WORLD TRADE
ORGANIZATIONTN/DS/W/3
21 March 2002
(02-1471)
Dispute Settlement Body
Special SessionOriginal:  English
PROPOSAL TO REVIEW ARTICLE 22.7 OF THE UNDERSTANDING
ON RULES AND PROCEDURES GOVERNING
THE SETTLEMENT OF DISPUTES
Communication from the Philippines and Thailand
The following communication, dated 19 March 2002, is being recirculated to Members at the
request of the Permanent Missions of the Philippines and Thailand.  The original communication can
be found in WT/MIN(01)/W/3 and Corr.1.
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I. RATIONALE
1. In the view of the Government of the Philippines and the Royal Thai Government, the
Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) is a workable
instrument that provides predictability and stab ility to the WTO multilateral trading system.  This
instrument, however, may be further improved by th e Members so as to enhance and strengthen its
multilateral character.
2. The two Governments are further of the view that some aspects of the DSU require urgent
attention and priority action.  One such aspect is the relationship between Articles 21 and 22 or theso-called "sequencing" issue.  Among the questions th at may be raised in this regard, there is one in
particular that needs to be carefully reflected upon by the Members.  This is the crucial question of the
level of suspension of concessions or other obligations authorized under Article 22 of the DSU.  Since
this suspension is considered as an exceptional, last resort measure as opposed to the withdrawal of
the measure found to be inconsistent with a covered agreement or compensation in lieu thereof
1, there
is a need to ensure that the level of suspension is strictly equivalent, in law and in practice , to the
level of the nullification or impairment of the complaining party in a given case.  This is essential for
maintaining fairness and the credibility of the WTO dispute settlement system.  The existing
mechanism in the current DSU, however, does not allow the DSB to ensure such equivalence.
II. PROPOSAL
3. Paragraph 7 of Article 22 of the DSU shall be amended to read as follows:2
"7 (a) The arbitrator16 acting pursuant to paragraph 6 shall not examine the nature of the
concessions or other obligations to be suspended but shall determine whether the level of such
suspension is equivalent to the level of nullification or impairment.  The arbitrator may also
                                                     
1Article 3.7 of the DSU.
2 In the event it is decided to amend the DSU on the basis of the proposal made by 11 Members on
28 September 2000 (WT/GC/W/410), paragraph 6, the words "Article 22.6" in sub-paragraph (b) below shall be
deleted and the words "Article 22.6(a)" shall be inserted in place thereof.TN/DS/W/3
Page 2
determine if the proposed suspension of concessions or other obligations is allowed under the
covered agreement.  However, if the matter referred to arbitration includes a claim that the
principles and procedures set forth in paragraph 3 have not been followed, the arbitrator shall
examine that claim.  In the event the arbitrator determines that those principles and
procedures have not been followed, the complaining party shall apply them consistent withparagraph 3.
(b) To determine whether the level of suspension proposed under Article 22.6 is
equivalent to the level of nullification or impairment, the arbitrator shall first determine the
level of the nullification or impairment of the benefits accruing to the complaining party
under the WTO Agreement in accordance with the recommendations and rulings of the DSB.
The complaining party shall provide sufficient trade information and data to enable thearbitrator to determine such level.
(c) Consistent with the level of nullification or impairment determined pursuant to
subparagraph (b) and with due respect to paragraph 3 of Article 22, the complaining party
shall submit to the arbitrator a detailed proposal containing a list of the concessions or otherobligations it intends to suspend.  The ar bitrator shall determine whether the level of
suspension resulting from the list of concessions or other obligations contained in the
proposal is equivalent to the level of nullification or impairment determined pursuant to
subparagraph (b).  In the event the arbitrator considers that the level of suspension is not
equivalent to the level of nullification or im pairment, the complaining party shall modify the
list of concessions or other obligations until the arbitrator determines that the level of
suspension resulting therefrom is equivalent to the level of nullification or impairment
determined pursuant to subparagraph (b).
(d) The DSB shall be informed promptly of the decision of the arbitrator.  The parties
shall accept such decision as final and shall not seek a second arbitration.
(e) Consistent with the decision of the arbitrator and with due respect to paragraph 3 of
Article 22, the complaining party shall submit a request to the DSB for an authorization to
suspend concessions or other obligations.  Th e DSB shall grant authorization to suspend
concessions or other obligations where the request is consistent with the determinations made
by the arbitrator pursuant to subparagraphs (b) and (c), unless the DSB decides by consensusto reject the request.
(f) The complaining party shall not suspend concessions or other obligations other than
those contained in the list of concessions or other obligations on the basis of which the
arbitrator has determined pursuant to subparagraph (c) that the level of suspension isequivalent to the level of nullification or impairment.  Such a list shall not be modified except
by mutual agreement between the complaining party and the Member concerned or pursuant
to subparagraph (g).
(g) Anytime after authorization by the DSB, the complaining party may submit a request
to the arbitrator for an adjustment, for technical purposes, of the list of concessions or other
obligations on the basis of which the arbitrator has determined pursuant to subparagraph (c)
that the level of suspension is equivalent to the level of nullification or impairment.  Such
requests shall be accompanied by a detailed proposal containing an adjusted list of
concessions or other obligations.  The arbitrator shall determine whether the level ofsuspension resulting from such a list is equivale nt to the level of nullification or impairment
determined pursuant to subparagraph (b).  In the event the arbitrator considers that the level of
suspension is not equivalent to the level of nullification or impairment the complaining party
shall modify the adjusted list of concessions or other obligations until the arbitrator
determines that the level of suspension resulting therefrom is equivalent to the level ofTN/DS/W/3
Page 3
nullification or impairment determined pursuant to subparagraph (b).  The DSB shall be
informed promptly of the decision of the arbitrator and the parties shall accept such decision
as final.  Consistent with the decision of the arbitrator and with due respect to paragraph 3 of
Article 22, the complaining party shall submit a request to the DSB for an authorization to
adjust the list of concessions or other obligations for technical purposes.  The DSB shall grantauthorization to adjust the list of concessions or other obligations for technical purposes
where the request is consistent with the determinations made by the arbitrator pursuant to
subparagraph (b) and this subparagraph, unless the DSB decides by consensus to reject the
request.  After authorization by the DSB, the complaining party shall not suspend concessions
or other obligations other than those contained in the list of concessions or other obligations
on the basis of which the arbitrator has determined pursuant to this subparagraph that the level
of suspension is equivalent to the level of nullification or impairment.
(h) In its determination pursuant to subparagraphs (c) and (g), the arbitrator shall take
due account of any time-period necessary for trade in the affected sectors to adjust itself prior
to and during the suspension of concessions or other obligations, and to regain its normal
course thereafter."
16The expression "arbitrator" shall be interpreted as referring either to an individual or a group
or to the members of the original panel when serving in the capacity of arbitrator.
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