RESTRICTEDWORLD TRADE
ORGANIZATIONTN/DS/M/2
3 July 2002
(02-3722)
Special Session of the Dispute Settlement Body
21 May 2002
MINUTES OF MEETING
Held in the Centre William Rappard
on 21 May 2002
Chairman:  Mr. Péter Balás (Hungary)
The Chairman recalled the first formal meeting of the Special Session of the Dispute
Settlement Body (DSB) on 16 April 2002 at which the proposal of the EC had been extensively
discussed and said that as the other proposals, namely Thailand's proposal, contained in document
TN/DS/W/2, and Thailand and the Philippines' joint proposal, contained in document TN/DS/W/3 hadnot been discussed because of lack of time, he would like to request the proponents to formally
introduce their papers and give the participants to the negotiations an opportunity to express their
comments.  He further stated that it was his underst anding that two more papers would be circulated,
namely a concept paper by a group of countries on the sequencing issue and the written response by
the European Communities (EC) to the set of questions posed by India in connection with the former'sproposal.  He said that if time permitted, participants would also be given the opportunity to comment
on these documents.  He urged participants not to make  detailed comments at this stage, as they would
have the opportunity do so when this meeting swit ched to an informal mode.  He proposed in that
connection the deletion of the item relating to "open-ended discussion" from the agenda of the
meeting.  His proposal was accepted by the participants.
1. Discussion of proposals submitted by delegations
1. The Chairman referred to the in-depth discussion  of the proposal by the EC at the first formal
meeting and thanked all participants who contributed to the debate in that regard.  He informed
participants that the set of questions posed by India to the EC had been circulated as document
TN/DS/W/5 and was available in the room.  He also informed them that the informal note prepared by
the Secretariat on the cost of the current panel system had also been circulated as Job N° 02(39) andwas also available in the room.  Finally, he drew the attention of the participants to a compilation of
the texts of specific proposals submitted so far to the Special Session.  The document was available
only in English, but would be made available very soon in Spanish and French.  He said that the
compilation would be updated regularly and it was his hope that it would prove to be a useful tool in
the negotiations.  He invited Thailand to formally present its proposal contained in documentTN/DS/W/2.
2. The representative of Thailand said that their proposal was not new as it had been submitted
to Members for their consideration in 2001.  It was being re-submitted in line with the understanding
reached that all old proposals would have to be re-submitted, if they had to be considered during these
negotiations.  Basically Thailand's proposal was aimed at amending Article 17.1 of the Understandingon Rules and Procedures Governing the Settlement of Disputes (DSU).  Thailand was convinced that
the proposal would improve the functioning of the DSU in line with the mandate conferred by
Ministers in the Doha Declaration.  The essence of their proposal was to increase the membership of
the Appellate Body from seven to either nine or eleven.  This was necessary given the significant
increase in the workload of the Appellate Body and the increasing complexity of cases brought beforeTN/DS/M/2
Page 2
them.  The Appellate Body was working under pressure and finding it difficult to complete its work
within the prescribed time periods under the DSU.  Thailand was conscious of the financial
implications of its proposal, but thought it could bring considerable benefits to Members.  Before a
definitive decision was made, it might be advisable to request the Secretariat to prepare an estimate of
how much it would cost, if the membership  of the Appellate Body was increased.
3. The representative of the European Communities sa id that there was considerable merit in the
proposal of Thailand to increase the membership of the Appellate Body.  In fact, in its own proposal,
the EC had suggested an approach which would ma ke it possible for the General Council  to increase
the membership of the Appellate Body if this was deemed necessary.  He stated that the EC was
willing to work with Thailand and other interested delegations to pursue further this proposal.  The
EC was of the view that while considering this propo sal, it would also be worthwhile to consider in
parallel the conversion of the positions of Appellate Body members into full-time positions.  Thisproposal was not novel and had been alluded to in their proposal.
4. The representative of Hong Kong, China said that his delegation could support the proposal
by Thailand to amend Article 17 of the DSU so as to increase the membership of the Appellate Body.
It was rather unfortunate that agreement could not be reached last year on this proposal and the one
relating to the tenure of Appellate Body members.  It would appear that the only realistic way to deal
with the increased workload of the Appellate Body was to increase the number of its members.  Hong
Kong, China had an open mind in terms of how many members should be added to the current seven
members.  Initially, it might be advisable to consider adding two members.  He further stated that it
would be advisable to consider a mechanism that would allow future adjustments to the number of
Appellate Body members to be made without ame nding the DSU.  In this regard, his delegation
welcomed the EC's proposal.
5.  The representative of Turkey said that his delegation had considered carefully the proposal
by Thailand to increase the membership of the Appellate Body and thought that it warranted further
consideration by participants to the negotiations.  The increase in the workload of the Appellate Body
had tended to slow down dispute settlement procedures to the detriment of Members.
6.  The representative of the United States said that it was important for the dispute settlement
mechanism that the Appellate Body functioned well.  In that context, his delegation was willing to
consider proposals that would ensure the smooth and effective operation of the Appellate Body.  His
delegation was mindful of the view of the Appellat e Body that it could not hear more than two
appeals at one time and the view of some Members that it should be possible for it to hear at least
three appeals at one time.  Given this divergence, his delegation welcomed the proposal by Thailand
and was willing to explore the possibility of incr easing the membership of the Appellate Body.  To
facilitate the process, his delegation thought it might be useful for participants to consider the
following questions: would the new number of Appell ate Body members be specified in the DSU?  If
this was the case, would there have to be an amendment to the DSU or was Thailand contemplating
another means to achieve this objective?  What would be the effect of any increase in the membership
of the Appellate Body on the current terms of the incumbents?  Would Thailand anticipate that anincrease in the size of the Appellate Body would also require additional staff for the Appellate Body
Secretariat?
7. The representative of Paraguay said that his delegation saw merit in the proposal by Thailand
to increase the membership of the Appellate Body and was prepared to consider it further given the
need for appeals to be dealt with more speedily.  Currently the workload before the Appellate Bodywas such that it was impossible for it to work as fast as Members would have wished.  He further
stated that his delegation could support the proposal by Hong Kong, China to initially add two
members to the Appellate Body.  Paraguay was also in agreement with the suggestion that a
mechanism should be found so that the membership of  the Appellate Body could be increased at any
relevant time without resorting each time to amendment of the DSU.TN/DS/M/2
Page 3
8. The representative of Thailand commended all those participants who had commented on
their proposal and said that his delegation was prepared  to work with them to arrive at an acceptable
solution.  In addressing the questions posed by the United States, he said that his delegation did not
see the need to recruit additional staff members if a decision was taken to increase the membership of
the Appellate Body.  Regarding the proposal that a mechanism should be found which would make itunnecessary to amend the DSU each time the membership of the Appellate Body was altered, he said
that his delegation was prepared to consider the views of other participants in the negotiations.  The
suggestion by Hong Kong, China that the Appell ate Body should be increased initially by two
members was very interesting, so also was th e EC proposal that the General Council should be
authorized to alter the membership of the Appe llate Body whenever it was deemed appropriate
without necessarily amending the DSU.
9. The Chairman thanked Thailand for its contribution and requested the Philippines and
Thailand to present their joint propos al contained in document TN/DS/W/3.
10. The representative of Thailand, speaking also on behalf of the Philippines, alluded to the fact
that the proposal by the Philippines and Thailand was not new and said that it had been circulated to
Members last year together with a draft Decision to amend the DSU.  It had been re-submitted as per
the agreement reached earlier among participants to the negotiations.  Their proposal was aimed atamending the provisions of Article 22.7 of the DSU.  It was their firm conviction an amendment to
Article 22.7 was warranted, if Members wished to strengthen the implementation phase of the dispute
settlement process.  Members should not have an unfettered discretion in deciding the level of
suspension of concessions or other obligations authorized under Article 22 of the DSU, including the
list of products to be targeted after the adoption of rulings and recommendations of the DSB.  It wasimperative that the suspension of concessions or other obligations be equivalent to the level of
nullification or impairment.  This issue was of systemic importance and deserved the serious
consideration of all participants.
11.  The representative of the European Communities commended the Philippines and Thailand
for their proposal and said that the EC and its member States were firmly convinced that any
amendment of the DSU must address the "carousel" issue.  They were of the view that unilateral
modification of the list of targeted products authorized pursuant to Article 22 of the DSU by the DSB
was contrary to the letter and spirit of the DSU and undermined the credibility of the multilateral
trading system.  In that context, the EC and its member states were prepared to work closely with
Thailand, Philippines and any other participants to introduce effective disciplines and clear rules in
the DSU which would outlaw unilateral modification of the list of targeted products once this had
been approved by the DSB.
12. The representative of Turkey said that it was necessary to provide clear rules in the DSU
which would disallow the unilateral modification of the lists of targeted goods once authorization had
been granted by the DSB.  The proposal of the Philippines and Thailand merited further consideration,
as it could help Members to deal with the "carousel issue", especially considering that any question
relating to suspension of concessions would be referred to arbitration.
13. The representative of Malaysia welcomed the proposal by the Philippines and Thailand on the
"carousel" issue and said that it would strengthen the dispute settlement process of the WTO.  He
stated that his country was prepared to work with  all participants which were interested in this
proposal.  He further indicated his delegation's support for the proposal by Thailand regarding the
increase in the membership of the Appellate Body.  He cautioned, however, that this should not beburdensome on Members in terms of their financial contributions to the budget of the WTO.  It would
be extremely useful if Members could be provided with some financial estimates.  He welcomed the
suggestion by Hong Kong, China that the member ship of the Appellate Body should initially be
increased by two members.TN/DS/M/2
Page 4
14. The representative of the United States stated that the position of his delegation on the
"carousel" issue was well known and as such he did not wish to engage in any lengthy debate.  He
only wished to make a few comments.  They had pointed out in the past that the proposal under
consideration would impose greater limitations on the Member whose trade had been adversely
affected than on the Member that had been found to be in breach of its obligations under the WTOAgreement.  There was no requirement in the DSU that the Member in breach of its obligations
should seek the approval of the DSB before modifying its inconsistent measure.  There were instances
where it would be in the interest of Members, if the list of targeted products was altered from time to
time.  An example would be where the suspension of concessions on a list of targeted products
adversely affected the complaining Member's own economy.  This unintended hardship suffered by
the complaining Member would be in addition to the nullification and impairment suffered by it from
the measure found to be inconsistent with the WTO Agreement.  A Member should not be forced tochoose between continuing to impose this hardship on  itself or suspending concessions at a level less
than the level of nullification or impairment.  In commenting on sub-paragraph (h) of the proposal, he
said that it would introduce for the first time into  the DSU the concept of a time-period within which
adjustment had to take place.  It was his delegation's view that if such a concept were to be introduced
into the DSU, it would be advisable to introduce it much earlier in the process.
15. The representative of Saint Lucia said that her delegation was interested in this proposal as it
would clarify the DSU in a manner which would preclude the unilateral modification of the list of
targeted products after authorization had been given by the DSB.  They were prepared to work with
the Philippines, Thailand and other participants to elaborate further on this proposal.
16. The representative of India said that his delegation was in support of the proposal tabled by
Philippines and Thailand.
17. The representative of Australia said that his delegation was interested in this issue and wished
to see improved procedures for DSB regulation of authorized levels of suspension of concessions.
Australia was, however, not convinced that an amendment to the DSU was necessary to achieve this
purpose.
18. The representative of Thailand thanked participants for their comments and said that his
delegation and that of Philippines were prepared to work with any participant to further elaborate on
this proposal.  Notwithstanding the views expressed by some participants, they were convinced that it
was appropriate to discuss the sequencing issue and the "carousel" issue together, as it would give a
clearer picture of the whole mechanism.
19. The Chairman thanked the delegations of the Philippines and Thailand for their proposal and
said that participants would have further opportunities to comment on it at subsequent meetings.  He
invited the delegation of Japan to introduce the concept paper on the sequencing issue authored by a
number of participants including Japan.
20. The representative of Japan said that the authors of the concept paper were encouraged that a
number of participants shared their view that the sequencing issue should be given priority in the
negotiations on the DSU.  Notwithstanding the views of other participants in the negotiations, mostnotably the EC whose proposal was in line with their thinking, their proposal was still relevant, as it
succinctly summarized the problems in this area a nd what the options were for addressing them.  The
authors were ready to work with any participant to further elaborate on their proposal with a view to
arriving at an acceptable solution.  He stated in that connection that the submission of this paper did
not preclude the possibility of any of the co-authors or the group as a whole from tabling furtherproposals on this issue.  The authors were fully prepared to discuss other issues that were connected to
the sequencing issue.  They were of the view that any re-drafting of Articles 21 and 22 of the DSU
should be done together, hence their decision to delay the submission of a legal text on the sequencing
issue.  One of the major limitations of the DSU was the failure to clarify the relationship betweenTN/DS/M/2
Page 5
Articles 21 and 22.  Article 22 seemed to require the request for the suspension of concessions in
response to an alleged non-compliance to be considered within 30 days after the expiration of the
reasonable period of time.  Under Article 21, however, it was stipulated that the panel procedure to
determine whether compliance had taken place should be completed within 90 days.  This
inconsistency had led Members to conclude ad-hoc agreements to deal with this sequencing issue.These ad-hoc agreements could hardly be said to be satisfactory.  There was the need for
predictability and equity.  To deal with this problem, Members had proposed textual changes to
Articles 21 and 22 during the DSU review in 1999, but no agreement was reached.  It was imperative
that this issue be taken up and resolved in the current negotiations on the DSU.  The DSU could be
amended along the following lines:  "where the parties concerned disagree on the existence or WTO
consistency of the implementing measure, a multilateral determination on the matter must take place
prior to any request for the suspension of concessions".  For this purpose, specific rapid disputesettlement procedures – a compliance panel with the possibility of appeal – would be established.  The
suspension of concessions should be authorized only after the adoption of the panel or Appellate Body
report that confirms WTO inconsistency".  Such an amendment if accepted by Members would
greatly enhance the stability and predictability of the WTO dispute settlement system.  The authors
were prepared to work with all interested participants in achieving this goal.
21. The Chairman said that the sequencing issue had been referred to by many participants during
the general discussions indicating the priority they  attached to this issue.  He asked the authors
whether their paper was a formal proposal or an informal note.
22.  The representative of Japan said the intention of the authors was to contribute to the
discussion on the sequencing issue and that they would prefer if their paper to be circulated as an
informal document, i.e. a job number, and not as an official WTO document.
23. The representative of New Zealand said his delegation was interested in this issue and had
been associated with what had been formally called the "Suzuki group" or the "co-sponsors group".
New Zealand had held the view that the sequencing issue was the core issue that had to be addressed
during the DSU Review.  His country was particul arly disappointed that agreement could not be
reached in the lead up to the Doha Ministerial Conference to amend the DSU along the lines
suggested by the representative of Japan.  While his country was not listed as a co-author of the
concept paper, he wanted to make it clear that  New Zealand was still a member of the co-sponsors
group and would like to be associated with the paper.
24. The representative of Korea said that his country was a member of the co-sponsors group and
a co-author of the concept paper on the sequencing issue.  Given the effort that had been expended by
the co-sponsors in highlighting and clarifying the sequencing issue in a systematic way, it was theirwish that the concept paper and the EC's proposal on this issue, which complemented each other,
would serve as a basis for consensus among participants to the negotiations.  He referred to
paragraph 9 of the concept paper and said that, like the EC's proposal, it would give Members the
possibility of appealing a compliance panel ruling.  A determination on whether the party complained
against had fully implemented the DSB recommendatio ns or rulings was an important step in the
sense that it triggered a virtually automatic authorization to suspend concessions by the DSB.  It was
because of the possible ramifications that the co-sponsors thought that it would be advisable to give
the respondent Member another chance to defend its measures.  It was to be conceded, however, that
allowing appeals of compliance panel reports would delay the dispute settlement process by two to
three months.  As there was the need to settle disputes promptly, Korea would make proposals aimedat speeding up the process at the next meeting of the Special Session of the DSB.
25. The representative of Colombia commended the delegation of Japan for its introduction of the
concept paper on the sequencing issue and said that it was a co-author of the paper.  In Colombia's
view, the sequencing issue fulfilled the two requirements which determined whether an issue should
be taken up during the current negotiations on the DSU.  The first was whether the proposal was inTN/DS/M/2
Page 6
response to an identifiable problem which greatly impacted on the operation of the dispute settlement
mechanism.  The second was whether the proposed solution would help to consolidate the objectives
of the dispute settlement system, namely to provide security and predictability.  Colombia was of the
view that the issue of strengthening the rights of third parties should also be taken up in the
negotiations.  In addition, it believed that the participation of third countries in consultations should bereviewed, focussing particularly on how to guarantee interested Members' access to information on
the outcome of consultations.  They also supported the Australian proposal for the reduction of time-
frames in certain types of disputes such as safeguards.
26. The representative of Peru said that the sequencing issue was of fundamental importance to
the operation of the dispute settlement system and the credibility of the multilateral trading system.
As one of the co-authors, Peru wished to formally endorse the statement by Japan on behalf of the
authors believing that the resolution of the seque ncing issue would improve the functioning of the
dispute settlement system to the benefit of all Members.  In that context, she said that Peru was open
to discussing this proposal further with any interested participant.
27. The representative of Argentina stated that although Argentina was not a co-author of the
concept paper, it agreed very much with almost all the ideas expressed therein.  Argentina had always
considered this issue to be of paramount importance and had in a written contribution in 1998 stressedthe importance of clarifying the relationship between Articles 21 and 22.  It was clear that
notwithstanding the conclusion of bilateral agreements between parties to disputes, a significant
number of Members attached priority to the sequencing issue.
28. The representative of Brazil welcomed the concept paper and said it covered one of the most
urgent issues which needed to be resolved.  By focusing on very specific issues and proposing
solutions, the concept paper sent a message as to what was essential and realistic and what was not.
The paper in its present form was detailed enough and could make an important contribution to the
debates on this issue in the Special Session.  Brazil was ready and willing to cooperate with the co-
authors and any interested participant on this issue.
29. The representative of Bulgaria commended the co-authors of the concept paper and said that
Bulgaria had always been interested in this issue and was willing to cooperate with the co-authors and
other interested participants in finding a solution to the sequencing issue.  While the sequencing issue
was very important, it was by no means the only issue which should receive the priority attention of
the Special Session.  As his delegation had not had enough time to examine the concept paper, they
would like to reserve their right to make comments at a later date.  In the meantime, he wished to ask
two questions which he hoped would clarify some of the ideas expressed in the paper.  The first
question concerned time-frames.  It appeared that co-authors had in the past incorporated the issue oftime-frames into their proposal, specifically advocating for a reduction in the time-frames.  As his
delegation had consistently made clear, they were against any proposal that would result in the
shortening of time-frames, especially before the adoption of the panel/Appellate Body report.  It
would appear that the concept paper was different in the sense that it did not integrate the issue of
time-frames into the proposal.  Was it the view of th e co-authors that the two items were separate and
not linked to each other.  The second question concerned the procedures for clarifying the relationship
between Articles 21 and 22.  As his delegation had repeatedly stressed, the best way to resolve the
inconsistency was through an interpretation.  The position of the co-authors on this point was not
known.  Could they indicate whether they would support an authoritative interpretation or an
amendment to the provisions of Articles 21 and 22 of the DSU?
30. The representative of the European Communities commended Japan and the co-authors for
their concept paper and said that it was an important contribution to the debate on this issue.  He
agreed with Japan and Korea that there were similarities in some of the ideas expressed in the concept
paper and their own proposal on the issue.  This wa s hardly surprising as the EC and the co-sponsors
group had been collaborating intensively on this issue for a considerable period of time.  They wereTN/DS/M/2
Page 7
committed to working closely on this issue with the co-authors.  He made reference to two other
issues covered in the concept paper and said they were of systemic importance.  These were the right
of Members to appeal compliance panel reports and the need for parties to engage in consultations
prior to requesting the establishment of a compliance panel.  It was the view of the EC that both of
these points were fundamental, although with regard to consultations, they could be accelerated.  Hereiterated his appreciation for the concept paper and the contribution it would make to the debate on
the sequencing issue.
31. The representative of Mexico thanked the co-authors of the concept paper and said that it
would make an important contribution to the debate on the sequencing issue.  Mexico was willing to
work constructively on this issue with the co-authors and other participants.  Like the EC, Mexico
believed that it was important for the concept pa per to retain the right of Members to appeal
compliance panel reports to the Appellate Body.  They had taken special interest in paragraph 12 ofthe concept paper dealing with the authorization to  suspend concessions by the DSB.  This was an
interesting suggestion in that it appeared to go beyond what had been agreed to by some Members in
their bilateral agreements.  The issue of the rights of third parties appeared not to have been covered
in the concept paper.  This was an important issue for many developing countries and it would be
advisable for it to be addressed in the concept paper.
32.  The representative of Singapore welcomed the concept paper and said that Singapore had
always attached priority to the sequencing issue and believed that clarification of this issue would
improve the functioning of the dispute settlement system.  Further thought needed to be given to the
impact the proposal of the co-authors would have on time-frames and other aspects of the dispute
settlement mechanism bearing in mind the need for prompt settlement of disputes, certainty andpredictability.  Singapore was ready to engage constructively with the co-authors of the concept
paper.
33. The representative of Hungary commended Japan and the 14 other authors of the concept
paper.  Hungary attached utmost importance to the clarification of the relationship between
Articles 21.5 and 22 of the DSU.  Clarification would ensure legal certainty and provide greaterpredictability to the system in contrast to the present practice of concluding ad-hoc bilateral
agreements.  The concept paper and the proposal by the EC provided a good basis for moving the
negotiations forward on this issue.  Hungary was ready to work constructively with all interested
participants on this issue and the negotiations generally.
34. The representative of Australia welcomed the concept paper and said that like other Members,
Australia also attached importance to the sequencing issue.  His country was pleased to see that the
right of appeal was referred to in the paper.  It was the view of Australia, however, that thesequencing issue had largely been resolved through practice by Members.  It was therefore probably
not necessary to attach high priority to it now.  Australia was opposed to a detailed textual amendment
as it could introduce new problems and rigidities into the DSU.
35. The representative of Thailand welcomed the concept paper and said that it was common
knowledge that his delegation attached priority to this issue.  Thailand was ready and willing to work
constructively with the co-authors on this issu e with a view to finding common ground.  In that
context, they were expecting that the co-authors would in due course submit a detailed proposal for
the consideration by Members.
36.  The representative of Saint Lucia welcomed the concept paper and said that her delegation
had not had enough time to consider it.  Nevertheless her delegation had had a long-standing interest
in this issue and saw final resolution of it as a matter of great importance whether through clarification
or formal amendment to the DSU.  The imposition of sanctions not only affected the interests of the
immediate parties to the dispute but also third parties.  Colombia had alluded to the rights of third
parties in its intervention but it seemed not to ha ve been reflected in the concept paper.  HerTN/DS/M/2
Page 8
delegation would be interested to know whether Colombia and the other co-authors intend to develop
this point further.  She endorsed the statement of Mexico in that regard.
37. The representative of the United States welcomed the concept paper and said that his
delegation would need more time to consider it thoroughly.  As had been previously stated, his
delegation was prepared to consider proposals to clarify the relationship between Articles 21 and 22of the DSU.  As a preliminary comment, his delegation would like to note that the concept paper did
not refer to the need to maintain overall time-frames as part of a sequencing approach.
38. The representative of Japan, on behalf of the co-authors, thanked all those participants who
had commented on the concept paper.  She said that the authors of the paper had chosen to focus
solely on the sequencing issue given the broad support for the clarification of the relationship between
Articles 21 and 22 among delegations.  As had been indicated in paragraph 2 of the paper, they were
prepared to consider other closely related issues such as time-frames and the rights of third partieswhich had been referred to by a number of participants including Bulgaria and the United States.  The
authors were open to suggestions from interested pa rticipants and looked forward to working closely
with them to find common ground on these issues.
39. The Chairman noted that notwithstanding its late circulation, the concept paper had provoked
a significant debate among participants.  He invited the EC to formally present the paper
(TN/DS/W/7) containing its written responses to the questions posed by India.
40. The representative of the European Commun ities thanked all those participants who had
posed questions and offered detailed comments on their proposal at the last meeting.  He said that it
was not his intention to make a detailed presentation of their responses but to highlight some salient
elements.  On the issue of permanent panelists, he  said that they had provided statistical data to
support their assertion that the current system of ad-hoc selection of panelists was clearly not working
in a satisfactory manner and that it was imperative for there to be reform.  There were four main
problems with the current system.  First, there were delays in the selection process.  They had
provided statistical data to show that this had become a significant problem over the years,
particularly in the recent past.  For instance in 1996, the average time for the composition of a panelwas thirty days, whereas in 2001 it was two months .  According to Article 8.7 of the DSU, panels
were expected to be composed within 20 days from the date of its establishment.  The figures clearly
demonstrated that this time-frame was routinely being missed.  The second was that recourse to the
Director-General to appoint panelists had become the norm instead of the exception.  Of the 24 panels
that were composed between 2000 and 2002, 14 were composed by the Director-General representing
nearly 58 per cent.  This figure demonstrated the reduced role of Members in the selection process.
The third defect of the current system was that it  was very difficult for panelists to fully engage
themselves in their panel work considering thei r other commitments.  The growing complexity of
WTO cases demanded panelists to be fully acquainted with new developments.  Lastly, ad hoc
panelists were not necessarily broadly representative of WTO membership; only 35 per cent of
panelists originated in developing countries.  He stated that the EC had done its best to respond to the
detailed questions that India had on how a permanent system of panelists would work in practice andthat they were ready and willing to discuss this issu e further both in a formal or informal setting.  On
the issue of the financial implications for switching to a system of permanent panelists, he said that
the advantages from such a system would not be disproportionate.  He referred to the Job
document (02)/39 circulated by the WTO Secretariat on the costs for operating the current system and
inquired whether it would be possible for the Secretariat to provide an estimate of the additional coststhat would be incurred if a switch was made to a system of permanent panelists.  The Secretariat
would require certain information before being able to undertake this analysis including the number of
permanent panelists to be appointed.  The EC had forwarded some options in its paper which could be
taken into account by the Secretariat.  The Secretar iat might also want to factor into the calculations
the cost of using full-time vis-à-vis part-time panelists.  Regarding the issue of compensation and howit could be made more attractive than suspension of concessions, he wished to underline its agreementTN/DS/M/2
Page 9
with India that the core objective of the dispute settlement mechanism was and should remain
compliance and that no proposal should be introduced which would compromise this overarching
objective.  Their proposal would not alter the hierarchy between compliance and compensation, but
would encourage Members to consider seriously compensation as an alternative to suspension of
concessions within the reasonable period of time.  The EC's proposal would also create a strongerincentive for compliance considering the requirement that the responding Member should be in a
position to offer compensation when requested by the complaining Member in the event of non-
compliance with the recommendations and rulings of the DSB.  This would make it very clear at the
domestic level that non-compliance had a cost and could be of particular relevance in those cases
where the complaining Member lacked effective power to suspend concessions towards the
responding Member.  While the ideas presented might have the effect of introducing further options
into the dispute settlement mechanism, they would in no way compromise the primary objective ofcompliance.  On the issue of transparency, he wished to make it clear that the EC's proposal did not
mix the issue of internal transparency with that of external transparency.  The EC supported the
enhancement of third party rights as was evident from their proposal.  The EC was not advocating that
entire panel and Appellate Body proceedings be opened up to the general public.  Their proposal
envisaged that certain parts of the proceedings might be opened up to the general public, if the partiesto the dispute were in agreement.  Members of the WTO would be entitled to attend these sessions
thus promoting both internal and external transparency.  It would also be up to third parties to decide
whether their interventions should take place in pub lic or in closed sessions.  Should the proceedings
be opened to the general public, those attending would have no rights other than to listen passively to
the intervention of the parties to the dispute.  With respect to the issue of amicus curiae , the EC was
aware that many participants had difficulties with it.  Their suggestions attempted to strike a balance
between the opposing views.  The issue of amicus curiae  briefs could not be easily dismissed, as the
right to submit such briefs had been recognised  by the Appellate Body .  It would, however, be
preferable if rules were drawn up by Members to regulate the submission of these briefs.  The EC was
ready and willing to discuss this issue further with an y interested participant with a view to arriving at
an acceptable solution.
41. The Chairman thanked the EC for presenting its paper containing the responses to the
questions posed by India and said that he had conferred with the Secretariat on the request of the EC,
but the Secretariat was understandably not very keen on estimating how much it would cost for
having a system of permanent of panelists.  To be able to undertake this analysis, the Secretariat
would require a lot of information including how many panelists were to be appointed and whether
their positions would be full-time or part-time.  He recalled that at the previous meeting therepresentative of the EC  had stated that the EC ha d done some internal calculations which they would
be willing to share later with the participants and inquired when those calculations could be made
available even if on a preliminary basis.  After receiving this information, the Secretariat could
perhaps be in a position to make a contribution.
42. The representative of the European Communities said that the EC appreciated the concerns of
the Chairman and the Secretariat relating to the lack of pertinent information to enable the Secretariat
to estimate the cost of switching to a system of permanent panelists.  The EC had made some
preliminary estimates but was in the process of refining its methodology to take into account certain
factors.  This might take some time, but the EC  would do its best to provide the information to
participants as soon as practicable.
43. The representative of India thanked the EC for its detailed responses to the set of questions
posed by India and said that since the paper was circulated shortly after the meeting commenced, he
would only offer preliminary comments, but reserved India's right to come up with a detailed response
at a later date.  While the responses appeared to have been well reasoned, the issue was whether India
agreed with them.  The EC had made a valid point about the delay in the selection of panelists and itagreed that this issue should be addressed in the context of the negotiations.  It was doubtful,
however, if switching to a system of permanent panelists would resolve the problem.  The EC hadTN/DS/M/2
Page 10
equally made a valid observation about the increasing recourse to the Director-General to appoint
panelists.  It could be inferred from the facts and statistics provided by the EC that the role of the
parties in the selection of panelists had greatly diminished over the years and that it was now more
illusory than real.  The question, however, remained whether switching to a system of permanent
panelists would resolve the problem.  India was examining this issue from a different angle and wouldsoon be tabling proposals in that regard.  In its response to question 3, the EC stated that the
requirement that panelists should not come from any of the disputing Members limited the pool of
available panelists much to the detriment of the system.  Whereas it was difficult to disparage this
view, it had to be examined in context.  A look at the statistics incorporated into the EC paper showed
that in a majority of the cases – 68 out of a total of 83 cases, the EC and the US were parties to the
dispute and in the remaining 15 they were third parties meaning that their nationals could be panelists
in all these cases.  The reasoning behind the requirement that nationals of disputing Members shouldnot be panelists was quite clear but admittedly, this requirement operated to restrict the pool of
available panelists.  On transparency, his delegation had serious difficulties with the approach
suggested by the EC that part of the proceedings should be opened up to the general public and WTO
Members where the parties to the dispute were in agreement.  On amicus curiae  briefs, India did not
share the view of the EC the right to submit such briefs was entrenched in WTO's legal systemfollowing the rulings by the Appellate Body.  The st atus of these briefs would have to be determined
by Members in the course of the negotiations.  It could not be said that there was an emerging practice
to accept amicus curiae  briefs, although in one case in which India was a party, the Appellate Body
had accepted such briefs notwithstanding India' s objections.  Many developing-country Members
including India had very strong views on this issue which, to some extent, had been addressed in partby the EC in its proposal.  The relevant provisions of the DSU clearly provided that panels could seek
experts' opinion, which was quite different from members of the general public coming and
presenting their views.  Given the depth of opposition to this issue by developing countries, it was
imperative for it to be examined quite closely dur ing the negotiations.  The EC's position on whether
panels should address new claims raised in amicus  briefs was not very clear.  While it appeared to
accept in principle that panels should not have that right to address new claims, it also stated in the
relevant paragraph in its submission that "on the other hand in the EC's view, the Panel/Appellate
Body could be free to address new arguments made in amicus  briefs, even if such arguments were not
otherwise made by the parties to the dispute".  The line of difference between the new claims and new
arguments could be very thin and, as such, it was necessary to focus on this issue as well in the
negotiations.  The EC's suggestions on compensation needed very careful consideration, as it could
have serious ramifications not only for the parties to the dispute, but the entire membership of the
WTO.  He confirmed that India would be submitting a detailed response to the EC's paper in due
course and that it was likely to address the compensation issue.
44. The representative of Turkey thanked the EC for its contribution and said that while his
delegation was in agreement with most of the proposals, they had some doubts about some of them.
The proposal on sequencing was very instructive and had to be developed in the light of otherproposals with a view to ensuring legal security and predictability.  With regard to the proposal on
making compensation more attractive than suspension of concessions and other obligations, they were
in agreement with the view that a compensation package mutually acceptable to the parties to the
dispute was likely to have fewer negative effects on the predictability of the trading system.
However, it was important to bear in mind that the primary objective of the dispute settlementmechanism of the WTO was withdrawal of the WTO-inconsistent measures.  Prior recourse to
arbitration as provided for in the proposal of EC woul d assist in realizing this objective.  They were in
support of the proposal for an expedited compliance panel procedure during the suspension of
concessions.  They had some doubts, however, about the proposal to replace ad hoc  panelists with
permanent ones.  According to the EC moving to a system of permanent panelists had manyadvantages including the possibility of less reversals of the reasoning of panels by the Appellate Body
which, in turn, could reduce the total time-frame of the dispute settlement mechanism and the
workload of the Appellate Body.  It would also reduce the costs for the parties to the dispute and
enhance the legitimacy and credibility of the panel process in the eyes of the public and increase theTN/DS/M/2
Page 11
involvement of developing countries in the panel process.  Turkey shared some of the concerns
expressed by India regarding the potential benefits of a system of permanent panelists.  They failed to
see how there would be less appeals under the proposed new system when under the current system
panelists were also selected on the basis their expertise in law, economics or international trade
policy.  The same was true for the legitimacy and credibility of panels.  One of the likely negativeeffects of a system of permanent panelists was th at it would produce a body of case law which would
be followed subsequently by other panels.  Decisions by panels and the Appellate Body were not
supposed to serve as precedents in future cases.  With respect to transparency, they were of the view
that the current system was satisfactory as all panel/Appellate Body reports were available for
consultation at the WTO or on the WTO website.  Allowing public access to panel or Appellate Body
procedures was likely to undermine the non-contentious character of these procedures.  This would be
inconsistent with the provisions of Article 3.10 of the DSU which provided that the use of the disputesettlement procedures should not be intended or considered as contentious acts.  With respect to
amicus curiae  briefs, they were of the view that they could create problems for the dispute settlement
mechanism of the WTO.  Panels and the Appellate Body would be inundated with submissions and, in
the absence of a legal framework, it would be very difficult for them to deal with the excess work.
Allowing the submission of these briefs would also provide an opportunity for NGOs or bigcorporations with expert lawyers, who had neither rights nor obligations under the WTO, to influence
the DSB.  This would be unfair to developing countries which generally had limited financial and
human resources than developed countries.  Consequently, amicus curiae  briefs should only be used if
the parties to the dispute expressly agreed to it.  Tu rkey reserved its right to make further comments or
proposals at a later date.
45. The representative of the European Communities said that the EC was willing to work with
India to find solutions to what they both perceive d to be shortcomings with the current dispute
settlement mechanism.  On the issue of the origin of panelists, it was clear that if a switch was made
to a system of permanent panelists, the nationality of the panelists would be irrelevant just as it was in
the case of the Appellate Body proceedings.  In cases where there was a problem of conflict ofinterests, they could be resolved under the specific rules on conflict of interests.  On the issue of
amicus curiae  briefs, the EC saw the need to clarify the distinction between claims and arguments
bearing in mind the established jurisprudence of panels and the Appellate Body on this issue.  It
would be totally inappropriate if amicus curiae  briefs introduced claims which had not been raised by
the parties to the dispute.  That would be against the very rationale of the dispute settlement system.
On the other hand, panels and the Appellate Body were there to apply the law and they were in no
way simply limited to those arguments which had been ra ised by the parties.  From that point of view,
if there was an argument in an amicus curiae  brief which could help settle the dispute between the
parties, it would make sense for it to be considered.  It should be made clear, however, that the
Appellate Body was not obliged to respond to all arguments raised in an amicus curiae  brief.  The EC
was willing to respond to any further questions that participants might have on this issue.  Turning
next to the comments of Turkey, the representative of the EC said that they had never suggested that
the current system of selecting panelists lacked legitimacy.  They only believed that a system of
permanent panelists would enhance the credibility of the panel phase of the dispute settlement
mechanism, which was a key component of the whole system.  Regarding the issue of whether there
would be less appeals if a switch was made to a system of panelists, the EC wished to stress that were
a number of factors which influenced a government to appeal against a panel decision.  Thus it wasnot possible to say definitively, if there would be more or less appeals.  What was sure though was
that it would reduce the delays associated with the current panel procedure particularly as it related to
the selection of panelists.  By virtue of being appointed on a permanent basis, the panelists were more
likely to focus solely on their work and develop the necessary expertise which would enable them to
dispose of cases as quickly as possible.  Where the panel reports were well-reasoned, it could reducethe number of appeals being lodged.  However, as stated before, there could not be any definitive
prediction on this point.  The EC would be obliged if Turkey could elaborate on its comment that a
system of permanent panelists was likely to create a body of case law which would be followed by
subsequent panels.  The EC saw no reason why a system of permanent panelists would change theTN/DS/M/2
Page 12
nature of WTO rulings which were meant to settle a specific dispute between the parties.  They were
not supposed to be precedents for future cases.
46. The Chairman said that the meeting had been productive as it had shed light on the various
proposals currently being considered in the negotiations.  He reminded participants that the next
meeting of the Special Session would take place on 15 and 16 July.  He further stated that thismeeting would be important as it would provide part icipants a further opportunity to contribute to the
process before the summer break.  He expected that after the summer break there would be a concrete
discussion of the texts of the proposals moving the negotiations to another level and a step closer to
fulfilling the mandate in the Doha Ministerial Declaration.
__________