THIRD PARTY INTERVENTION IN THE WTO DISPUTE SETTLEMENT INTERNATIONAL EXPERIENCES AND LESSONS FOR VIETNAM

MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY DISSERTATION THIRD PARTY INTERVENTION IN THE WTO DISPUTE SETTLEMENT: INTERNATIONAL EXPERIENCES AND LESSONS FOR VIETNAM Major: International Trade Policy and Law Full name: Hoang Hai Van Ha Noi – 2016 MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY DISSERTATION Third party intervention in the WTO dispute settlement: International experiences and lessons for Vietnam Major: International Trade Policy and Law Full Name: Hoang Hai Van Supervisor: A Prof Ho Thuy Ngoc Ha Noi - 2016 DECLARATION OF AUTHORSHIP I, Hoang Hai Van declare that the dissertation with the title below and the work presented in it are my own and has been generated by me as the result of my own original research with the supervision of A Prof Ho Thuy Ngoc: Third party intervention in the WTO dispute settlement: International experiences and lessons for Vietnam I confirm that: - This work was done wholly or mainly while in candidature for a research degree at this University; - Where any part of this thesis has previously been submitted for a degree or any other qualification at this University or any other institution, this has been clearly stated; - Where I have consulted the published work of others, this is always clearly attributed; - Where I have quoted from the work of others, the source is always given With the exception of such quotations, this thesis is entirely my own work; - I have acknowledged all main sources of help; - Where the thesis is based on work done by myself jointly with others, I have made clear exactly what was done by others and what I have contributed myself; TABLE OF CONTENTS CHAPTER 1- INTRODUCTION CHAPTER – LITERATURE REVIEW 2.1 Overview of WTO Dispute Settlement mechanism in general and with the participation of third party 2.1.1 WTO Dispute Settlement Mechanism in general 2.1.1.1 General Facts 2.1.1.2 The principles of WTO Dispute Settlement 15 2.1.1.3 The process of WTO Dispute Settlement 17 2.1.2 WTO Dispute Mechanism with the participation of third party 24 2.1.2.1 The procedure to become a third party and the rights of third party in DSM 24 2.1.2.2 The participation of developed countries, developing countries and least developing countries as third parties in WTO DSU 25 2.2 The advantages and disadvantages when joining as a third party in WTO Dispute Settlement 32 2.2.1 The Advantages of joining as a third party in WTO Dispute Settlement 32 2.2.2 The Disadvantages of joining as a third party in WTO Dispute Settlement 34 2.3 The influence of the third party invention on WTO Dispute Settlement Mechanism 35 2.3.1 Lower the possibility of early settlement and raising the cost of settlement 36 2.3.2 Decrease the discriminatory settlement between complainants and defendants 37 2.3.3 Lower the winner's pay-off and raising the loser's payoff 38 2.4 International Experiences of active countries in joining WTO Dispute Settlement as a third party 40 2.4.1 China experiences 41 2.4.1.1 Economy and international policy characteristics 41 2.4.1.2 China and WTO Dispute Settlement 44 2.4.1.3 The participation of China in WTO as third party 47 2.4.2 Thailand experiences 50 2.4.2.1 Economy and international policy characteristics 50 2.4.2.2 Thailand and WTO Dispute Settlement 53 2.4.2.3 The participation of Thailand in WTO Dispute Settlement as Third Party 56 2.4.3 India experiences 57 2.4.3.1 Economy and international policy characteristics 57 2.4.3.2 India and WTO Dispute Settlement 61 2.4.3.3 The participation of India in WTO as third party 62 CHAPTER – FINDINGS 67 3.1 The participation of Vietnam in WTO Dispute Settlement as a third party 67 3.2 Impacts on Vietnam when joining WTO Dispute Settlement as a third party 70 3.2.1 Positive impacts on Vietnam when joining WTO Dispute Settlement as the third party 70 3.2.1.1 Enhance the legal capacity of the country 70 3.2.1.2 Gain public benefits under the principles of Most-Favored-Nation 71 3.2.2 Negative impacts on Vietnam when joining WTO Dispute Settlement as the third party 73 3.2.2.1 Possible Trade Cross-Retaliation 73 3.2.2.2 Resource requirements 73 3.3 Lessons for Vietnam when joining WTO Dispute Settlement as a third party 74 3.3.1 Government perspectives on the active participation as a third party 74 3.3.2 Develop human resource and ad hoc agencies devoting to WTO Dispute Settlement 77 3.3.3 Balance between the benefits and the risks when deciding to join in WTO Dispute Settlement as a third party 78 3.3.4 Enhance the cooperation between governmental department and private sectors 78 3.3.5 Mobilize the resources outside the country 80 CHAPTER – CONCLUSION 81 ANNEX A 84 ANNEX B 91 ANNEX C 93 ANNEX D 95 BIBLIOGRAPHY 101 LIST OF TABLES Table 1: WTO members involved in disputes, 1995 to 2015 Table 2: Request for consultations in 2015 Table 3: Active appeals and panels as of 31 December 2015 13 Table 4: Time Frame of WTO Dispute Settlement Process 22 Table 5: China Economy Data 42 Table 6: Cases involving as a third party, 1995-2015 45 Table 7: Dispute cases involving China 1995 – 2016 47 Table 8: Indicators of Thailand, from 2011-2014 52 Table 9: Dispute Settlement involving Thailand 54 Table 10: Cases involving Thailand as the complainants, 1995-2015 55 Table 11 : Cases involving Thailand as defendants, 1995-2015 56 Table 12: Economic Facts of India 59 Table 13: Dispute cases involving India 63 Table 14: Disputes involving Vietnam as third Party 68 LIST OF FIGURES Figure 1: WTO agreements referred to in requests for consultations, 1995-2005 (number of times) 10 Figure 2: Dispute Settlement Procedure 23 Figure 3: Participation of Advanced Economies 28 Figure 4: Participation of developing countries as third parties 30 Figure 5: The participation of least developed countries as third parties 31 Figure 6: The most active members involving in WTO dispute settlement, 19952015 40 LIST OF ABBREVIATIONS No Acronym Definition WTO World Trade Organization GATT General Agreement on Tariffs and Trade DSM Dispute Settlement Mechanism DSU Dispute Settlement Understanding ICJ International Court of Justice The UN The United Nation TRIPS The Agreement on Trade-Related Aspects of Intellectual Property Rights GATS The General Agreement on Trade in Services GDP Gross Domestic Product 10 MFN Most-Favoured-Nation 11 IMF International Monetary Fund 12 FDI Foreign Direct Investment 13 ACWL Advisory Centre on WTO Law 14 US The United States 15 EU European Community CHAPTER 1- INTRODUCTION Overview World Trade Organization (WTO) was officially established after the date of January 1st 1995 as a result of the Uruguay Round (1986 to 1995) with the predecessor the General Agreement on Tariffs and Trade (GATT 1947) WTO is considered as a significant success in the development of legal framework in international trade of the twentieth century with a massive system of treaties and agreements, the list of tariff concessions which regulate the commercial rights and obligations of the member states With the ambition of accelerating the process of international trade liberalization and settling all the conflicts among member states of multilateral trade, the operation of WTO has had a huge effect on the long-term future of the world economy As calculated, around 95% of commercial activities in the world nowadays are governed by the Agreement of this Organization To ensure the full implementation of the Agreement, WTO dispute settlement mechanism (DSM) was established This mechanism is the realization of the legal trend of the dispute settlement in international trade today, gradually replacing the old dispute resolution method which was effected by politics and diplomacy This dispute settlement was the successor to the provisions on dispute settlements which had been promoting positive effects in 50 years of the history of the GATT 1947 Learning from the shortcomings of the old mechanism, some basic improvements in procedures have been included in the new mechanism, a significant contribution in improving the judicial nature of this procedure as well as enhancing the binding decisions of the dispute resolution One of countries the positive changes of the DSM of the WTO is a more active involvement of developing countries (Nguyen Tien Vinh, Foreign experience and the enhancing of the effective participation of Vietnam in the Dispute Settlement Mechanism of the World Trade Organization, 2012) Within 47 years of existence of the GATT, from 1947 to 1995, developing countries took part in just 20% of the lawsuit as plaintiffs, 80% of the remaining lawsuits was launched by developed countries This disparity has changed since WTO came into operation According to the statistics of WTO, by the end of 2015, 185 out of more than 500 requests for consultations were conducted by developing countries, equivalent to 37% of all requests At first glance, this figure shows that the difference does not really matter compared to the previous situation of GATT However, if the analysis in each divided stage, probably we will see more clearly its significant meaning In particular, in the first years of the WTO, from 1995 to 2001, on a total of 219 requests for consultations, there were 56 requests made by developing countries, accounting for 25.6% In the next years, from 2001 to 2006, in the context of the total number of disputes dropped to 116 cases, the number of lawsuits started by developing countries was 59, equivalent to 50.9% In the last 10 years, from 2006 to 2010, when the total number of disputes continues to drop to 83 cases, the number of cases this kind of country was still 42, equals to 50.6% (WTO, Annual Report 2015) The figure of this more than 50% proportion is significantly encouraging In other aspect, the dispute settlement is usually known as the legal discussion between two parties, the defendant and plaintiff However there is a fact that these two parties seldom negotiate alone, there exists the participation of one or several other members who are willing to be involved and influence the outcome of the resolution (Marc L Busch and Eric Reinhardt, Three is a Crowd, 2006) Until the 1970’s, in the dispute United Kingdom—Dollar Area Quotas, third parties first participated in the panel procedure instigated by GATT Council However it was not officially noticed until the insurance of the Understanding on Notification, Consultation, Dispute Settlement and Surveillance (hereinafter “1979 Understanding”) From then, this kind of dispute resolution has took three-fifth of the whole number of dispute settlement, which proves that the popularity of third parties’ participation on WTO After years of WTO membership, Vietnam had an important beginning in using the dispute settlement mechanism of the WTO to protect the rights and interests of its enterprises in international trade: On the day of the 1st of February 2010, the Government of Vietnam set a very first step in its WTO mission by sending a request for consultations to the US government related to the antidumping measures on products frozen warm water shrimp imported from Vietnam - To assist the Prime Minister in organizing the coordination of activities of ministries, branches, localities and enterprises in international economic integration process; urge and inspect the implementation of the Government’s undertakings, policies, strategies, programs and plans, the Prime Minister’s decisions and the fulfilment of Vietnam’s commitments to international economic integration, as well as the efficient protection of Vietnam’s legitimate rights and interests in international economic integration process; adjust, supplement and perfect the system of the national economic and trade laws and policies to make them compatible with the regulations of international and regional economic-trade organizations which Vietnam has joined - To monitor and evaluate international and regional situation; report to the Prime Minister on new theoretical and practical matters in international economic relations, lessons and experiences of other countries in the process of joining international and regional economic and trade organizations; propose undertakings, policies and mechanisms in order to expand external economic relations, enhance economic and trade cooperation with other countries and international organizations, and fulfil Vietnam’s international economic integration commitments - To coordinate with the concerned ministries and branches in carrying out the ideological work, disseminating and propagating the international economic integration - To perform other tasks assigned by the Prime Minister This Decision takes effect after its signing To annul the Prime Minister’s Decision No 31/1998/QD-TTg of February 10, 1998 establishing the National Committee for International Economic Cooperation 92 ANNEX C THE PRIME MINISTER SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom – Happiness No 51/2009/QD-TTg Hanoi, April 8, 2009 DECISION DEFINING THE FUNCTIONS, TASKS, POWERS AND ORGANIZATIONAL STRUCTURE OF THE PERMANENT MISSION OF THE SOCIALIST REPUBLIC OF VIETNAM TO THE UNITED NATIONS, THE WORLD TRADE ORGANIZATION AND OTHER INTERNATIONAL ORGANIZATIONS AT GENEVA THE PRIME MINISTER Pursuant to the December 25, 2001 Law on Organization of the Government; Pursuant to the December 2, 1993 Ordinance on Overseas Representative Missions of the Socialist Republic of Vietnam; Pursuant to the Government's Decree No 183-CP of November 18, 1994, detailing the implementation of Ordinance on Overseas Representative Missions of the Socialist Republic of Vietnam; Pursuant to the Government's Decree No 15/ 2008/ND-CP of February 4, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Foreign Affairs; At the proposal of the Minister of Foreign Affairs, DECIDES: Article Position and functions The Permanent Mission of the Socialist Republic of Vietnam to the United Nations (UN), the World Trade Organization (WTO) and other International Organizations at Geneva, Switzerland, (below referred to as the Mission) is the official representative agency of the Socialist Republic of Vietnam in its relations 93 with the UN, the WTO and other international organizations at Geneva in conformity in relevant treaties to which Vietnam is a contracting party The English transaction name of the Mission is Permanent Mission of the Socialist Republic of Vietnam to the United Nations, the World Trade Organization and other International Organizations at Geneva (referred to as Vietnam Mission to the UN and the WTO at Geneva) The Mission has its own head office in Geneva, bank account and seal bearing the national emblem Its operation funds are allocated from the state budget in accordance with law 94 ANNEX D THE PRIME MINISTER THE SOCIALIST REPUBLIC OF VIETNAM - Independence– Freedom – Happiness - No 06/2012/QD-TTg Hanoi, January 20, 2012 DECISION ON CONSULTATION WITH THE BUSINESS COMMUNITY ON INTERNATIONAL TRADE AGREEMENTS THE PRIME MINISTER Pursuant to the December 25, 2001 Law on Organization of the Government; Pursuant to the 2005 Law on Conclusion, Accession to and Implementation of Treaties; Pursuant to the Government’s Decree No 189/2007/ND-CP of December 27, 2007, on the functions, tasks, powers and organizational structure of the Ministry of Industry and Trade; Pursuant to the Prime Minister’s Decision No 182/2007/QD-TTg of November 26, 2007, on strengthening governmental negotiation delegations on international economics and trade; At the proposal of the Minister of Industry and Trade, DECIDES: Article Scope of regulation and subjects of application This Decision provides the powers, responsibilities and scope of consultation between agencies responsible for negotiation and the Vietnamese business community in the process of preparing and negotiating international trade agreements 95 Article Interpretation of terms In this Decision, the terms below are construed as follows: Agency responsible for negotiation is a ministry, ministerial-level agency, government-attached agency or negotiation delegation established by competent authorities to assume the prime responsibility for negotiating an international trade agreement with one or more than one partner Business community comprises Vietnamese enterprises defined under the Enterprise Law, business associations and lawful representative agencies and organizations of these enterprises as provided by Vietnamese law International trade agreement means a bilateral or multilateral trade agreement or equivalent economic or trade agreement containing commitments to open the market, amend and supplement regulations and laws directly or indirectly affecting the operation of the economy in general and of the business community in particular, which is implemented by the agency responsible for negotiation under the Prime Minister’s assignment Feasibility study of an international trade agreement is a study conducted by the agency responsible for negotiation itself or in coordination with another agency or other agencies to analyse strengths and weaknesses, opportunities and challenges, identify benefits and assess impacts of an international trade agreement concerning market opening on Vietnam so as to recommend whether to initiate negotiations to competent authorities for consideration and decision Article Powers and responsibilities of agencies responsible for negotiation to consult enterprises in the stage of feasibility study Consultation to provide and collect information may be conducted after competent authorities decide to initiate the stage of feasibility study of negotiations on an international trade agreement with potential partners After the decision to conduct a feasibility study is made, the agency responsible for negotiation shall notify on its website the following information: 96 a/ The decision of a competent authority to conduct a feasibility study of an international trade agreement b/ The agency responsible for negotiation (its name, postal address and email address for receiving information and proposals from the business community) c/ The potential partner for negotiating the international trade agreement (including information on its agency responsible for negotiation); brief information on economic and trade relations between Vietnam and the potential partner d/ Requirements set for the feasibility study and expected time of its completion e/ The deadline for receiving proposals from the business community Responsibility to confirm and process information: The agency responsible for negotiation shall receive and process information, study opinions of the business community and confirm the receipt of opinions of the business community via e-mail or on its website Provision of information upon completion of the feasibility study: The agency responsible for negotiation may announce feasibility study results by: a/ Holding a conference to introduce study results, or b/ Posting study results on its website In case of necessity, if the provision of information may affect the process of negotiation, the agency responsible for negotiation may consider and select an appropriate form, level and time to announce information to the business community Article The business community’s right to consultation in the stage of feasibility study The business community may give opinions to the agency responsible for negotiation within the time limit specified at Point e, Clause 2, Article of this Decision, either directly or through the Vietnam Chamber of Commerce and Industry Article Powers and responsibilities of agencies responsible for negotiation to consult enterprises in the stage of negotiation 97 Provision of information on initiation of negotiations: The agency responsible for negotiation shall announce the decision to initiate negotiations on its website with the following details: a/ The competent authority’s decision on initiation of negotiations on the international trade agreement b/ The agency responsible for negotiation (its name, postal address and email address for receiving information and proposals from the business community) c/ The negotiating partner (including information on its agency responsible for negotiation) Provision of other relevant information: The agency responsible for negotiation shall provide the following documents to the business community, including the Vietnam Chamber of Commerce and Industry, by email or on its website: a/ Typical treaties and agreements on market opening signed between the negotiating partner and third parties The agency responsible for negotiation may provide original versions only in case no Vietnamese translations are available b/ Typical treaties and agreements on market opening (equivalent to the international trade agreement on market opening which is being negotiated) which have been signed between Vietnam and third parties c/ Other documents which the agency responsible for negotiation finds possible and necessary as additional information for the business community d/ The schedule, time, venues and agendas of conferences and workshops exclusively reserved for the business community which will be held on the sidelines of negotiation sessions, in case the negotiating parties organize these activities Upon receiving proposals of the business community, the agency responsible for negotiation shall: a/ Confirm the receipt of opinions via email or on its website b/ Receive, process and study the proposals 98 Article The business community’s right to consultation in the stage of negotiation The business community may give opinions and proposals related to the negotiation plans and contents or requirements to be set for partners or taken into account in the process of negotiation The business community may participate in workshops and other activities exclusively reserved for the business community organized on the sidelines of negotiation sessions, in case the negotiating parties organize these activities The business community may send its opinions directly or via the Vietnam Chamber of Commerce and Industry to the agency responsible for negotiation The business community may not participate in the process of negotiation, unless otherwise agreed by the negotiating parties Article Powers and responsibilities of the Vietnam Chamber of Commerce and Industry to collect opinions of enterprises in the stage of negotiation The Vietnam Chamber of Commerce and Industry may act as the focal point in gathering and reflecting opinions of the business community In playing this role, it has the following powers and responsibilities: To disseminate documents provided by the agency responsible for negotiation to the business community To organize researches, propose negotiation contents and plans, including requirements set for negotiating partners, and guide enterprises in considering and paying attention to important issues in negotiations so as to help enterprises contribute more effective opinions to the agency responsible for negotiation To organize various activities of providing information and raising awareness for enterprises To urge, collect and summarize feedbacks of enterprises and send them to the agency responsible for negotiation Article Consultation on specific negotiation contents 99 In case of necessity, the agency responsible for negotiation may hold consultations on a restricted scale on one or several specific contents of negotiation with enterprises or their representative agencies and organizations Procedures and responsibilities of parties: a/ When holding consultations under Clause of this Article, the agency responsible for negotiation shall draft and request consulted enterprises and their representative agencies and organizations to commit in writing to keeping confidential information shared or discussed by the agency responsible for negotiation b/ Consulted enterprises or their representative agencies and organizations shall keep confidential information as committed Any violation shall be handled under the law on protection of national secrets Article Confidentiality regime during the process of negotiation In all circumstances, consultation activities must strictly observe the law on protection of national secrets Article 10 Funds for information provision and collection Funds for the implementation of this Decision by agencies responsible for negotiation shall be allocated from the state budget according to current regulations applicable to their regular duties Article 11 Implementation provisions This Decision takes effect on March 15, 2012 Ministers, heads of ministerial-level agencies, heads of government- attached agencies, heads of governmental negotiation delegations on international economics and trade, heads of negotiation delegations formed by competent authorities, the president of the Vietnam Chamber of Commerce and Industry, and 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