.

Psychological Factors in Negotiation

• Defendants may settle early due to the fear of normative pressure from potential rulings, creating leverage for complainants in negotiations.

• The concept of a 'punch that will not hit anyone' illustrates the psychological leverage created by potential adverse rulings.

Reform Implications

Historical Context of Reforms

• Examination of past reforms, particularly in 1989 and 1995, concluded they did not significantly alter the dispute escalation patterns.

• Instead of increasing paneling instances, reforms seemed to encourage early settlements without a demonstrable rise in settlement cases.

Future Considerations

• Calls for increased transparency in dispute resolution processes may not be beneficial and could hinder negotiation efforts.

• The need for privacy in consultations is crucial to facilitate settlements without excessive public scrutiny.

Supporting Developing Nations

• The WTO must strengthen support for Least Developed Countries (LDCs) to effectively engage in the dispute resolution system.

• Emphasis on developing legal expertise and providing resources for LDCs to strengthen their negotiation capabilities beforehand to level the playing field.