WORLD TRADE
ORGANIZATIONTN/DS/W/40
27 January 2003
(03-0550)
Dispute Settlement Body
Special SessionOriginal:  Spanish
AMENDMENTS TO THE UNDERSTANDING ON RULES AND PROCEDURES
GOVERNING THE SETTLEMENT OF DISPUTES
PROPOSED TEXT BY MEXICO
Communication from Mexico
The following communication, dated 21 January 2003, has been received from the Permanent
Mission of Mexico.
_______________
Article 3
General Provisions
1. - 6. (…)
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 di spute 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 us ually 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, as well as the possibility of transferring this right of
suspending the application of concessions or other obligations under the covered agreements to
other Member(s) .
8. – 12 (…)
Article 6
Establishment of Panels
1 (…)2.  The request for the establishment of a panel sha ll 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 pr oblem clearly.  In case the applicant requests theTN/DS/W/40
Page 2
establishment of a panel with other than standard term s of reference, the written request shall include the
proposed text of special terms of reference.  If the complaining Member requests the panel to take
actions under Articles 12.6 bis and 12.6 ter, it shall explain why one or more of the measures at
issue are causing or threatening to cause damage di fficult to repair.  It shall also indicate what
actions might stop or counteract the damage or threat thereof, including the actions it intends to
take, as well as the expected trade impact of such actions.
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 th e establishment of the panel:
"To examine, in the light of the releva nt provisions in (name of the covered
agreement(s) cited by the parties to the disp ute), the matter referred to the DSB by (name of
party) in document ... and to make such findings as will assist the DSB in making therecommendations or in giving the rulings provided for in that/those agreement(s).  If so
requested, the panel shall also determine the level of nullification or impairment and may
take actions under Articles 12.6 bis and 12.6 ter."
2. - 3. (…)
Article 11
Function of Panels
The function of panels is to assist the DSB in discharging its responsibilities under this
Understanding and the covered agreements.  Accord ingly, a panel should make an objective assessment
of the matter before it, including an objective assessm ent of the facts of the case and the applicability of
and conformity with the relevant covered agreements, and make such other findings as will assist theDSB in making the recommendations or in giving the rulings provided for in the covered agreements.  If
so requested, panels shall determine the level of nullification or impairment and may take actions
under Articles 12.6 bis and 12.6 ter. Panels should consult regularly with the parties to the dispute and
give them adequate opportunity to develop a mutually satisfactory solution.
Article 12
Panel Procedures
1. – 6 (…)
6 bis.     A complaining party that has indicated that one or more of the challenged measures is
causing or threatening to cause damage difficult  to repair, shall submit in its first written
submission the arguments and evidence thereof.  It shall also submit arguments and evidence
supporting its assertions of what actions might stop or counteract the damage or threat thereof,
particularly those referring to the actions it inte nds to take, as well as the expected trade impact
of such actions.  In such cases, the panel shal l decide, at its first substantive meeting with the
parties, whether the claims of the complainin g party concerning such damage are sufficientlyTN/DS/W/40
Page 3
substantiated and, in exceptional circumstances , shall request the responding party to take
actions to stop or counteract the damage or threat thereof to such complaining party.
6 ter.      Within 30 days, unless the responding pa rty demonstrates that it has taken the actions to
stop or counteract the damage or threat thereof to  such complaining part y, as requested by the
panel, the panel shall authorize the complaining pa rty to take actions to stop or counteract the
damage or threat thereof.  In doing so, the panel shall indicate what acti ons the complaining party
is allowed to take and shall determine the maximum trade impact that those actions may have.
The actions taken pursuant to paragraph 6 bis and this paragraph shall be maintained until the
panel or the Appellate Body decide to terminate su ch actions or, in the abse nce of such a decision,
until the DSB authorizes suspensi on of concessions or other ob ligations pursuant to Article 22,
provided that if no such authorization is requested  within 60 days of the date of adoption of the
panel or the Appellate Body reports, the actions under paragraphs 6 bis and this paragraph shall
be removed immediately.
7. Where the parties to the dispute have failed to develop a mutually satisfactory solution, the
panel shall submit its findings in the form of a written report to the DSB.  In such cases, the report of a
panel shall set out the findings of fact, the applicab ility of relevant provisions and the basic rationale
behind any findings and recommendations that it makes, including those relating to actions under
paragraphs 6 bis and 6 ter.  If a determination of the level of nullification or impairment has been
requested, the panel report shall al so contain such determination .  Where a settlement of the matter
among the parties to the dispute has been found, the report of the panel shall be confined to a brief
description of the case and to reporting that a solution has been reached.
8. - 12 (…)
Article 15
Interim Review Stage
1. (…)2. Following the expiration of the set period of time for receipt of comments from the parties to the
dispute, the panel shall issue an interim report to th e parties, including both the descriptive sections and
the panel's findings and conclusions.  Within a period of time set by the panel, a party may submit a
written request for the panel to review precise aspect s of the interim report prior to circulation of the
final report to the Members.  At the request of a pa rty, the panel shall hold a further meeting with the
parties on the issues identified in the written comm ents.  If no comments are received from any party
within the comment period, without prejudice to the provisions contained in paragraph 4 , the
interim report shall be considered the final pane l report and circulated promptly to the Members.
3. (…)
4.           After the issuan ce of the interim report, any party may request the panel to determine
the level of nullification or impairment pursuant to Article 22.7.  The determination of the level
of nullification or impairment shall form part of the final panel report.
Article 17
Appellate Review
1. – 5. (…)TN/DS/W/40
Page 4
6. An appeal shall be limited to issues of law co vered in the panel report and legal interpretations
developed by the panel.  However, if the panel report includes a determination of the level of
nullification or impairment, such determinat ion may also be the s ubject of an appeal.
7. The Appellate Body shall be provid ed with appropriate administrative, technical  and legal
support as it requires.
8. - 12. (…)13. The Appellate Body may uphold, modify or reve rse the legal findings and conclusions of the
panel,  as well as the action taken under Articles 12.6 bis and 12. 6 ter, and the determination of the
level of nullification or impairment.
14. (…)
Article 22
Compensation and the Suspension of Concessions
1. Compensation and the suspension of concessions  or other obligations are temporary measures
available in the event that the recomme ndations and rulings are not implemented immediately  within a
reasonable period of time .  However, neither compensation nor th e suspension of concessions or other
obligations is preferred to full implementation of a recommendation to bring a measure into conformity
with the covered agreements.  Compensation is volunt ary and, if granted, shall be consistent with the
covered agreements.
2. If the Member concerned fails to bring the m easure found to be inconsistent with a covered
agreement into compliance therew ith or otherwise comply with the recommendations and rulings
immediately  within the reasonable period of time determined pursuant to paragraph 3 of Article 21 ,
such Member shall, if so requested, and no later than the expiry of the reasonable period of time, enter
into negotiations with any party having invoked th e dispute settlement procedures, with a view to
developing mutually acceptable compensation.  If no satisfactory compensation has been agreed within
20 days there after the date of expiry of the reasonable period of time , any party having invoked the
dispute settlement procedures may request authorizati on from the DSB to suspend the application to the
Member concerned of concessions or othe r obligations under the covered agreements.
3.          In considering what concessions or other oblig ations to suspend, the complaining party shall
apply the following principles and procedures:
              (a)          the general principle is that the compla ining party should first seek to suspend
concessions or other obligations with respect to the same sector(s) as that in which the
panel or Appellate Body has found a viola tion or other nullification or impairment;
              (b)         if that party considers that it is not pract icable or effective to suspend concessions or
other obligations  with respect to the same sector(s), it may seek to suspend concessions
or other obligations in other sectors under the same agreement;
              (c)          if that party considers that it is not pract icable or effective to suspend concessions or
other obligations with respect to other sectors under the same agreement, and that the
circumstances are serious enough, it may s eek to suspend concessions or other
obligations under another covered agreement;TN/DS/W/40
Page 5
              (d)         in applying the above principles, that party shall take into account:
                            (i)          the trade in the sector or under the agreement under which the panel or
Appellate Body has found a violation or other nullification or impairment, and
the importance of such trade to that party;
                            (ii)         the broader economic elements related to the nullification or impairment and
the broader economic consequences of th e suspension of concessions or other
obligations;
              
              (e)          if that party decides to request authorizati on to suspend concessions or other obligations
pursuant to subparagraphs (b) or (c), it shall state the reasons therefor in its request.  At
the same time as the request is forwarded to the DSB, it also shall be forwarded to the
relevant Councils and also ,  in the case of a request pursuant to subparagraph (b), the
relevant sectoral bodies;
              (f)          for purposes of this paragraph, "sector" means:
                            (i)          with respect to goods, all goods;
                            (ii)         with respect to services, a principal sect or as identified in the current "Services
Sectoral Classification List" which identifies such sectors;1
              
                            (iii)        with respect to trade-related intellectua l property rights, each of the categories
of intellectual property rights covered in  Section 1, or Section 2, or Section 3,
or Section 4, or Section 5, or Section 6, or Section 7 of Part II, or the
obligations under Part III, or Part IV of the Agreement on TRIPS;
              
              (g)         for purposes of this paragraph, "agreement" means:
                            (i)          with respect to goods, the agreemen ts listed in Annex 1A of the WTO
Agreement, taken as a whole as well as the Plurilateral Trade Agreements in so
far as the relevant parties to the dispute are parties to these agreements;
                            (ii)         with respect to services, the GATS;
                            (iii)        with respect to intellectual property rights, the Agreement on TRIPS.
4. The level of the suspension of concessions or other obligations authorized by the DSB shall
be equivalent to the level of the nullification or impairment  from the date of [imposition of the
measure ] OR [request for consultations ] OR [establishment of the panel ].
5. (…)
6. When the situation described in paragraph 2 occurs, the DSB, upon request, shall grant
authorization to suspend concessions or other obligations within 30 days of such request  the expiry of
the reasonable period of time unless the DSB decides by consensus to reject the request.  However, if a
determination of the level of nullification or impairment pursuant to Articles 15 or 17 has not
been issued and  the Member concerned objects to the level of suspension proposed, or claims that the
principles and procedures set forth in paragra ph 3 have not been followed where a complaining party
has requested authorization to suspend concessions or other obligations pursuant to paragraph 3(b) or
                                                     TN/DS/W/40
Page 6
(c), the matter shall be referred to arbitration. Such arb itration shall be carried out by the original panel,
if members are available, or by an arbitrator appoi nted by the Director-General and shall be completed
within 60 days  after its referral .  Concessions or other obligations shall not be suspended during the
course of the arbitration,  except for those actions authorized by the panel pursuant to Articles 12.6
bis and 12.6 ter.
7. The arbitrator2 acting pursuant to paragraph 6 shall not examine the nature of the concessions or
other obligations to be suspended but shall determin e whether the level of such suspension is equivalent
to the level of nullification or impairment , measuring such nullification or impairment from the date
of [ imposition of the measure ] OR [request for consultations ] OR [establishment of the panel ]. If
actions have been auth orized under Articles 12.6 bis and 12.6 ter, the trade impact of such actions
shall be accounted for in the calculation of the nullification or impairment .  The arbitrator may also
determine if the proposed suspension of concessions or other obligations is allowed under the covered
agreement.  However, if the matter referred to ar bitration includes a claim that the principles and
procedures set forth in paragraph 3 have not been fo llowed, the arbitrator shall examine that claim.  In
the event the arbitrator determines that those prin ciples and procedures have not been followed, the
complaining party shall apply them consistent with paragraph 3.   The parties shall accept the arbitrator's
decision as final and the parties concer ned shall not seek a second arbitration. However, if the level of
nullification or impairment has changed, in or der to conform to this change, parties may
request the DSB to modify its authorization or a new arbitration may be sought.   The DSB shall
be informed promptly of the decision of the arbitrator or the determination pursuant to Articles 15 or
17 and shall upon request, grant authorization to susp end concessions or other obligations where the
request is consistent with the decision of the arbitrator  or the determination pursuant to Articles 15
or 17 , unless the DSB decides by consensus to reject the request.
7 bis.     The right to suspend concessions or oth er obligations may be transferred to one or more
Member(s). In that case, the Member(s) transferr ing the right to suspend concessions or other
obligations and the Member(s) acquiring such right shall jointly request the DSB that it
authorize the latter to suspend concessions or other obligations.  In that case, the DSB shall
grant each acquiring Member authorization to su spend concessions or other obligations within
30 days of such request, unless the DSB decides by  consensus to reject the request.  In no case
shall the transfer(s) exceed the level of  suspension authorized by the DSB.
8. The suspension of concessions or other obligati ons shall be temporary and shall only be applied
until such time as the measure found to be inconsiste nt with a covered agreement has been removed, or
the Member that must implement recommendations or  rulings provides a solution to the nullification or
impairment of benefits, or a mutually satisfactory solution is reached.   However, the suspension of
concessions or other obligations may remain in  force thereafter until such time as which such
suspension becomes equivalent to the level of nullification or impairment from the date of
[imposition of the measure ] OR [ request for consultations ] OR [establishment of the panel ] to the
date on which the authorization by the DSB to suspend was granted.  In accordance with
paragraph 6 of Article 21, the DSB shall continue to keep under surveillance the implementation of
adopted recommendations or rulings, including t hose cases where compensation has been provided or
concessions or other obligations have been suspe nded but the recommendations to bring a measure into
conformity with the covered agreem ents have not been implemented.  In such cases, Members which
have been granted the right to suspend concessions or other obli gations shall notify the DSB and
the relevant WTO bodies of all the measures ta ken as suspension of concessions or other
obligations within three months after the DSB has granted such authorization and thereafter
every six months, until such suspension may no longer be applied.
                                                     TN/DS/W/40
Page 7
9. (…)
Article 23
Strengthening of the Multilateral System
1. When Members seek the redress of a violat ion of obligations or other nullification or
impairment of benefits under the covered agreements or an impediment to the attainment of any
objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures
of this Understanding.
2. In such cases, Members shall:
(a) not make a determination to the effect that a violation has occurred, that benefits have
been nullified or impaired or that the attainment of any objective of the covered
agreements has been impeded, except through recourse to dispute settlement inaccordance with the rules and procedures of this Understanding, and shall make any
such determination consistent with the fi ndings contained in the panel or Appellate
Body report adopted by the DSB or an  arbitration award rendered under this
Understanding;
(b) follow the procedures set forth in Article 21 to determine the reasonable period of
time for the Member concerned to implement the recommendations and rulings;  and
(c) without prejudice to Articles 12.6 bis and 12.6 ter, follow the procedures set forth in
Article 15 or Article 22 to determine the level of suspension of concessions or other
obligations and obtain DSB authorization in accordance with those procedures before
suspending concessions or other obligations under the covered agreements in responseto the failure of the Member concerned to  implement the recommendations and rulings
within that reasonable period of time 
immediately .TN/DS/W/40
Page 8
APPENDIX 3
WORKING PROCEDURES
l. – 4. (…)5. At its first substantive meeting with the parties, the panel shall ask the party which has brought
the complaint to present its case.   Subsequently, a nd still at the same meeting, the party against which
the complaint has been brought shall be  asked to present its point of view.  At the end of the first
substantive meeting with the parties, the panel shall issue its decision  pursuant to Article 12.6 bis.
6. – 9. (…)
10. In the interest of full transparency, the presentations, rebuttals and statements referred to in
paragraphs 5 to 9 shall be made in the presence of the parties.  Moreover, each party's written
submissions, including any comments on the descriptive part of the report , and responses to questions
put by the panel and the documents relevant to the determination of nullification or impairment
pursuant to Article 15 , shall be made available to the other party or parties.
11. Any additional procedures specific to the panel.
12. Proposed timetable for panel work:
(a) Receipt of first written submissions of the parties:
(1) complaining Party: _______ 3-6 weeks
(2) Party complained against: _______ 2-3 weeks
(b) Date, time and place of first substantive meeting
with the parties;  third party session,  action by the
panel under Article 12.6 bis: _______ 1-2 weeks
(c) Receipt of written rebuttals of the parties: _______ 2-3 weeks
(c bis)  Action by the panel under Article 12.6 ter:                                      _______       30 days
from (c)
(d) Date, time and place of second substantive
meeting with the parties: _______ 1-2 weeks
(e) Issuance of descriptive part of the report to the parties: _______ 2-4 weeks
(f) Receipt of comments by the parties on the
descriptive part of the report: _______ 2 weeks
(g) Issuance of the interim report, including the
findings and conclusions, to the parties: _______ 2-4 weeks
(h)  Deadline for party to request review of part(s) of report,
and request for the procedure to determine the level
of nullification or impairment : _______ 1 weekTN/DS/W/40
Page 9
(i) Period of review by panel, including possible
additional meeting with parties: _______ 2 weeks
(I bis)  Deadline for subm issions concerning the level
of nullification or impairment:                                                                   _______       2 weeks
(I ter)  Hearing of the procedure to determine level
of nullification or impairment:                                                                   ________   2–3 weeks
(j)  Issuance of final report to parties to dispute: _______ 2 weeks
(k) Circulation of the final report to the Members: _______ 3 weeks
The above calendar may be changed in the lig ht of unforeseen developments. Additional
meetings with the parties shall be scheduled if required.
__________