WORLD TRADE
ORGANIZATIONTN/DS/W/8
8 July 2002
(02-3769)
Dispute Settlement Body
Special SessionOriginal:  English
NEGOTIATIONS ON IMPROVEMENTS AND CLARIFICATIONS OF THE
DISPUTE SETTLEMENT UNDERSTANDING
Communication from Australia
The following communication, dated 27 June 2002, has been received from the Permanent
Mission of Australia.
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Australia has identified a number of areas where we consider that improvements and/or
clarifications of the Dispute Settlement U nderstanding (DSU) are required.  These are:
(a) The need to address anomalies in procedural time-frames for dispute settlement on
safeguards compared to subsidies;
(b) the need to ensure that the rights of non-parties to a dispute are respected, particularly
in relation to compensation arrangements;
(c) the need to ensure that the actual level of  retaliation imposed by a complaining party
is consistent with the level of retaliation authorized by the Dispute Settlement Body
(DSB);
(d) the potential for possible time savings in the dispute settlement procedure;
(e) the usefulness of adopting a consolidated understanding on agreed procedures under
Articles 21 and 22 of the DSU to replace the current need for ad hoc bilateral
agreements.
Australia considers that these improvements and clarifications of the DSU can be put in place
through adoption of decisions on agreed practice by the DSB.  There is no need for formal treaty
amendments to the DSU to introduce these clarifications.
(a) Anomalies in procedural time-frames for dispute settlement on safeguards compared to
subsidies
Issue
• Disputes relating to prohibited or actionable subsidies benefit from accelerated
dispute settlement procedures under the Agreement on Subsidies and CountervailingMeasures (Articles 4 and 7).TN/DS/W/8
Page 2
• A list of these accelerated procedures, with comparisons with the standard
timeframes under the DSU, is provided at Annex A.
• Disputed safeguard actions taken under the Agreement on Safeguards (SA),
Agreement on Textiles and Clothing (ATC) and Agreement on Agriculture (AOA)are not subject to any such accelerated dispute settlement procedures but must operate
according to the standard time-frames under the DSU.
• In the case of safeguard actions under the ATC, the timeframe for dispute
settlement is actually considerably longer than the standard DSU procedure
(by at least 90 days).  This is because a disputed safeguard action must be
examined by the Textiles Monitoring Body (TMB) before reference to the
DSB (see Annex B).
• The fact that safeguard actions are not subject to similar accelerated dispute
settlement procedures as provided for prohibited and actionable subsidies is an
anomaly for the following reasons:
• safeguard actions have similar adverse trade effects as prohibited and
actionable subsidies;  and
• safeguard actions are by definition time-limited
1, with the result that
implementation of a panel/Appellate Body decision that a safeguard action is
WTO-inconsistent will often not occur until the time-frame for that safeguard
action has expired.
Proposal
Adoption of a DSB decision that:
• Expedited procedures will be instituted for dispute settlement on all safeguard matters
brought under the DSU, including:
• A request for establishment of a panel may be made 30 days (rather than
60 days) after the request for consultations if the consultations fail to settle
the dispute (this is merely adopting agreed practice under Article 4.7 DSU).
• The panel will be established at the first DSB meeting following the request
(again, merely adopting agreed practice on what parties are already free toagree under Article 6.1 DSU).
• All time-frames in the Working Procedures in Appendix 3 will be halved for
disputes on safeguard action, unless the parties otherwise agree (again,adopting agreed practice on what panels are already free to agree, after
consultation with the parties, under Article 12.1 DSU).
                                                     
1 The maximum duration of any safeguard measure under the Agreement on Safeguards, and the
Agreement on Textiles and Clothing is four years.  Under the Agreement on Agriculture, the duration forvolume-based special safeguards is the end of the cal endar year, while price-based special safeguards are
applied on a shipment-by-shipment basis.TN/DS/W/8
Page 3
• If one or more of the parties to a dispute is a developing country, then the
developing-country party may request and receive the application of standardDSU time-frames.
(b) Compensation arrangements and rights of non-parties to a dispute
Issue
• The DSU provides that compensation arrangements are temporary measures in the
event that implementation is not achieved within a reasonable period of time
(Articles 3.7, 22.1 and 22.8).
• It also provides that these compensation arrangements must be consistent with the
covered agreements (Article 22.1).  This includes MFN provisions.
• We are concerned by a recent trend toward bilateral compensation deals agreed
between parties which have no timetable for implementation and which are not
offered to other Members whose rights and obligations have also been nullified and
impaired.
• If Members are forced to initiate their own complaints to acquire compensation
rights, when it has already been proven that the Member concerned is in breach of its
WTO obligations, this will place enormous pressure on the WTO dispute settlementsystem and will lead to a waste of valuable resources.
Proposal
Adoption of a DSB decision that:
• Members will fully observe the requirement in Article 3.7 of the DSU that the
provision of compensation is a temporar y measure pending the withdrawal of a
measure found to be WTO-inconsistent.
• Members will not enter into compensation arrangements that in effect
constitute a waiver of their obligations.
• Members will observe the requirement in Article 22.1 of the DSU that compensation
must be consistent with the covered agreements.
• In acknowledging that any compensatory measures need to be available on an
erga omnes  basis, Members will seek, to the extent feasible, to agree on
measures that are generally available to other WTO Members.
• Members agree that, in circumstances where it is not feasible to apply compensatory
measures that are generally available, a non-implementing Member will, on request,
agree to expedited arbitration under Article 25 of the DSU that would serve to
determine the right of a third party to negotiate compensation, as well as the level of
that compensation.TN/DS/W/8
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(c) DSU surveillance of retaliation
Issue
• There is a need to provide a procedure to en sure that the actual level of retaliation
imposed by a complaining party remains co nsistent with the level of retaliation
authorized by the DSB under Article 22.2 of the DSU.  The level of retaliationauthorized must be equivalent to the level of nullification or impairment incurred by
the complainant (Article 22.4 DSU).
• Under Article 22.6 and 22.7 of the DSU, a respondent may request an arbitrator to
determine whether the level of concessions or other obligations proposed to be
suspended by a complainant is equivalent to the level of nullification or impairment.
• A respondent may seek a further arbitration if the concessions or other obligations are
subsequently altered by the complainant and the respondent believes that these
measures now exceed the level of nullification or impairment (Article 22.6).
• The need for such further arbitration procedures could be largely avoided if Members
undertook to keep to their original proposals for suspension of concessions or otherobligations, except to correct technical errors or in exceptional circumstances.
Proposal
Adoption of a DSB decision that, further to the procedures set out in Article 22.6 and 22.7
DSU:
• Members agree that, once an arbitrator has determined that the concessions or other
obligations proposed for suspension by a complainant are equivalent to the level ofnullification or impairment, they will refrain from varying this list except to correct
technical errors or in response to unforeseen circumstances.
• In cases where a complainant does nonetheless seek to vary its concessions or other
obligations suspended, a respondent retains the right to seek arbitration under
Articles 22.6 and 22.7 of the DSU.
(d) Proposals for saving time on the dispute settlement procedure
Issue
• There is a need to implement time-saving measures to the DSU process to ensure that
disputes are dealt with effectively.
• It is important that any time-savings introduced for DSU procedures respect the due
process and procedural fairness aspects of the system, do not disadvantagedeveloping countries, and do not significantly alter the balance of rights and
obligations between the parties to the dispute.
• Two simple time-saving measures could be adopted at the start of the DSU procedure
that satisfy all of the above criteria:TN/DS/W/8
Page 5
• the establishment of a panel at first request by the complainant (time saving
of approximately 3 weeks);
• a requirement that complainants lodge their first written submission at the
time of the first panel request (time saving of between 3 to 6 weeks).
• These simple time-savings would benefit developing-country complainants facing
substantial damage caused by an allegedly WTO-inconsistent trade barrier and are in
keeping with Article 3.12 DSU (which allows  a developing-country complainant, in a
dispute brought against a developed country, to request accelerated panel
procedures).
Proposal
Adoption of a DSB decision that:
• Unless both parties to a dispute agree otherwise, a panel will be established at the first
DSB meeting following the request by the complainant (this adopts agreed practice
which is consistent with Article 6.1 DSU).
• Complainants will lodge their first written submissions at the same time as they first
request the establishment of a panel on a particular matter (this is what panels are
already free to agree, after consultation with the parties, under Article 12.1 DSU).
(e) "Sequencing" the relationship between Article 21.5 and Article 22
• There is a need to clarify the "sequencing" is sue.  In simple terms this issue refers to
the order in which Articles 21.5 and 22 apply in disputes.
• Members have responded to issues surrounding the sequencing of Article 21.5 and
Article 22 processes by entering into bilateral understandings on a case-by-case basis.
• The practice developed through these understandings could be consolidated
to avoid the need for such understandings on each occasion.
• An examination of selected bilateral understandings suggests that there are broadly
two approaches that Members have taken to the sequencing issue.
• The first approach allows the procedures in Articles 21.5 and 22 to be
initiated simultaneously.  The Article 22 retaliation process is then suspended
until the Article 21.5 procedure is complete.  If the respondent has failed to
comply with the panel’s recommendation and rulings at the completion of the
Article 21.5 procedure, the complainant may commence the previouslyinitiated retaliation procedure under Article 22 (examples of this approach are
WT/DS108/12 and WT/DS103/14).
• The second approach allows the procedures in Articles 21.5 to be initiated
before the retaliation process in Article 22.  Given that there is a 30 day
time-limit on the retaliation process, the respondent must agree that theretaliation process under Article 22 cannot be blocked because the request for
authorization is made outside the 30 day time-period (examples of this
approach are WT/DS141/11 and WT/DS34/13).TN/DS/W/8
Page 6
Proposal
Adoption of a DSB decision to:
• Provide an understanding on agreed procedures under Articles 21.5 and 22 of the
DSU applicable to all current disputes (unl ess the parties have already entered into a
bilateral understanding for that dispute) and future disputes.
• This understanding may be adapted for a particular dispute at the agreement
of both parties.
(This understanding would be based on bilateral understandings submitted to the WTO to date –
Members are invited to indicate examples of such understandings which might serve as a model).TN/DS/W/8
Page 7
ANNEX A
Summary of Accelerated Dispute Settlement Procedures for Prohibited and Actionable Subsidies
under the Agreement on Subsidies and Countervailing Measures (SCM)
(Comparisons are with standard timeframes for other disputes under the DSU)
Prohibited Subsidies
Task SCM (Article 4) DSU
Request for establishment of panel
after consultations unsuccessful30 days after request for consultations
(Article 4.4)60 days after request for consultations
(Article 4.7)
Actual establishment of panel Immediate establishment of panel
(Article 4.4)Established no later than the second
DSB meeting following the meetingat which the request first appears onthe DSU Agenda (Article 6.1)
Final panel report to be circulated toMembers after establishment of
panel’s composition and terms of
referenceWithin 90 days (Article 4.6) Within 6-9 months, or in the case of
emergency 3 months (Articles 12.8
and 12.9)
Adoption of panel report by DSB Within 30 days of issuance of panel’s
report to all Members (Article 4.8)Within 60 days of circulation of a
panel report to Members(Article 16.4)
Appellate Body decisions to be issued Within 30-60 days from the date a
party to the dispute gives notice of itsdecision to appeal (Article 4.9)Within 60-90 days from the date a
party to the dispute gives notice of itsdecision to appeal (17.5)
Adoption of Appellate Body reports
by DSBWithin 20 days following its issuance
to the Members (Article 4.9)Within 30 days following its issuance
to Members (Article 14)
Granting of authorization to the
complainant to take certain action,where DSB recommendation is notfollowed within the specified time-periodGranting of authorization to take
appropriate countermeasures isimmediate after expiry of timespecified by panel for withdrawal ofprohibited subsidy (Article 4.7 and4.10)Granting of authorization to suspend
concessions or other obligations issubject to:
• the respondent having a
"reasonable time" to comply
with DSB recommendation
(should not exceed15 months from the date ofadoption of a panel orAppellate Body report)(Article 21.3);
• failing such compliance and
any negotiations on mutuallyacceptable compensation(which must be agreedwithin 20 days after the dateof expiry of the "reasonable
period of time"),
authorization may berequested (Article 22.2); and
• the DSB can grant
authorization within 30 days
of the expiry of the
"reasonable period of time"(Article 22.6).
All other tasks Time-periods to be halved
(Article 4.12)As provided in the DSUTN/DS/W/8
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Actionable Subsidies
Task SCM (Article 7) DSU
Request DSB to establish panel Within 60 days of request for
consultations (Article 7.4)Within 60 days of request for
consultations (Article 4.7)
Actual establishment of panel Established at first DSB meeting(Article 7.4)Established no later than the second
DSB meeting following the meetingat which the request first appears onthe DSU Agenda (Article 6.1)
Composition and panel terms ofreference to be establishedWithin 15 days of establishment of
panel (Article 7.4)Up to 30 days from establishment of
panel (Articles 7.1 and 8.7)
Final panel report to be circulated toMembers after establishment of
panel's composition and terms of
referenceWithin 120 days (Article 7.5) Within 6-9 months, or in the case of
emergency 3 months (Articles 12.8
and 12.9)
Adoption of panel report by DSB Within 30 days of issuance of the
panel report to Members (Article 7.6)Within 60 days of circulation of a
panel report to Members(Article 16.4)
Appellate body decisions to be issued Within 60-90 days from the date a
party to the dispute gives notice of itsdecision to appeal (article 7.7)Within 60-90 days from the date a
party to the dispute gives notice of itsdecision to appeal (17.5)
Adoption of appellate body reports by
DSBWithin 20 days of issuance to
Members (Article 7.7)Within 30 days following its issuance
to Members (Article 14)
Granting of authorization to the
complainant to take appropriatecountermeasures, where DSBrecommendation is not followedwithin the specified time-periodGranting of authorization to take
appropriate countermeasures isimmediate after failure of Member totake appropriate steps to removeadverse effects of the subsidy within
6 months from the date when the
DSB adopts the panel or AB report(Article 7.9)Granting of authorization to suspend
concessions or other obligations issubject to:
• the respondent having a
"reasonable time" to comply
with DSB recommendation
(should not exceed15 months from the date ofadoption of a panel orAppellate Body report)(Article 21.3);
• failing such compliance and
any negotiations on mutuallyacceptable compensation(which must be agreedwithin 20 days after the dateof expiry of the "reasonable
period of time"),
authorization may berequested (Article 22.2); and
• the DSB can grant
authorization within 30 days
of the expiry of the
"reasonable period of time"(Article 22.6).TN/DS/W/8
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ANNEX B
Summary of Additional Procedures for Agreement on Textiles and Clothing (ATC)
Where there is no agreement following 60 days consultations between the two Members
concerned over the proposed safeguard action, the Textiles Monitoring Body must examine the matter
and make appropriate recommendations to the Members concerned within 30 days of referral of the
matter (Article 6.10 ATC).
A Member that considers itself unable to conform with the recommendations of the TMB has
one month to notify this to the TMB with reasons (Article 8.10 ATC).
The TMB must then undertake a thorough consideration of the reasons given and issue any
further recommendations it considers appropriate – no time-limit for this is given (Article 8.10 ATC).
If after such further recommendations, the matter remains unresolved, either Member
concerned may bring the matter before the DSB and invoke Article XXIII GATT 1994 and the DSU.
This would seem to imply that a fresh request for consultations must be made under Article 4 of the
DSU to commence the dispute settlement procedure.
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