RESTRICTEDWORLD TRADE
ORGANIZATIONTN/DS/M/7
26 June 2003
(03-3416)
Special Session of the Dispute Settlement Body
16 – 18 December 2002
MINUTES OF MEETING
Held in the Centre William Rappard
on 16 – 18 December 2002
Chairman:  Mr. Péter Balás (Hungary)
Prior to the adoption of the agenda, the Chairman  stated that this was the seventh meeting of
the Special Session of the Dispute Settlement Body (DSB), the last one of the year.  He stated that
since the last meeting, two new proposals had been tabled, one by Chinese Taipei – this proposal had
already been circulated informally at the last meeting – and also by Ecuador.  He said that he intended
to give the proponents of the proposals the opportunity to present them formally and later to giveparticipants the chance to react to these new proposals and any of the previously tabled proposals.  He
also added that he had just been informed that so me participants wished informally to present a new
proposal and to have an initial discussion during the meeting.  He proposed that the authors of the new
proposal be allowed to present it during the present meeting and that participants be given a chance to
comment on it the following day.  He recalled that as from the first meeting in January 2003, therewould no longer be the possibility of presenting new conceptual proposals.  Turning to address the
future work of the Special Session, he recalled that the Session had been working for nearly a year
and said that he would like to thank participants for their hard work and dedication during this period.
The level of engagement was a positive testimony both to the importance attached by delegations to
preserving the effectiveness and efficiency of the WTO's dispute settlement system and to the
mandate given to agree on clarifications and improvements to the DSU.  He continued that, as he had
recently reported to the TNC, the work carried out during the year had been significant in achievingtwo important results:  firstly, a "critical mass" of proposals had been put forward reflecting a very
broad range of perspectives and addressing aspects relating to virtually all aspects of the dispute
settlement proceedings;  secondly, the discussions of the negotiating issues had enabled all concerned
to better understand the details and implications of the proposals and helped convey a clearer sense of
what was at stake under the various proposed improv ements and clarifications to the DSU.  He noted
that he had found it particularly useful to be able to consult informally with delegations, both
individually, and in various groups and formats, and that this was something he hoped to be able to
continue next year.  He pointed out that there now remained less than six months in which to reach an
agreed text;  he then suggested proceeding to outl ine informally, the approach he proposed following
in January, and that, if as a result of informal discussions, certain elements could be agreed, he wouldthen formally confirm them.
He proposed that from the January meeting there be a switch from the issues-based discussion
to a discussion based on draft legal texts of possible clarifications and improvements.  This discussion
would be based on the text of proposals to be put forward by delegations.  Second, this work would be
conducted on the basis of the compilation of proposed texts which would be prepared by the
Secretariat reflecting various submissions.  He noted that contrary to the compilation that had been
worked on so far, this new working document would reflect specific draft texts of proposed
amendments, decisions, or other forms of texts for clarification and improvement.  Similar to the
earlier working document, this compilation could be updated as new proposals or changes ofproposals were submitted.  He noted that some of the contributions submitted so far already contained
such specific draft legal texts.  These could remain unchanged in the compilation, if the proponents soTN/DS/M/7
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wished.  He urged those delegations who had so far submitted proposals of a more conceptual nature,
without providing specific legal language, and those delegations who wished to resubmit their earlier
proposed legal texts, to do so by Wednesday, 15 January 2003, so that they could be included in the
compilation to be circulated to participants before the meeting at the end of January.  He added that it
was to be understood that the discussion by any delegation of draft legal texts did not prejudge thatdelegation's position with respect to the acceptance of the underlying concept.  He concluded by
stating that he hoped that he had been able to reflect the direction of the discussions.  The Chairman's
approach was agreed to by participants.
The representative of Australia asked that given the absence of a number of developing
countries who had made proposals, but who were absent from the room, that the assistance of theSecretariat be enlisted in bringing to their attention the decision that had just been agreed.
The Chairman agreed that this was a useful proposal and said that he would try to circulate
this information as a letter.  He recalled that there were some important parallel informal consultations
taking place which were particularly pertinent for developing countries.  He also recalled that he had
undertaken to find out in what way interested developing countries could get technical assistance todraft their specific legal texts.  He then confirmed the meeting dates for next year as follows:
28-30 January;  17-18 February;  10-11 March;  10-11 April;  and 19, 21-22 May.  He said that these
dates might not be enough and that he was discussing with the Secretariat the possibility of scheduling
further meetings.  Assuming a consensus was reached, a further meeting had to be scheduled in late
May 2003 to adopt the agreement reached by participants.  He proposed reverting to this at a futuremeeting and then invited the representative of Chinese Taipei to present its proposal.
1
1. Discussion of proposals submitted by participants
1. The representative of Chinese Taipei recalled that its proposal comprised two major parts.
The first was related to the issue of transparency.  She gave in that context full support to the United
States proposal on timely circulation of final reports, as it could facilitate the implementation of the
recommendations and rulings of the DSB, consistently with the time-frame set out in Article 20 of the
DSU.  She said, however, that that her delegation had some reservations against the proposals of the
United States relating to public access to submissions, the opening up of meetings to the general
public, and " amicus curiae " submissions.  With regard to the latter, she recalled that Chinese Taipei
was asked by some participants to clarify its position at the sixth meeting of the Special Session.  As
regards the panel stage, she said that her delegation had made it clear that a combined reading ofArticles 12 and 13 of the DSU made it clear that panels had the discretionary authority to seek
information and technical advice from any individual or body it deemed appropriate.  In relation to the
Appellate Body stage, she said that her delegati on had questioned the need for creating guideline
procedures for the handling of amicus curiae  submissions, believing this to be already covered by
precedents from past cases, which the Appellate Body could follow.  She identified two distinctapproaches on the issue of amicus curiae  submissions.  The first was to prohibit the acceptance of
such briefs and, the second, was to facilitate their acceptance in the process.  Each of these
alternatives had its own flaws; the former option would put the Appellate Body in a straitjacket and
prevent it from consulting individual experts and relevant bodies for their opinions, while the latter
option would put Members with least resources at a disadvantage.  In view of these shortcomings,Chinese Taipei favoured maintaining  the status quo.
2. She said that the second component of the Chinese Taipei's proposal dealt with third-party
rights, which her delegation wanted to see enhanced, although not at the expense of rights of the
parties to the dispute.  It should not make the procedures for the settlement of disputes more complex
and give third parties undue influence over panel and Appellate Body decisions.  In this context, shesaid that Chinese Taipei supported the granting of the following rights to third parties: making
                                                     
1 See document TN/DS/W/25.TN/DS/M/7
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available all documents to third parties, with the exception of those containing business confidential
information; allowing them to attend all relevant meetings; and giving them access to final reports at
the same time as the parties to the dispute.  She said, however, that her delegation had reservations
against the reflection of the arguments of third parties in panel reports and giving third parties the
right to comment on the descriptive part of the report, other than their own submission, and theinterim ruling of the panel.
3. The representative of Ecuador thanked participants for their comments on its proposal,
particularly in relation to the appropriate time  for determining the level of nullification and
impairment, and said that he would like to offer some comments on Article 21 of the DSU and on its
proposed amendments - Articles 21.3 bis and 21.3 ter.  He said that in the spirit of moving forward the
negotiations given the May 2003 deadline and taking into account the views expressed by
participants, Ecuador would like to supplement the wording contained in WT/MIN(01)/W/6, whichwas reflected in the proposal by Japan.  He said that it was Ecuador's considered view that the timely
determination of the level of nullification and impairment was essential in ensuring compliance with
the recommendations and rulings of the DSB.  To that end, the complaining Member should be able to
choose the opportune time to request arbitration to determine the level of nullification or impairment.
In the event of prompt compliance not being possible, the parties' negotiations on compensationwould be facilitated by the knowledge of the level of nullification and impairment.  He said that it was
clear from Ecuador's proposal that the level of nullification and impairment determined by the
arbitrator under the proposed Article 21 bis by Japan (TN/DS/W/22) could be adjusted to take account
of the ruling or findings of the compliance panel.  It was possible for concurrent findings to be made
on the issue of compliance with the recommendations and rulings of the DSB and that on the level ofnullification and impairment.  He noted that Ecuador's proposal as regards the relationship between
Articles 21 and 22 of the DSU was based on other texts which had been presented with a view to
assisting and ensuring that there was greater convergence and consideration of the various views.
Ecuador hoped to be able to present a legal text as regards its initial proposal in relation to Article 22
of the DSU.
4. The representative of Costa Rica welcomed the presentations by Ecuador and Chinese Taipei
and said that his delegation was grateful for the support of its proposal on third-party rights by
Chinese Taipei.  With respect to the proposal by Chinese Taipei, he stated that Costa Rica shared
some of their ideas in relation to public participation in the dispute settlement processes, access to
submissions and amicus curiae  submissions.  He further said that Costa Rica was also of the opinion
that these measures would have a negative effect on the intergovernmental nature of the WTO dispute
settlement system and would place a heavy burden on Members, in particular on developing countries
with meagre resources.  Giving greater access opportunities to the so-called "civil society" would not
help to strengthen the dispute settlement system, rather the opposite; it would politicise discussions,
reduce the space for seeking prompt solutions to trade conflicts and favour the participation and
influence of powerful lobbies from industrialized countri es in such processes.  With regard to third-
party rights, Costa Rica welcomed Chinese Taipei's endorsement of several elements in its proposal,in particular the need to establish a deadline for a third party to express an interest in participating in
panel proceedings and strengthening the rights of third parties by guaranteeing their access both to all
documentation and to all meetings.  Costa Rica noted that it would like to address two points made by
Chinese Taipei in relation to its proposal.  Firstly,  with regard to consultations, he said that the
purpose of its proposal was to prevent the discriminatory rejection of the participation of otherMembers as third parties at that stage of the dispute settlement process.  Costa Rica was conscious
that at this stage, the parties might attempt to have a negotiated settlement to their dispute.  However,
the rights of other Members could be affected during these consultations.  It was therefore important
for a balance to be struck between the current political process, which allowed governments a certain
amount of room for manoeuvre, and protection of third-party rights.  It was for this reason that CostaRica was only proposing an amendment to Article 4 for disputes under Article XXII of the GATT,
with the procedures under Article XXIII of the GATT being maintained as the intrinsically political
process.  Costa Rica noted that Article 4 did not clearly establish how the claim "substantial tradeTN/DS/M/7
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interest" could be proved; he wondered, for example, how should cases be resolved where such
substantial trade interest had not yet been able to develop precisely because of the measures under
discussion.  Costa Rica added that the Member to which the request for consultations was addressed
had the power to decide unilaterally whether "the claim of substantial interest is well-founded".  There
was a contradiction between the provisions of this Article and Article 10.2 of the DSU which merelymentioned a "substantial interest".  The proposal by Costa Rica's aimed to give the DSU coherence in
this aspect and to avoid discriminatory rejection of third-party participation at the consultation stage.
5. Costa Rica welcomed the clarification by Chinese Taipei, in relation to its comments with
regard to third-party arguments being reflected in panel reports and the possibility of their being able
to comment on the interim report.  Costa Rica proposed that these arguments, in addition to being
included in the report, should also be taken into consideration by the panel, provided that they are
limited to the terms of reference established by the parties to the dispute.  A third party, he suggested,might contribute different arguments and points of view in relation to some of the points under
discussion and the panel should take such arguments into consideration.
6. The representative of Thailand expressed it s appreciation to Chinese Taipei for its
contribution to the discussions.  He said that Thailand shared thoughts and arguments similar to those
illustrated in the contribution itself.  He took the opportunity to highlight two points among otherswith which Thailand agreed:  (i) third-party rights should be enhanced to include all three elements
contained in subparagraph (c);  and (ii) also the need to set a deadline as contained in
subparagraph (b) on page 3 of the contribution.  Thailand also welcomed the point made regarding
timely circulation of the final report.  With regard to the proposal by Ecuador, he welcomed it and
said that his delegation would offer some comments after it had studied the proposal and that ofJapan.  As an initial comment, he wondered whether it was necessary to retain the second part of the
last sentence of paragraph 3 ter considering that the parties would have to accept the decision as
definitive.
7. The representative of Israel expressed her thanks to the delegations of Chinese Taipei and
Ecuador for their valuable contributions.  As regards the proposal by Chinese Taipei, she said that
Israel shared several of the points raised in that submission, in particular, the enhancement of third
party's rights – a view shared by Costa Rica, the EU and Jamaica –  this was a topic that, in the view
of Israel, warranted discussion in this review.  In the panel stage, those rights should include
entitlement to receive all information and documents except, of course, for confidential business
information, and to be present at all meetings with  the Panel.  In addition, this should encompass the
right to receive the final report at the same time as the parties to the dispute.  In respect of suggestions
that had been made relating to other rights, such as the one to comment on the interim report, Israelwas still reflecting further on them.  It was, how ever, necessary to maintain a balance between the
rights of third parties and that of the parties to the dispute.  With respect to Ecuador's proposal, she
said that Israel was encouraged to learn that the comments of participants had been taken into account
in its formulation.  By way of a preliminary comment , she said that Israel was generally in support of
an early determination of the level of nullification and impairment in the context of Article 21 of theDSU.  She also said that Israel appreciated the intent to deal with the issue of sequencing between
Articles 21 and 22 of the DSU, by specifying that the determination of the level of nullification or
impairment should be done before the authorization for suspension of concessions was requested.
8. The representative of Mexico welcomed the contributions of Chinese Taipei and Ecuador.  As
regards the text from Chinese Taipei, he said that Mexico would like to make four comments.  First,
in relation to the United States proposal relating to the timely distribution of documentation, he said
that the WTO should make available more resources for translation in order to ensure the timely
circulation of reports of panels and the Appellate Body in all three official languages.  Secondly, he
said that his delegation was in agreement with the views expressed by Chinese Taipei regarding
public access to meetings and to reports.  It was imperative for the inter-governmental nature of theWTO to be preserved.  Thirdly, he said that Mexico was in agreement with Chinese Taipei that it wasTN/DS/M/7
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not necessary to establish guidelines for handling amicus curiae  submissions, as guidance had already
been provided by the Appellate Body.  He added, however, that this statement should not be taken to
mean that Mexico approved of the approach adopted by the Appellate Body.  Fourthly, he noted that
Mexico had been a third-party in several disputes and was in support of the enhancement of third-
party rights.  With respect to the proposal from Ecuador concerning the determination of the level ofnullification and impairment, he welcomed the submissi on of a legal text by Ecuador and said that the
underlying concerns of the proposal were quite similar to that of Mexico's proposal.  Both countries
saw a need for the early determination of the level of nullification and impairment.  However, the two
proposals were likely to produce different results.  The proposal by Mexico had the advantage of
giving immediate effect to the determination.
9. The representative of India welcomed the legal text submitted by Ecuador and said that his
delegation would offer some comments when the meeting switched to an informal mode.  As regards
the proposal by Chinese Taipei, he said that India agreed with the views of Chinese Taipei on the
proposal by United States to open up panel and Appellate Body proceedings to the general public.  He
said that India, however, had some concerns with the position adopted by Chinese Taipei on the
timely circulation of final reports.  He recalled that at the previous meeting of the Special Session, a
number of participants, including Malaysia had stated that the need for a time-gap between the timewhen reports are made available to Members and the general public.  This was necessary to enable
delegations to prepare reports on the cases for the authorities in their respective capitals.
consideration.  With reference to amicus curiae  briefs, he said that India did not agree with the view
that the matter had been settled by the Appellate  Body.  While the Appellate Body had laid down
some guidelines, this had been done without regard to the relevant provisions of the WTO Agreement.With respect to third-party rights, he said that  India saw some merit in the proposal by Chinese
Taipei's proposal and also agreed with the position adopted by Costa Rica and the EU.  However, it
disagreed with Chinese Taipei that Members still needed to demonstrate that they had a "substantial
trade interest" in a matter before they could participate in consultations under Article 4.11 of the DSU.
He said that India was in agreement with the position of Costa Rica on this issue and urged ChineseTaipei to re-consider its position.  Regarding the reservation expressed in the submission against the
reflection of third-party arguments in panel reports, he asked what would be the benefit, if the views
of third parties were not to be reflected in panel reports.
10. The representative of Hong Kong, China thanke d both the delegations of Chinese Taipei and
Ecuador for their contributions.  On the submission of Chinese Taipei, he said that like other
participants, Hong Kong, China was in agreement with most of the views expressed in the proposal.
On the issue of amicus curiae  submissions, he said that his delegation did not agree with the position
adopted by Chinese Taipei and that it agreed with  Mexico and India that the Appellate Body had
exceeded its mandate when it laid down guidelines for the handling of such submissions.  On third-
party rights and the right to be joined in consultations under Article 4.11 of the DSU, he said that his
delegation favoured the more inclusive criterion of "substantial interest", as had been proposed by
Costa Rica.  While Hong Kong, China was generally in agreement with the proposal to grant thirdparties greater access to meetings, it had some hesitation about third-party participation at the interim
review stage.  With respect to the proposal by Ecuador, he said that his delegation was still reviewing
it, and as a preliminary comment, he would like to obs erve that it might be premature to determine the
level of nullification and impairment before the expiry of the reasonable period of time for the
implementation of the recommendations and rulings.  The level determined by the arbitrator would
have to be adjusted, if the non-conforming Member were to partially implement the recommendations
and rulings of the DSB.  It would be helpful if Ecuador could indicate whether it had taken this point
into account.
11. The representative of Cuba thanked Chinese Taipei and Ecuador for their contributions and
said that in relation to the proposal by Chines e Taipei, her comments would focus on third-party
rights, as they had already provided their comments on transparency and amicus curiae  submissions at
the previous meeting of the Special Session.  Regarding transparency, she said that Cuba did not shareTN/DS/M/7
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the view of Chinese Taipei regarding the need to  maintain the requirement of substantial trade
interest, as a pre-requisite to the participation of third parties in consultations.  In that context, she said
that her delegation was in agreement with the views of Costa Rica on this issue.  She further said that
her delegation was in support of the proposal by Jamaica regarding the need for the elaboration of
guidelines in order to avoid the arbitrary rejection of third parties' requests for consultations.  Cubasupported all proposals which would have the effect of strengthening third-party rights.  With regard
to Ecuador's proposal, she stated that Cuba was still examining it and would provide its comments at a
future meeting.
12. The representative of Korea thanked Chinese Taipei and Ecuador for their contributions.
Regarding the proposal by Chinese Taipei, he recalled the comments of his delegation at the previous
meeting of the Special Session and reiterated its support for most of its elements.  With respect to the
proposal from Ecuador, he said that Korea had examined it closely when considering the appropriatetime to determine the level of nullification or impairment.  In Korea's view, the answer to this
question was tied to the remedy structure in force at the WTO.  If it had been possible to obtain a
retrospective remedy under the current system, it would have made sense for the level to be
determined by the original panel, as had been suggested by Mexico.  Given that under the current
system, remedies were of a prospective nature, the appropriate time to determine the level ofnullification and impairment appeared to be some time after the ruling of the compliance panel.
13. The representative of Chinese Taipei said th at she would like to react to some of the
comments made by participants.  In relation to th e participation of third parties in the consultations
phase when the DSB was yet to exercise its adjudicatory functions, she said that it was necessary to
maintain the requirement of "substantial trade intere st", as the parties should be given enough space to
explore the possibility of finding a mutually satisfactory solution to their dispute.  The involvement of
all third parties in the consultations could complicate the process and make it harder for an agreement
to be reached.  She said that Chinese Taipei could agree to Jamaica's proposal that guidelines should
be elaborated in order to prevent the arbitrary refusal of third-party requests for consultations.  She
further said that in the interests of judicial economy, panels and the Appellate Body should not be
required to take into account the views and arguments of third parties in their reports.  They only
needed to address those claims necessary to resolve the dispute between the parties.  A primary
objective of Chinese Taipei's proposal on transparency was to increase the access of third parties to
relevant documentation and to increase generally their knowledge about the dispute settlement
process.  She said that Chinese Taipei would take into consideration the views expressed by
participants when drafting its legal text for the consideration of the Special Session.
14. The representative of Ecuador thanked participants for their comments on its proposal and
said that his delegation was willing to discuss it furt her with any interested participant.  In relation to
the comment by Korea on the sequencing issue, he said that it was imperative for there to be a
multilateral determination on non-compliance before steps could be taken to suspend concessions.
There were several advantages in determining earl y in the process the level of nullification and
impairment.  Firstly, it was an incentive to ensure compliance;  secondly, it could facilitatecompensatory negotiations in the event of non-complianc e;  and thirdly, it would inform the parties as
to the nature of trade interests at stake and assist the Member which wanted to suspend equivalent
concessions in the event of non-compliance and lack of agreement on compensation.  He
distinguished the proposal by Ecuador from that of Mexico and said that its proposal would not have
retroactive effect.  With respect to the question from Thailand, and the last sentence of paragraph 3 ter
in its proposed legal text, he said that the sentence was necessary because Ecuador was advancing the
possibility of an initial arbitration to determine the level of nullification and impairment and that
arbitration could be readjusted as a result of a determination of partial compliance.  Until this partial
compliance determination had been made, the level determined could not be readjusted or appealed
against by the parties.  With respect to the question raised by Hong Kong, China in relation to theappropriateness of determining the level of nullification and impairment before the expiry of the
reasonable period of time, he said that Ecuador's proposal would not bring about a dramatic change inTN/DS/M/7
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the present system; the effect of its proposal would be a few days, perhaps one month before the
expiry of the reasonable period of time, at which time the defendant would have already informed the
DSB about its inability to comply immediately, and that therefore, as from that time, it would no
longer be in compliance with the recommendations and rulings of the DSB.  Since there would now
be a situation of non-compliance, negotiations could commence in order to determine the reasonableperiod of time.  This could also be the appropriate moment to determine the level of nullification and
impairment.
15. The representative of the United States expressed his appreciation for having been given the
opportunity to present the joint submission by Chil e and the United States on improving flexibility
and Member control in dispute settlement proceedings.  He said that a number of participants had
emphasized in their interventions that the central objective of the dispute settlement system was the
prompt resolution of disputes between parties.  For that reason, participants had emphasized both theimportance of ensuring that dispute settlement procedures facilitated resolution of a dispute and, as
part of this approach, the need for flexibility in the system to allow parties to resolve disputes in a
prompt manner.  While Members had acknowledged the general effectiveness of the DSU, there had
been concerns that some limitations in the current procedures might have resulted, in some cases, in
an interpretative approach, or in legal reasoning being applied by WTO adjudicative bodies that couldhave benefited from additional Member review.  In addition, the reasoning and findings of reports
might at times go beyond what the parties consider ed necessary to resolve the dispute, or, in some
circumstances, might even be counterproductive to resolving the dispute.  At present, there was little
that parties or Members could do about this.  Dispute settlement reports were a "take it or leave it"
proposition, where Members must accept or reject the reports in their entirety, without modification.It was the belief of the United States that these negotiations offered an opportunity to change this, and
to introduce greater Member control and input into the dispute settlement system.  The advantages of
having flexibility in the system had been alluded to by a number of Members.
16. The United States believed that these negotiations offered an opportunity to build upon the
flexibility that was already there to ensure that the system itself did not pose obstacles to Members'
efforts to find a solution to their disputes.  The joint submission set forth several options on how this
might be accomplished.  One option would be to provide for interim reports at the Appellate Body
stage, as was currently provided for at the panel stage.  Inasmuch as there was no appeal from
Appellate Body reports, it was particularly importa nt that parties had an opportunity to address the
reasoning in these reports and, through their comments, ensure that they were of the highest quality
and credibility.  Another option would be to prov ide a mechanism for parties, after review of the
interim report, to delete by mutual agreement findings in the report that were not necessary or helpfulto resolving the dispute, thus continuing to allo w the parties to retain control over the terms of
reference.  Again, the purpose of the dispute settlement system was to resolve disputes.  Unnecessary
or unhelpful findings did not serve that purpose.  A third option would be to provide for some form of
a "partial adoption" procedure, in which the DSB would decline to adopt certain parts of reports,
while still allowing the parties to secure the DSB recommendations and rulings necessary to helpresolve the dispute.  In effect, adoption by negative consensus would be applicable not simply to the
report as a whole, but to its parts.  If there was a consensus that part of a report should not be adopted,
it would not be.  A fourth option would be to provide the parties with a right, by mutual agreement, to
suspend panel and Appellate Body procedures to allow time to continue working on resolving the
dispute.  Currently there was no provision for suspending Appellate Body proceedings oncecommenced, and panel proceedings could only be suspended if the panel accepted the request of the
complaining party.  If Members wished to seek the preferred result of a mutually agreed solution, the
dispute settlement process should not be so rigid as to stand in the way.  A fifth option would be to
ensure that members of panels had appropriate expertise to appreciate the issues presented in a
dispute.  Experience to date had shown that it coul d be helpful for the panelists to have the appropriate
expertise concerning the particular issues in a dispute, although the current agreement did not address
this issue.  Finally, another option would be to provide some form of additional guidance to WTO
adjudicative bodies on the scope and nature of the task presented to them.TN/DS/M/7
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17. The United States said that, in the view of the co-sponsors, through elaboration and adoption
of these options, Members could strengthen their ability to ensure that the dispute settlement system
served them in their efforts to resolve disputes, and to ensure high quality reports which enjoyed the
highest level of credibility and support.  The co-s ponsors looked forward to discussing their joint
submission on greater Member control and greater flexibility at the present meeting and in futuresessions.  The representative of the United States said that the co-sponsors welcomed input on how to
structure the options in the joint submission and said that the co-sponsors were willing to work with
participants in developing the particular details for each option and on other means by which
Members could improve the operation of the DSU.
18. The representative of Chile said that its joint proposal with the United States was inspired by
one of the fundamental objectives of the dispute settlement system – the prompt settlement of
disputes.  For this objective to be realised, it was necessary for the parties not only to have controlover the process, but also the requisite flexibility to  negotiate mutually agreed solutions.  He said that
in Chile's experience, it had not always been possible for the parties to achieve this objective,
particularly at the Appellate Body stage.  He sa id that Chile was willing to support proposals aimed at
expanding third-party rights, but cautioned that increased rights meant increased responsibilities.
increased third-party rights but emphasized that it must be borne in mind that along with such rightsgo obligations.
19. The representative of Costa Rica thanked Chile and the United States for their proposals.  He
also thanked Mexico for its proposal which was aimed at addressing one of the major problems
confronting the dispute settlement system.  He said that the DSU had proved to be an extremely useful
tool for all Members, particularly smaller countries such as Costa Rica which had limited political andeconomic power and had to rely on international law to protect their rights.  The dispute settlement
system had undeniably fulfilled this objective and Costa Rica could attest to its benefits.  However, it
should be recognized that the current dispute settlement system did not differ very much from the
previous GATT system, particularly in relation to the remedies that could be obtained by the
complaining Member.  Like the GATT system, remedies under the DSU were prospective incharacter; past wrongs were not rectified even if it could be established that they had damaging effects
on the economy of a Member.  It was in this context that the proposal by Mexico was very instructive.
As regards the proposal relating to the retroactive determination and application of nullification and
impairment, he said that while it might appear to be very revolutionary, this concept was not unknown
under general international law.  The rules of the International Court of Justice required the
elimination of all consequences of the illegal act and the re-establishment of the situation which had
existed previously.  The WTO Agreements on Anti-Dumping and Subsidies and CountervailingMeasures had elements of retroactivity.  To prevent the abuse of this remedy, it would be essential to
determine as from which date the level of nullification and impairment should be calculated.  It would
not be proper, for example, to allow a Member to seek redress if it had not taken any steps to assert its
rights which had been violated for a considerable period of time by the responding Member.  As
regards preventive measures, he said that this remedy was not unknown in most domestic andinternational legal systems.  While it could safeguard the rights of Members, it could also pose serious
challenges for countries with small economies were their exports subjected to such measures.  Steps
must be taken to avoid the gross abuse of this remedy.  He urged participants to consider seriously the
proposal by Mexico, as it could strengthen the dispute settlement system for the benefit of each
Member.
20. The representative of India welcomed the proposal by Mexico and said that it had identified
one of the major problems facing the dispute settlement system.  Currently, it was possible for a
measure which had been found to be WTO-inconsistent to remain in force for at least three years
without any consequence.  With respect to the proposal on early determination and application of
nullification and impairment, he said that it was India's understanding that the determination made bythe panel in respect of the level of nullification and impairment could subsequently be modified by the
Appellate Body, and that suspension of concessions  and compensation would be effective from theTN/DS/M/7
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date of adoption of the panel/Appellate Body reports by the DSB.  It had also been stated by Mexico
that its proposal would result in fewer arbitrations to determine the reasonable period of time.  Given
these statements, he queried whether the concept of reasonable period of time would have any
relevance in the dispute settlement system if the proposals of Mexico were adopted.  He added that
according to the Mexican proposal, if there was any disagreement between the parties regarding themeasures taken in compliance with the DSB's recommendations and rulings, the suspension of
concessions and compensation would not be lifted unti l the findings of the compliance panel.  Such a
result would amount to penalizing the losing party, if the measure was subsequently found to be
WTO-consistent.  He urged Mexico to re-consider this aspect of its proposal.  With respect to
retroactive determination and application of nullification or impairment, he said that it required
careful consideration and that his delegation would provide detailed comments at a future meeting of
the Special Session.  He said that as an interim comment, India was of the view that if the remedy wasgoing to be available from the date of imposition of the measure, it could raise certain technical
problems comparable to those experienced in cases involving quantitative restrictions taken for
balance-of-payments reasons.  Such measures woul d be consistent when first adopted, but could be
found later to be WTO-inconsistent.  He said that if panels were required to determine the consistency
or otherwise of a measure from the date of the panel request and/or from the date of imposition of themeasure, there could be considerable difficulties in fulfilling this requirement.  Given these
considerations, India was a little hesitant about supporting this proposal.  With regard to preventive
measures, he said that unless detailed conditions were agreed upon, this measure could be abused
easily by Members.  It was necessary for there to be a definition of the circumstances that would
amount to "damage that would be difficult to repair".  He referred to the statement made by CostaRica and said that while it was true that the remedy was available in a number of domestic
jurisdictions, there were detailed rules governing when  it could be awarded in a dispute.  The absence
of detailed rules at the WTO meant that the issue ha d to be approached with maximum care.  He said
that there was the possibility that the introduction of this remedy would undermine the effectiveness
of trade remedy measures.  It could be envisaged that some countries might take the view thatirreparable damage would be caused should their exports be subjected to trade remedy measures, such
as anti-dumping duties.  He inquired whether the responding Member would be required to suspend
the application of the questioned measure only against the complaining Member or against all other
Members.  With respect to negotiable remedies, he said that the concept could give rise to certain
practical problems related to implementation and needed careful scrutiny.  It had been demonstrated
that suspension of concessions might not be a viable alternative in disputes involving developing
countries.  It was because of this practical limitation that India had advocated that developingcountries should be given the right to cross-retaliate in its joint proposal with a number of developing
countries.  Since retaliation was also likely to hurt the complaining Member, it might be difficult to
get countries that would be willing to purchase the right to subject its own economic operators to
higher levels of duty and other forms of retaliatory measures.
21. The representative of Australia welcomed the joint proposal by Chile and the United States
and said that it contained important ideas that deserved the close attention of Members.  He also
thanked Mexico for its innovative and interesting proposal which addressed one of the key problems
confronting the WTO dispute settlement system, namely the possibility for an inconsistent measure to
remain in place for a considerable time without any consequences.  He said that Australia was broadly
supportive of the thrust of the proposal and believed that there was scope for improvement of thesystem in order to induce prompt and effective compli ance.  With regard to the specifics, he said that
Australia had some reservations against the proposals relating to preventive measures and negotiable
remedies.  It was, however, open to the proposal re lating to the early termination and application of
nullification and impairment and was assessing the implications of making this determination
retroactively.  He said that the overall shortening of the current DSU time-frames was in a wayconsistent with the objective of the Mexican proposal, which was to ensure prompt and effective
compliance.  Simple time-saving measures effectively reduced the amount of time a WTO-
inconsistent measure could remain in place.  In th is context, he said that the Australian proposal,TN/DS/M/7
Page 10
which suggested accelerated procedures for disputes involving safeguard measures and other simple
time-saving measures, shared the same objective as the Mexican proposal.
22. The representative of Mexico recalled the discussion that took place on its proposal at the
November Special Session and said that his delegation was pleased with the attention being given to it
by participants.  He further said that Mexico was also encouraged by the acknowledgement ofparticipants in the negotiations that the one of the major problems facing the dispute settlement
system was the ability of a Member to maintain an inconsistent measure for a considerable period of
time without any consequences.  He said that given the fast approaching deadline, it was imperative
that participants start exploring the possibility of reaching consensus on the proposals.  On its part,
Mexico was willing to take into account the comments on its proposal and work with any interested
participant in further refining its elements.  He said that he would attempt to provide responses to
some of the questions posed by participants concerning its proposal.  As a general comment, he saidthat Mexico's proposal was practical in that it intended to address one of the major problems facing
the dispute settlement system.  It was not revolutionary as had been labelled by some participants; the
essence was to try to incorporate recognised concep ts in domestic and international legal systems in
the dispute settlement system.
23. With respect to question posed by Thailand and Norway concerning the early determination
and application of nullification and impairment, he said that the proposal by Mexico that the award
should be kept confidential until the adoption of the Appellate Body report was defensible.  He
recalled in that connection that in its proposal Mexico had suggested:  (a) giving Members the right to
appeal arbitration awards; or (b) having the Panel/arbitrator modify its award in light of the findings
of the Appellate Body.  Confidentiality was only relevant for the second option.  Procedures underArticle 21.5 would essentially involve a parallel exercise of a Panel and an arbitrator, in which the
arbitrator would not circulate its award before a final decision was either made by the panel or
Appellate Body.  He said that this idea had been incorporated into the proposal, partially because of
Members' familiarity with it.  He said that Mexico  was willing to explore different approaches to this
matter.  With respect to the question raised by Norway regarding whether the determination of the
level of nullification or impairment was a question of law to be resolved by the Appellate Body, he
said that Mexico did not have a definite answer at this moment and would reflect further on it.  He
said that should Members consider that it was not a question of law, they could modify Article 17 of
the DSU to allow the Appellate Body to take up this issue.  With respect to the question posed by
Hong Kong, China regarding what would happen if the Appellate Body were to modify the findings
of the panel, he said that if the first option was selected, the level of nullification and impairment
determined by the panel would not be reviewed by  the Appellate Body, but the arbitrator would have
the opportunity to modify its confidential preliminar y ruling in light of the findings by the Appellate
Body's finding.  If the second option was selected, the Appellate Body itself could modify the level of
nullification and impairment determined by the panel.  In both cases, however, the authorization to
suspend concessions would be based on a final award.  With respect to the question by Norway
whether they would be a system of daily fines on a pr ogressive scale, he said that this was not part of
Mexico's proposal, but given its potential to induce compliance with the recommendations and rulings
of the DSB, Mexico had an open mind on it.  With respect to the questions posed by Argentina,
Brazil, Canada, Chile and Cuba concerning the im portance of awards being made only after final
decisions had been either made by the panel or the Appellate Body, he said that while an award could
be made on the basis of provisional findings, ultimately what mattered was that an authorization tosuspend concessions had to be based on a final DSB decision ( res judicata ).  He said that even if the
right was not created for the DSB to adjust the level of nullification or impairment, the level, as
determined by the Panel/arbitrator, would have to reflect the findings made by the Appellate Body.
The reason why Mexico had proposed that the level of nullification or impairment be decided by the
original panel was that it would concentrate the minds of Members on the actual level of nullificationor impairment before they decided to initiate a case.  It would also encourage parties to negotiate
which could invariably result in lesser appeals.TN/DS/M/7
Page 11
24. With respect to the questions posed by Canada, India and Malaysia concerning whether
Members would no longer have a reasonable period of time to implement the recommendations and
rulings of the DSB, he said that it was not the inte ntion of Mexico to abrogate this right of Members.
However, by permitting the suspension of concessions from the day of the adoption of the
panel/Appellate Body report, Mexico was attempting to give meaning to Article 21.3 of the DSU,which obliged Members to promptly comply w ith the recommendations and rulings of the DSU,
unless it was impracticable to do so.  The incentives created by the suspension itself would induce
Members into complying "in the shortest period possible within their legal system".  It was unfair to
expect the complaining Member to bear the brunt of  slow compliance, in addition to the costs it would
have already suffered as a result of the maintenance of the illegal measure by the responding member
before and during the dispute settlement proceedings.  The representative of Canada expressed doubts
about whether knowledge of the level of nullification or impairment would actually induce Members'compliance with the recommendations and rulings of the DSB.  The representative of Mexico said
that while knowledge of the level of nullification or impairment might not modify Members' conduct
in all cases, knowledge of the economic realities, including the amount at stake could certainly prove
to be relevant in some cases.  One possible advantage was that it could reduce the number of actions
initiated under the DSU.  The representative of Canada said that the Mexican proposal could makecompliance less enticing, (e.g., by creating domestic pressure to "just pay for it").  The representative
of Mexico accepted the truth of this statement and said that this proposal was, in any event, an
improvement of the current system, which allowed Members to violate their obligations without even
attempting to "just pay for it".  He said that Mexico would reflect on the suggestions by some
participants that the early determination and application of nullification or impairment should not bemade mandatory.  The representative of Brazil recalled that the elimination of the interim report at the
Panel phase had already been proposed, and said that it this was to be accepted, then an opportune
time had to be found to trigger this procedure.  He said that Brazil was convinced that the concept of
an early determination and application of nullification or impairment would be an important
improvement of the current system, no matter what the precise moment was determined to be in orderto activate the arbitration.  He further suggested that the complaining Member should be made to
request the level of nullification or impairment of its benefits, presumably in its first submission.  The
representative of Argentina queried whether this would not result in a parallel litigation on the validity
and the level of nullification or impairment.  The representative of the EC asked whether the panel
could resolve the two issues at the same time.  The representative of the Mexico said that it would be
better if parties were to start talking about the level of nullification or impairment, once all their
substantive arguments had been considered (at least at the Panel stage).  He noted that in somejudicial systems, it was possible for the substance of the violation to be argued together with the level
of damage.
25. The representative of Argentina had inquired if it was possible that a measure that had been
modified and later condemned in an Article 21.5 process could cause a level of nullification or
impairment different to the one caused by the original measure.  He referred to Article 22.4 of theDSU which provided that "[t]he level of suspension of concessions or other obligations authorized by
the DSB shall be equivalent to the level of the nu llification or impairment".  Bearing in mind that
Article 21.5 referred to "recourse to these dispute settlement procedures", he said that it was the
expectation of Argentina that an Article 21.5 panel would rule that the new level of nullification or
impairment should conform with the requirements of Article 22.4.  The representative of thePhilippines observed that the Mexican proposal appeared to have introduced a new element in the
injury analysis.  The representative of Mexico stated in response that it was not the objective of the
Mexican proposal to introduce a new concept, bu t to bring forward the time when the level of
nullification or impairment was determined and when authorization to suspend concessions was
granted.  With these new elements, the current DSU rules would apply.
26. With respect to the question posed by Thailand whether Mexico's proposal on retroactive
determination and application of nullification and impairment was similar to the common law
principle of restitution in integrum , the representative of Mexico said that the aim of its proposal wasTN/DS/M/7
Page 12
to rebalance concessions upset by the WTO-inconsistent measure being maintained by the responding
Member.  With respect to the other question posed by Thailand concerning whether the date of the
retroactivity could be determined by the panel or Appellate Body, the representative of Mexico stated
that this was not foreseen in the proposal.  However, should Members agree on the appropriate
moment, it could be applied in all cases.  He inquired whether Members would want thisdetermination to be made by the adjudicative bodies.  The representative of Chile observed that this
concept could be more easily implemented in trade remedies cases such as anti-dumping.  The
representative of Mexico concurred with this statement and said that retroactive determination had
been made in some cases.  That an important perc entage of disputes in the WTO related to trade
remedies underscored the potential benefit of this proposal.  He continued by saying that so long as a
determination of the level of nullification or impairment was feasible (and experience had shown that
even SPS measures and TRIPS obligations could be measured), applying it retrospectively was only amathematical process.  In any event, he said Mexico failed to see why a de facto  waiver should be
permitted in other agreements.
27. The representative of Chile had asked whether the determination would take into account both
the static and dynamic effects.  The representative of Mexico said in response that his delegation was
still working on some guidelines, but had not proposed any particular methodology.  He said thatMexico was interested in working with all particip ants to develop the guidelines, particularly those
which had been involved in arbitrations.  The representative of Argentina asked Mexico whether it
was possible for agreement to be reached on its proposal before the May 2003 deadline.  The
representative of Mexico reiterated the willingness of his delegation to work closely with participants
with a view to refining the elements of its proposals with a view to getting agreement on it before theMay 2003 deadline.  The representative of Korea asked whether the introduction of a retroactive
remedy regime would also necessitate a fundamental change in the current DSU, for example, to
Article 19.1.  The representative of Mexico agreed that in order to introduce such a regime, Article 19
had to be amended.  The representative of the EC raised the issue of the overlap between preventive
and retroactive remedies, stating that they dealt with similar issues.  He inquired about how they couldbe combined effectively.  The representative of Mexico stated in response that the amount of
preventive measures could be deducted from the final determination of nullification or impairment.
Preventive measures served to bring a timely relief before a particular industry was severely damaged,
something that retroactivity might not be able to achie ve in due time.  If the final level of nullification
or impairment turned out to be smaller than that of the preventive measures authorized (either because
the measure was considered not to be WTO-inconsistent or because the level of a certain
inconsistency was lesser than what originally was expected), the responding Member should be ableto receive compensation for such excessive application of preventive measures, therefore restoring the
balance of rights and concessions.
28. The representative of the Philippines had stated that compensation was only effective if
actually given.  The right to suspend concessions had more apparent than real benefits.  The
representative of Mexico stated that it was not the objective of its proposal to create an obligation tocompensate retroactively, but rather to give more  leverage to complaining Members in compensation
negotiations.  With respect to suspension of conces sions, he said that retroactive determination and
application would enhance the negotiating position of complaining Members and induce compliance
by responding Members.  He admitted that in certain cases, it would be difficult for some Members to
suspend concessions prospectively let alone retroactively.  The representative of the Philippines askedwhat would happen to old measures such as 1916 Anti-dumping Act of the United States.  The
representative of Mexico responded that any amendments agreed to in the negotiations could only be
applied prospectively.
29. With regard to the proposal on preventive measures, the representative of Korea stated that it
might conflict with Article 7 of the DSU, which set out the standard terms of reference of panels andArticle 11 which defined their functions, as well as the principle that the recommendations and rulings
of the DSB could not add to, or diminish the rights and obligations provided in the coveredTN/DS/M/7
Page 13
agreements (Articles 3.2 and 19.2 of the DSU).  The representative of Mexico said that since its
proposal would have the effect of rebalancing concessions granted by Members, it would allocate
better the rights and obligations of Members, therefore giving effect to the relevant provisions of the
DSU.  He further added that a timely authorization to tackle the negative effects of a potentially
illegal measure would effectively preserve the rights acquired by the complaining Member under theWTO Agreement.  If preventive measures were incorporated into the DSU, they would become an
integral part of the rights and obligations of the covered agreements.  Therefore, its exercise would be
consistent with Articles 3.2 and 19.2 of the DSU.  The representative of Thailand inquired how the
proposal would work in practice.  The representative of Mexico responded that Mexico was proposing
a two-step system:  (i) the panel could, in excep tional circumstances, request the responding Member
to suspend the application of the challenged measure (or rather, its harmful effects) for a certain
period of time;  and (ii) if this suspension was not achievable or done within a short period, then thepanel might be able to authorize the complaining Member to take measures to prevent the damage that
would be difficult to repair.  The representative of Canada asked whether Mexico was proposing to
insert a unilateral determination into the process.  The representative of Mexico said that was not the
case and that the provisional determination would be made by the Panel.  The representative of Chile
stated that the proposal by Mexico would invariably  result in the prejudging of the substantive issue
between the parties.  The representative of Mexico responded that the panel would be required to
make a pre-assessment of a number of elements, including the validity of the measure and the nature
of the irreparable damages that were likely to occur should the measure be maintained, before
authorising recourse to this remedy.
30. The representative of Thailand had asked whether Mexico would consider inserting punitive
damages into the system.  The representative of Mexico reiterated his statement that it was not the
objective of its proposal to create new obligations, but rather to restore the balance of rights and
obligations under the WTO Agreement.  Against this background, it was not the intention of Mexico
to introduce such a concept into the system, as it would create a new obligation.  The representatives
of Norway and the EC asked Mexico to give an indication of the type of cases where this remedycould be invoked.  The representative of Mexico gave the following example: "Assuming Member
"A" has recently imposed anti-dumping duties on goods from Member "B".  Member "B" is of the
view that the measure is unjustified and requests the establishment of a panel and seeks authorisation
to impose a preventive measure.  The panel, after making a pre-assessment of the relevant elements
and analysing the specific situation of the domestic industry in "B", concludes that irreparable damage
would be caused, if the challenged measure were to remain in force and as such requests "A" to
suspend the measure or its harmful effects.  To co ntinue exporting to country "A", country "B" offers
to post a bond covering the duties to be paid on its exports to A.  However, "A" argues, that its
internal legislation does not allow it to accept the bond.  In the circumstances, the panel allows "B" to
provide loans to exporters to pay those anti-dumping duties in order to avoid the irreparable damage."
31. The representative of Hong Kong, China had asked what these irreparable damages might be.
The representative of Norway asked whether this remedy could be introduced with a high threshold
for its utilization, such as used in the Internatio nal Court of Justice and other international bodies.
The representative of Brazil queried how one could establish a well-founded right and the damage that
might ensue I there was a delay.  The representative of Argentina asked whether a panel report would
be needed and how potential abuses could be limited.  The representative of Mexico replied that it
would be necessary to develop clear criteria in respect of which circumstances could be regarded asserious enough to justify immediate action in order to prevent irreparable damage from occurring.  He
emphasized that each case was different and every situation had its own particularities that needed to
be taken into account.  He said in that connection that the rules, customs and practices of other
international adjudicatory bodies could be useful in that regard.  Given the nature of this remedy, it
should be resorted to sparingly.
32. The representative of Canada had asked what measures the defending Member could apply
during the suspension of the challenged measure.  The representative of Mexico agreed with CanadaTN/DS/M/7
Page 14
that, in some situations applying no measure at all might be a feasible option, but in other situations
some type of interim measure might be essential.  The measures taken by the defending Member
might well vary from case to case.  The representative of Canada inquired whether in all cases the
Member could apply the new measure immediately.  The representative of Chile questioned how it
would work with respect to legislative measures.  The representative of Mexico replied that theremight be various scenarios in which the immediate suspension of the measure was not necessarily
feasible, for example, in the case of legislation.  He added, however, that an important feature of
Mexico's proposal was that it created the legal means for a Member to suspend a measure, or at least
its harmful application, something that at the moment did not exist.  The representative of Canada also
asked if there would be any control in the selection of the measures that would be applied.  The
representative of Mexico stated that preventive measures could be applied only to the extent
authorized by the Panel and should not affect the interests of third-country Members.  While thecomplaining party would be free to choose the measure to be taken, that measure should be aimed
exclusively at reducing the damage that its domestic industry was suffering; so, in practice, this might
reduce the scope to a limited set of actions.
33. The representative of Chile had asked if the new measure was going to be adopted by the
DSB and whether it could be appealed.  The representative of Mexico replied that they had not taken adefinitive position on whether the section on preventive measures had to be adopted before the rest of
the panel report, and that it was still considering this point.  He recalled that currently, panels made
preliminary determinations on various issues, which were only adopted together with the full report.
Inasmuch as this authorization was an issue of law or a legal interpretation, it might be subject to an
appeal.  The representative of Brazil asked whether Mexico considered applying these remedies in allcases or only in areas such as trade remedies.  The representative of Mexico said in response that it
was probably easier to apply this concept to cases involving trade remedies.  He said, however, that
the intention of Mexico was to implement preventive remedies for all WTO cases.  The representative
of the Philippines asked if Mexico considered that a game of creditors and debtors would be created,
if the measure was found to be WTO-inconsistent.  The representative of Mexico responded that tosome extent this game of creditors and debtors alre ady existed.  It existed even without respecting the
rights of third Members.  A Member that needed to react to a measure taken by another one would do
whatever was necessary to protect its domestic industry, regardless of the long-term consequences.
What Mexico was proposing was having the opportunity of legally and transparently avoiding the
irreparable damages.  Moreover, the boundaries of the measures would be effectively regulated and
limited.  The representative of the Philippines asked who would determine whether the harmful
effects of the challenged measure had been mitigated.  The representative of Mexico responded thatthe complaining Member had an interest in seeing to the mitigation of the effects of the challenged
measures.
34. With respect to negotiable remedies, the representative of Ecuador asked how this would
work in practice and whether it could be created in the light of other proposals.  The representative of
Argentina asked how the negotiation could take place.  The representatives of Argentina and Canadaasked how the transfer of the right could be implemented so as to be compatible with the disciplines
of the WTO.  The representative of Mexico answered that the system would not need any substantial
change, to implement negotiable remedies.  Once a Member had received an authorization to suspend
benefits, that Member would have the legitimate right to take measures which would otherwise be
WTO-illegal up to a certain amount.  The concept of negotiable remedies would only require a changeof name of the Member enjoying such a benefit, which could be made through a simple joint
notification or a monitoring system.  Mexico did not see what principle of WTO law would be
infringed, if negotiable remedies were to be implemented.  The representative of Norway asked
whether this proposal would still be necessary if compensation was made stronger or more binding.
In response, the representative of Mexico asserted that the mere idea that a third-country Membermight be able to acquire the right to suspend conces sions might, in turn, provide the incentives for the
losing party to buy that right, thus enhancing compensation.  By knowing there was an effective threat
of retaliation, the losing party would be inclined  to negotiate with the complaining party on a moreTN/DS/M/7
Page 15
suitable compensation.  He said that strengthening the provisions relating to compensation alone had
an obvious limitation – in cases where the responding Member adopted an uncooperative attitude.
The responding Member was likely to ignore any ma ndatory compensation awarded in that regard.
The threat of suspension of concessions would induce it to negotiate seriously with the complaining
Member on an acceptable compensation package.
35. The representatives of Hong Kong, China and Cuba had asked if this proposal would not
make the WTO system more political.  The representative of Mexico responded by saying that the
imposition of an illegal measure, in and of itself, already involved many political considerations, both
domestic and external.  The concept of suspension of benefits itself had the object of permitting the
imposition of illegal measures for a certain time and up to a certain amount, as a response to an illegal
measure of another Member.  The concept of negotiable remedies had the mere object of granting this
right to a Member, other than the complaining Member.  The representative of Canada asked how theestablishment of a market of restrictive trade measures could be avoided.  The representatives of the
Philippines, Poland and Uruguay added that it would create a clearing-house.  The representative of
Mexico noted that Article 22 of the DSU already allowed for the adoption of these restrictive
measures in the form of suspension of benefits.  He did, however, agree that Mexico's proposal would
create a market for the suspension of benefits.  The objective was to make suspension of concessionsmore efficient, while ensuring that this remedy was not abused by Members.  Where a Member was
unable to suspend concessions and negotiate that right away to a Member willing and capable of
suspending concessions towards the responding Member, the complaining Member would obtain a
tangible benefit from the third country which, in turn, would be given a right to suspend concessions
consistently with WTO rules.  The representative of Chile asked if there could be any guarantees thatthis remedy would not be abused by Members.  The representative of the Philippines noted that some
Members might initiate disputes merely for the benefit of accumulating these rights.  The
representative of the European Communities sought assurances that a lucrative door would not be
opened with the introduction of such measures.  The representative of Mexico stated that it was only
fair for a Member whose rights had been infringed upon by another Member to be compensated.  Theentitlement would only be limited to the level of nullification or impairment caused by the violating
measure.  Who suspends the concessions towards the responding Member was not as important as
compensating the complaining Member for the injuri es that it had sustained.  The representatives of
Argentina and Hong Kong, China asked why would a Member acquire from the complaining Member
the right to suspend concessions towards the responding Member.  The representative of Mexico
stated that it could well be that the acquiring Member would be responding to pressures from its
domestic industry to take action against products originating in the responding Member.  Thepossibility of being able to do that legitimately might appeal to that country.  The purchase price was
likely to be attractive to the acquiring Member and it could even pay for it in kind.  An undertaking to
invest in the complaining Member or provide it with technical assistance could be envisaged.
36. The representative of Poland had observed that the right of suspension of concessions was a
right to be exercised by the complaining Member and that transferring it to another Member wouldnot be appropriate.  He suggested that the implementation of such a measure could increase
protectionism.  The representative of Mexico argued in response that protectionist behaviour had
existed since the creation of trade, thousands of years ago.  He said that while Mexico accepted that
its proposal was ambitious, it could not agree with the view that it would create protectionist
pressures.  He reiterated his statement that Article 22 of the DSU already authorised the adoption ofrestrictive measures in response to the adoption of an inconsistent WTO measure.  Contrary to the
view expressed, the Mexican proposal would create incentives for compliance with the
recommendations and rulings of the DSB.  It also proved that the long held view that suspension of
concessions was anathema to trade creation was wrong.  Suspension of concessions could be trade
creating depending on how it was applied.  The view  that some Members owing to their economic and
trade conditions could apply or benefit from suspen sion of concessions had also been disproved.  By
being able to negotiate its right to another Me mber in exchange for a benefit, suspension of
concessions could benefit any Member who had been authorized to take such an action.TN/DS/M/7
Page 16
37. The representative of Chile noted that Chile had not always held the same views as the United
States in the WTO, especially in these DSU negotiations.  However, they did share common interests
and concerns on some key issues in the multilateral trading system, including on agriculture.  The
joint proposal by the United States and Chile was intended to address the systemic concerns of both
countries over the evolution of the jurisprudence and practices of the Appellate Body.  He said thatChile had been observing with growing concern, ce rtain decisions by panels and the Appellate Body
that had disregarded the context, object and history of the negotiations of the Uruguay Round
Agreements.  Those conclusions were re-shaping the history and re-writing the results of the
negotiations, thereby altering the balance of rights and obligations of Members.  He recalled that
Chile had repeatedly emphasized that the WTO dispute settlement mechanism was not a judicial
system per se  and that it had been designed in such a way as to assist Members to resolve their trade
disputes.  This was how the DSU came into being, as a delicate balance between the inherentlybilateral nature of any dispute and the fact that such a mechanism unquestionably formed part of a
multilateral framework that conferred rights and obligations on all WTO Members, including when
they were not party to a particular dispute.  He stressed that a central objective of the dispute
settlement system was the prompt settlement of disputes between the parties in a manner that was
consistent with the WTO Agreement.  To achieve such a settlement, Chile believed that there must beroom for manoeuvre, allowing the parties involved to negotiate mutually agreed solutions, including
in the later stage of the process.  Panels and the Appellate Body could not be viewed as courts of law
and their procedures should be adapted to the requirements of the parties involved, granting them the
flexibility they needed to work towards negotiated settlements.
38. The reports of panels and the Appellate Body allowed the parties to the dispute to gain a
clearer insight into what was at stake and constituted a basis for dispute settlement.  They were not
enforceable rulings, as in national legal systems.  It  was in this context that the parties should retain
control over reports issued by panels and the Appellate Body, until such time that they were adopted
by the DSB.  Conferring power on the parties di d not mean denying the multilateral nature of the
DSU.  This was why Chile supported some proposals that reaffirmed this multilateral character, suchas those aimed at enhancing the rights of third parties.  He stressed, however, that the rights of third
parties should not equal or exceed those of the part ies to the dispute.  It was in the same vein that
Chile would not accept proposals that envisaged a larger role akin to those of courts of law for panels
and the Appellate Body.  Turning to the joint proposal, he said that the United States and Chile were
conscious that some of its elements needed further elaboration and that they were ready to work with
interested participants with a view to refining these elements.
39. The representative of Colombia thanked Chile and the United States for their proposal which
added a new dimension to the negotiations.  Giving parties tighter control over the dispute settlement
mechanism and making it more flexible were indeed objectives which clearly formed part of the
mandate conferred by the ministers at Doha.  She agreed with the view that Members were frequently
resorting to the dispute settlement system to fill in gaps in the multilateral trade agreements left by the
negotiators.  For the proper functioning of the system, it was essential for the parties to exercisegreater control over the dispute settlement process.  Greater control would entail greater responsibility
on the part of users of the dispute settlement mechanism.  The need to improve the chances of a
successful outcome had, in some cases, led some Members to call for decisions and interpretations
which went beyond the real capabilities of the system.  Turning to the options identified by the
proponents, she said that Colombia could support the elements relating to the introduction of aninterim review at the Appellate Body stage, partia l adoption of reports and flexibility as regards the
suspension of panel and Appellate Body proceeding s.  She sought further details on the proponents'
ideas on ensuring that panel members had the appropriate expertise and on the guidelines for the
interpretation of the WTO Agreements.  Regarding the latter, she made reference to the proposal by
Jamaica concerning the need to kept an accurate record of the negotiating history of thesenegotiations.TN/DS/M/7
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40. The representative of Norway said that his delegation found the joint proposal quite
intriguing.  For its part, Norway was satisfied with the rulings of panels and the Appellate Body, even
though some cases had gone against it.  The move from positive consensus to negative consensus in
the dispute settlement system was a major step forwar d that should not be undermined.  Turning to the
specifics of the proposal, he said that the proposal raised a number of questions which he would liketo highlight.  With respect to the proposal rela ting to the introduction of interim reports at the
Appellate Body stage, he said that given the proposal by some participants that they were unnecessary
and should be discarded at the panel stage, as they did not serve any useful purpose, other than to give
an opportunity to the parties to correct factual errors of panels and not influence legal interpretations
or findings, he wondered why the proponents were proposing that they should be introduced at the
Appellate Body stage.  With respect to the proposa l which would allow the parties to delete by mutual
agreement certain parts of reports, he expressed doubts  as to how it would work in practice.  His own
experience with the dispute settlement mechanism indicated that it would be difficult to get agreement
of the parties to delete certain portions of a report.  He wondered if there was any link between this
proposal and the issue of non-compliance with the recommendations and rulings of the DSB.  It was
not certain if this proposal would lead to full compliance or partial compliance with reports and
whether it would facilitate agreement between the parties on how the legislation of the responding
Member should be changed.  With respect to subparagraph (c) regarding partial adoption of reports,
he again expressed doubts about how it would work in practice.  Under the current system, positive
consensus was required if a report was not to be adopted by the DSB.  He wondered whether the
proponents wish this to be changed.  He also asked whether positive consensus would be required to
delete certain portions of reports.  It would be a retrograde step if Members were to return the practiceof decision-making under the GATT in dispute settlement cases.  With reference to subparagraph (d),
he requested the proponents to provide further explanation as to how the suspension of panel and
Appellate Body proceedings would actually work in practice.  On subparagraph (e), he agreed with
the proponents that panelists should always have the appropriate expertise, but questioned if the
problem was not exacerbated by the requirement that panelists should not be nationals of the disputingor interested countries.  He said that this proposal might fit in with the proposal by the European
Communities on permanent panelists, thus ensuring that persons with the requisite expertise would
always be available.  With reference to subparagraph (f), and specifically as regards the rules of
interpretation of WTO agreements, he stated that there were already rules of interpretation in public
international law, based on the Vienna Convention and also on the rules of procedure of the
International Court of Justice that had been applied by panels and the Appellate Body.  These had
been agreed amongst all countries in the world and had never been challenged to the best of hisknowledge.  He inquired as to what sort of rules of interpretation the parties would like to see apply
specifically to trade agreements that would be different from the ones applied in other agreements.
He referred to the issue of judicial economy and said that in appeals one or both of the parties might
complain against the exercise of judicial economy and the extent to which it should be applied.  The
answer would clearly depend on the case at hand and it was doubtful if any particular guidance couldbe given in advance on how it should be exercised.  He asked the proponents if they foresaw any
guidelines on judicial economy under their proposal.
41. The representative of Malaysia stated that this was a proposal with which Malaysia would
like to align itself.  To that end, Malaysia was considering whether to be a co-sponsor of the proposal.
It should be borne in mind that the dispute settlement body was not a court of law, but rather a forumin which to settle trade disputes between Members.  It was important, given the recent history of what
many Members had experienced and were still experiencing, that they gained control of the dispute
settlement process.  There were many interesting points in the paper which he looked forward to
discussing with other participants.  Some elements needed further elaboration and he hoped this
would be provided in due course.  As regards the introduction of interim reports at the Appellate Bodystage, he said that Malaysia was convinced about its value to the dispute settlement process and that
the time that would be lost could be compensated by the reduction of the time-frame in other stages of
the process.  With regard to partial adoption, he said that it was an interesting proposal which
deserved further consideration.  With regard to the expertise of panelists, he said that this could beTN/DS/M/7
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achieved independently of the proposal by the EC on permanent panelists.  With regard to rules of
interpretation of WTO Agreements, he said it was Malaysia's expectation that the rules would provide
guidance in respect of the substantive decisions of the panels and Appellate Body.
42. The representative of Costa Rica thanked the delegations of Chile and the United States for
their proposal and said that it was currently being studied by his authorities in San José after which he
hoped to provide substantive comments on it.  He, however, had some preliminary questions which he
would like to put to the parties.  With respect to th e proposal relating to the ability of the parties to the
dispute to delete by mutual agreement certain parts of reports, he said that this might be in
contradiction with the terms of Article 7.3 of the DSU, which gave the authority to the DSB to
approve the terms of reference of panels.  He further noted that where the parties agree on special
terms of reference, it was within the right of every Member to pose questions and seek clarifications.
This demonstrated the multilateral involvement in the setting up of terms of reference.  It would
therefore seem inappropriate to give the parties th e authority to delete certain parts of reports by
mutual agreement.  The fact that Article 7.2 of the DSU provided that "panels shall address the
relevant provisions in any covered agreement or agreements cited by the parties to the dispute was no
justification that they could also delete certain parts of the reports.  He stated that this proposal could
not be reconciled with the objective of making the dispute settlement process more transparent, asaccess to the expunged parts would be denied to other Members and the general public.  He stated that
the value of case law in the WTO system went well beyond the cases themselves.  Findings in
previous cases were an excellent tool for shaping the multilateral trading system of the future and
helping all Members to learn more about the operation of the Agreements.  Allowing parties to delete
certain elements of the Panel report would undermine the contribution which the dispute settlementsystem made to the multilateral trading system as a whole.  He inquired further information from the
proponents as to how their proposal would impact on the interests of third parties.
43. The representative of Australia thanked Chile and the United States for their proposal which
was aimed at improving flexibility and Member control in the WTO dispute settlement.  He said that
the proposal raised a number of important issues which warranted further reflection by themembership.  Australia saw merit in options (a), (b) and (d) of the proposal (i.e. provision of interim
reports at the Appellate Body stage;  mechanism fo r parties to delete findings in a panel or Appellate
Body report;  right to suspend panel and Appellate Body procedures to allow parties to resolve the
dispute).  Australia believed that these options would enhance Member control over the dispute
settlement process.  He sought clarification from the co-sponsors on the other elements of the
proposal.  In relation to element (c) (partial adoption procedure), he welcomed comments from the
co-sponsors on possible modalities for this issue.  In relation to element (e) (ensuring that panel
members have the appropriate expertise), he asked if the co-sponsors envisaged an enlargement of the
expertise of panellists in the context of paragraphs 1, 2 and 7 of Article 8 of the DSU, or whether they
had other ideas on this point.  In relation to element (f) (provision of guidance to the WTO
adjudicative bodies), he said that Australia was unclear on the rationale and modalities of this element
of the proposal.  In particular, he sought clarif ication from the co-sponsors on how this element would
be developed;  would it be the parties to a di spute or the WTO membership who would offer this
guidance.  He also wondered what form would th e "guidance" would take, and under what provision
of the WTO agreement would such guidance be given.  He asked whether the co-sponsors envisaged a
structured debate taking place in the DSB prior to the adoption of reports.  He said that Australia was
willing to work with the proponents  with a view to further refining the elements of the proposal.
44. The representative of Hong Kong, China thanke d the United States and Chile for their paper
and said that his authorities in Hong Kong, China were currently analysing it.  He said that in the
meantime he would like to offer some preliminar y comments about some elements of the proposal.
Generally, while giving control of the dispute settlement system to the parties had some benefits,
including ensuring that panels and the Appellate Body did not deviate from their terms of referenceand stray into rule-making or "filling the gaps", such as in the case of amicus  briefs, it could also
compromise the effectiveness of the dispute settlement mechanism, as the parties could deleteTN/DS/M/7
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whichever parts of the reports that they did not like, even if they were not controversial and based on
solid legal reasoning.  Turning to the specifics, he said that proposal (a)  did not seem to have any
adverse effects, but it would prolong the Appellate Body process.  He inquired from the proponents,
whether they had any ideas regarding how to make up the time that would be lost.  With respect to
proposal (b), he said that under the current rules and procedures, parties could just make a request to"review the precise aspects of the interim report" at the panel stage, and the final panel report needed
only to "include a discussion of the arguments made at the interim review stage".  Thus, the proposal
appeared to go much further than what was contemplated under Article 15 of the DSU.  Nothing was
mentioned about the power of the parties to delete anything from the interim panel report.  He
expressed some doubts on how this proposal would work in practice, assuming that it was accepted by
participants.  He said that it could be a long and difficult process for the parties concerned to agree to
deleting anything from an "interim Appellate Body report", especially in cases which involved anumber of co-complainants.  With respect to proposal (c), he said that it was unclear who, and on
what criteria would be used to decide which part(s) of the report should be adopted.  It was not clear
whether it would be by positive consensus or by negative consensus.  If the DSB as a whole were to
take this decision, it would be a retrograde step as it would invariably mean returning to the decision-
making process under the GATT.  With regard to proposal (d), he said that Hong Kong, China did nothave much difficulty with this proposal per se , as suspension of panel or Appellate Body procedures
were not uncommon.  With respect to proposal (e), he said that Hong Kong, China was generally
supportive of it, but would appreciate receiving further information as to how this could be achieved.
He asked whether the proponents were considering a system or permanent panelists or a hybrid
system.  With regard to proposal (f), he said th at Hong Kong, China shared the concerns raised by
Australia.
45. The representative of Canada thanked the United States and Chile for their proposal and said
that he would like to offer some preliminary commen ts.  He said Canada shared the view that the
dispute settlement system of the WTO was a central element in guaranteeing security and
predictability in the multilateral trading system.  Since coming into force, the DSU had demonstratedits effectiveness to the satisfaction of Members.  A central objective was the clarification of the rights
and obligations of Members under the agreements for all Members.  In this respect too, it was only
right that Members would want a DSU and DSU juri sprudence that was coherent and not subject to
the individual views of some Members.  Turning to the specifics of the proposal, he said that Canada
found proposal (c) relating to partial adoption, an intriguing proposition.  He asked how this proposal
would operate in practice.  With respect to proposal (d), he said that Canada saw merit in giving the
parties to the dispute further opportunities to explore the possibility of reaching a mutually agreedsolution to their dispute.  With respect to proposal (e ), he said that Canada fully shared the view that
adjudicators needed to have the appropriate expertise.  He said that Canada did not, however, have the
same enthusiasm for the other proposals.  With respect to proposal (b) regarding the possibility of the
parties to the dispute to delete certain portions of reports, he said that that it raised a number of issues
which had to be analysed critically.  With respect to proposal (f), he said that it also raised a numberof issues that needed to be clarified further by the proponents.  It was unclear what sort of guidance
should be provided and the role of the DSB in formulating such guidelines.  He concluded by saying
that Canada was willing to engage the proponents with a view to further refining some of the elements
in the proposal.
46. The representative of Switzerland thanked the delegations of Chile and the United States for
their contribution and said that she would like to make some general observations.  She noted that the
two stated objectives of the proposal were to impr ove flexibility and to strengthen Member control
over the dispute settlement process.  She said that while Switzerland appreciated the need for
flexibility in the dispute settlement system to allow the parties to explore the possibility of reaching
mutually agreed solutions, it did have some hesitations regarding the second objective.  She said thatSwitzerland agreed that with the proponents that the WTO dispute settlement system was "almost
unique".  The independence of panels and the Appellate Body were crucial to the effective
functioning of the dispute settlement system.  The principle of negative consensus had ensured theTN/DS/M/7
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smooth operation of the system by removing the power of Members to interfere in the process.  This
had resulted in cases being decided on legal considerations, as opposed to political considerations.
Against this background, she said that Switzerland was hesitant to support the second objective of the
proposal, as it would invariably undermine the effect iveness of panels and the Appellate Body.  She
added that while Switzerland had been displeased with some of the jurisprudence of the AppellateBody, particularly its controversial interpretation of Article 13 of the DSU relating to amicus curiae
briefs, it still was of the firm view that its in dependence should not be compromised.  Turning to
address the specifics of some elements of the proposal, she said that it was unclear whether the parties
to the dispute could comment only on the factual aspe cts of the report of the Appellate Body or also
the legal findings under item (a) of the proposal.  With respect to proposal (e), she asked whether it
was being implied that in the past, panelists did not have the requisite qualifications and experience.
She asked whether the proponents had any specific ideas on how this objective could be achieved andwhether they were inclined to support the proposal  by the EC relating to the system of permanent
panelists.  She wondered whether the proposal would impact on the rights of third parties; it was not
clear whether they would be allowed to comment on the interim report.
47. The representative of Japan thanked the delegations of Chile and the United States for their
proposal and said that she would like to offer some preliminary comments.  She said that Japan was in
agreement with the proponents that the DSU had worked quite will since its entry into force in 1995.
With respect to the proposal relating to the interim re view of Appellate Body reports, she said that her
delegation would appreciate some clarifications on the scope of review to be undertaken by the
parties.  Would it only be limited to the factual aspects of the report or also cover the legal reasoning
as well.  She said that her delegation was also concerned about the impact this proposal would haveon the overall time-frame for settling disputes, especially considering the short time-frame within
which reports of the Appellate Body had to be finalised.  With respect to giving the parties to the
dispute the possibility to delete certain parts of the report, she said that this procedure could be abused
by parties and asked if there were any guarantees against such potential abuses.  With respect to
partial adoption, s said that her delegation shared the concerns expressed by other delegations as tohow this would work in practice.  On the susp ension of proceedings, she welcomed the underlying
reason but asked at what stage of the procedure would the parties be able to exercise this right.  She
asked in that connection whether there would be any time-frames for resuming the suspended
proceedings.  She wondered whether the decision rested  solely with the parties or whether panels and
the Appellate Body would have any role.  With respect to the qualifications and expertise of panelists,
she said that Japan was supportive of this proposal and asked whether the proponents had any ideas as
to how this objective would be fulfilled.  With respect to providing guidance to adjudicative bodies,she wondered whether the proponents intended the development of general or specific guidelines.
48. The representative of Ecuador thanked the delegations of Chile and the United States for their
proposal and said that he would like to offer some  preliminary comments.  He recalled that Ecuador
had also in its earlier statement proposed the need for the parties to be given control over the dispute
settlement process.  He said, however, that the approach being advocated by it was different from thatbeing advanced by the proponents.  He said that certain aspects of the joint proposal were not clear
and needed to be clarified.  It was, however, doubtful if this could be accomplished before the end of
May.  A distinction needed to be drawn between giving the parties control over the case in which they
were involved and the dispute settlement process itself.  It was imperative for the independence of
panels and the Appellate Body to be guaranteed.  A close examination of the proposal by Chile andthe United States revealed that it would not compromise the independence of panels and the Appellate
Body.  It was, however, not clear if giving total control over the dispute settlement process would in
some way affect the orientation of reports of panels and the Appellate Body.
49. The representative of Israel thanked the delegations of Chile and the United States for their
contribution and said that Israel was supportive of the proposal to give the parties to the dispute the
flexibility to negotiate mutually agreed solutions to their dispute.  She said, however, that Israel would
be interested in getting more information abou t how the proposal would work in practice.  SheTN/DS/M/7
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emphasized a particular interest in the clarification of the issue (f) relating to the provision of
additional guidance to the adjudicative bodies.  She said in that context that her delegation was in
agreement with the views expressed by Australia, Hong Kong, China and Canada.
50. The representative of Egypt thanked the United States and Chile for their proposal and asked
whether the proponents could clarify certain aspects of their proposal, particular the elements relating
to partial adoption under item (c) and additional guidance to adjudicative bodies under item (f).  He
also asked whether the proposed modifications to current dispute settlement system would not affect
its neutrality and compromise the security and predictability offered by it.
51. The representative of Argentina thanked the United States and Chile for their proposal and
said that he would like to make a preliminary observation.  While the proposal contained some
interesting elements, it also contained some controversial aspects which needed to be examined
carefully.  He said that Argentina was generally in agreement with the views expressed by previousparticipants, particularly Norway and Australia.  He further said that Argentina was open to
considering any clarifications that might be provided by the proponents on the controversial aspects of
their proposal.  Turning to the specifics of the prop osal starting with item (b) which would authorise
the parties to delete certain parts of the report by mutual agreement, he said that Argentina was not
clear how it would operate in practice.  He also asked whether third parties would have any role toplay in issues which might be of systemic interest to them.  He observed that the implementation of
this proposal might possibly diminish the role of th e reports of the panel and the Appellate Body to a
certain degree.  That would mean that the total impact over the system might not necessarily be
positive.  Regarding item (c) concerning the partia l adoption of reports, he queried how this would be
put into effect.  He said that this proposal might affect the way in which reports were currentlyadopted.  The principle of negative consensus which was used in adopting reports was one of the most
significant achievements of the Uruguay Round and it should not be compromised.  He further said
that while Argentina was in agreement with the view that the parties should be able to request panels
and Appellate Body to suspend their work, it was also of the view that the provisions of Article 12.12
could be adapted to give effect to the intention of the proponents.  As regards item (e), he asked howit could be ensured that panelists had the requisite knowledge and expertise in any given case.  With
regard to item (f), he inquired whether the proponents were of the view that additional rules were
required to supplement Articles 31 and 32 of the Vienna Convention.
52. The representative of the European Communitie s thanked the United States and Chile for
their proposal and said that he would like to give  a preliminary reaction to it, as the views of the
member states of the European Union had not been sought.  As the proposal stood, it was still in the
form of objectives and it did not enable the reader to have full knowledge of the precise intent andconsequences of such a proposal.  Before turning to comment on the proposal, he said that he would
like to make two general observations:  An objective of the dispute settlement system was the prompt
settlement of disputes between the parties.  This implied that the bilateral character of the dispute
settlement system should be preserved.  It should be  also borne in mind that according to Article 3.2
of the DSU, "the dispute settlement system of the WTO is a central element in providing security andpredictability to the multilateral trading system".  It was further stated in this article that "Members
recognize that it serves to clarify the existing provisions of those agreements in accordance with
customary rules of interpretation of public international law".  As rightly observed by Canada, apart
from its function of settling disputes directly between Members, the dispute settlement system also
played a vital role through its clarification of the existing agreements, thus ensuring security andpredictability in the multilateral trading system.  He said that in the joint proposal, the proponents
envisaged the situation where the WTO Agreement would not contain a specific provision to address
a situation and a panel would attempt to fill this gap through its ruling.  In such a situation, they
contended that the Panel might add to or diminish Members' rights and obligations under that
particular agreement.  While this might happen, it  was not in the view of the EC something which
could be said to affect the actual operation of the DSU.  He asked if the United States could provide a
list of cases where such situations might have happened.  He said that it so happened to be the caseTN/DS/M/7
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that usually the prevailing party would in most cases be satisfied with the rulings of the Panel and the
Appellate Body and the losing party would have strong reservations against the adoption of the
reports.
53. Turning to the proposal starting with item (a) concerning interim reports at the Appellate
Body stage, he asked whether the report would be circulated only to the parties or whether it would becirculated also to third parties, the entire WTO membership and also to the general public.  Given the
view of the United States that disputes should be settled promptly, she wondered whether the
introduction of this new phase would not lengthen the time-frame for the settlement of disputes.  He
wondered whether the United States had any suggestions regarding where time-savings could be made
in the dispute settlement process to compensate for the extra-time that would be added as a result of
its proposal.  With regard to item (b) concerning giving the parties to the dispute the possibility to
delete certain parts of the report by mutual agreement, he queried how this would work in practice.He wondered whether the rest of the membership would see the contents of the reports before the
deletion of those parts by the parties or whether the report would be restricted only to the parties.
Given the commitment of the US to transparency in  the dispute settlement system, he wondered how
that objective could be reconciled with this proposal.  He further asked about the procedure that would
be followed by the parties in such situations and whether they needed the consent of the Panel or theAppellate Body before exercising the right to dele te those portions of the report they regarded as
unhelpful to the resolution of the dispute between themselves.  He asked the US to confirm if the
objective of this proposal was indeed to give the parties to the dispute "the ability to reject specific
aspects of the report that hinder settlement or do not accurately reflect the obligations that were
agreed on by the negotiators", as reported in a recent bulletin issued by the USTR.  With regard toitem (c) concerning the partial adoption of reports, he asked whether consensus would be needed for
the partial adoption of the reports.  He also asked the proponents if their proposal would not affect the
value that Members attached to panel and Appellate Body reports.  If a Member had been found to
have violated five obligations under different WTO Agreements, he wondered whether the report
could still be adopted if the parties had agreed that implementation was only required in the case ofonly one agreement.  He stressed that a primary objective of the dispute settlement system was to
ensure full consistency and wondered how this objective could be reconciled with the proposal by the
proponents.  He also said it might be difficult to reconcile this proposal with the commitment of the
US to transparency in the dispute settlement system, as apart from the parties, no one will know the
rulings of the panel or the Appellate Body on the other claims initiated by the complaining Member.
With respect to item (d) concerning the suspension of  Appellate Body proceedings, he said that the
EC was willing to consider it, as it was of the view that the parties should be given adequateopportunities to explore the possibility of finding a mu tually satisfactory solution to their dispute.  It
was, however, concerned about the impact it w ould have on the time-frame for the settlement of
disputes.  With respect to item (e), he wondered whether the proponents were proposing a different
version of a system of permanent panelists advocated by the EC.  He also requested the proponents to
clarify their proposal relating to providing additional guidance to the WTO adjudicative bodies.
54. The representative of Brazil thanked Chile and the US for their proposal and said that Brazil
shared the view expressed by other delegations, in cluding Norway that the dispute settlement system
had worked satisfactorily over the years.  He recalled that Brazil had on numerous occasions stated
that it was necessary for the Special Session to focus on issues on which it was possible likely to reach
consensus given the May 2003 deadline.  He stated that this would help Members reflect better on thetension that existed between the legitimate interests of the parties to have on the one hand, some kind
of influence over the process and on the other hand, the systemic interests of the all Members to have
impartial panels and an efficient system of adjudication.  He said that as compared to other proposals
on the table, the proposal by the United States and Chile was very different in that it would transform
the present system of adjudication by an independen t body of panels/Appellate Body into a bilateral
exercise of adjudication in the presence of pane ls/Appellate Body, where th eir role would be limited
to only assisting the parties to find a solution to thei r dispute.  Turning to address the specifics of the
proposal starting with item (a) concerning the intr oduction of an interim phase at the Appellate BodyTN/DS/M/7
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stage, he said that the purpose of interim reports at the panel and the Appellate Body stages would not
necessarily be the same.  He said that his delegation was willing to seriously consider this proposal, as
it would afford an opportunity to the parties to co mment on the legal findings of the Appellate Body.
With regard to item (c) concerning partial adoption of reports, he said that for this proposal to
function effectively, it would need to satisfy th e following elements: first, there needed to be
consensus among the parties to the dispute before the procedure for partial adoption could be invoked;
second, the report must be adopted by negative consensus and it would be necessary to have at least
two meetings of the DSB for that purpose.  At the first meeting, Members could be informed that the
parties would like to have recourse to the procedures for partial adoption in their case and at the
second meeting, the report could be considered for adoption.  With respect to item (d) concerning the
suspension of Appellate Body proceedings, he said that his delegation was willing to consider it and
asked whether this right could be exercised after the issuance of the interim report to the parties.Regarding item (e), he said that one way of ensuring that panellists possessed the right qualifications
and expertise was to improve the existing indicati ve list of panelists being maintained by the
Secretariat.
55. The representative of India thanked Chile and the United States for their proposal and stated
that he would like to make some preliminary commen ts.  With regard to the introduction of an interim
phase at the Appellate Body stage, he said that his delegation was supportive of it, as it would afford
an opportunity to the parties to point out any errors or inconsistencies.  With regard to the proposal
which would allow the parties to delete certain parts of the report by mutual agreement, he said that
his delegation had some strong reservations.  With respect to the possibility of partial adoption of
reports, he recalled that India had recently argued before the DSB that certain parts of the Panel reportin the Indian automotive sector case should not be adopted, as the Panel had exceeded its terms of
reference.  With regard to the instant proposal, however, he said that India had some doubts as to how
it would operate in practice.  There were a number of unanswered questions, including who would
decide on the request; he also wondered whether it  would be the parties, or whether the DSB would
have any role in it.  He said that India was in support of the statement made by Brazil concerning theneed to hold at least two DSB meetings before the adoption of the report.  He said that his delegation
would later provide further comments on this proposal.  In relation to the proposal concerning the
suspension of Appellate Body proceedings, he said that his delegation was prepared to seriously
consider it, as it could give the parties more possibilities for exploring a mutually satisfactory solution
to their dispute.  The proposal would, however, lengthen the time-frame for the settlement of disputes.
With regard to the proposal on appropriate expertise of panelists, he said that his delegation was
generally in support of it, although it had some questions regarding how it would be operationalized.He wondered whether the existing indicative list wo uld be modified, or whether new selection criteria
would be drawn up.  With respect to the proposal concerning providing additional guidance to the
WTO adjudicative bodies, he said that India had the same concerns as other delegations, including
Norway.  By way of a general comment, he noted that one of the most significant results of the
Uruguay Round was the creation of a semi-automa tic dispute settlement system under which the
independence of panels and the Appellate Body was guaranteed.  Giving too much control over the
dispute settlement system to the parties would appear to be a retrograde step and undo the
improvements which were made to the GATT dispute settlement system.
56. The representative of Singapore thanked the United States and Chile for their proposal and
said that her delegation shared the assessment made by Brazil concerning the tensions between the
interests of the actual parties to the disputes and the systemic interest of all Members in having an
independent and effective dispute settlement mechanism.  She further stated that there was some
contradiction between some of the elements proposed and the objective of having an expeditious
settlement of the dispute between the parties.  With  respect to item (a) of the proposal concerning the
introduction of an interim phase in Appellate Body proceedings, she stated that her delegation couldsupport it, as it could facilitate the implementation of the DSB's recommendations and rulings.
Regarding item (b) of the proposal, she said that Singapore shared the same concerns as Hong Kong,
China and had some hesitation about the proposal rela ting to allowing the parties to delete certainTN/DS/M/7
Page 24
parts of the report by mutual agreement.  It would appear that this proposal was inconsistent with the
key principles of transparency and security and predictability.  It was not clear who would decide
which parts of the report were unnecessary or unhelpful in resolving the dispute.  She also suggested
that it might take quite some time to achieve mutual agreement as to which parts of the report were to
be deleted.  Regarding item (c) concerning partial adoption, she said that her delegation was willing toconsider it further.  With respect to items (d), (e) and (f), she said that her delegation shared some of
the concerns previously expressed by other participants.
57. The representative of Korea thanked Chile and United States for their proposal.  He said that
Korea viewed this proposal in the same vein as Mexico’s proposal, as they both sought to make
fundamental changes to the DSU.  He said that Ko rea would be interested in seeing how the ideas
contained in the paper would be transformed into concrete legal texts.  With regard to proposal (c)
concerning partial adoption, he said that Korea shared the views expressed by Norway and other
participants that the proposal would weaken the dispute settlement system and make it comparable to
the GATT's dispute settlement system.  With regard to item (f) concerning additional guidance to the
WTO adjudicative bodies, he said that this proposal might compromise the independence of panels
and the Appellate Body.
58. The representative of the United States than ked participants for their thoughtful comments
and suggestions on the proposal from the United States and Chile.  He noted that the United States
and Chile would be happy to respond to the preliminary questions that had been raised when the
meeting moved into informal mode.  He stated that  the proponents looked forward to working with all
delegations in further refining the proposal and developing appropriate legal texts.
59. The representative of Chile thanked participants for their comments on their proposal and said
that the proposal was formulated on the basis of their experiences with the dispute settlement
mechanism.
60. The representative of the United States expressed his appreciation for the comments and
questions from participants.  He said that Chile and the United States were conscious of the need for
further work on their proposal.  The previous day's discussion was a good beginning for the work thatneeded to be done.  The United States looked forw ard to working with other delegations in developing
further the elements contained in the proposal and in putting the proposal into legal text.  He assured
delegations that the proposal was not intended to affect either the independence of panels and the
Appellate Body or what had been described as the "automaticity" of the WTO dispute settlement
system.  Rather, he suggested that the proposals all built on elements of the existing DSU; they
continued the approach of allowing parties to have flexibility in the process and Members to
ultimately control the process.  As most of the questions revolved around the particular options set outin the joint submission, the co-sponsors had tried to group their responses to the questions by each
option.
- Making provision for interim reports at the Appellate Body stage, thus allowing parties to
comment to strengthen the final report
61. In response to assertions that interim review at the panel stage was only for the purpose of
correcting factual findings.  The representative of the United States responded that interim review was
currently not limited in scope, and parties had submitted comments on both the factual and legal
aspects of interim reports.  Panels have sometimes refined, corrected and improved reports in
response to comments in both areas.  It was true that an appeal was limited to issues of law and legalinterpretation, so naturally comments would be likely  to concentrate on the legal aspects.  However, it
was just as important that the facts were accurately presented in an Appellate Body report.  Perhaps
one of the largest benefits of interim review at th e appellate stage would be that it would offer the
Appellate Body an opportunity to receive parties' views on issues that had never been commented on
by the parties.TN/DS/M/7
Page 25
62. With respect to questions about the overall effect on the time-frame and whether the
proponents had in mind time savings from other parts of the process, the representative of the United
States stated that there would be no effect on the time-frame if the interim report were moved from
the panel to the Appellate Body phase.  If the interim review process were to be retained at the panel
stage and introduced at the Appellate Body phase, that could add three weeks or so to the process.  Hesuggested that there might be an opportunity to find an offsetting time saving elsewhere in the
process.
63. Regarding whether interim report would be circul ated only to the parties to the dispute, or
whether third parties and the entire membership would also be eligible to receive it, the representative
of the United States responded that it was envisa ged that the interim review stage at the Appellate
Body phase would operate in the same manner as at the panel stage.
- Providing a mechanism for parties, after review of the interim report, to delete by mutual
agreement findings in the report that were not necessary or helpful to resolving the dispute,
thus continuing to allow the parties to retain control over the terms of reference
64. In response to questions concerning the decision on which findings should be deleted, the
representative of the United States reiterated that any decision to delete findings would have to be bythe agreement of both the parties.  The parties wo uld need to work out between them which, if any,
findings were not necessary or not helpful to resolve the dispute.  He noted that the opportunity to
suspend the proceedings - which was also part of the proposal - could be helpful in this regard since it
would allow parties to agree to suspend the procee dings while they worked on finalizing an agreement
to delete findings.
65. In replying to queries about the effect on transparency, he replied that the co-sponsors would
be interested in hearing Members' views on this, in particular whether this aspect of the interim
review should be treated differently from other aspects.
66. With respect to questions about the proposal's effect on the dispute settlement system
generally, he stated that the purpose of the proposal was to facilitate a resolution of the disputebetween the parties by deleting findings that were not necessary or helpful to a resolution.  Parties
were in the best position to know which findings would help them resolve a dispute, and which might
be counterproductive.  The co-sponsors were of the view that there should not be situations in which
the dispute settlement system hindered settlement of disputes.  He also noted in this respect the
direction in Article 3.7 of the DSU, that mutually acceptable solutions were to be preferred under the
WTO dispute settlement system.  The co-sponsors saw the proposal as operating in a manner similar
to that of Article 12.7 of the DSU.  Article 12.7 provid ed that if the parties reached an agreement, the
report was to be confined to reporting that a solution had been reached.  He noted that this provision
had been employed a number of times, including after the interim report had been provided to the
parties, in which case all of the findings contained in the report were deleted.  Under this proposal,
there would actually be more transparency and jurisprudence since those findings that helped to
resolve the dispute would be retained and made available to the DSB for its consideration and
adoption.  At the same time, the proponents did not see that findings that were not necessary or not
helpful to resolving the dispute would be findings that the DSB would want to consider for adoption.
If those findings would not aid in settling the dispute, then what was their purpose in the report?
Panels and the Appellate Body did not have the job of providing an interpretation of a provision
outside of the context of resolving a dispute.  The Marrakesh Agreement explicitly provided Memberswith the exclusive authority to provide interpretati ons of the provisions of the WTO agreement.  If
Members wished a particular provision to be clarified just for the sake of clarification, then they
always had the ability to provide an authoritative interpretation of that provision.
67. Regarding the effect of this proposal on full compliance, he stated that the proposal would not
diminish full compliance and could in fact enhance it, since it would facilitate the prompt resolutionTN/DS/M/7
Page 26
of disputes.  The obligation of compliance applied only to the recommendations and rulings of the
DSB.  If a finding was not adopted by the DSB, then there was noting with which to comply.  If a
Member complied with all the DSB's recommendations and rulings, then there was full compliance.
In response to questions about whether this proposal would allow a pick and choose approach to the
findings, he said that the proposal was designed to allow parties to choose to delete findings that werenot necessary or helpful to resolving the dispute between them.  With respect to whether the Appellate
Body or panel would first be consulted before the parties agreed on which findings to delete, he stated
that the proposal concerned those findings the parties agreed were not necessary or helpful to
resolving the dispute between them.  The parties were in the best position to make this determination.
The co-sponsors did not see that it would be necessary or productive for the parties to consult a panel
or the Appellate Body on this question.
- Making provision for some form of "partial adoption" procedure, where the DSB would
decline to adopt certain parts of reports while still allowing the parties to secure the DSB
recommendations and rulings necessary to help resolve the dispute
68. In response to questions about who would make the partial adoption decision, the
representative of the United States stated that the co-sponsors expected this decision to be taken byDSB Members as a whole.  Currently a report was adopted unless there was a consensus against
adoption.  A logical extension of this principle would be that a particular finding would be adopted
unless there was a consensus against it.  In practice, this would mean that the two parties would have
to agree that the finding should not be adopted, plus the rest of the DSB would have to agree.  With
respect to whether two DSB meetings would be required to take the decision on partial adoption, hestated that the United States and Chile expected that Members would need sufficient time to consider
a proposed decision not to adopt a particular findi ng and that they would welcome others' ideas on
how in practice to present the proposed decision and provide the necessary time to consider it.
- Providing the parties with a right, by mutual  agreement, to suspend panel and Appellate Body
procedures to allow time to continue to work on resolving the dispute
69. In response to queries as to the stages at which this would be possible, the representative of
the United States said that the co-sponsors saw no reason to limit the ability to suspend the
proceedings at any time prior to circulation of the report.  With respect to questions regarding the
effect on the time-frame, he noted that Article 12.12 of the DSU currently provided that if the
proceedings were suspended, then the time during which the proceedings were suspended did not
count against the time-frames.  The proponents saw the proposal as being an extension of thisprovision.  In other words, the time-frames would also be suspended while the proceedings were
suspended.  Regarding whether the authority of the panel should lapse during such suspension, he
noted that Article 12.12 currently also provided that the authority for a panel shall lapse if the
proceedings were suspended for more than 12 months.  He wondered if it would make sense to take
the same approach if the parties had agreed on a on a date certain when the suspension would end.However, the proponents would be interested in hearing Members' views on whether it would make
sense to extend the approach in Article 12.12 to a suspension of the proceedings by agreement of the
parties.  Concerning whether this proposal was different from Article 12.12, he confirmed that it was
indeed different from the current Article 12.12 in that Article 12.12 permitted a suspension of the
proceedings only in the case of panels and only if the complaining party requested it and the panelagreed.  Under the joint proposal, the proceedings of a panel or the Appellate Body could be
suspended if both parties agreed.  On the issue of de adlines, he stated that in the first instance the co-
sponsors thought it should be up to the parties to decide whether they wished to agree to a specific
deadline for the resumption of the proceedings.  Howe ver, they would be interested in hearing other
delegations' views.
- Ensuring that the members of panels have appropriate expertise to appreciate the issues
presented in a disputeTN/DS/M/7
Page 27
70. Responding to questions about whether this objective could be achieved by improving the
indicative list of panelists or by having a standing panel body and whether this could be done in the
context of Articles 8.1, 8.2, and 8.7 of the DSU, the representative of the United States said that there
were a number of different ways to ensure that panel members had appropriate expertise.  In thiscontext, he noted that Article 8.2 of the DSU did not specifically mention this as a criterion for panel
selection and said that the co-sponsors were intere sted in hearing the views of Members on how best
to provided this assurance.
- Providing some form of additional guidance to WTO adjudicative bodies concerning: (i) the
nature and scope of the task presented to them (for example when the exercise of judicial
economy is most useful) and (ii) rules of interpretation of the WTO agreements
71. In response to a question about how this proposal related to Jamaica's proposal to develop an
agreed negotiating history, the representative of the United States replied that the co-sponsors'
proposal concerned guidance to adjudicative bodies in carrying out the tasks assigned to them.  The
co-sponsors did not see this as related to Jamaica's proposal to develop an agreed negotiating history,
which was focused on the actions of Members in connection with negotiations.
72. With respect to comments concerning potential overlap with the Vienna Convention, the
representative of the United States stated that the proposal was not designed to replace the customary
rules of interpretation of public international law,  which were reflected in the Vienna Convention on
the Law of Treaties.  However, in applying those rules to the WTO agreements, there was room for
additional guidance by the Members.  He noted that the customary rules of interpretation were
developed in the relations among sovereign nations, the vast majority of whom were WTO Members.
There was no reason to assume that the Members could not contribute to a better understanding of
these customary rules.  In response to questions about whether the proposal was related to other
proposals on the table, he confirmed that it was not and stated that the guidance contemplated here
was not to be confused with any suggestion of guidelines in other contexts.  He further stated that theproposal listed as item (f) referred to guidance in general provided by the WTO Members as a whole,
and did not refer to the parties or to individual disputes.  He noted that the joint proposal would not in
any way compromise the ability of parties and other Members to present their views in the course of
individual disputes and said that other elements of the proposal were designed to facilitate that
process.  One opportunity under the current system for the Members to provide their views on a
particular dispute was a debate in the DSB at the time the reports were under consideration for
adoption.  The proposal would not in any way diminish this opportunity and other elements wouldenhance it.
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