Disputes can be initiated under the WTO, like in many other legal systems, when there is a specific violation of a rule or law. The General Agreement on Tariffs and Trade(GATT), applicable to the WTO’s Dispute Settlement Understanding (DSU), provides for a further category of disputes - commonly referred to as Non-Violation and Situation Complaints.

The basic principles for a Non-Violation complaint are laid out under Article XXIII (1)(b) of the General Agreement on Tariffs and Trade, 1994. This provision provides for a procedure for complaint to be set into motion when a Member country considers that a benefit under the WTO Agreements, accruing to it directly or indirectly, is nullified or impaired as a result of another Member country applying a measure, irrespective of whether or not such measure conflicts with any of the WTO Agreements.

Article XXIII(1)(c) extends such nullification or impairment as resulting from a broader range of circumstances, captured by the phrase ‘existence of any other situation’. This clause is normally referred to as a ‘situation complaint’.

Both these circumstances envisaged were generally felt to be very broad. Streamlining of the procedural aspects for exercise of the same is sought to be achieved to a certain extent under Article 26 of the Dispute Settlement Understanding (DSU) of the WTO. Article 26 specifies certain procedural requirements for initiating a non-violation complaint under Article XXIII(1)(b). This includes, inter alia, that where a measure is found to nullify or impair benefits under the WTO, without a violation of the same, then there is no obligation to withdraw the measure. However a Panel or Appellate Body of the WTO can recommend to the Member to make a mutually satisfactory arrangement. The DSU also provides that an arbitration panel may be constituted to examine the level of benefits alleged to have been nullified or impaired, and suggest ways and means for reaching a mutually satisfactory arrangement. These suggestions, however, are not legally binding on the Member(s).

For a situation complaint under Article XXIII(1)(c), Article 26(2) of the DSU provides that a Panel can review the complaint and circulate a report among the WTO Members. The DSU however does not specify any obligation to withdraw the measure or provide compensation.

Most disputes that have arisen under Article XXIII(1)(b) have pertained to legitimate expectations of improved competitive opportunities from a tariff concession. The WTO’s Appellate Body has observed that the remedy under Article XXIII(1)(b) should be approached with caution and should remain an exceptional remedy. As observed a WTO Panel, "the reason for this is simple. Members negotiate the rules they agree to follow and only exceptionally would expect to be challenged for actions not in contravention of those rules." There is as yet no WTO jurisprudence on Article XXIII(1)(c).

TRIPS Agreement and Non-Violation Complaints

Both Article XXIII(1)(b) and Article XXIII(1)(c) of the GATT are referred to in Article 64 of the TRIPS Agreement, which establish a moratorium on the application of the non-violation remedy to the Agreement, and commits WTO Members to examine how the concept might apply in the context of the TRIPS Agreement. The moratorium under Article 64 was specified only till January 2000.

Doha Declaration on Implementation-Related Issues and Concerns under para 11.1 directed the TRIPS Council to continue its examination of the scope and modalities for complaints of the types provided for under subparagraphs 1(b) and 1(c) of Article XXIII of GATT 1994 and make recommendations to the Fifth Session of the Ministerial Conference. It was agreed that, in the meantime, Members would not initiate such complaints under the TRIPS Agreement. A number of proposals from developing and developed countries were submitted in the TRIPS Council in this regard. The draft Cancun Ministerial Text(Second Revision) under para 22 took note of the work done by the TRIPS Council and directed it to continue its examination of the scope and modalities for complaints of the types provided for under subparagraph 1(b) and 1(c) of Article XXIII of GATT 1994 and make recommendations to the first Ministerial Conference to be held after 1 August 2004. It was agreed that, in the meantime, Members would not initiate such complaints under the TRIPS Agreement. However, since there was no consensus among the Member countries on the draft Cancun Ministerial Text, the above draft language also could not be agreed to.