WORLD TRADE
ORGANIZATIONWT/WGTCP/W/229
14 May 2003
(03-2578)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM THE EUROPEAN COMMUNITY AND
ITS MEMBER STATES
The following communication, dated 9 May 2003, has been received from the Permanent
Delegation of the European Community with the request that it be circulated to Members.
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Dispute Settlement and Peer Review:  Options for a WTO Agreement
on Competition Policy
INTRODUCTION
1. Although some references have been made to both a peer review process as well as the
application of dispute settlement in written submissions as well as oral interventions in the Working
Group, so far neither submissions, nor any specific meeting have been dedicated to this important
topic.  However, these issues remain no less crucial to understanding what a WTO competition
agreement could contain and how it could work in practice.
2. Thus, the EC and its member States have found it both timely and appropriate to table this
submission, to complement the clarification of the possible elements of a WTO competitionagreement that have been already discussed in the Working Group.
3. The submission addresses both the issue of peer review and that of dispute settlement as being
complementary .  Indeed, the EC and its member States see peer review as a distinct and separate
instrument  aimed at addressing matters different from those which would be subject to dispute
settlement.
4. The submission in no way purports to deal exhaustively with all issues relating to peer review
and dispute settlement.  Nor does it seek to offer any ready-made solutions.  Rather, it is intended to
stimulate debate in the Working Group on the issues and to point to some possible ways in which peer
review and dispute settlement may be used so as to provide optimal results in the trade and
competition area, while at the same time duly respecting national sensitivities and prerogatives.
5. Before addressing the issues involved, it is useful to state the underlying rationale for peer
review and dispute settlement in a competition context:
• Dispute settlement is a cornerstone of the multilateral, rule-based system.  In a system
of corresponding rights and obligations, dispute settlement is the instrument by whichcompliance is ensured thereby upholding the integrity of the system.WT/WGTCP/W/229
Page 2
• In our view, there is a precise correspondence with the legal obligations that WTO
Members assume under an agreement:  binding rules must be enforceable through the
application of the dispute settlement mechanism.  And conversely, any matter which
is not the subject of a binding commitment cannot be subject to dispute settlement.
• Peer review, on the other hand, is not an enforcement instrument, but a tool to help
WTO Members (collectively, but above all the Members whose practices are underreview) verify the effectiveness and efficiency of the laws, regulations and practices
through which the WTO Member implements an agreement.
• In other words, peer review would serve both as a valuable "service-check" of a WTO
Member’s competition law and policy and to help identify areas where improvements
could be made, including through the identification of priority areas for technical
assistance (TA) and capacity-building (CB) activities.  To this end, peer review
should apply to all provisions of a WTO competition agreement, whether or not they
contain binding commitments.
1. DISPUTE SETTLEMENT
6. The application of some form of dispute settlement in the context of a WTO Agreement on
Competition is desirable:
• Firstly, the binding character of any agreement would be severely weakened if the
obligations contained therein were not subject to WTO dispute settlement to ensure
compliance with the obligations contained in the agreement.
• Secondly, although certain special rules and/or procedures apply with regard to some
existing WTO Agreements (cf. Appendix 2 of the DSU), a factor common to all
agreements is the application of dispute settlement for all of these "covered
agreements", cf. Appendix 1. In other words, non-application of WTO dispute
settlement to a WTO Agreement could be seen as creating an anomaly from an
overall systemic and institutional point of view.
• Thirdly, to take into account the specificity of competition matters and depending on
the actual provisions of the eventual agreement, some explicit provisions reflectingthis specificity may be included in a WTO competition agreement.
7. A number of issues, which would need to be addressed when deciding upon the application of
WTO dispute settlement to a WTO competition agreement are discussed below (although the list isnot exhaustive).
8. Needless to say, in keeping with the spir it of the WTO DSU, including Article 24, due
consideration to the specific circumstances of developing country Members, in particular the least-
developed among them, should be a guiding principle for the initiation of any WTO dispute
settlement proceedings against such Members.  It is also worthwhile already at this stage to stress thatWTO dispute settlement would be strictly limited - as is also currently the case under the DSU and the
covered agreement - to complaints brought forward by WTO Members.  Private individuals and firms
would have no standing therefore.WT/WGTCP/W/229
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1.1 S COPE OF JURISDICTION
9. Obviously the scope of jurisdiction would strictly depend on the actual obligations contained
in a competition agreement.  On the basis of what the EC and its member States have proposed, for
instance, dispute settlement would apply to the three core principles of non-discrimination,transparency and procedural fairness, as well as to the ban on hard-core cartels.  It would not apply to
co-operation under the agreement, which would  be voluntary and non-binding.
10. Furthermore, as indicated in the EU submission on core principles
1, dispute settlement would
apply only to the actual scope of the individual obligations concerning core principles (for instance to
non-discrimination in the letter of the laws, regulations and guidelines of general application in the
domestic competition law regime and not to their application through individual decisions).  Thus, the
purpose of any dispute would be to ascertain the conformity of such laws, regulations and guidelinesof general application with the obligations concerning core principles and not to challenge the actions
of a WTO Member based on such laws, regulations and guidelines of general application.
11. However, this "shorthand" description of the scope would clearly be insufficient, and a WTO
competition agreement should be more precise as to the scope of application of dispute settlement.
The issue is obviously one for negotiations, but some indications can be given already now, forinstance on the basis of the proposals made by the EC and its member States:
(a) In the case of a provision banning hard-core cartels, the corollary is that WTO
Members should entrust the public authorities with the enforcement of the ban in a
clearly identifiable manner.  This would depend on the administrative and legal
structure of a WTO Member.  For instance, some Members may choose to entrustenforcement to the court system itself by allowing private action against anti-
competitive practices.  A body entrusted with enforcement need not be a newly-
created body (it could for example be an existing administrative authority, or perhaps
even in certain instances the police), and the level of resources of this authority would
not be subject to dispute settlement, since it would not be the subject of obligationsunder a WTO Competition Agreement.  Absence of a clearly identifiable authority
responsible for enforcement under a domestic competition law would be subject to
dispute settlement as this could clearly result in lack of enforcement.
(b) If a domestic competition regime had other substantive provisions (e.g. on
monopolies or on mergers), the substantive content of these provisions would not be
subject to dispute settlement, but substantive provisions in addition to a ban on hard
core cartels would become subject to the overriding core principles of a WTOcompetition agreement, including transparency and non-discrimination.
(c) As regards the core principles, since these would be binding, their absence from a
competition domestic regime would be subject to dispute settlement.  However, this
has to be subject to some very important qualifications:
(i) if a binding principle on non-discrimination is applied only to discrimination
in the letter of the law, regulation or guidelines of general application, equally
dispute settlement could only cover this discrimination and could not extend
                                                     
1 WT/WGTCP/W/222.WT/WGTCP/W/229
Page 4
to the application of the law, regulation or guidelines of general application
through individual decisions2.  In particular, the "prosecutorial discretion " of
a competition enforcement body with n ecessarily finite resources, to take
action in the first place against those cartels or other restrictions of
competition which it considers most serious, and dealing with less seriousrestrictions later, resources permitting, must be respected and not subject to
dispute settlement;
(ii) as to procedural fairness, we are of the view that dispute settlement should
only apply to whether procedural fairness provisions exist in a domestic
competition regime, and to whether these provisions comply with the
minimum standards of procedural fairness set out in a WTO competitionagreement, dispute settlement could not apply to whether or not procedural
fairness has, in fact , been applied in a particular case, because this would
bring individual competition decision within the scope of dispute settlement,
which would be inappropriate for the reasons set out in the next paragraph of
this submission;
(iii) as to transparency, application of dispute settlement to transparency
provisions is not novel to the WTO a nd we would suggest that we need not
innovate in this respect.
12. As already anticipated above, there appears to be a growing consensus, from the submissions
to and discussions in the Working Group, that there should be no obligations on the conduct of
individual competition cases.  In this situation, dispute settlement could not cover such cases.  We
also agree with this view, and strongly believe that dispute settlement should be strictly limited to
assessing the overall conformity of the actual law, regulations and guidelines of general applicationsagainst the core principles contained in a WTO agreement, as well as the possible substantive
provisions to be included in a WTO agreement, including a ban on hard core cartels.  In order to make
sure of this, dispute settlement panels and the Appellate Body should be explicitly barred from
second-guessing and overruling indi vidual decisions of competition authorities by having clear text to
this effect contained in the agreement itself.
13. The following sections discuss how it could be ensured that panels and the Appellate Body do
not exceed the scope of dispute settlement and have the requisite expertise to make correct decisionsas to the WTO-conformity of competition laws.
1.2 C
ONSULTATIONS UNDER THE WTO D ISPUTE SETTLEMENT UNDERSTANDING
14. It will be further explained in section 3 below that a WTO competition agreement should have
a general consultation mechanism as a key component of the agreement itself.  Those consultations
would have a general purpose of allowing WTO Members to discuss the operation of the agreement,as well as any bilateral matter, irrespective and quite distinctly from the consultations which form an
integral part of WTO dispute settlement.
15. Quite apart from such a general consultation clause relating to the overall operation of a WTO
competition agreement, there will also be the need for dispute settlement-related consultations.  In
                                                     
2 "Discrimination " being understood, as "(..)an obligation according to which domestic competition
laws should be firmly based on the principle of non-discrimination as regards the corporate nationality of firms.In other words, what would be at issue would be the treatment accorded to firms pursuant to the terms of
domestic competition laws  as such, and not the treatment accorded to firms under a range of other policies.(..) ",
cf. WT/WGTCP/W/222, para 12.WT/WGTCP/W/229
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fact, should one WTO Member be of the view that the legislation of another WTO Member does not
meet the core principles and other obligations contained in a WTO agreement, then this would be a
matter that should usefully and appropriately be raised  under the DSU consultation mechanism.
16. Where such DSU consultations do not yield any satisfactory result, a party would then have
the right to seek recourse to dispute settlement.
17. In keeping with the GATT tradition of amicable settlement of disputes, the DSU in Article 4
sets out the mechanism for mandatory consultations between the parties to a dispute before  a matter
can be brought before a dispute settlement pane l. Experience has shown that this consultation
mechanism can in fact serve to prevent a number of disputes from moving to the actual panel stage –
either due to an amicable solution being found already at the stage of consultations, or, due to
clarification of legal and factual circumstances which render panel proceedings unnecessary.
18. Article 4.3. of the DSU sets out that where such consultations have failed to settle a dispute
within 60 days after the date of receipt of the re quest for consultations, the complaining party can then
request the establishment of a dispute settlement panel.
1.3 E NSURING THE INVOLVEMENT OF COMPETITION EXPERTS
19. On the probable hypothesis that a WTO competition agreement would explicitly bar any
review of individual competition decisions, as well as narrow  the application of non-discrimination to
instances of discrimination in the letter of the law, regulation or guidelines of general application, any
dispute settlement case arising under the agreement would have as its primary task to assess whether
domestic legislation conforms with the provisions of the WTO agreement, in particular the core
principles.  In this context, competition experts could have an important role to play.
20. Setting aside the technical expertise on competition matters that could be required from the
panel Members themselves, it is worth noting that  already at present, the DSU would allow for
competition expertise to assist the panel in reaching its findings on more technical issues where
needed. Article 13 of the DSU establishes the right for a panel to "seek information and technical
advice from any individual body which it deems appropriate."  The WTO competition agreement
might inscribe a right, or even an obligation, on a panel to seek such information.
21. Inspiration for another way of ensuring that technical expertise is made available to a panel
when needed can be drawn from existing WTO Ag reements, which include innovative approaches to
ensuring the necessary technical expertise in certain matters. One such example is found in
Article 24 (3) of the Agreement on Subsidies and Countervailing Measures which establishes a
"Permanent Group of Experts composed of five indepe ndent persons, highly qualified in the fields of
subsidies and trade relations.(…) The PGE may be requested to assist a Panel (…)" (emphasis
added). A variation of the recognition of the need to ensure the involvement of experts in moretechnical matters is provided by Article 14 (2) of the Agreement on Technical Barriers to Trade
according to which "[A]t the request of a party to a dispute, or at its own initiative, a panel may
establish a technical expert group to assist in questions of a technical nature, requiring detailed
consideration by experts." Again, for any panel in the competition field, the consultation of such a
permanent expert group could be made either optional or obligatory.
1.4 T
ERMS OF REFERENCE FOR A DISPUTE SETTLEMENT PANEL
22. Under the WTO, DSU Article 7 provides for "standard terms of reference" which will form
the basis of the panel’s work, unless  the parties to the dispute no later than 20 days from the
establishment of the panel have agreed on other "customised" terms of reference. The standard terms
of reference read as follows: "To examine, in the light of the relevant provisions in (name of theWT/WGTCP/W/229
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covered agreement(s) cited by the parties to the dispute), the matter referred to the DSB by (name of
party) in document … and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in that/those agreement(s)."
23. The terms of reference of any WTO panel will always have to be read in the light of the
substantive agreement(s) at issue, and consequently, in the case of a WTO competition agreement, anexplicit provision in that agreement barring review  of individual decisions would directly delineate
the outer boundaries of the jurisdictional scope of a panel.  Another important delineation would flow
from of the fact that any non-discrimination provision would be limited to discrimination in the letter
of the law, regulation or guidelines of general application.
24. Whatever option or options, among those referred to above, are eventually retained (for
instance that of an optional or obligatory consultation of a permanent group of competition experts)
such options would obviously need to be clearly set out in the competition agreement itself.
1.5 A
PPELLATE BODY PROCEEDINGS
25. Unlike panels, which are currently established on an ad hoc  basis,  the Appellate Body
("AB"), which considers appeals by the parties to a dispute on the findings in a WTO dispute panel
report, consists of seven individuals out of which three serve on each case brought before the AB.
The AB members are appointed on a four-year basis with the possibility of a one-time reappointment,cf. DSU Article 17.
26. Consequently, AB members hear and decide cases much more frequently than an average ad
hoc panellist, just as the scope of appellate review is strictly limited to "issues of law covered in the
panel report and legal interpretations developed by the panel."
3  The AB cannot examine new
evidence, nor can the AB at present remit a di spute back to the original panel for renewed
consideration. In other words, the scope of review  conducted by the AB is narrowly determined by
how the case was initially presented before and decided by the panel and by the issues of law and
legal interpretations addressed and developed by the panel.  And as already shown in the above, that
panel stage can be tempered and limited by the drafting of the agreement and other means.
2. WHAT WOULD BE THE PURPOSE OF PEER REVIEW AND WHAT COULD IT
HELP OBTAIN?
27. As already stated above, dispute settlement and peer review should be seen as complementary
mechanisms and peer review addresses a number of issues which would not be subject to WTO
dispute settlement.  Both the very nature of peer review and the difference in the subject matter
addressed serve to underline the complementary nature of the exercises.
28. Unlike dispute settlement which would apply to the obligations contained in the WTO
competition agreement (cf. above), peer review would aim at a wider range of competition law andpolicy matters.  As a WTO competition agreement would merely set out a limited number of binding
obligations, WTO Members would remain at liberty to decide for themselves whether or not to
include additional substantive areas in their domestic competition law, including e.g. abuse of
dominance.  Given the distinct nature of peer revi ew, it would be natural and indeed appropriate for
such a process to address the entirety of a domestic competition law framework.
29. To take just one example, general issues relating to the effectiveness of enforcement of
domestic competition laws over a period of time could usefully be included within the scope of peer
reviews.  This could include best practices regarding investigative techniques, fact-finding, etc.
                                                     
3 Cf. DSU Article 17 (6)WT/WGTCP/W/229
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However, individual decisions (involving the legal or economic interpretation of facts), or questions
relating to the strategy or prioritisation of a competition enforcement body, would be excluded from
peer review, just as it would be excluded from dispute settlement.
30. One important result from an effective WTO peer review process is that the WTO Member
under review would have its domestic legislation reviewed in such a manner as to help identify waysof improving the legislative framework, includ ing any possible the need for amendments and
updating.  Another important result could be attaining a greater degree of international convergence in
competition policy on a range of issues.
31. In addition to this, peer review in the WTO would aim at ascertaining the adequacy of
technical assistance and capacity building work being provided in the competition area and would
thus go beyond the scope and purpose of existing systems of peer review.
32. As suggested by the EC and its member States in earlier submissions, a WTO Competition
Policy Committee could provide a useful forum for providers and recipients of such assistance to
better co-ordinate and develop multi-year programmes for individual WTO Members.  By ensuring
better co-ordination - and by including a review of the technical assistance and capacity building - this
would serve to ensure a more efficient use of available resources, including by amendments and
adjustments to TA and CB activities as they are gradually designed and implemented.  By using theCompetition Policy Committee as the framework for such peer reviews, this would also serve to
ensure that the process would be as resource effective as possible.
2.1 H
OW COULD PEER REVIEW BE DESIGNED TO OPERATE MOST EFFECTIVELY ?
33. When considering the introduction of peer review in relation to a WTO Competition
Agreement, there are a number of practical issues that would need to be addressed regarding theoptimal design for such a process of peer review as applied in an organisation with more than 140
Members.
34. The concept of "peer review" is already known from the WTO Trade Policy Review
Mechanism ("TPRM") which broadly covers the trade policy of a given WTO Member, or an  issue-
specific peer review mechanism  such as the peer reviews undertaken in the Competition Law andPolicy Committee of the OECD. However, the TPRM covers a wide range of trade-related issues in
addition to  competition and would not allow the necessary time and degree of detail which an
effective competition-specific peer review warrants.  Such time and detail, on the other hand, is
offered by the competition peer reviews undertaken  in the OECD, but these reviews are traditionally
limited to the actual membership of the OECD, save for the OECD Global Forum on Competition in
which e.g. South Africa has recently been the subject of peer review. Consequently, we see a  need for
a separate peer review mechanism within the WTO for  competition, the design of which should avoidduplication with other fora and should draw upon relevant work from such fora, including the OECD
Global Forum on Competition, the ICN and UNCTAD where relevant.
2.2 W
HO WOULD BE CONDUCTING THE REVIEW ?
35. One issue to be addressed is who would be considered "peers"  in the WTO as the organisation
encompasses countries at widely different stages of economic development as well as experience inthe area of competition law and policy?  Obviously, the Members of the WTO are the "peers", but it
remains to be seen whether the examination should be conducted by the whole membership, perhaps
in the Competition Policy Committee (as is the case for the TPRM in the TPRB) or be – at least in a
first analytical stage – conducted by a more limited number of Members, which begs the question of
how to select such Members.WT/WGTCP/W/229
Page 8
36. A related question is whether or not the substantive work relating to the peer review would be
undertaken by the countries serving as the revi ewers (in practice presumably the competition
authorities and/or other related bodies), possibly assisted by the WTO Secretariat. The question of
capacity and human resources, for all Members, but more crucially so for developing and LDC
Members, is obviously most relevant here. Another solution could be for an independent, outsideexpert to undertake the drafting of the report on the basis of which the review would then take place.
37. Finally, the permanent group of experts discussed above under 1.3. could potentially also play
a role in peer review, thus providing a bridge between dispute settlement and peer review being
complementary - not alternative - processes.
2.3 H
OW OFTEN WOULD REVIEWS TAKE PLACE ?
38. Another issue is how frequently  reviews would take place in an organisation with as many
Members as the WTO? One possibility would be to review all WTO Members on a revolving basis,
but with a higher frequency for the larger trading partners, as is already the case under the WTO
TPRM. However, this could raise resource implications, and raise questions for certain WTO
Members as to possible overlaps with OECD competition peer reviews. Another possibility is to give
priority to those countries which have only recently implemented – or are in the very process of
implementing - a domestic competition law and policy4.
39. If there is no revolving peer review of all WTO Members, then the question would arise as to
how a peer review would be triggered.  Clearly, at the request of the Member itself, but how should
requests for a peer review of another member be treated, if the member in question is not supporting
the request?  If any Member can trigger a peer review of any other member at any time simply by
requesting it, this could lead to the conflictualisation of peer review, which could defeat the object,and blur the distinction between peer review and dispute settlement.  One idea in this context, is that
for a peer review of a Member to take place without the explicit request of that Member, then a
"quorum" of a fixed number of other Members, would have to make the request, and if the Member to
be the object of the peer review is a DC or LDC, then the Members making the request should also
include a DC or an LDC.
40. Probably, in the early days, there will be enough spontaneous requests from Members to be
peer reviewed to fully occupy the WTO resources fo r this activity.  Subsequently, if such requests
begin to "dry up", then those Members who have not yet been peer reviewed can be encouraged to do
so, with past PRs existing as positive examples of how peer review is a constructive process.
8. GENERAL CONSULTATION MECHANISM UNDER A WTO COMPETITION
AGREEMENT
41. As explained in greater detail in a previous EC submission
5, we envisage that a consultation
and co-operation mechanism would be a key component of any WTO competition agreement.  A
range of issues could be raised under the consultation provisions of such an agreement, including one
WTO Member’s assessment – rightly or wrongly - that the domestic legislation of another WTO does
not meet the standards contained in the WTO agreement, in particular as regards the core principles of
transparency, non-discrimination and procedural fairness.  What is to be noted in this context is thatconsultations under this mechanism would be distinct from the consultations under DSU Article 4
which form an integral part of formal WTO dispute settlement proceedings and are a precondition for
requesting the establishment of a dispute settlement panel, cf. DSU Article 6.
                                                     
4 This would also tally well with the fulfilment of one of the envisaged purposes of peer review, i.e.
identifying and addressing possible shortcomings in TA and CB assistance.
5 WT/WGTCP/W/184WT/WGTCP/W/229
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42. Such specialised consultation provisions are not novel to the WTO system and would afford
Members the opportunity to discuss matters that may or may not be subject to obligations under the
Agreement and that may be of such a confidential nature that a discussion in the proposed
Competition Committee would not be appropriate or desirable.  Such a consultation provision could
be drafted in terms of a reference to, for instance, "any matters relating to the operation of thisAgreement or the furtherance of its objectives". An example of such a provision can be found in
Article 17.2 of the Anti-dumping Agreement.
43. In procedural terms, we would envisage an obligation in a WTO competition agreement for
WTO Members to hold such consultations upon duly notified requests, and to maintain these
consultations distinct from those foreseen by the DSU in case of an alleged violation of an obligation
under the agreement.
44. It is important to stress that, in an area such as competition law, where WTO Members need
to strike the right balance between a minimum set of common obligations and a maximum of
flexibility for the development of individual domestic competition regimes, this consultation
mechanism would afford WTO Members a venue to discuss matters they either cannot or do not wish
to bring under the WTO dispute settlement provisions.  Such consultations would also provide an
essential complement to the more public processes of discussion in the Competition Policy Committeeand of peer review.
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