RESTRICTEDWORLD TRADE
ORGANIZATIONTN/DS/M/3
9 September 2002
(02-4716)
Special Session of the Dispute Settlement Body
15 July 2002
MINUTES OF MEETING
Held in the Centre William Rappard
on 15 July 2002
Chairman:  Mr. Péter Balás (Hungary)
Subjects discussed: Page
1. Discussion of proposals submitted by participants................................................................1
(a) Proposal by  Austra lia....................................................................................................... ...........2
(b) Proposal by Ecuador ......................................................................................................... ........10
(c) Proposal by Korea........................................................................................................... ..........14
(d) Proposal by Costa Rica ...................................................................................................... .......17
2. Other business............................................................................................................... ..........21
1. Discussion of proposals submitted by participants
1. The Chairman noted that this was the third meeting of the Special Session of the Dispute
Settlement Body (DSB) and the last to be held before the summer recess.  He stated that since the last
meeting, three new proposals had been tabled by Australia, Ecuador and Korea.  These had been
circulated as TN/DS/W/8, TN/DS/W/9 and TN/DS/W/11, respectively.  He said that he intended to
invite the authors of these proposals to present them and later give participants the opportunity to
react to them.  However, he urged participants not to make detailed comments at this stage, as they
would have the opportunity to do so when the meetin g switched from a formal to an informal mode.
He observed that with the tabling of these three new proposals, there had been a doubling of the
proposals before the Special Session.  He recalled that the target date for the submission of proposals
was the end of July 2002 and that it was his expectation that participants who wanted to table
proposals would do so before the summer recess.  He stated that under "Other Business", he would
discuss the future work programme of the Special Session.  He proposed the deletion of the itemrelating to "Open-ended Discussion" from the agenda of the meeting.  His proposal was accepted by
the participants and the agenda was adopted without the item relating to "Open-ended Discussion".
2. The Chairman said that although the three new proposals had been circulated quite late, it was
his hope that participants would make substantive comments about them.  He drew the attention of
participants to the revised compilation of the text of specific proposals which had been submitted sofar to the Special Session, including the three proposals submitted by Australia, Ecuador and Korea.
He said that this informal document had been circulated as Job(02)/42/Rev.1 and was for the moment
available only in English and that the Spanish and French versions would be circulated later.  He then
invited the representative of Australia to introduce the proposal.TN/DS/M/3
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(a) Proposal by Australia (TN/DS/W/8)
3. The representative of Australia commended the Secretariat for updating the compilation and
said that it was a useful technique which would greatly assist participants in the negotiations.  He said
that Australia had made five suggestions covering substantive issues and had also proposed how the
improvements and clarifications could be carried out without resorting to formal amendment of theDispute Settlement Understanding (DSU).  He recalled that Australia had always taken this view,
although it remained quite flexible on the question of modalities.  In that context, Australia was
interested in exploring with other participants the scope of the relevant provisions of the WTO
Agreement relating to decision-making, interpretations and clarifications.  Australia was very
concerned that a very detailed drafting process could lead to a document which might be longer than
the DSU itself.  Such a document might not be free from ambiguities and could necessitate a further
review for its provisions to be clarified.  He recalled the pragmatic approach adopted by the GATT indealing with these issues as reflected in GATT document L/4907 in the twenty-sixth edition of the
Basic Instruments of Selected Decisions consolidating the practices that had been adopted with regard
to dispute settlement.  On substance, he reiterated that the Australian proposal covered five issues.
The first was the anomalies in procedural time-frames involving safeguard disputes.  He noted that
unlike other trade remedies such as anti-dumping for which detailed provisions had been provided inthe Agreement on Anti-Dumping, the Safeguards Agreement did not contain very detailed procedures
to be followed by Members wishing to impose safeguard measures.  This lacuna had been taken
advantage of by some Members who knew that they could maintain safeguards measures for the
maximum time permitted under the Agreement before the dispute settlement process run its full
course.  Australia had experienced such an anomalous situation before;  its decision to seek recourseto the DSU in the Lamb case was not to get the responding Member to lift its safeguard measures, but
to ensure that the measures were not reimposed afte r the expiry of the initial period.  The objective of
Australia in introducing this proposal was to have accelerated time-frames for dealing with cases
involving safeguard measures.  Australia was conscious that its proposal might have relevance for
other trade remedies such as anti-dumping.  The second issue covered by the Australian proposal wasthe rights of non-parties to a dispute.  Two sub-issues deserved consideration; the first was when a
Member had failed to comply with the recommendations and rulings of the DSB and had negotiated
compensation with the complaining Member, but not extended the compensation on a non-
discriminatory basis to other Members who also had a commercial and systemic interest in the case.
The second issue was the type of compensation provided by the responding Member.  In the "Japan
Alcoholic Beverages" case, compensation was given on a genuine MFN basis, whereas in other cases
including one in which Australia was involved, compensation in the form of monetary damages wasgiven only to the complaining Member.  The second proposal by Australia was intended to deal with
these two issues.
4. He said that the third proposal by Australia concerned retaliation.  He noted that there was no
specific mechanism in the DSU for the surveillance of the level of retaliation and that once a Member
received authorization from the DSB, there was no formal way of establishing whether retaliation wasbeing applied consistently with the levels determin ed by the DSB.  While Australia accepted that the
list of products subjected to the suspension of concessions could be varied, it also was of the view that
there was a need for transparency, hence the proposal to establish a surveillance mechanism which
could comprise a notification and comment process and a mechanism which would allow responding
Members to seek corrections if this proved necessary.  The fourth proposal was aimed at expeditingthe dispute settlement process by reducing the time-frames at certain stages.  In its proposal, Australia
had suggested that panels should be established on the first request and that complaining Members
should be made to lodge their first written submission at the time of making the request for the
establishment of the panel.  Australia was aware that some participants had reservations against this
proposal on the grounds that it would be premature to require the early submission of briefs when thepanel had not even been composed.  In Australia's experience, a Member would have already prepared
its submission before making a request for the establishment of a panel.  Another factor which also
had to be taken into account was the short time respondents had under the present time-table toTN/DS/M/3
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respond to submissions by complaining Members.  The argument that it would be premature to
require an early submission of briefs lost force when you considered the Article 21.5 process, as the
review was usually done by the original panel.  He stated that Australia was willing to consider other
alternatives put forward by other participants, including requiring the complaining Member to lodge
its first written submission within five days after the composition of the panel.  He said that the lastproposal by Australia concerned the sequencing issue.  Australia was of the view that this issue had
largely been resolved by the practices that had been adopted by Members over the years and that it
was preferable not to have an elaborate and over-negotiated text.
5. The Chairman stated that he had taken note of the preference of Australia regarding the
modalities to be employed in clarifying and improving the DSU.  It was perhaps too early to consider
this issue at this stage of the negotiations.  It  was important for the participants to agree on the
clarifications and improvements that had to be made to the DSU before considering the options opento them for achieving their objectives.
6. The representative of the European Communities (EC) welcomed the proposal by Australia
and said that the EC had studied it with great care and interest.  Regarding the proposal by Australia
on the modalities to be used to effect changes to th e DSU, he said that the EC recognised the need for
flexibility in certain cases but its preference was for a formal amendment of the DSU.  He said thatthe EC was, however, prepared to consider furthe r the proposal by Australia.  In relation to the
proposal that there should be accelerated procedures for safeguard cases, he said that the EC was fully
in agreement with Australia and that consideration should also be given to having accelerated panel
procedures for other trade remedies cases.  As had been alluded to by Australia, trade defence
measures were imposed usually for a temporary period and for the DSU to have any practicalsignificance, it was imperative for the complainin g Member to get a remedy before the measures
themselves expired.  Regarding the proposal which would require responding Members to enter into
expedited arbitration pursuant to Article 25 of the DSU with any Member that considered that it was
entitled to receive compensation in order to determine if that Member's claim was well-founded and,
if so, to determine the level of compensation to be  provided to it, the EC had some doubts about its
practicality.  On its face, the proposal would seem to give a potential right to any Member to claim
compensation even if that Member did not participate in the original dispute as a third party.  It was
not clear from the Australian proposal whether the Member that requested arbitration would be
entitled to seek authorization to suspend conce ssions or other obligations in the event of the
responding Member not complying with the arbitration award.  If that Member were to have the right
to suspend concessions, it would appear that the Australian proposal was advocating retaliation erga
omnes and not compensation erga omnes .  Such a proposal would have far-reaching implications and
required further examination.  While the EC agreed  with the view that compensation should not be an
easy alternative to compliance, it was also of the view that it would be inappropriate for compensation
options to become overly rigid and burdensome.
7. In relation to the time-saving proposal of Australia, he said that the EC agreed that a panel
should be established on the first request by the complaining Member.  However, it was of the viewthat the proposal that the complaining Member should be required to lodge its first written submission
at the same time of making the request for the establishment of a panel was problematic and required
further consideration.  It was not clear from the proposal when the responding Member would lodge
its submission.  If the panel had not been composed, there would be no one to read the submissions,
and considering the delay in constituting panels in recent times, the practicality of the Australian
proposal was quite doubtful.  It would be feasible if there were to be a system of permanent panelists
as had been suggested by the EC.  Regarding th e Australian proposal on the need to monitor the
consistency of retaliatory measures with the level authorized by the DSB, the EC was of the view that
it was an interesting approach to resolving the so-ca lled carousel issue.  He recalled that the joint
proposal by Thailand and Philippines contained similar ideas and said that the EC was willing to workwith all interested participants on this issue.  In relation to the Australian proposal on the sequencing
issue, he said that the views of the EC did not differ significantly from those of Australia, except thatTN/DS/M/3
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the EC would favour a formal treaty amendment as opposed to the less formal means advocated by
Australia.  He said that there was consensus among Members that a party had to first exhaust the
procedures laid down in Article 21.5 of the DSU before seeking recourse to Article 22.  He further
stated that the ability of parties to appeal against compliance panel reports should be preserved.
Consultations were sine qua non  before a request for a compliance panel under Article 21.5 could be
made.
8. The representative of Bulgaria said that the Australian proposal contained very interesting
ideas and that he wanted to flag his delegation's interest to take part in any consultations which the
Chairman or other participants might hold on the proposal.  He said that he had some preliminary
comments to make on the Australian proposal.  On the issue of the modalities to be employed in
improving and clarifying the DSU, his delegation was of the view that the Australian proposal was
very interesting and deserved further consideration.  While Bulgaria agreed with the views expressedby some participants that in certain situations formal amendments to the DSU might be necessary or
required to achieve certain objectives, there were other cases where other alternatives could be
explored.  As had been consistently stated by Bulgaria, the problem of sequencing could be resolved
through an authoritative interpretation of the relevant provisions of the DSU.  Whereas in certain
situations, a simple decision by the DSB might not be sufficient, it was worth exploring the possibilityof letting the DSB take an interim decision once consensus had been reached on an issue and explore
how such improvements could be put into force at a later date.  On the issue of time savings,  he said
that his delegation would study them carefully, although Bulgaria was, in principle, against any
proposal which would shorten the time-frame, especially before the report of the panel was adopted
by the DSB.  He stated that his delegation would study the other proposals made by Australiaincluding the one on compensation arrangements, which appeared to require further elaboration.
9. The Chairman reiterated his earlier statement that it might be premature to consider at this
stage the modalities to be employed in effecting changes to the DSU.  He concurred with the view
expressed by Bulgaria that whether or not an am endment or interpretation would be required would
very much depend on the issue under consideration.
10. The representative of the United States commended Australia for its proposal and said that the
United States would seek clarifications of some of the underlying concepts when the meeting
switched to an informal mode.  In referring to the statement by the EC that there was consensus that a
Member should have recourse to Article 21.5 of the DSU before resorting to Article 22, he said that it
was premature to make such a statement.
11. The representative of Norway commended Australia for its useful proposal and said that he
had some preliminary comments on it.  He agreed with the Chairman that it was premature to have a
discussion at this stage on the modalities for implementing any changes to the DSU that might be
agreed to by the participants.  On the issue of time- frames, he said that it was necessary to balance the
rights of the responding Member and that of the complaining Member.  It was a question of legal
certainty and predictability on the one hand and the need for the expeditious resolution of disputes on
the other.  Norway was against reducing the time for consultations and agreed with Bulgaria that itwas perhaps important  to look into the possibility of reducing the time-frame for the implementation
of the recommendations and rulings of the DSB.  Norway supported the proposal that panels should
be established on the first request by complaining Members.  It was also supportive of the proposal to
have a system of permanent panelists, as it would save time.  On the proposal relating to
compensation, he said that Norway found the issue of  the application of the MFN principle to bilateral
agreements concluded by parties to disputes very interesting.  It was, however, of the view that the
Australian proposal was too radical and would alter fundamentally the current approach of the DSU to
compensation.  On the proposal relating to accelerated procedures for safeguard actions, he said that it
might be better to take up these issues in the negotiating group on rules.TN/DS/M/3
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12. The representative of Hungary welcomed Au stralia's proposal and said that it was an
important contribution to the work of the Special Session of the DSB.  On the issue of modalities,
Hungary agreed with the Chairman that it was premature to discuss this issue at this stage of the
negotiations and that it was necessary to agree first on the changes that were going to be made to the
DSU before discussing the mode through which the changes would be put into effect.  On the issue ofcompensation arrangements and rights of non-parties to a dispute, Hungary was of the view that the
Australian proposal was interesting, although further clarification was required because of its possible
ramifications.  As regards surveillance of retaliation, Hungary believed that the Australian proposal
together with other relevant proposals submitted by other participants represented a good basis for
further consideration of this issue.  In relation to the proposal on time savings, she said that Hungary
was supportive of the proposal that panels should be established at the first DSB meeting following
the request by the complainant.  Concerning the timing of the first written submission, Hungarybelieved that this issue should be examined in connection with the system of permanent panelists.  On
sequencing, she said that her delegation was in favour of resolving the ambiguity in the sequencing of
Articles 21.5 and 22 of the DSU.  This would ensure legal certainty and provide greater predictability
to the system.
13. The representative of Thailand welcomed the proposal by Australia which broadly covered
five areas of interest to Thailand.  He said that Thailand saw merit in the proposal to have accelerated
procedures for cases involving safeguard measures.  In relation to time savings, Thailand was also
supportive of the Australian proposal and had taken note that developing countries could still avail
themselves of the normal DSU time-frames in the event of there being a decision to reduce the present
time-frames to accelerate the process.  The primary responsibility of Members under the DSU wasimplementation of the recommendations and rulings of the DSB.  Compensation had to be given on an
MFN basis for it to be consistent with the rule s of the WTO.  With regard to surveillance of
retaliation, he said that the Australian proposal  touched upon the carousel issue and was in line with
the joint proposal by the Philippines and Thailand.  Thailand was prepared to work with all interested
participants including Australia and the EC to find a solution to this issue.  Thailand was also
supportive of the proposal to clarify the relationship between Articles 21.5 and 22 of the DSU.
14. The representative of Indonesia commended Australia for its proposal and said that it was an
important contribution to the work of the Special Session of the DSB.  On the proposal to address
anomalies in the procedural time-frames, especially in relation to safeguards measures under the
Agreements on Safeguards, Textiles and Clothing a nd Agriculture,  Indonesia was of the view that the
integrity of the relevant agreements would be preserved if the existing procedures for dispute
settlement were not altered.  With regard to the issue of compensation and the rights of non parties,Indonesia was of the view that the provisions of Article 3.7 of the DSU had to be respected and that
any arrangement had to be transparent in order to allow other interested parties to evaluate whether
the arrangement would undermine their interests.  On e way to ensure transparency was to develop a
system of notification for compensation arrangements entered into by Members.  On the issue relating
to the surveillance of retaliation by the DSB, I ndonesia shared the views of Australia.  On the one
hand, it was necessary to have strengthened rules regulating the alteration of the list of products or
other concessions subject to suspension and, on the other hand, rules that would permit the adjustment
of the list when there were unforeseen circumstances.  Regarding the proposal on time savings,
Indonesia was of the view that the issue required further consideration to determine whether it would
be in the interests of developing countries.  Indonesia attached great importance to the consultationsphase of the dispute settlement process, given its potential to facilitate mutually agreed solutions
between the parties.  On the sequencing issue, Indonesia favoured a clarification of the relationship
between Articles 21.5 and 22 of the DSU.  Although Members were increasingly entering into
bilateral agreements to resolve this issue, there was a need for legal security and predictability.
Indonesia had an open mind regarding the modality to be used to accomplish this objective; it couldbe by an amendment, understanding or interpretation.TN/DS/M/3
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15. The representative of Japan welcomed the proposal by Australia and the clarifications
provided by the Australian representative and said that it would contribute significantly to the
negotiations.  On the issue of modalities, he said that it would be difficult to put through the changes
proposed by Australia without amending the provisions of the DSU.  He said that Japan was
supportive of the proposal that there should be accelerated procedures for cases involving safeguardmeasures, but thought that it should be extended to other cases as well.  He further stated that Japan
was of the view that any substantial change to th e content of provisions of any agreement including
the Safeguards Agreement could not be effected through a decision of the DSB.  On the issue of
compensation and the rights of non-parties, he said that Japan was in agreement with the statement
that the primary responsibility of Members was implementation and that compensation was not a
substitute for implementation.  As provided in Article 3.7 of the DSU, compensation was a temporary
measure which could be adopted pending the withdrawal of the measure which had been found to beinconsistent with a covered agreement.  Regarding the applicability of the MFN principle to bilateral
compensatory arrangements concluded by parties to disputes, Japan was of the view that the DSU did
not provide any useful guidance on this issue.  The provisions of Article 22.1 were quite vague as to
whether compensation should be provided on an MFN basis.  The DSU had given the parties the
freedom to negotiate their own compensatory arrang ements.  It should also be borne in mind that
findings of panels were exclusively limited to the rights of the parties to the dispute.  Taking all these
elements into consideration, Japan was of the view that whether MFN treatment was applicable
depended on the nature of the proposed compensatory measure and whether that particular measure
was applied on a non-discriminatory basis under the relevant WTO Agreement.  Concerning the right
of a third party to compensation, Japan was of the view that in accordance with Article 10.4 of the
DSU, third parties could have recourse to the normal dispute settlement procedures, if they considered
that their benefits under the WTO Agreement were being nullified or impaired by another Member.
Regarding the surveillance of retaliation, Japan wa s in agreement with the view that the level of
suspension always had to be equivalent to the level of the nullification or impairment and the level
authorized by the DSB.  Japan was also in agreement with the view that arbitrary change in the list of
products or other concessions could have serious ramifications.  The procedural time-frames needed
further study.  As regards the proposal on time savings, Japan was supportive of the proposal that
panels should be established on first request.  Requiring the complaining Member to lodge its first
written submission at the same time of making the request for the establishment of a panel might be
burdensome.  Further thought should be given to this proposal.  Japan was of the view that
introducing a new procedure could be accomplished only through an amendment to the DSU.  On the
sequencing issue, Japan was of the view that this was a major systemic fault in the DSU that neededto be addressed in a comprehensive manner by way of amendment to the relevant provisions of the
DSU.
16. The representative of Canada welcomed the Australian proposal and said that it was a major
contribution to the work of the Special Session of the DSB.  On the issue of modalities, he said that it
was Canada's preliminary view that the changes proposed by Australia could only be accomplishedthrough an amendment to the DSU.  With regard to accelerated procedures for cases involving
safeguard measures, Canada was in agreement with Australia that the implementation of the
recommendations and rulings of the DSB in a challenge to WTO-inconsistent safeguard measures
might not occur until close to, or even after, the expiry of the safeguard action itself.  To prevent this
anomaly, it might be necessary to have an expedited process for such types of cases.  On the issue ofcompensation and the rights of non parties, Canada was of the view that the Australian proposal raised
very difficult issues and as such required further study.  As regards the surveillance of retaliation by
the DSB, Canada was of the preliminary view that it might be difficult to reach consensus on this
issue.  As regards the proposal on time savings, Canada could agree to the establishment of panels on
first request and was willing to consider requiring the complaining Member to lodge its first writtensubmission at the time of making the panel request .  It would, however, be necessary to consider a
number of elements before arriving at a decision, including the implications of this proposal on the
establishment of the terms of reference for a panel, and whether it would be appropriate to deprive the
complaining party of the opportunity to know, before drafting its first submission, who would beTN/DS/M/3
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hearing the case.  In relation to the sequencing i ssue, Canada was in agreement with Australia that
Members had dealt with the relationship between Articles 21.5 and 22 by entering into bilateral
understandings on a case-by-case basis.  While such practice had been extremely useful to date,
Canada was of the view that the sequencing problem required a textual solution through an
amendment to the DSU.  Canada did not share the view of Australia that this issue could be resolvedthrough a mere DSB decision setting out a non- binding understanding on agreed procedures.
17. The representative of Korea welcomed the Australian proposal and said that it was a major
contribution to the work of the Special Session of  the DSB.  On the issue of accelerated procedures
for cases involving safeguard measures, Korea was supportive of the Australian proposal given the
time-bound nature of safeguard measures and the relatively long time it took to exhaust the
procedures of the DSU.  A typical case could take one and half to two years and the responding
Member could have 15 months within which to implement the recommendations and rulings of theDSB.  On compensation and rights of non parties, Korea was of the view that the Australian proposal
raised many more questions than it solved.  Arbitration under Article 25 of the DSU was not
mandatory and recourse to it was subject to the mutual agreement of the parties as provided in
Article 25.2 of the DSU.  The Australian proposal would effectively amend the provisions of
Article 25, as it would oblige non-implementing Members to enter into arbitration with any Memberthat requested it.  He said that his delegation would be grateful if Australia could confirm whether it
was their intention to amend Article 25 of the DSU.  It was worth noting that the proposal would
create rights for non parties to participate in compensation negotiations and it was doubtful if this
would be possible or manageable.  Under Article XXVIII of the GATT 1994, compensation
negotiations following the modification of schedules of concessions were restricted only to countrieswith principal supplying interest and those with a su bstantial interest in the product.  On time-savings,
Korea was supportive of the proposal that panels should be established at the first DSB meeting.  It
was, however, of the view that it would not be appropriate to require the complaining Member to
lodge its first written submission at the same time as making the panel request.  On the sequencing
issue, Korea agreed that it was necessary to clarify the relationship between Articles 21.5 and 22, butwas of the view that this objective could be better achieved through an amendment of the provisions
of the DSU.
18. The representative of New Zealand welcomed the proposal by Australia and said that it was
an important contribution to the work of the Special Session of the DSB.  New Zealand's preliminary
views would focus on two of  the issues covered in the Australian proposal, both of which related to
time savings.  With regard to the proposal to have accelerated procedures for cases involving
safeguard measures, New Zealand was in agreement with Australia that an expedited procedure wasneeded for such cases.  As rightly pointed out by Australia, safeguard measures were usually imposed
for three years, while the dispute settlement process took over two years to yield results.  Thus, it was
possible to envisage a situation where a safeguard measure could be removed before the dispute
settlement mechanism produced results.  This possibility created no incentive for Members to comply
with their obligations under the Safeguards Agreement.  While New Zealand was open to discussingthe feasibility of having accelerated dispute settlement procedures for other trade remedies, it was
very convinced that safeguards deserved specia l treatment.  The jurisprudence had consistently
emphasized that safeguards were an exceptional remedy that should only be used in emergency
situations.  The extraordinary nature of the safe guard remedy provided further justification for
developing a faster process for dealing with disputed safeguard measures.  With regard to the othertime-saving proposals by Australia, New Zealand saw considerable merit in the proposal that panels
should be established at the first request of the complainant.  In practice, it did not appear that the time
between first and second requests had allowed for further consultations and resolution of disputes.
With regard to the timing of first submissions of complainants, New Zealand had taken note of the
concerns expressed by other delegations and the statement by Australia that it was willing to considerother alternatives, for example, perhaps five days after the panel composition.  New Zealand had also
taken note of the statement by Australia that the issue of panel composition was unlikely to be anTN/DS/M/3
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issue in the Article 21.5 context, as the review was usually done by the original panel.  New Zealand
would need time to reflect further on some of these issues.
19. The representative of India commended Australia for its detailed proposal and the succinct
explanations provided by the representative of Australia.  The proposal had identified five important
issues, some of which clearly needed the attention of Members.  Clarity on these issues would go along way in improving the functioning of the dispute settlement mechanism of the WTO.  Australia
had proposed expedited time-frames for cases involving safeguard measures including those imposed
pursuant to the Agreement on Textiles and Clothing.  It had also proposed that developing countries,
if they so wished, could avail themselves of the normal time-frames under the DSU.  India was
supportive of these proposals and would prefer if the exception proposed for developing countries was
cast in legally binding language.  On compensation, the Australian proposal had two essential
elements.  First, Members would not enter into co mpensatory arrangements that circumvented their
WTO obligations.  Second, an expedited arbitration was being proposed for determining the right of a
non party to negotiate compensation, as well as the level of such compensation.  Australia had also
proposed that once the level of nullification and impairment had been determined by an arbitrator, the
list of products subject to retaliation could not be changed unilaterally.  As had been observed by a
number of delegations, there were similar proposals on the carousel issue that had been tabled byother participants.  India had taken note of thes e interesting proposals an d would come back with
substantive comments in due course.  Australia had suggested expedited time-frames for the dispute
settlement process, whereby the panel would be established at the first request of the complaining
Member, implying a saving of about three weeks.  It had also suggested that complainants should be
required to lodge their first written submission at the time of the panel request, saving about three tosix weeks.  This aspect of the proposal needed to be looked at carefully, since it might unwittingly
encourage the responding Member to frustrate the composition of the panel so as to gain extra time to
prepare its defence in reply.  In its proposal, Australia had stated that this particular set of proposals
would benefit developing-country complainants.  India had some doubts if that was the case,
especially considering some of the proposals that had been tabled by some developing countries in thenegotiations on special and differential treatment in the Special Session of the Committee on Trade
and Development.  The Australian proposals would have the effect of reducing the extended time-
periods that had been requested by some developing  countries.  On the sequencing issue, India was
supportive of the efforts to clarify the relationship between Articles 21.5 and 22 of the DSU.  India
reserved the right to make detailed comments at a later date.
20. The representative of Hong Kong, China welcomed the Australian proposal and said that it
raised a number of interesting questions which his delegation would like to explore further at future
meetings.  He said that his delegation had a few preliminary remarks to make.  On the question of
modalities, Hong Kong, China was flexible and was prepared to explore options other than
amendments to the DSU in giving effect to the chan ges that might be agreed to by the participants.
Hong Kong, China was, however, in agreement with the Chairman that this issue should be put aside
until such time that consensus was reached on the substantive changes to be made.  In relation to
accelerated procedures for safeguard disputes, Hong Kong, China was generally supportive of this
idea and was willing to explore the possibility of extending it to other trade remedies such as anti-
dumping disputes.  On the question of compensati on arrangements and rights of non-parties, Hong
Kong, China shared the concern about the recent trend towards bilateral compensation arrangements
and was sympathetic to the idea of ensuring that bilateral compensation arrangements incorporatedthe MFN principle.  There were, however, some fundamental questions that needed to be addressed.
These included how to enforce compensation arrangements and whether the Member that requested
arbitration should have the right to seek authorization to suspend concessions in the event of non-
implementation.  On surveillance of retaliation and sequencing, he said that Hong Kong, China was
prepared to consider further the proposals which had been tabled by Australia and other delegations.With regard to time saving suggestions, Hong Kong China was supportive of the proposal to establish
panels on the first request, but thought that the proposal to require complaining Members to lodge
their submissions at the time of making the request required careful consideration as it could giveTN/DS/M/3
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some advantages to the responding Member.  It might be advisable to consider variations of the
Australian proposal including requiring the complaining Member to lodge its submission within five
days of the composition of the Panel.
21. The representative of Peru welcomed the Australian proposal and said that it was an
important contribution to the work of the Special Session of the DSB.  Peru was, however, of the view
that the various proposals would require a modification of the DSU.  On accelerated procedures for
cases involving safeguards, she said that Peru was supportive of the Australian proposal as it would
remove the current imbalance between the treatment of safeguard measures and other measures which
had accelerated timetables.  With regard to compensation, Peru agreed with the view that it should be
given on an MFN basis, but doubted the feasibility of all interested Members participating in
compensation negotiations.  On time savings, Peru was in agreement that panels should be established
on the first request.  It was, however, important for developing countries to have flexibility as wasenvisaged in the Australian proposal.  On sequencing, Peru was of the view that it was important to
clarify the relationship between Articles 21.5 and 22 so as to ensure legal certainty and predictability.
22. The representative of Colombia welcomed the proposal by Australia and said that it was a
major contribution to the work of the Special Session of the DSB.  On modalities for implementing
the changes that might be agreed, Colombia thought that the Australian proposal was interesting and
was willing to give it further thought.  On accelerated procedures for cases involving safeguard
measures, Colombia was supportive of the Australian proposal, but it was of the view that such
procedures should be extended to all three types of trade remedies, namely safeguards, countervailing
and anti-dumping measures.  On time savings, Colombia was in agreement with the proposal that
panels should be established on the first request and further agreed with Australia that any reductionin time frames could be of potential benefit to developing countries.  It was, however, difficult to
assert that this proposal would benefit developing countries when it would be applicable to all
Members.  With regard to compensation, Colombia was of the view that the Australian proposal
would bring about fundamental changes to the nature, scope and design of the dispute settlement
mechanism.  Acceptance of the Australian proposal would require the role of third parties and otherMembers in all of the various stages of the dispute settlement mechanism to be re-visited and adapted.
It was imperative for further thought to be given to this proposal.  On sequencing, Colombia shared
the view there was a need to clarify the relationship between Articles 21.5 and 22 so as to ensure legal
certainty and predictability.
23. The representative of Brazil welcomed the Australian proposal and said that it was a major
contribution to the work of the Special Session of the DSB.  While the Australian proposal attempted
to provide rational solutions to some of the problems that had been encountered in the operation of theDSU, it was important to ensure that it did not raise any problems subsequently.  On expedited
procedures for disputes involving safeguard measures, Brazil was of the view that the Australian
proposal made sense and deserved further consideration by Members.  While the proposal on
compensation arrangements and rights of non-parties to disputes underlined the need for judicial
economy and rationalization of the procedures, it also raised serious concerns regarding the grantingof formal rights to non-parties in a dispute.  As regards time saving proposals, Brazil was willing to
consider the many proposals that had been submitted by various participants, but would like to stress
the need for flexibility for developing countries.
24. The representative of Australia expressed his appreciation for the comments and reactions by
participants and said that his delegation had taken careful note of them and would probably respond in
writing to some of the questions that had been rais ed.  He further said that Australia was prepared to
make changes to some of their proposals based on the views that had just been expressed.  He said
that his delegation was very conscious of the impact that their time saving proposals might have on
developing countries and was willing to give further t hought to this issue.  It was Australia's view that
it would be in the interest of all Members, if there were to be an equitable dispute settlementmechanism which settled disputes expeditiously.TN/DS/M/3
Page 10
(b) Proposal by Ecuador (TN/DS/W/9)
25. The representative of Ecuador said that his country had a systemic interest in the DSU
negotiations as a result of its experience in the "Bananas" case which had remained on the
GATT/WTO agenda for close to a decade.  Ecuador wanted to stress that it was satisfied with the
mutually agreed solution that it had reached with the EC, and that its proposal was not prompted byfrustration of any kind given that it never expected to be compensated as this was not the normal
practice of either the GATT or WTO.  The settlement reached between the EC and Ecuador was based
on an Ecuadorian proposal underscoring its commitment to the rules and procedures of the DSU.
While some of the interested parties had chosen retaliation, Ecuador had opted for a determination,
pursuant to Article 21.5 of the DSU, of the consistency of the measures implemented by the EC with
the recommendations and rulings of the DSB provoking the well-known crisis over the sequencing of
Articles 21.5 and 22 of the DSU.  The Banana dispute was examined by two GATT Panels and it hadbeen the subject of six determinations by WTO Panels and the Appellate Body underscoring its
unique history in the GATT/WTO's legal system.
26. In addressing the ineffectiveness of suspension of concessions as the remedy of last resort in
the WTO's legal system, Ecuador wanted to make it clear that it was not approaching the issue from a
developing country perspective, but rather from a very broad perspective, as its experience was basedon a matter which had arisen between two developed Members.  Ecuador's own experience was
irrelevant, as it never suspended concessions authorized by the DSB.  He recalled that his country's
request was made 12 months after the most developed economy in the world had suspended
concessions, the failure of which had become only too clear in terms of not securing the desired result,
but also the harm that it was causing to trading en tities in the complaining Member which had nothing
to do with the dispute.  Ecuador's decision to request retaliation was made for strategic reasons;  it
was meant to state clearly for the record that injury was being done to Ecuador's economy and to press
for a solution that would enhance its negotiating capacity as a developing country.
27. It was common knowledge that the GATT authorized retaliation only on a single occasion - a
dispute between developed countries – and because it was known to be pointless, it was never carriedout.  The results in the WTO's seven years of existence were self-evident.  Suspension of concessions
and other obligations had not been carried out either because there were doubts about its effectiveness
and the possibility of it having a boomerang effect;  or, the realization that even if implemented,
suspension of concessions had never been able to secure its objective of prompt compliance.  While
there was compliance in the banana case, it took the EC over thirty months after the expiry of the
reasonable period of time to implement the recommendations and rulings of the DSB.  It was
Ecuador's opinion that a viable solution should be found which acknowledged that lex talionis,  "an
eye for an eye", was at variance with the nature of the multilateral trading system and the spirit of the
dispute settlement mechanism.  The solution should be based on the basic principles underpinning the
DSU, such as ensuring the security and predictability of the multilateral trading system, prompt
compliance, favouring negotiation between parties, recourse to the dispute settlement mechanism not
constituting a contentious act, presumption both of the good faith of Members and of nullification andimpairment, and the fact that breaches of the covered Agreements upset the balance of the whole
system, not merely that between the parties to a dispute.  Along these lines, it would be advisable to
provide ways for allowing these principles to be  put into practice whilst recognising the palpable
reality that the DSU did not provide the necessary facilities when the sequence reached the last resort.
28. The dispute settlement mechanism should be able to deal readily with situations where it was
not possible to achieve compliance within the reasonable period of time determined in accordance
with the relevant provisions of the DSU.  In this context, it was Ecuador's view that the annual level
of nullification or impairment should be determined  by the arbitrator who would also determine the
reasonable period of time within which compliance should take place.  Since any difficulties in
achieving compliance would be known at this stage, timely provision should be made for a soundbasis on which to negotiate compensation assuming that it would be able to restore the balance lostTN/DS/M/3
Page 11
between the rights and obligations of the parties involved in the dispute and the multilateral trading
system itself.  Thus, if a dispute on compliance had not been settled at the end of the reasonable
period of time, compensation might be granted within the twenty days envisaged in the DSU.  There
should be a framework within which the parties should be able to agree on a compensation package
which not only included trade advantages, but also other feasible forms of compensation includingcash payment or the cancellation of foreign debts if the complaining Member was a developing
country.  Possible exemption of the MFN principle in order to grant compensation to the complaining
Member should be considered.  The idea was to make compensation a viable alternative and not
another embellishment of the system with limited practical relevance to Members.  Once voluntary
compensation had proved elusive and the Panel had confirmed that there had been no compliance
within the reasonable period of time, the problem was no longer between the parties to the dispute but
between the non-complying Member and the multilatera l trading system.  This marked the beginning
of the stage corresponding to the last resort or economic sanctions imposed by the system on the non-
complying Member, the law of retaliation being ruled out since it would merely prove disruptive to
the already disturbed trade relations and preference given to compensation as an element which
restored the balance lost as a result of non-compliance by the responding Member.
29. It was Ecuador's view that when adopting the Panel or Appellate Body report confirming non-
compliance, the DSB should inform the responding Member of its obligation to submit a
compensation package at its next session.  If none was submitted, on the assumption, which might not
be rebutted, that the Member was acting in good faith, the DSB would presume that it intended to
compensate the complaining Member in cash and,  on the principle that compensation could not
replace compliance, which was the goal of the dispute settlement mechanism, a six-month periodwould be established during which the responding Member would be obliged to pay the compensation
and bring its trade regime into conformity with the covered Agreements.  Any Member which
accepted responsibility for its obligations in the multilateral trading system would strive to avoid the
stage of compulsory compensation as it would mean that the situation had really escalated.
Consideration of extreme measures such as suspension of the responding Member's right to haverecourse to the dispute settlement mechanism or the possibility of suspension of concessions by the
entire membership of the WTO against that Member would represent a further escalation of the
situation and might be considered as an intellectual exercise.  He emphasised that the fact that few
cases had reached this critical stage did not mean that a full reform of the process to effectively
guarantee prompt compliance was unnecessary.  The credibility of the system was at stake and it was
imperative that shortcomings of the system be addressed as mandated by the Doha Development
Agenda.
30. The representative of Indonesia commended Ecuador for its proposal and said that it was a
major contribution to the work of the Special Session of the DSB.  He recalled that Indonesia had
expressed its general satisfaction with the operation of the dispute settlement mechanism at the
previous meeting of the Special Session.  It was,  however, of the view that the system could be
improved without necessarily amending its essential features.  Indonesia was supportive of Ecuador'sproposals on compensation and compliance, as they w ould strengthen the implementation phase of the
dispute settlement mechanism.  It was its understanding that these proposals would strengthen the
procedures for compensation and make it more attractive than retaliation.  On the argument that
compensation was a better alternative as it would not injure other parties, it was Indonesia's view that
compensation could also undermine other Members' interests, as products originating in thecomplaining Member tended to be treated better th an those originating in other countries.  Indonesia
could, however, accept that from the viewpoint of developing countries, compensation was better than
suspension of concessions whose implementation had given rise to problems making it ineffective.  It
was apparent that both compensation and retaliation had their positive and negative sides.  Regarding
Ecuador's suggestion that as a first step, compensation should be voluntary based on an assessment ofthe level of nullification and impairment by the panel, Indonesia was of the view that a broader
mandate than that currently set out in Article 21.3(c) was needed.  Strengthening the procedures for
compensation could improve the functioning of the dispute settlement mechanism and Indonesia wasTN/DS/M/3
Page 12
supportive of adopting measures in that regard.  Every compensatory arrangement had to meet the
requirements for transparency and other fundamental principles of the WTO.  To ensure transparency,
it was important to strengthen the notification obligations of Members.  Indonesia was supportive of
the proposal by Ecuador that compensation should be made mandatory at the second stage.  Given the
complexities surrounding the proposal, it would be advisable for further thought to be given to theproposals by Ecuador, and the enhancement of the rights of third parties in relation to compensatory
arrangements.
31. The representative of India welcomed the proposal by Ecuador and said that it was a positive
contribution to the work of the Special Session of  the DSB.  It was India's view that Ecuador's
proposal would ensure that Members complied with the recommendations and rulings of the DSB.
However, there were certain aspects of the proposal which required clarification.  A measure which
had been found to be inconsistent could have various components, some of which might be broughtinto conformity, while others might continue to be inconsistent with the obligations under the covered
agreements.  If the level of nullification and impairment was determined at the same time as the
reasonable period of time, the arbitrator might not be in a position to know whether there would be a
partial implementation of the recommendations and rulings of the DSB.  He asked whether Ecuador
could clarify its statement that the WTO Secretariat should be entrusted with the task of verifyingwhether compensation packages covered the value of the level of nullification and impairment.
32. The representative of the European Communities commended Ecuador for its proposal and
said that it raised some pertinent issues which dese rved further study.  He said that the EC had some
preliminary comments on some of the proposals and would offer detailed comments after it had
studied them in greater detail.  On the issue of the effectiveness of sanctions, he said that while the ECrecognized the indispensability of sanctions as the remedy of last resort, it was also its view that
sanctions could prove to be ineffective and counterproductive.  The EC was in agreement with the
view that compensation had to be facilitated to make it a viable alternative to the suspension of
concessions and other obligations.  It was, however, of the view that compensation should not be used
to circumvent prompt compliance.  He recalled that the EC's paper contained some proposals forstrengthening the provision of compensation and said that the Ecuadorian proposal contained some
new ideas which the EC was prepared to explore.  In relation to the proposal on monetary
compensation, he said that while the EC recognized that monetary compensation would be
appropriate in certain situations, it also felt that it should be resorted to only in special cases if major
problems were to be avoided.  In that context, he likened this proposal to the Australian proposal on
non-parties and compensatory arrangements and said that it might not be possible, for example, to
draw a cheque to be paid to a large number of countries.  Regarding the proposals on special anddifferential treatment, particularly the possibility of doubling the amount for nullification and
impairment in cases involving developing countries and the waiving of the MFN principle in order to
compensate developing countries, he said that the EC would have difficulties with any proposal which
compromised any of the fundamental principles of the multilateral trading system including the MFN
principle.  These proposals needed further study considering their possible ramifications.  It wouldappear that developing countries had a qualitative problem rather than a quantitative problem when it
came to suspending concessions or negotiating adequate and appropriate compensation in line with
their needs.
33. The representative of Korea welcomed the pr oposal by Ecuador which was aimed at making
compensation a viable alternative to the suspension of concessions, which had often not been effective
in ensuring prompt compliance with the recommendations and rulings of the DSB.  He said that while
Korea appreciated the concerns of Ecuador, it could not support any proposal which would bring
about fundamental changes to the current dispute settlement system.  He recalled that in its proposal
(TN/DS/W/11) submitted to the Special Session, Korea had stated its satisfaction with the operation
of the dispute settlement mechanism since its inception in 1995.  Given the limited mandate given bythe Doha Ministerial Declaration, it was Korea's view that any changes to the DSU would have to be
based on the basic principles of the DSU.  Against this background, Korea had doubts about whetherTN/DS/M/3
Page 13
it would be advisable to make compensation compulsory when Article 22.1 made it clear that
compensation was voluntary.  The proposals relating to monetary compensation and suspension of
concessions were also radical and would necessitate fundamental changes to the current rules.
Concerning the timing for determining the level of  nullification and impairment, Korea believed that
the appropriate timing was immediately after the expiry of the reasonable period of time, at whichtime the implementing Member would have had ample chance to bring its measures into conformity
with the recommendations and rulings of the DSB.
34. The representative of Thailand commended Ecuador for its proposal and said that while his
delegation was not able to offer detailed comments at this stage on the proposal, it would like to pose
some questions to Ecuador concerning its proposal.  Regarding the reference to extreme measures, his
delegation wanted to know whether there were other measures apart from compulsory compensation?
Thailand was not sure whether such measures would be considered in combination with other options.Thailand also wanted to know the exact time-fra me within which the responding Member would be
expected to provide compensation to the complaining Member.
35. The representative of Norway welcomed the proposal by Ecuador and said that it was a
significant contribution to the work of the Special Session of the DSB.  The proposal contained
interesting ideas, some of which could be said to be revolutionary.  While Norway shared the views of
Ecuador regarding the need to ensure that disputes were settled as rapidly and as effectively as
possible, it had some doubts about the practicality of some of the proposals put forward by Ecuador.
Regarding the proposal that the arbitrator who would determine the reasonable period of time under
Article 21.3(c) of the DSU, should as part of its mandate, also determine the level of nullification and
impairment, Norway was of the view that it ignored the possibility of partial implementation of therecommendations and rulings of the DSB by the responding Member.  Korea's proposal on this point
was workable and appeared to be a better alternative.  In relation to Ecuador's suggestions to ensure
prompt compliance and full compliance, while Norway agreed that massive retaliation or erga omnes
compensation could raise the costs of non-implementation and probably induce implementation of the
recommendations and rulings of the DSB, it was also of the view that other solutions should beexplored.  Norway could not agree to the proposal to permit developing countries to impose
retaliatory measures over and above the level of nullification and impairment.
36. The representative of Japan welcomed the proposal by Ecuador and said that it was a major
contribution to the work of the Special Session of the DSB.  Japan fully appreciated the difficulties
Members encountered whenever they tried to avail themselves of the remedy of last resort.  This was
a systemic problem faced not only by developing-country Members but by all Members.  With this in
mind, Japan wanted to make some preliminary comments on the proposal by Ecuador.  While Japanaccepted that suspension of concessions or other obligations by its very nature was trade-restrictive
and compensation might be a better alternative, it wanted to stress that the DSU made it clear that
compensation was a temporary measure available in the event that the recommendations and rulings
of the DSB were not implemented within the reasonable period of time.  Compensation was therefore
not to be preferred to the full implementation of the recommendations and rulings of the DSB.  Fromthe viewpoint of a responding Member, compensa tion had some distinct advantages including
extending the reasonable period of time for the im plementation of the recommendations and rulings of
the DSB.  This might be necessary when prompt compliance could result in drastic economic changes
and create some socio-economic problems.  While such a reason should not allow Members to escape
from their obligations under the DSU, it was Japan's vi ew that where the parties to the dispute were in
agreement, they should be able to extend the reasonable period of time for implementation and
negotiate compensation in the interim.  This had the advantage of preventing retaliation which was
trade-restrictive and confrontational.  The provisions of the DSU on compensation were adequate and
did not need to be amended.
37. The representative of Switzerland welcomed the contribution from Ecuador and said that his
delegation shared the concerns of Ecuador regarding the problems faced by small and developingTN/DS/M/3
Page 14
countries in securing prompt compliance with the recommendations and rulings of the DSB.
Suspending concessions might be an ineffective means in a situation where a great imbalance existed
in terms of the volume of trade and economic power between the two parties.  While Switzerland
agreed that compensation should be made mandatory, it had some doubts about the offering of cash
compensation.  Its preference would be the offering of alternative market access opportunities.Monetary compensation between two governments wa s quite a revolutionary approach but it should
be examined further.  Even if accepted, it was Switzerland's view that it should be restricted to
exceptional situations.  An important issue was the relationship between compensation arrangements
and rights of non-parties to the dispute, which was raised in the Australian proposal.  The main issue
was whether benefits exchanged under bilateral compensation arrangements had to be offered to all
Members in accordance with the MFN principle or whether the MFN principle should be waived
temporarily in order to allow such compensation.  It was important for the principle of transparency tobe respected at all times.
38. The representative of Ecuador thanked delegations for their detailed comments on Ecuador's
proposal.  He said that Ecuador had formulated the proposal after consulting extensively with a
number of delegations.  The crux of the problem was the ineffectiveness of the remedy of last resort.
Suspension of concessions was incompatible with the very nature of the multilateral trading system.
In responding to the questions raised by some participants, he said that Ecuador was willing to engage
other participants to find a workable solution to this problem which had undermined the credibility of
the dispute settlement mechanism.  On extreme measur es, he said that the fact that there were extreme
meant that there was no need to give further consideration to them.  He had put forward these options
in order to highlight the problem and the need to fi nd a lasting solution to it.  Regarding the role to be
performed by the WTO Secretariat, Ecuador thought that if implementation did not occur within the
reasonable period of time, the dispute ceased to be between the parties but the non-implementing
Member and the WTO as an institution.  The Secretariat was well equipped to assess whether the
compensation package was consistent with the level of nullification and impairment as determined by
the arbitrator.  The proposed time-frame of six months was based on Ecuador's experience in theBananas case.  It was Ecuador's view that Members should not be able to choose any arbitrary time-
period within which to comply with their obligations.  It should be ensured that compensation did not
become a substitute for compliance with the recommendations and rulings of the DSB.
(c) Proposal by Korea (TN/DS/W/11)
39. The representative of Korea stated that it was Korea's view that the DSU had been functioning
quite well since its inception in 1995.  Notwithstanding this positive assessment, some improvements
could be made to strengthen the system.  The whole dispute settlement process could be divided intothree phases: the consultations stage;  the panel/Appellate Body proceedings stage; and the
implementation stage.  From Korea's viewpoint, the process moved relatively smoothly during the
first two phases, while the third phase was beset by a number of problems.  It was not a coincidence
that the majority of the proposals for the improvement of the DSU, apart from those concerning
systemic issues such as the permanent panel roster , related to the implementation stage of the dispute
settlement process.  The proposal of the Korean delegation dealt with two aspects of the
implementation stage;  namely arbitration to determine the reasonable period of time and the timing
for determining the level of nullification and impa irment.  With respect to the arbitration on the
reasonable period of time, Article 21.3(c) of the DSU stipulated that the determination of the
reasonable period of time by the arbitrator should be completed within 90 days of the adoption of thepanel/Appellate Body report.  In practice, this ti me-frame had not been met in almost all instances.
To redress this situation, Korea had proposed that th e complaining party, if it so wished, be allowed to
request the Director-General to appoint an arbitrator at the DSB meeting to be held within 30 days
after the adoption of the panel/Appellate Body report.  On the surface, deviation from the standard
time-frame of 90 days could take place upon the mutual agreement by the parties concerned.However, the real reason for going beyond the deadline laid in the fact that under the current DSU, no
meaningful bilateral discussion on the reasonable period of time under Article 21.3(a) and (b) couldTN/DS/M/3
Page 15
begin until the responding party came up with its offer of reasonable period of time, which was
usually not until it had informed the DSB of its in tention with respect to the implementation of the
recommendations and rulings at a meeting held within 30 days after the adoption of the
panel/Appellate Body report.  If the complaining party was allowed to announce its intention to
request the Director-General to appoint an arbitrator after 30 days of unfruitful discussion with therespondent regarding the reasonable period of time, the arbitrator nominated by the Director-General
would be given 50 days within which to complete its work.  In normal circumstances, this should be a
sufficient amount of time to meet the 90-day deadline under Article 21.3(c) of the DSU.  The second
element of Korea's proposal addressed the timing of the determination of the level of the nullification
or impairment.  Korea's proposal to have the complia nce panel determine the level of the nullification
or impairment stemmed from its view that without knowing the level of nullification or impairment in
advance, it was not feasible to conclude the nego tiation for compensation successfully within 20 days
after the expiry of the reasonable period of time, as provided for in Article 22.2 of the DSU.  Korea
was of the view that shortly after the expiry of the reasonable period of time was the most appropriate
time to determine the level because, by that time , the implementing party would have had ample time
to implement the recommendations and rulings of the DSB.  In concluding, he underlined that Korea's
proposal was based on a core principle of the DSU, namely prompt compliance.  It did not represent
any departure from the basic principles of the current dispute settlement mechanism of the WTO.
40. The representative of Japan welcomed the proposal by Korea and said that Japan had some
preliminary comments on the two issues addressed in  the Korean proposal.  In relation to the proposal
on the determination of the reasonable period of time through recourse to arbitration, Japan was of the
view that early stage consultations would put pressure on the Member concerned and could facilitatethe prompt implementation of the recommendations of the DSB.  Japan was therefore supportive of
this proposal.  It, however, had some doubts whether the period of 30 days after the adoption of the
recommendations and rulings of the DSB would be long enough for compliance to take place.  Japan
was also not sure whether Members should be able to request the Director-General to appoint an
arbitrator when the parties had not even tried to agree on one.  In relation to the proposal that thecompliance panel under Article 21.5 of the DSU should not only determine whether compliance had
taken place, but also the level of nullification and impairment, Japan was generally supportive but
wanted the issue to be considered further in light of similar proposals which had been made by other
delegations in the context of determining the level of compensation to be offered by the responding
Member in the event of non-compliance.  As had been repeatedly stressed by Japan, compensation
should not become a substitute for compliance.
41. The representative of Bulgaria commended Korea for its proposal and said that it was a
significant contribution to the work of the Special Session of the DSB.  The proposal was interesting
in that it focussed on the implementation stage, where the dispute settlement process had been beset
by a number of difficulties.  Bulgaria reserved its right to offer detailed comments on the proposal at a
later stage.
42. The representative of Thailand welcomed the proposal by Korea and said that his delegation
agreed with the view that the implementation ph ase of the dispute settlement mechanism should be
strengthened.  In Thailand's view, the proposal on the determination of the level of nullification and
impairment was connected to the sequencing issue and would make some comments when the
meeting switched to an informal mode.
43. The representative of the European Communities commended Korea for its proposal and said
that it was a significant contribution to the work of the Special Session of the DSB.  He said that the
EC was interested in the two issues addressed by Korea in its proposal and was willing to enter into a
substantive discussion with Korea.  Given time considerations, it would only offer preliminary
comments at this stage.  The EC was supportive of the proposal to have an early determination of the
level of the nullification and impairment, which incidentally was included its own proposal.  The ECwas willing to discuss and refine it in order to find the best possible practical solution.  Regarding theTN/DS/M/3
Page 16
time-period within which a request for arbitration could be made to determine the reasonable period
of time, the EC was of the view that this propos al would have the effect of reducing the time-frame
during the implementation phase and was willing to discuss it constructively with Korea and other
delegations.  He recalled that the EC's proposal also contemplated a revised procedure.
44. The representative of Peru said that her delegation was supportive of the proposals tabled by
Korea, as they would facilitate the prompt implem entation of the recommendations and rulings of the
DSB.
45. The representative of Brazil welcomed the proposal by Korea and said that his delegation's
comments would focus on the second proposal, namely the appropriate time to determine the level of
nullification and impairment.  He noted that the Korean proposal mentioned that this could be
determined during compliance panel proceedings under article 21.5, while the Ecuadorian proposal
mentioned that it could be determined by the arbitrator who would be deciding the reasonable periodof time under article 21.3(c).  He further noted that the EC proposal mentioned that this could be done
at any point of time before the request for authorization of suspension of concessions.  Brazil had
taken note of the differences in opinions of all which were aimed at making compensation a viable
alternative to the suspension of concessions or other obligations.
46. The representative of Norway asked Korea whether the front-loading of the choice of the
arbitrator to determine the reasonable of time would have an effect on the length of time itself.  If it
would not make a difference, then what purpose would this proposal serve?
47. The representative of Korea expressed his delegation's appreciation for the positive comments
made on their proposal by some participants and said that he would attempt to respond to some of the
questions posed by Japan and Norway.  Regarding Japan's comment that the parties should be givenadequate opportunity to agree on an arbitrator before recourse was made to the Director-General, he
said that Korea's proposal was not mandatory and that the decision to turn to the Director-General
depended on the complaining party, who had the option to follow the standard procedures.  It was
only when the complaining Member so desired that he could request the Director-General to appoint
the arbitrator within 30 days after the adoption of the Panel/Appellate Body report by the DSB.  Thus,where the parties to the dispute were in agreement to extend their bilateral discussion on the
reasonable period of time beyond the 45 day-period stipulated in Article 21.3, they were free to do so
as envisaged in Article 3.7.  In such cases, Korea's proposal would not be applicable.  Regarding
Norway's question, he said that there was a link be tween the arbitration proceedings to determine the
reasonable period of time and the duration of the reasonable period of time itself.  The time spent on
arbitration constituted a substantial part of the reasonable period of time itself.  The relevant date was
the date of the adoption of the reports by the DSB.   Article 21.3(c) provided guidance with regard to
the length of the reasonable period of time.  It provided that the responding Member was to be given
15 months to implement the recommendations and ru lings of the DSB in normal cases.  According to
emerging WTO jurisprudence, the length of the reasonable period of time would be longer in cases
where the implementation of the recommendations and rulings of the DSB would require legislative
changes.  In such cases, it could even exceed the 15-month guideline.  Where implementation couldbe effected through administrative means, the reasonable period of time would be considerably
shorter.  If regulatory changes had to be made, the reasonable period of time granted would generally
be between 6 to 10 months.  Where there was no need for regulatory change and simple withdrawal of
the measure would be enough, the reasonable period of time granted would usually be less than 6
months.  Accordingly, it was important to meet th e 90-day deadline as the time spent on arbitration
could affect the length of the reasonable period of time that would be granted, especially when the
implementation could be achieved through administrative means.
48. The Chairman invited Brazil to make a statement on behalf of MERCOSUR.TN/DS/M/3
Page 17
49. The representative of Brazil, on behalf of MERCOSUR , said that he was going to make some
preliminary comments about the DSU negotiations and that this was without prejudice to the final
positions that might be adopted by the individual members of the group on specific issues.  From an
overall perspective, Mercosur's members considered that the present dispute settlement system had
provided satisfactory results since its inception in 1995.  The adoption of a more legal-orientedapproach to resolving disputes had contributed significantly to strengthening the rules-based system
and attenuated the power-oriented features of the GATT's system.  Practice had, however, shown that
some changes to the DSU were necessary for it to function effectively.  To meet the deadline of
May 2003, it was necessary to focus on the most urgent issues.  One of such issues was the
sequencing issue, which still was a source of tension among Members.  Certain elements had to be
clarified, including whether it was necessary to have consultations before resorting to Article 21.5 and
the right of appeal of compliance panel reports.  Other issues which needed examination wereprocedures for the lifting of sanctions and the establishment of a remand authority for the Appellate
Body, with due consideration given to the effects of this procedure on time periods.  Third party rights
could be enhanced, for example, by granting third parties access to second submissions and to the
second panel meetings.  Regarding time-frames, it was the view of Mercosur countries that they were
satisfactory when compared with those of other international judicial bodies or domestic courts.Persuasive reasons should be provided to justify shortening the current time-frames.  In the event of
there being agreement to shorten the time-frames, developing countries should be given the right to
adhere to the present time-frames.  The debate about compensation and suspension of concessions
was of utmost importance as it touched on one of the central pillars of the dispute settlement
mechanism;  a pillar which increasingly was showing visible cracks.  Strengthening the relevantprovisions, especially those on compensation to make it a more attractive option, would be desirable.
Compliance with the recommendations and rulings of the DSB must, however, remain the over-riding
objective of the WTO dispute settlement system.
(d) Proposal by Costa Rica (TN/DS/W/12)
50. The representative of Costa Rica said that Costa Rica has always attached great importance to
the review of the DSU in order to improve its functioning.  It saw in the dispute settlement mechanism
a tool for ensuring that the rules of the multilateral trading system were respected to the benefit of all
Members.  While the dispute settlement mechanism had worked satisfactorily to date, there was room
for improvement.  It was against this background that Costa Rica was making a proposal to enhance
the rights of third parties in the dispute settlement mechanism.  It was Costa Rica's view that this
could be achieved without compromising the swiftnes s and effectiveness of the process, nor the major
objective of encouraging the parties to find a mutually  satisfactory solution to their dispute.  The basic
thrust of Costa Rica's proposal was to increase the rights of third parties during the consultations
phase and also to ensure that their submissions were taken into account by panels and the Appellate
Body in their reports.  They should not be relegate d to the descriptive part of the report as was the
current practice.  Third parties should participate in all meetings of panels and the Appellate Body
with the parties to the dispute and have guaranteed access to all written submissions and to all theother information brought before the panels as well as the Appellate Body including replies provided
in writing sometimes by the parties to questions from panels or the Appellate Body.  Increased
participation of third parties in the dispute settlem ent system would promote transparency and inspire
greater confidence in the system.  Costa Rica was of the view that Members should be able to
participate as third parties in Appellate Body proceedings even though they may not have participatedas third parties during the panel stage.  Third parties should receive the written submissions at the
same time as parties to the dispute and be able to submit comments during the interim review stage of
the dispute settlement process.  This was important if panels and the Appellate Body were to be able
to take their views into consideration.  Furthermore, third parties should receive the provisional report
of the panel at the same time as the parties to the dispute.
51. The Chairman observed that while it might not be possible for participants to comment on the
proposal by Costa Rica given the time at which it was circulated, there would be other opportunitiesTN/DS/M/3
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for them to do so.  He invited India to presen t its comments on the responses by the EC to the
questions that it posed in connection with the EC proposal (TN/DS/W/1).
52. The representative of India commended the EC for its detailed responses to the questions
raised by India and said that while some of the replies had helped to clarify some of the issues, there
were still some issues which required further clarification.  On permanent panelists, he said thatalthough the EC had raised some concerns regarding the increasing resort to the Director-General to
appoint panelists, it was India's experience, and perhaps that of others as well, that the panelists had
discharged their responsibilities with considerable objectivity and only in rare occasions have their
competence been questioned.  It was India's view that before the present system was abandoned, all
aspects of any new system should be critically examined before a decision was made.  Without
prejudging its position, India would like to have further information about the criteria and procedure
for the appointment of the permanent panelists.  It w ould be essential to ensure that the procedure was
transparent and inclusive in its actual operation.  It was imperative for suitably qualified candidates to
be selected.  Panelists who lacked adequate qualifications and expertise would pose problems whose
magnitude could not be underestimated.  Another i ssue of concern to India was the procedure through
which panelists would be assigned to specific disputes.  The EC had suggested that the present
practice followed by the Appellate Body should be adopted.  India would be obliged if the EC could
provide further details as to the kind of procedures  followed by the Appellate Body.  Any procedures
for the assignment of panelists to specific disputes should be transparent.  India would be interested to
know whether under the proposed new system, one of the panelists would come from a developing
country in disputes involving a developing country if that country so desired.
53. On transparency, the EC in its response had stated that the general public should be allowed
to attend the panel and Appellate Body proceedings.  The EC was also of the view that there should
not be any reporting restrictions on the proceedings.  This raised the crucial issue of how and to what
extent the panelists and their decisions could be insured or insulated from biased reporting of the
media.  While the EC had stated that Dispute Settlement Mechanisms established under International
Public Law normally provided for public access to their proceedings, it had no where stated why suchaccess was relevant in the context of the WTO or in what manner such transparency would enhance
the effectiveness of the dispute settlement process.  Nor had the EC provided any comparative
structure to establish that comparison between the WTO and other international organizations was
meaningful.  India would be obliged if the EC c ould provide further details in this regard.  On amicus
curiae  briefs, India wanted to make it clear that it had strong reservations against the response of the
EC that the issue of whether amicus curiae  briefs should be allowed or not had been largely resolved
by the Appellate Body.  The EC's emphatic statem ent was questionable on two grounds.  First, it
ignored the strong sentiments of the overwhelming majority of WTO membership which had
expressed serious reservations on this issue during the meeting of General Council held on
22 November 2000 in the context of the "EC – Asbestos" dispute.  India would like to quote from
some of the statements that were made during that meeting:
"It was clear that there was no agreement among Members on the issue of amicus curiae
briefs.  This had been demonstrated in a number of occasions, including during the DSU
review process before Seattle and, in particular, when the reports on the shrimp/turtle and the
US - British steel cases were considered by the DSB." (Egypt)
"The Appellate Body's decision to solicit amicus briefs affected the existing rights and
obligations of WTO Members, which the dispute settlement system precisely served to
preserve, as stated in Article 3.2 of the DSU ... Members should send the strongest signal to
the Appellate Body, and for that matter to any panel, that submission of amicus briefs was a
substantive matter.  It was a matter for Members, and Members only and the Appellate Body
and panels should not do anything that may prejudice the outcome of deliberations by WTOMembers on this substantive issue." (Hong Kong, China)TN/DS/M/3
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"The disquiet and anxiety generated among the membership by the Appellate Body's
communication was so great that convening this Special Meeting of the General Council on
short notice was more than justified." (India)
"The Appellate Body's findings regarding amicus curiae briefs relied heavily on the authority
Members granted to panels and the Appellate B ody to draw up their own working procedures.
However, the Appellate Body had read in this mandate more than what was actually in it."
(Brazil)
According to Mexico, the decision of the Appe llate Body Division in the Asbestos case to
adopt an additional procedure to deal with any written briefs received from natural or legal persons
other than parties and third parties to the dispute, not only lacked any legal basis, but also createdserious problems that should not arise.
"The issue of amicus curiae briefs should be solved through negotiations and it was Members'
responsibility to legislate on it within the framework of the DSU review." (Switzerland)
54. To state that the question had largely been resolved by the Appellate Body was perhaps an
attempt at adopting a substantive interpretation of the DSU without seeking recourse to provisions of
Article IX:2 of the Marrakesh Agreement.  As distinguished delegates would be aware, the findings of
a panel/Appellate Body in a dispute were confined to that specific dispute and did not constitute a
formal precedent that a subsequent panel must follow.  It would therefore not be correct on the part ofthe EC to take the position that the issue of amicus curiae  had largely been resolved by the Appellate
Body.  This was an issue which concerned the entire membership and the views expressed by a
majority at the special meeting of the General Council held on 22 November 2000 were very clear.
Second, on whether the issue of amicus curiae  had largely been resolved by the Appellate Body, India
was of the view that the findings of the Appellate Body in this regard were far from clear.  The fact ofthe matter was that through a "stretched" interpretation of the term "to seek" the Appellate Body
managed to introduce amicus curiae  briefs in the dispute settlement process at the WTO.  Crucially, it
did so by reference to Article 13 of the DSU.  In India's view, this was not the appropriate way to
proceed.  To confound the issue further, the Appellate Body in " US - CVD on Lead Bismuth Steel "
stated that "we have the legal authority under the DSU to accept and consider amicus curiae  briefs in
an appeal in which we find it pertinent and useful to do so."  The Appellate did not clearly identify the
specific provision in the DSU or other agreements in the WTO acquis from which this legal authoritywas derived.  India was at a loss as to which specific provision in the DSU could perhaps be a basis
for acceptance and consideration by the Appellate Body of unsolicited amicus curiae  briefs.
55. India would like to briefly discuss the provisions of the DSU, which could be possible sources
for legal authority for consideration of amicus curiae briefs and would demonstrate why each of these
cannot be the appropriate legal basis for consideration of such briefs by the panels and the AppellateBody.  If it was indeed the case that Article 13 of the DSU conferred such authority on WTO
adjudicating bodies, why did the Appellate Body add in its Shrimps/Turtle decision that the Panel
should consult with the parties to the dispute before accepting unsolicited information?  The legal
authority of panels to request information from any source under Article 13 of the DSU was not
subject to any such prior duty to consult the parties to the dispute.  More importantly, Article 13 of theDSU talked of the right of panels and panels only to seek information from outside sources.  Unless
one extends the term "a panel" to cover all WTO adjudicating bodies, a questionable interpretation,
Article 13 of the DSU could not be of much help in resolving the issue relating to amicus curiae
briefs.  It could be argued by a few Members that  Rule 16(1) of Working Procedures for Appellate
Review might be the appropriate provision.  This approach could not be correct as Rule 16(1) relatedto ad-hoc  solutions and did not reflect a general right.  It had been India's objective to establish the
fact that the issue of amicus curiae  briefs had not been satisfactorily resolved by the Appellate Body.
On the contrary, the interpretations developed by the Appellate Body had raised more questions in the
process whose answers were not forthcoming.  Indi a would therefore request the EC to reconsider itsTN/DS/M/3
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proposal on amicus curiae  briefs, more so in the light of the statements of Members during the
meeting of the General Council held on 22 November 2000.
56. Turning to some of the answers provided by the EC in response to the questions posed by
India, the EC maintained that the acceptance of amicus curiae  briefs would not slow down the
proceedings.  It was the view of India that EC had not given adequate reasons for its assertion in thisregard.  Consideration of such briefs would involve their examination by the parties to the dispute and
possible response to arguments contained therein.  India was not clear how this would not add to the
existing obligations of the parties to the dispute.  This would be even more pertinent in high profile
disputes which were likely to attract a large number of unsolicited briefs.  Instead of clarifying why,
in its opinion, consideration of such briefs would not add to the burden of the disputants, EC had
simply asserted, without giving any reasoned explanation, that the issue could be resolved in a manner
without putting any excessive burden on the parties.  India simply did not understand this assertion.India would also like the EC to explain in detail  the specific parameters which would be used to
determine the factual and legal relevance of the amicus  briefs to the dispute before the panel and the
Appellate Body.  Similarly what parameters would be used to determine the relationship, if any,
between the entity submitting the brief and the disputing parties?  India would like to receive an
exhaustive listing of such parameters.  A system which was designed for coping with the maximumpossible load was more likely to work.
57. A related question which arose was whether panels and the Appellate Body would have
adequate resources including financial and time, fo r screening individual applications?  Agreeing to
the consideration of amicus  briefs would overload the dispute settlement process with the possibility
of crumbling.  The EC in its reply had stated th at panels and the Appellate Body would be free to
address as they saw fit arguments included in the briefs that had been admitted.  India was not clear
whether this would also require panels and the Appellate Body to give a reasoned justification of
acceptance of certain arguments while rejecting others.  In the absence of such justification, India was
concerned that the consideration of amicus  briefs would become an arbitrary exercise fraught with
subjectivity.  On the other hand, if panels and the Appellate Body were to give reasoned explanationfor acceptance or rejection of each argument made in each accepted brief, this would certainly be a
time consuming exercise.  All this when a key consideration before us was how to speed up and
prevent any slow down of the dispute settlement process.
58. India would like to know from the EC whether amicus  briefs could be used to establish facts
in the dispute, which normally was the responsibility of the parties to the dispute.  It might be
appropriate to recall the Appellate Body's views in the dispute " Japan – Measures Affecting
Agricultural Products " in which the issue was whether an argument provided by an expert witness
invited to testify before a panel, but not raised by  the complaining party, could still be used by the
panel.  The Appellate Body did not favour the cons ideration by the panel of such arguments and held
that "A panel is entitled to seek information and advice from experts and from any other relevant
source it chooses ... to help it understand and evaluate the evidence submitted and the arguments made
by the parties, but not to make the case for a complaining party" (paragraph 129 of the AB report).This laid down the possible role of arguments from an expert or any relevant source.  It was therefore
incumbent upon the EC to specify how panels a nd the Appellate Body would ensure that all
arguments in amicus  briefs would be confined to and used solely to evaluate arguments made by
parties to the dispute and not to make the case for the either of the parties.  Although the risks and
pitfalls of consideration of amicus  briefs were well known, it was important to recall some of them.
Consideration of such briefs would change the intergovernmental nature of the WTO.  For one,
ultimate compliance was to be done by the governments and not by others.  Furthermore,
governmental position in disputes were arrived at after balancing the interests of all domestic
stakeholders so that national position represented the general interest as against amicus  submissions
which were likely to represent narrowly defined interests.  If governments knew that their non-governmental organizations would have a further chance to influence the dispute settlement process,
they would pay less attention to finalizing their positions.  Furthermore, the position of differentTN/DS/M/3
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domestic interest groups would boil over to the dispute settlement process, which was definitely not
the forum for resolution of such differences.  The outcome of such clashes and the impact of such
clashes upon the domestic policies of the Member countries would be unpredictable.  In brief,
consideration of amicus briefs would undermine the authority and ability of governments to
effectively participate in the dispute settlement pr ocess.  Non-governmental organizations might focus
on areas of interest to them and ignore other public interest concerns.  Allowing access to amicus
participation would privilege the ideas and interests of the non-governmental organizations in
developed countries at the expense of those in developing countries which lacked the resources to
participate in the dispute process.  Full-scale participation by various non-state actors in the dispute
process would overwhelm the institutional structures of the WTO and was unlikely to lead to any
more effective representation of public interest.
59. India would like to recall the concerns expressed by certain experts that the beneficiaries of
trade liberalization lacked the incentives to gather information, organize, or vote.  On the other hand,
other experts have stated that protected industries mobilize constituencies to preserve protectionist
laws.  This had a particularly pernicious implication if amicus  briefs were accepted by panels and the
Appellate Body.  If all non-state actors could potentially submit amicus  briefs, it was the narrow
protectionist-oriented interest groups that would be more likely to muster the resources necessary forsuch briefs than would the more numerous beneficiaries of trade liberalization.  The flexibility which
would be made available to interest groups through amicus submissions at the cost of national
balancing of interests of all domestic stakeholders had the potential to distort the dispute settlement
process.  In this context it might be appropriate to recall the views of certain experts that regulations
that interest groups influence, such as the tax code, tended to be somewhat distorted.  It was India'sbelief that similar distortions might be witnessed in the dispute settlement process if amicus curiae
submissions are permitted.  It had been argued by certain experts that consideration of amicus briefs
would increase the public support for the underlying process.  There was little empirical evidence to
support such assertions.  In concluding, he said that India had been able to demonstrate that there was
no clarity in the findings of the Appellate Body regarding the consideration of amicus curiae  briefs.
In any case, during the current negotiations on the DSU, the participants would need to evaluate the
risks associated with consideration of amicus curiae  briefs in the dispute settlement process.  The
parameters of the underlying obligations inherent in the system proposed by the EC were far from
clear.  It was India's considered view that amicus curiae  briefs were neither required nor necessary in
the dispute settlement process.
2. Other business
60. The representative of the United States stated that his delegation hoped to submit a proposal
on transparency before the summer break.
61. The Chairman said that he would like to gi ve some indications as to how he intended to
proceed regarding the work programme after the summer break.  Before doing that, he drew
participants' attention to two informal documents which had been prepared by the Secretariat with a
view to assisting delegations to have focussed discussions of the issues that had been proposed fornegotiation.  The first was a compilation of the specific proposals that had been submitted by
participants (Job No. 02(42)/Rev.1.) and the second was a checklist of issues contained in
Job No. 02(86).  He said that these documents would be regularly updated to take into account new
proposals that would be submitted by participants.  To advance the work, he said that he intended to
have an issue-by-issue discussion of the various proposals after the summer break until the end of theyear, by which time it should be clear as to which proposals enjoy the broad support of participants
and should be elaborated into a draft text for the consideration by participants in the new year.  He
indicated that given the volume of work and the short deadline for completing the negotiations, it
might be necessary to have open-ended informal meetings in addition to the scheduled meetings.  He
also indicated that he would continue to have meetings with delegations and groups of delegations invarious formats.  These meetings had been particular ly helpful in terms of enabling him to get a betterTN/DS/M/3
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sense of participants' priorities and positions.  He said that he was available at all times to meet with
any interested participant on a one-on-one basis to discuss any issue connected with the negotiations.
He urged all participants to become actively involved in the negotiations.
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