200 TOKYO ROUND AGREEMENTS
UNDERSTANDING REGARDING NOTIFICATION,
CONSULTATION, DISPUTE SETTLEMENT AND SURVEILLANCE
Adopted on 28 November 1979
(L/4907)
1. The CONTRACTING PARTIES reaffirm their adherence to the b asic GATT
mechanism for the management of disputes based on Articles X XII and XXIII.1With
a view to improving and refining the GATT mechanism, the CONT RACTING
PARTIES agree as follows:
Notification
2. Contracting parties reaffirm their commitment to existi ng obligations under the
General Agreement regarding publication and notification .
3. Contracting parties moreover undertake, to the maximum e xtent possible, to
notify the CONTRACTING PARTIES of their adoption of trade me asures affecting
the operation of the General Agreement, it being understood that such notification
would of itself be without prejudice to views on the consiste ncy of measures with
or their relevanceto rightsand obligations under the Gener alAgreement.Contracting
parties should endeavour to notify such measures in advance of implementation. In
other cases, where prior notification has not been possible , such measures should
be notified promptly ex post facto. Contracting parties which have reason to believe
that such trade measures have been adopted by another contra cting party may seek
information on such measures bilaterally, from the contrac ting party concerned.
Consultations
4. Contracting parties reaffirm their resolve to strengthe n and improve the
effectiveness of consultative procedures employed by cont racting parties. In that
_______________
1It is noted that Article XXV may, as recognized by the CONTRAC TING PARTIES, inter alia ,
when they adopted the report of the Working Party on particul ar difficulties connected with trade in primary
products (L/930) also afford an appropriate avenue for cons ultation and dispute settlement in certain
circumstances.DISPUTE SETTLEMENT 201
connection, they undertake to respond to requests for consu ltations promptly and to
attempt to conclude consultations expeditiously, with a vi ew to reaching mutually
satisfactory conclusions. Any requests for consultations should include the reasons
therefor.
5. During consultations, contracting parties should give s pecial attention to the
particular problems and interests of less-developed contr acting parties.
6. Contracting parties should attempt to obtain satisfacto ry adjustment of the matter
in accordance with the provisions of Article XXIII:1 before resorting to
Article XXIII:2.
Dispute settlement
7. The CONTRACTING PARTIES agreethat the customarypractic eof the GATT
in the field of dispute settlement, described in the Annex, s hould be continued in the
future, with the improvements set out below. They recognize that the efficient
functioning of the system depends on their will to abide by th e present understanding.
The CONTRACTING PARTIES reaffirm that the customary practi ce includes the
procedures for the settlement of disputes between develope d and less-developed
countries adopted by the CONTRACTING PARTIES in 19661and that these remain
available to less-developed contracting parties wishing t o use them.
8. If a dispute is not resolved through consultations the con tracting parties concerned
may request an appropriate body or individual to use their go od offices with a view
to the conciliation of the outstanding differences between the parties. If the unresolved
dispute is one in which a less-developed contracting party h as brought a complaint
against a developed contracting party, the less-developed contracting party may request
the good offices of the Director-General who, in carrying ou t his tasks, may consult
with the Chairman of the CONTRACTING PARTIES and the Chairma n of the
Council.
9. It is understood that requests for conciliation and the us e of the dispute settlement
procedures of Article XXIII:2 should not be intended or cons idered as contentious
acts and that, if disputes arise, all contracting parties wi ll engage in these procedures
in good faith in an effort to resolve the disputes. It is also u nderstood that complaints
and counter-complaints in regard to distinct matters shoul d not be linked.
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1BISD 14S/18 .202 TOKYO ROUND AGREEMENTS
10. It is agreed that if a contracting party invoking Article XXIII:2 requests the
establishment of a panel to assist the CONTRACTING PARTIES t o deal with the
matter, the CONTRACTING PARTIES would decide on its establi shment in
accordance with standing practice. It is also agreed that th e CONTRACTING
PARTIES would similarly decide to establish a working party if this were requested
by a contracting party invoking the Article. It is further ag reed that such requests
would be granted only after the contracting party concerned had had an opportunity
to study the complaint and respond to it before the CONTRACTI NG PARTIES.
11. When a panel is set up, the Director-General, after secur ing the agreement of
the contracting parties concerned, should propose the comp osition of the panel, of
three or five members depending on the case, to the CONTRACTI NG PARTIES
for approval. The members of a panel would preferably be gove rnmental. It is
understood that citizens of countries whose governments1are parties to the dispute
would not be members of the panel concerned with that dispute . The panel should
be constituted as promptly as possible and normally not late r than thirty days from
the decision by the CONTRACTING PARTIES.
12. The parties to the dispute would respond within a short pe riod of time, i.e.,
seven working days, to nominations of panel members by the Di rector-General and
would not oppose nominations except for compelling reasons .
13. In order to facilitate the constitution of panels, the Di rector-General should
maintain an informal indicative list of governmental and no n-governmental persons
qualified in the fields of trade relations, economic develo pment, and other matters
covered by the GeneralAgreement, and who could be available for servingon panels.
For this purpose, each contracting party would be invited to indicate at the beginning
of every year to the Director-General the name of one or two pe rsons who would
be available for such work.2
14. Panel members would serve in their individual capacitie s and not as government
representatives, nor as representatives of any organizati on. Governments would
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1In the case customs unions or common markets are parties to a d ispute, this provision applies to
citizens of all member countries of the customs unions or com mon markets.
2The coverage of travel expenses should be considered within the limits of budgetary possibilities.DISPUTE SETTLEMENT 203
therefore not give them instructions nor seek to influence t hem as individuals with
regard to matters before a panel. Panel members should be sel ected with a view to
ensuring the independence of the members, a sufficiently di verse background and
wide spectrum of experience.1
15. Any contracting party having a substantial interest in t he matter before a panel,
and having notified this to the Council, should have an oppor tunity to be heard by
the panel. Each panel should have the right to seek informati on and technical advice
from any individual or body which it deems appropriate. Howe ver, before a panel
seeks such information or advice from any individual or body within the jurisdiction
of a State it shall inform the government of that State. Any co ntracting party should
respond promptly and fully to any request by a panel for such i nformation as the panel
considers necessary and appropriate. Confidential inform ation which is provided
should not be revealed without formal authorization from th e contracting party
providing the information.
16. The function of panels is to assist the CONTRACTING PARTI ES in discharging
their responsibilities under Article XXIII:2. Accordingl y, a panel should make an
objective assessment of the matter before it, including an o bjective assessment of the
facts of the case and the applicability of and conformity wit h the General Agreement
and, if so requested by the CONTRACTING PARTIES, make such ot her findings
as will assist the CONTRACTING PARTIES in making the recomme ndations or in
giving the rulings provided for in Article XXIII:2. In this c onnection, panels should
consult regularly with the parties to the dispute and give th em adequate opportunity
to develop a mutually satisfactory solution.
17. Where the parties have failed to develop a mutually satis factory solution, the
panel should submit its findings in a written form. The repor t of a panel should
normally set out the rationale behind any findings and recom mendations that it makes.
Where a bilateral settlement of the matter has been found, th e report of the panel
may be confined to a brief description of the case and to repor ting that a solution
has been reached.
18. To encourage development of mutually satisfactory solu tions between the parties
and with a view to obtaining their comments, each panel shoul d first submit the
descriptive part of its reportto the parties concerned, and should subsequently submit
to the parties to the dispute its conclusions, or an outline t hereof, a reasonable period
of time before they are circulated to the CONTRACTING PARTIE S.
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1A statement is included in the Annex describing the current p ractice with respect to inclusion on
panels of persons from developing countries.204 TOKYO ROUND AGREEMENTS
19. If a mutually satisfactory solution is developed by the p arties to a dispute before
a panel, any contracting party with an interest in the matter has a right to enquire
about and be given appropriate information about that solut ion in so far as it relates
to trade matters.
20. The time required by panels will vary with the particular case.1However, panels
should aim to deliver their findings without undue delay, ta king into account the
obligation of the CONTRACTING PARTIES to ensure prompt sett lement. In cases
of urgency the panel would be called upon to deliver its findi ngs within a period
normally of three months from the time the panel was establis hed.
21. Reports of panels and working parties should be given pro mpt consideration
by the CONTRACTING PARTIES. The CONTRACTING PARTIES should take
appropriateaction on reportsof panels and working parties within a reasonableperiod
of time. If the case is one brought by a less-developed contra cting party, such action
should be taken in a specially convened meeting, if necessar y. In such cases, in
considering what appropriate action might be taken the CONT RACTING PARTIES
shall take into account not only the trade coverage of measur es complained of, but
also their impact on the economy of less-developed contract ing parties concerned.
22. The CONTRACTING PARTIES shall keep under surveillance a ny matter on
which they have made recommendations or given rulings. If th e CONTRACTING
PARTIES recommendationsarenot implementedwithin areasonablepe riodof time,
the contracting party bringing the case may ask the CONTRACT ING PARTIES to
make suitable efforts with a view to finding an appropriate s olution.
23. If the matter is one which has been raised by a less-develo ped contracting party,
the CONTRACTING PARTIES shall consider what further action they might take
which would be appropriate to the circumstances.
Surveillance
24. The CONTRACTING PARTIES agree to conduct a regular and sy stematic review
of developments in the trading system. Particular attentio n would be paid to
developments which affect rights and obligations under the GATT, to matters affecting
the interests of less-developed contracting parties, to tr ade measures notified in
accordance with this understanding and to measures which ha ve been subject to
consultation, conciliation or dispute settlement procedu res laid down in this
understanding.
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1An explanation is included in the Annex that "in most cases th e proceedings of the panels have
been completed with a reasonable period of time, extending f rom three to nine months".DISPUTE SETTLEMENT 205
Technical assistance
25. The technical assistance services of the GATT secretari at shall, at the request
of a less-developed contracting party, assist it in connect ion with matters dealt with
in this understanding.
ANNEX
Agreed Description of the Customary Practice of the GATT
in the Field of Dispute Settlement (Article XXIII:2)
1. Any dispute which has not been settled bilaterally under t he relevant provisions
of the General Agreement may be referredto the CONTRACTING P ARTIES1which
are obliged, pursuant to Article XXIII:2, to investigate ma tters submitted to them
and make appropriate recommendations or give a ruling on the matter as appropriate.
Article XXIII:2 does not indicate whether disputes should b e handled by a working
party or by a panel.2
2. The CONTRACTING PARTIES adopted in 1966 a decision establ ishing the
procedureto be followed for ArticleXXIII consultations be tween developed and less-
developed contracting parties3. This procedure provides, inter alia, for the
Director-General to employ his good offices with a view to fa cilitating a solution,
for setting up a panel with the task of examining the problem i n order to recommend
appropriate solutions, and for time-limits for the executi on of the different parts of
this procedure.
3. The function of a panel has normally been to review the fact s of a case and the
applicability of GATT provisions and to arrive at an objecti ve assessment of these
matters. In this connection, panels have consulted regular ly with the parties to the
dispute and have given them adequate opportunity to develop a mutually satisfactory
solution. Panels have taken appropriate account of the part icular interests of developing
countries. In cases of failureof the parties to reacha mutua lly satisfactory settlement,
panels have normally given assistance to the CONTRACTING PA RTIES in making
recommendations or in giving rulings as envisaged in Articl e XXIII:2.
4. Before bringing a case, contracting parties have exercis ed their judgement as
to whether action under Article XXIII:2 would be fruitful. T hose cases which have
come before the CONTRACTING PARTIES under this provision ha ve, with few
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1The Council is empowered to act for the CONTRACTING PARTIES, in accordance with normal
GATT practice.
2At the Review Session (1955) the proposal to institutionali ze the procedures of panels was not adopted
by CONTRACTING PARTIES mainly because they preferred to pre serve the existing situation and not
to establish judicial procedures which might put excessive strain on the GATT.
3BISD 14S/18 .206 TOKYO ROUND AGREEMENTS
exceptions, been brought to a satisfactory conclusion. The aim of the
CONTRACTING PARTIES has always been to secure a positive sol ution to a dispute.
A solution mutually acceptable to the parties to a dispute is clearly to be preferred.
In the absence of a mutually agreed solution, the first objec tive of the CONTRACTING
PARTIES is usually to secure the withdrawal of the measures c oncerned if these are
found to be inconsistent with the General Agreement. The pro vision of compensation
should be resorted to only if the immediate withdrawal of the measure is impracticable
and as a temporary measure pending the withdrawal of the meas ures which are
inconsistent with the General Agreement. The last resort wh ich Article XXIII provides
to the country invoking this procedure is the possibility of suspending the application
of concessions or other obligations on a discriminatory bas is vis-à-vis the other
contractingparty,subject to authorizationby the CONTRAC TING PARTIES of such
measures. Such action has only rarely been contemplated and cases taken under
Article XXIII:2 have lead to such action in only one case.
5. In practice, contracting parties have had recourse to Art icle XXIII only when
in their view a benefit accruing to them under the General Agr eement was being
nullified or impaired. In cases where there is an infringeme nt of the obligations
assumed under the General Agreement, the action is consider edprima facie to
constitute a case of nullification or impairment. A prima facie case of nullification
or impairment would ipso facto require consideration of whether the circumstances
are serious enough to justify the authorization of suspensi on of concessions or
obligations, if the contracting party bringing the complai nt so requests. This means
that there is normally a presumption that a breach of the rule s has an adverse impact
on other contracting parties, and in such cases, it is up to th e contracting parties against
whom the complaint has been brought to rebut the charge. Para graph 1 (b)permits
recourse to Article XXIII if nullification or impairment re sults from measures taken
by other contracting parties whether or not these conflict w ith the provisions of the
General Agreement, and paragraph 1 (c)if any other situation exists. If a contracting
party bringing an Article XXIII case claims that measures wh ich do not conflict with
the provisions of the General Agreement have nullified or im paired benefits accruing
to it under the General Agreement, it would be called upon to p rovide a detailed
justification.
6. Concerningthecustomaryelements ofthe proceduresrega rdingworkingparties
and panels, the following elements have to be noted:
(i) working parties are instituted by the Council upon the re quest of one or
several contracting parties. The terms of reference of work ing parties
are generally "to examine the matter in the light of the relev ant provisions
of the General Agreement and to report to the Council". Worki ng parties
set up their own working procedures. The practice for workin g parties
has been to hold one or two meetings to examine the matter and a final
meeting to discuss conclusions. Working partiesareopen to participation
of any contracting party which has an interest in the matter. Generally
working parties consist of a number of delegations varying f rom about
five to twenty according to the importance of the question an d the interests
involved. The countries who are parties to the dispute are al ways members
of the Working Party and have the same status as other delegat ions. TheDISPUTE SETTLEMENT 207
report of the Working Party represents the views of all its me mbers and
therefore records different views if necessary. Since the t endency is to
strive for consensus, there is generally some measure of neg otiation and
compromise in the formulation of the Working Party s report. The
Council adopts the report. The reports of working parties ar e advisory
opinions on the basis of which the CONTRACTING PARTIES may ta ke
a final decision.
(ii) In the case of dispute, the CONTRACTING PARTIES have est ablished
panels (which have been called by different names) or workin g parties
in order to assist them in examining questions raised under
Article XXIII:2. Since 1952, panels have become the usual pr ocedure.
However, the Council has taken such decisions only after the party
concerned has had an occasion to study the complaint and prep are its
response before the Council. The terms of reference are disc ussed and
approved by the Council. Normally, these terms of reference are "to
examine the matter and to make such findings as will assist th e
CONTRACTING PARTIES in making the recommendations or rulin gs
provided for in paragraph 2 of Article XXIII". When a contrac ting party
having recourse to Article XXIII:2 raised questions relati ng to the
suspension of concessions or other obligations, the terms o f reference were
to examine the matter in accordance with the provisions of Ar ticle XXIII:2.
Members of the panel are usually selected from permanent del egations
or, less frequently, from the national administrations in t he capitals
amongst delegates who participate in GATT activities on a re gular basis.
The practice has been to appoint a member or members from deve loping
countries when a dispute is between a developing and a develo ped country.
(iii) Members of panels are expected to act impartially with out instructions
from their governments. In a few cases, in view of the nature a nd
complexity of the matter, the parties concerned have agreed to designate
non-government experts. Nominations are proposed to the pa rties
concerned by the GATT secretariat. The composition of panel s (three
or five members depending on the case) has been agreed upon by the
parties concerned and approved by the GATT Council. It is rec ognized
that a broad spectrum of opinion has been beneficial in diffi cult cases,
but that the number of panel members has sometimes delayed th e
composition of panels, and therefore the process of dispute settlement.
(iv) Panels set up their own working procedures. The practic e for the panels
has been to hold two or three formal meetings with the parties concerned.
The panel invited the parties to present their views either i n writing and/or
orally in the presence of each other. The panel can question b oth parties
on any matter which it considers relevant to the dispute. Pan els have also
heard the views of any contracting party having a substantia l interest in
the matter, which is not directly party to the dispute, but wh ich has
expressedin the Council a desireto presentits views. Writt enmemoranda
submitted to the panel have been considered confidential, b ut are made
available to the parties to the dispute. Panels often consul t with and seek208 TOKYO ROUND AGREEMENTS
information from any relevant source they deem appropriate and they
sometimes consult experts to obtain their technical opinio n on certain
aspects of the matter. Panels may seek advice or assistance f rom the
secretariat in its capacity as guardian of the General Agree ment, especially
on historical or proceduralaspects. The secretariatprovi desthe secretary
and technical services for panels.
(v) Where the parties have failed to develop a mutually satis factory solution,
the panel has submitted its findings in a written form. Panel reports have
normally set out findings of fact, the applicability of rele vant provisions,
and the basic rationale behind any findings and recommendat ions that it
has made. Where a bilateral settlement of the matter has been found,
the report of the panel has been confined to a brief descripti on of the case
and to reporting that a solution has been reached.
(vi) The reports of panels have been drafted in the absence of the parties in
the light of the information and the statements made.
(vii) To encouragedevelopment of mutually satisfactoryso lutions between the
parties and with a view to obtaining their comments, each pan el has
normally first submitted the descriptive part of its report to the parties
concerned, and also their conclusions, or an outline thereo f, a reasonable
period of time before they have been circulated to the CONTRA CTING
PARTIES.
(viii) In accordance with their terms of reference establis hed by the
CONTRACTING PARTIES panels have expressed their views on wh ether
an infringement of certain rules of the General Agreement ar ises out of
the measure examined. Panels have also, if so requested by th e
CONTRACTING PARTIES, formulated draft recommendations ad dressed
to the parties. In yet other cases panels were invited to give a technical
opinion on some precise aspect of the matter (e.g. on the moda lities of
a withdrawal or suspension in regard to the volume of trade in volved).
The opinions expressed by the panel members on the matter are anonymous
and the panel deliberations are secret.
(ix) Although the CONTRACTING PARTIES have never establish ed precise
deadlines for the different phases of the procedure, probab ly because
the matters submitted to panels differ as to their complexit y and their
urgency, in most cases the proceedings of the panels have bee n completed
within a reasonable period of time, extending from three to n ine months.
The 1966 decision by the CONTRACTING PARTIES referred to in p aragraph 2
above lays down in its paragraph 7 that the Panel shall report within a period of sixty
days from the date the matter was referred to it.