WTO Dispute Settlement Remedies: Monetary Compensation as an Alternative for Developing Countries


When the WTO came into existence formally as an institution in 1995, it was a culmination of the process to institutionalize the General Agreement on Trade and Tariffs (GATT) which had been in operation since 1947. As an institution with Membership of 149 countries, the goal of the WTO is to facilitate the implementation, administration, and operation of the Multilateral Trade Agreements (MTAs); to provide a forum for negotiations among Member States; to administer the Understanding on Rules and Procedures Governing the Settlement of Disputes, amongst others.

The Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) of the WTO has been touted as one of the biggest achievements of the Uruguay Round of trade negotiations. Its aim is to provide security and predictability to the multilateral trading system. It provides for a range of remedies where there has been a violation of WTO obligations. With all these remedies in place, the WTO dispute settlement mechanism is actively being used in the resolution of disputes among WTO Members. Despite this however, cases generally revolve around ‘the usual suspects’ i.e. the countries that have been making the most use of dispute settlement procedures under the WTO (e.g. the United States, the European Communities, Canada, and Brazil). It is a fact that the smaller developing countries have been sorely lacking in the WTO dispute settlement procedure.

This paper argues that one of the reasons why more use is not being made of the dispute settlement process by developing countries is the inadequacy of the existing remedies, for their peculiar situation. The existing dispute settlement remedies are: withdrawal of the offending measure, compensation, and suspension of equivalent concessions i.e. retaliation. But it has been found that these remedies do not always meet the expectations of Members. The violating Member will not always remove the violation; Compensation is hardly ever agreed on; and Retaliation is at odds with the trade liberalization goal of the WTO and hardly benefits either party anyway. Consequently, there is an urgent need to review the existing remedies with a view to finding alternative remedies, particularly for developing countries. This paper is proposing monetary compensation as an alternative dispute settlement remedy. With the current negotiations going on as part of the Doha Round, the appropriate forum is available for these discussions to take place.


International Trade Law

Date of this Version

May 2006