WORLD TRADE
ORGANIZATIONTN/DS/W/49
17 February 2003
(03-0976)
Dispute Settlement Body
Special SessionOriginal:  English
NEGOTIATIONS ON IMPROVEMENTS AND CLARIFICATIONS OF THE
DISPUTE SETTLEMENT UNDERSTANDING
Communication from Australia
The following communication, dated 14 February 2003, has been received from the
Permanent Mission of Australia.
_______________
Australia has identified the following improvements and/or clarifications of the Dispute
Settlement Understanding (DSU):
(a) The need to address anomalies in procedural time-frames for dispute settlement on
safeguards compared to subsidies (involving amendments to Articles 1(2) and the
inclusion of a new 8bis) ;
(b) the need to ensure that the rights of non-parties to a dispute are respected, particularly
in relation to compensation arrangements (involving amendments to Article 22.2) ;
(c) the need to ensure that the actual level of  retaliation imposed by a complaining party
is consistent with the level of retaliation authorized by the Dispute Settlement Body(DSB) (involving amendments to Article 22.7) ;
(d) the potential for possible time savings in the dispute settlement procedure (involving
amendments to Article 6 and item 12 of Appendix 3) ;
(e) the usefulness of adopting a consolidated understanding on agreed procedures under
Articles 21 and 22 of the DSU to replace the current need for ad hoc bilateralagreements (involving the inclusion of a new 5bis and amendments to
Article 22.6) .
Further to Australia’s proposal TN/DS/W/34, we offer the following draft legal texts for the
above clarifications and improvements of the Dispute Settlement Understanding.
Article 1
Coverage and Application
1. The rules and procedures of this Understanding shall apply to disputes brought pursuant to the
consultation and dispute settlement provisions of the agreements listed in Appendix 1 to this
Understanding (referred to in this Understanding as the "covered agreements").  The rules andTN/DS/W/49
Page 2
procedures of this Understanding shall also apply to consultations and the settlement of disputes
between Members concerning their rights and obligations under the provisions of the Agreement
Establishing the World Trade Organization (referred to in this Understanding as the "WTO
Agreement") and of this Understanding taken in isolation or in combination with any other covered
agreement.
2. The rules and procedures of this Understanding shall apply subject to such special or
additional rules and procedures on dispute settlement contained in the covered agreements as are
identified in Appendix 2 to this Understanding.  Article 8bis shall apply to disputes involving
safeguard actions.  To the extent that there is a difference between the rules and procedures of this
Understanding and the special or additional rules a nd procedures set forth in Appendix 2, the special
or additional rules and procedures in Appendix 2 shall prevail.  In disputes involving rules and
procedures under more than one covered agreement, or under one or more covered agreements and
Article 8bis, if there is a conflict between special or additional rules and procedures of such
agreements under review, and where the parties to the dispute cannot agree on rules and procedures
within 20 days of the establishment of the panel, the Chairman of the Dispute Settlement Body
provided for in paragraph 1 of Article 2 (refer red to in this Understanding as the "DSB"), in
consultation with the parties to the dispute, shall determine the rules and procedures to be followed
within 10 days after a request by either Member.  The Chairman shall be guided by the principle that
special or additional rules and procedures should be used where possible, and the rules and procedures
set out in this Understanding should be used to the extent necessary to avoid conflict.
Article 6
Establishment of Panels
1.  If the complaining party so requests, the DSB shall establish a panel at the meeting shall be
established at the latest at the DSB  meeting following that  at which the request first appears as an item
on the DSB's agenda, unless at that meeting  the DSB decides by consensus not to establish a panel.1
2.  The request for the establishment of a panel shall be made in writing.  It shall indicate
whether consultations were held, identify the specific measures at issue and provide a brief summary
of the legal basis of the complaint sufficient to present the problem clearly.  In case the applicant
requests the establishment of a panel with other than standard terms of reference, the written requestshall include the proposed text of special terms of reference.
Article 8bis
Accelerated time-frames for disputes on safeguard actions
1.          The following accelerated time-frames shall apply to disputes on safeguard actions unless
otherwise extended by mutual agreement of the parties to the dispute.
2.          If the consultations fail to settle a dispute under Article 4 within 30 days of the request for
consultations, any party to such consultations may re fer the matter to the Dispute Settlement Body for
the immediate establishment of a panel, unless the DSB decides by consensus not to establish a panel.
3.          The time-frames in the Working Procedures of item 12 of Appendix 3 shall be halved.
                                                     
1 In the event that the DSB decides not to establish a panel, if the complaining party so requests, a
meeting of the DSB shall be convened for this  the purpose of making a subsequent request for panel
establishment within 15 days of the initial  request, provided that at least 10 days' advance notice of the meeting
is given.TN/DS/W/49
Page 3
4.          The accelerated time-frames in this Article shall not apply to a dispute if a developing country
party to that dispute requests the application of the standard DSU time-frames.
Article 21
Surveillance of Implementation of Recommendations and Rulings
1. Prompt compliance with recommendations or rulings of the DSB is essential in order to
ensure effective resolution of disputes to the benefit of all Members.
2. Particular attention should be paid to matters affecting the interests of developing country
Members with respect to measures which have been subject to dispute settlement.
3. At a DSB meeting held within 30 days2 after the date of adoption of the panel or Appellate
Body report, the Member concerned shall inform the DSB of its intentions in respect of
implementation of the recommendations and rulings of the DSB.  If it is impracticable to comply
immediately with the recommendations and rulings, the Member concerned shall have a reasonableperiod of time in which to do so.  The reasonable period of time shall be:
(a) the period of time proposed by the Member concerned, provided that such period is
approved by the DSB;  or, in the absence of such approval;
(b) a period of time mutually agreed by the parties to the dispute within 45 days after the
date of adoption of the recommendations and rulings; or, in the absence of such
agreement;
(c) a period of time determined through binding arbitration within 90 days after the date
of adoption of the recommendations and rulings.
3  In such arbitration, a guideline for
the arbitrator4 should be that the reasonable period of time to implement panel or
Appellate Body recommendations should not exceed 15 months from the date of
adoption of a panel or Appellate Body report.  However, that time may be shorter or
longer, depending upon the particular circumstances.
4. Except where the panel or the Appellate Body has extended, pursuant to paragraph 9 of
Article 12 or paragraph 5 of Article 17, the time of providing its report, the period from the date of
establishment of the panel by the DSB until the date of determination of the reasonable period of time
shall not exceed 15 months unless the parties to the dispute agree otherwise.  Where either the panel
or the Appellate Body has acted to extend the time of providing its report, the additional time taken
shall be added to the 15-month period; provided that unless the parties to the dispute agree that thereare exceptional circumstances, the total time shall not exceed 18 months.
5. Where there is disagreement as to the existence or consistency with a covered agreement of
measures taken to comply with the recommendations and rulings such dispute shall be decided
through recourse to these dispute settlement procedures, including wherever possible resort to theoriginal panel. The panel shall circulate its report within 90 days after the date of referral of the matter
to it.  When the panel considers that it cannot prov ide its report within this time frame, it shall inform
                                                     
2 If a meeting of the DSB is not scheduled during this period, such a meeting of the DSB shall be held
for this purpose.
3 If the parties cannot agree on an arbitrator within ten days after referring the matter to arbitration, the
arbitrator shall be appointed by the Director-General within ten days, after consulting the parties.
4 The expression "arbitrator" shall be interpreted as referring either to an individual or a group.TN/DS/W/49
Page 4
the DSB in writing of the reasons for the delay together with an estimate of the period within which it
will submit its report.
5bis. The procedures in Article 21.5 shall be completed before the procedures in Article 22 are
initiated.
6. The DSB shall keep under surveillance the implementation of adopted recommendations or
rulings.  The issue of implementation of the recommendations or rulings may be raised at the DSB by
any Member at any time following their adoption.  Unless the DSB decides otherwise, the issue of
implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting
after six months following the date of establishment of the reasonable period of time pursuant to
paragraph 3 and shall remain on the DSB's agenda until the issue is resolved.  At least 10 days prior toeach such DSB meeting, the Member concerned shall provide the DSB with a status report in writing
of its progress in the implementation of the recommendations or rulings.
7. If the matter is one which has been raised by a developing country Member, the DSB shall
consider what further action it might take which would be appropriate to the circumstances.
8. If the case is one brought by a developing country Member, in considering what appropriate
action might be taken, the DSB shall take into account not only the trade coverage of measures
complained of, but also their impact on the economy of developing country Members concerned.
Article 22
Compensation and the Suspension of Concessions
1. Compensation and the suspension of concessions or other obligations are temporary measures
available in the event that the recommendations a nd rulings are not implemented within a reasonable
period of time.  However, neither compensation nor the suspension of concessions or other
obligations is preferred to full implementation of a recommendation to bring a measure into
conformity with the covered agreements.  Compensation is voluntary and, if granted, shall be
consistent with the covered agreements.
2. If the Member concerned fails to bring the measure found to be inconsistent with a covered
agreement into compliance therewith or otherwise comply with the recommendations and rulings
within the reasonable period of time determined pursuant to paragraph 3 of Article 21, such Member
shall, if so requested,and no later than the expiry of the reasonable period of time,
 enter into
negotiations within 10 days of such a request with any party having invoked the dispute settlement
procedures, with a view to developing mutually acceptable compensation.  If any party having
invoked these dispute settlement procedures and the Member whose measure has been found to be
inconsistent agree on acceptable compensation but su ch compensation is not available to third parties
to a dispute, the Member whose measure has been found to be inconsistent shall, on request, agree to
expedited arbitration under Article 25 to determine the right of a third party to compensation. If no
satisfactory compensation has been agreed within 20 days after the date of expiry of the reasonable
period of time any party having invoked the dispute settlement procedures may request authorization
from the DSB to suspend the application to the Member concerned of concessions or other obligations
under the covered agreements.
3. In considering what concessions or other obligations to suspend, the complaining party shall
apply the following principles and procedures:TN/DS/W/49
Page 5
(a) the general principle is that the complaining party should first seek to suspend
concessions or other obligations with respect to the same sector(s) as that in which the
panel or Appellate Body has found a violation or other nullification or impairment;
(b) if that party considers that it is not practicable or effective to suspend concessions or
other obligations  with respect to the same sector(s), it may seek to suspend
concessions or other obligations in other sectors under the same agreement;
(c) if that party considers that it is not practicable or effective to suspend concessions or
other obligations with respect to other sectors under the same agreement, and that the
circumstances are serious enough, it may seek to suspend concessions or other
obligations under another covered agreement;
(d) in applying the above principles, that party shall take into account:
(i) the trade in the sector or under the agreement under which the panel or
Appellate Body has found a violation or other nullification or impairment,and the importance of such trade to that party;
(ii) the broader economic elements related to the nullification or impairment and
the broader economic consequences of the suspension of concessions or other
obligations;
(e) if that party decides to request authorization to suspend concessions or other
obligations pursuant to subparagraphs (b) or (c), it shall state the reasons therefor in
its request. At the same time as the request is forwarded to the DSB, it also shall be
forwarded to the relevant Councils and also,  in the case of a request pursuant tosubparagraph (b), the relevant sectoral bodies;
(f) for purposes of this paragraph, "sector" means:
(i) with respect to goods, all goods;(ii) with respect to services, a principal sector as identified in the current
"Services Sectoral Classification List" which identifies such sectors;
5
(iii) with respect to trade-related intellectual property rights, each of the categories
of intellectual property rights covered in  Section 1, or Section 2, or Section 3,
or Section 4, or Section 5, or Section 6, or Section 7 of Part II, or the
obligations under Part III, or Part IV of the Agreement on TRIPS;
(g) for purposes of this paragraph, "agreement" means:
(i) with respect to goods, the agreemen ts listed in Annex 1A of the WTO
Agreement, taken as a whole as well as the Plurilateral Trade Agreements in
so far as the relevant parties to the dispute are parties to these agreements;
(ii) with respect to services, the GATS;
(iii) with respect to intellectual property rights, the Agreement on TRIPS.
                                                     
5 The list in document MTN.GNS/W/120 identifies eleven sectors.TN/DS/W/49
Page 6
4. The level of the suspension of concessions or other obligations authorized by the DSB shall
be equivalent to the level of the nullification or impairment.
5. The DSB shall not authorize suspension of concessions or other obligations if a covered
agreement prohibits such suspension.
6. When the situation described in paragraph 2 occurs,  Tthe DSB, upon request by a party,
where such request is permitted by paragraph 2, shall grant authorization to suspend concessions or
other obligations within 30 days of the expiry of the reasonable period of time  unless the DSB decides
by consensus to reject the request.  However, if the Member concerned objects to the level of
suspension proposed, or claims that the principles and procedures set forth in paragraph 3 have not
been followed where a complaining party  has requested authorization to suspend concessions or otherobligations pursuant to paragraph 3(b) or (c), the matter shall be referred to arbitration. Such
arbitration shall be carried out by the original panel, if members are available, or by an arbitrator
6
appointed by the Director-General and shall be completed within 60 days after the date of expiry ofthe reasonable period of time.  Concessions or other obligations shall not be suspended during the
course of the arbitration.
7. The arbitrator
7 acting pursuant to paragraph 6 shall not examine the nature of the concessions
or other obligations to be suspended but shall determine whether the level of such suspension is
equivalent to the level of nullification or impairment.  The arbitrator may also determine if the
proposed suspension of concessions or other obligations is allowed under the covered agreement.However, if the matter referred to arbitration includes a claim that the principles and procedures set
forth in paragraph 3 have not been followed, the arbitrator shall examine that claim.  In the event the
arbitrator determines that those principles and procedures have not been followed, the complaining
party shall apply them consistent with paragraph 3.  The parties shall accept the arbitrator's decision
as final and the parties concerned shall not seek a second arbitration unless the concessions or other
obligations suspended have been varied.  The DSB shall be informed promptly of the decision of the
arbitrator and shall upon request, grant authorization to suspend concessions or other obligationswhere the request is consistent with the decision of the arbitrator, unless the DSB decides by
consensus to reject the request.  A member shall not vary the concessions or other obligations once
the arbitrator has determined under paragraph 6 that they are equivalent to the level of nullification or
impairment, unless the variation is to correct a technical error or the concessions or other obligations
are made inutile by subsequent developments.   Where a member varies the concessions or other
obligations, the other member retains the right to seek arbitration under Article 22.6.
8. The suspension of concessions or other obligations shall be temporary and shall only beapplied until such time as the measure found to be inconsistent with a covered agreement has been
removed, or the Member that must implement recommendations or rulings provides a solution to thenullification or impairment of benefits, or a mutually satisfactory solution is reached.  In accordance
with paragraph 6 of Article 21, the DSB shall continue to keep under surveillance the implementation
of adopted recommendations or rulings, including those cases where compensation has been provided
or concessions or other obligations have been suspended but the recommendations to bring a measure
into conformity with the covered agreements have not been implemented.
9. The dispute settlement provisions of the covered agreements may be invoked in respect of
measures affecting their observance taken by regional or local governments or authorities within the
territory of a Member.  When the DSB has ruled that a provision of a covered agreement has not been
observed, the responsible Member shall take such reasonable measures as may be available to it to
                                                     
6 The expression "arbitrator" shall be interpreted as referring either to an individual or a group.
7 The expression "arbitrator" shall be interpreted as referring either to an individual or a group or to the
members of the original panel when serving in the capacity of arbitrator.TN/DS/W/49
Page 7
ensure its observance.  The provisions of the covered agreements and this Understanding relating to
compensation and suspension of concessions or other obligations apply in cases where it has not been
possible to secure such observance.8
                                                     
8 Where the provisions of any covered agreement concerning measures taken by regional or local
governments or authorities within the territory of a Member contain provisions different from the provisions of
this paragraph, the provisions of such covered agreement shall prevail.TN/DS/W/49
Page 8
Appendix 3
Working Procedures – item 12
12. Proposed timetable for panel work:
(a) Receipt of first written submissions of the parties:
(1) complaining Party: _______ within five days of
the composition of the panel 3-6 weeks
(2) Party complained against: _______ 2-3 weeks
(b) Date, time and place of first
substantive meeting with the parties:
third party session: _______ 1-2 weeks
(c) Receipt of written rebuttals of the parties: _______ 2-3 weeks
(d) Date, time and place of second
substantive meeting with the parties: _______ 1-2 weeks
(e) Issuance of descriptive part of the
report to the parties: _______ 2-4 weeks
(f) Receipt of comments by the parties
on the descriptive part of the report: _______ 2 weeks
(g) Issuance of the interim report,
including the findings and
conclusions, to the parties: _______ 2-4 weeks
(h) Deadline for party to request
review of part(s) of report: _______ 1 week
(i) Period of review by panel, including
possible additional meeting with
parties: _______ 2 weeks
(j) Issuance of final report to parties
to dispute: _______ 2 weeks
(k) Circulation of the final report to the
Members: _______ 3 weeks
The above calendar may be changed in the light of unforeseen developments. Additional
meetings with the parties shall be scheduled if required.
__________