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It appears that, as global trade increases, so are the trade disputes. Divergences are bound to arise amid trade partners in addition to country partners with regards to International Economic Transactions and a Dispute Resolution framework should be available to tackle these issues. A dispute resolution mechanism is “a structured process that addresses disputes or grievances that arise between two or more parties engaged in business, legal, or societal relationships.” It is used in dispute resolution and might incorporate mediation, conciliation and arbitration which are commonly known as Alternate Dispute Resolution (ADR).
They can be used in lieu of litigation process. Since the latter can be costly and time consuming, the alternatives have proved to be more advantageous in several ways to parties engaged in disputes. Theoretically, disputes could be settled in the domestic courts of the parties involved in disputes. However, international trade transactions have some specificities and thus, the parties can turn to either the mechanisms available within international organisations like the WTO under which the Dispute Resolution System’s (DSS) is available or they can follow the ADR process.
It is useful to mention that the DSS under the WTO acts as a forum for arbitration dealing mainly with State-State disputes.
All these mechanisms are quite interesting and have proved to be successful in certain ways for some countries. Conversely, they may be both a difficult and ineffective mechanism for resolving certain types of disputes and especially where the bargaining power of certain countries weights a lot. Since we are here elaborating on International Trades, it is understood that the goods traded between richer countries was more beneficial to the global market opening than products exported by poorer countries.
Small countries like Mauritius, are bound to resilience in some cases. Therein may lie a certain degree of frustration and uncertainty for those lacking trading power and the existing mechanisms may lack expertise to deal with those types of issues. Is there not a need to move from an archaic mechanism to a more updated one? A critical and succinct analysis of the different interrelated components is crucial if the mechanism is to be understood in its entirety.
These mechanisms are amongst the main options available and are procedures to dispute that are accepted freely if the parties so agree. They are amongst the predominantly adopted option by all the protagonists to resolve conflicting issues. Despite slight differences in their respective procedures they remained the preferred methods in case the parties decide to opt for an out of court settlement due several advantages they offer ranging from confidentiality, cost-effectiveness to the benefit in terms of time consumption to find a solution. Also worthy of note that they are also exemplified under article 5 of the Dispute Mechanism Understanding (DSU) in the dispute mechanisms available within international organisations like the WTO.
Whilst this option has proved to work mostly in domestic disputes, it must be recalled that we are, here, dealing with international trades meaning different cultures, languages, customs and perceptions. These methods can face complicated cultural and/or language barriers (India – Patents (US). They also require, mediator and conciliator to have a comprehensive understanding of the parties’ complaints and a firm commitment to agreeing the conflict. The emergent trade war between the United States (US) and China whereby US has sanctioned China for alleged intellectual property rights violations can be interpreted as the inefficiency of these methods in some cases. Furthermore, parties with strong bargaining power can use force to uphold or defeat the existing balance of power of the mediation or conciliation process. The two following cases can serve as an illustration of the impact of bargaining power of the US and European Community (EC) over developing countries (US– Line Pipe), (EC– Tariff Preferences).
An analysis of these options tends to point out the inefficacity of mediation and conciliation process in certain disputed fields despite having valuable aspects. We also understand that the final award arising from these processes is not binding (unless specified in the contract). And, that if one party is still not agreeable with the proposed solution, moving to the litigation process is one possibility. What can be reckoned here is that, these two mechanisms can be perceived as being the “starting point of a litigation process” and not as an escape route from litigation since finally, in some case, parties will proceed to the litigation process.
Disputes that are proceeded to courts of laws are at all times expensive and usually harsh. Cases recurrently slog through the courts during a certain number of years, without the certainty that the final award will be arbitrated in favour of the complainant. The Arbitration, for the actors on the global scene, seems to be the process overcoming the flaws present in litigation. An arbitration procedure is based on two pillars: the contractual and the judicial dimensions. The contractual element is the arrangement amongst the parties to refer disputes to arbitration if they arise and the award remains binding. This is normally in the arbitration contractual clause.
As an illustration, the case of Kosi Meubles Ltée v. Alliance Building contractor Ltd can be referred to as a matter of contractual clause. Whilst the judicial element refers to the need to comply with the procedural aspects of arbitration which is established in recognised Arbitration Rules and Guidelines e.g. the UNCITRAL model law under the ICA . However, the rules are note mandatory and need to be agreed by the parties and incorporated in the contractual terms to be applied in case of dispute. It is used as a guide for states developing their own national arbitration laws by harmonizing national legislations on arbitral procedures. The UNICITRAL and its Arbitration Rules, the LCC , LCIA and the ICSID are uniformed procedures under the ICA.
A close analysis of the arbitration process points out doubts about its “fairness”. Since respective parties can select their own arbitrators to a commercial dispute, it means they may be drawn to influence their representatives and the process carried out with favoritism. Another point is regarding the “integrity” of the decision-makers since the very fact that the arbiter is appointed by a certain party means that his ability to stay unbiased is compromised. It issues doubt about the neutrality of the selected appointee and cannot ensure that he is not acting in a partisan way (case AT&T Corporation v Saudi Cable Co). Another interesting point is that any legal judgment must be based on evidence and not from any other source, so how can a party ensure that the chosen arbitrator has not any current or past relationship with the adverse parties to the dispute. Finally, countries worldwide have different laws relating to the validity and methods of enforcing the arbitration clause as illustrated in the case State Trading Corporation v. Betamax Ltd (again in the Mauritian context). It will be problematic to enforce award granted through arbitration in countries that are not participant members of the New York Convention 1958.
Long established harmful trade protectionism has led to the development of organisations to resolve trade disputes from the creation of the GATT in 1947 to, what is now known as, the World Trade Organisation (WTO, 1995). While GATT was predominantly concerned with trade in goods, the WTO and its agreements offer a broad coverage of trading rules ranging from trade in services to intellectual property and new approaches for the settlement of disputes via the WTO Dispute Settlement system (DSS). The rules governing the DSS are embodied in the Dispute Settlement Understanding (DSU) which sets the procedures, outline the structure, and specific time-frame that is followed when settling disputes and an appellate panel. The DSS enjoys, as per the WTO’s Director-General, “tremendous confidence among the membership who value it as a fair, effective and efficient mechanism to solve trade problems.”
However, the following analysis tends to put in evidence adverse precepts of its efficiency. Arguments are being put forward that the WTO is not equipped to handle an economy. It has proved to be a critical failure in political disagreements over trade especially in the dispute between the United States and China that questions the relevancy of these statements. Additionally, to successfully challenge other participants’ policies the system requires too many means which are unaffordable for under-developed and/or developing countries. Moreover, cost considerations do favour richer members over poorer ones. Mauritius, like other small countries, are bound to resilience. Under what other intercontinental measures a tiny country can win condemnation or compel reform of the offending policies of a larger economy? As a developing country we need the help (not to say begging the help) of those countries for our economy to flourish and this raise the question whether developing countries (Article 21 of the DSU) have enough bargaining power to effectively argue their cases (US – Line Pipe), (EC – Tariff Preferences). Finally, the statistics from the WTO’s site show more than 50% of the disputes have been proceeded to the litigation stages which is a sign that may be the WTO’s jurisprudence must be reviewed.
In light of the foregoing, in order to achieve the best possible result, some remedies would be harmonising all procedures under an exclusive organisation and guarantee the feasibility of its enforcement in all jurisdictions worldwide. Intensifying the pool of professionals and digitising paperwork to modernise procedures would help to expedite cases and attain efficiency. By ensuring that the mechanism is conducted with high integrity and altruistic understanding supported by laws, disputes would be easily surmounted.
Moreover, despite the various points raised earlier, the Dispute Resolution Mechanism plays an important role worldwide. It aims at ending disputes in an equitable and efficient way. It preserves the rights of the aggrieved parties, clarifies the scope of their rights and obligations, which progressively increase security level and predictability. Issues that are covered are certain to be permanently resolved and will not surface again. It is an important and a useful guide in case of dispute. So, in a nutshell, we can say that despite the various underlined shortcomings in the absence of a dispute resolution mechanism, it would have been impossible to uphold, justice, equity and fairness worldwide.
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