2. Discuss the advantages and disadvantages of arbitration, and explain the benefits and the costs of resolving an international commercial dispute by arbitration in Australia.
1. History and Role of the World Trade Organization (WTO)
World Trade Organization (WTO) is an intergovernmental organization which administers the trade all over the world. It commenced its operations on 1st January 1995 as per the Marrakesh Agreement. The agreement was signed by 123 nations as of 15th April 1994. It had replaced the General Agreement on Tariffs and Trade (GATT) which had commenced in 1948. GATT was a component of Bretton Woods comprising of World Bank and International Monetary Fund.
After a series of trade negotiations, the rounds of GATT began by the end of World War II and it was aimed to reduce the tariffs for facilitating the international trade. The rationale of GATT was established upon the clause of Most Favored Nations (MFN) and it gave the specific countries an opportunity of trading rights. So it aimed at assisting all the countries to obtain the status of MFN so that a single country cannot hold the trading advantage over others.
WTO deals with the administration of trade amongst the participating countries through providing a framework for the negotiation of trade agreements and dispute resolution procedure. These procedures aim at enforcing the adherence of the participants to the agreements of WTO and they are authenticated by the representatives of the member governments. The WTO focuses on the issues which are derived from the last trade negotiations, particularly from the Uruguay Round.
The Uruguay Round has also laid the basis for administration of trade in services. The General Agreement on Trade in Services (GATS) is the framework for directing the multidimensional trade in services. Intellectual property rights were addressed for the formulation of regulations regarding the safeguarding of trade and investment of ideas, patents, concepts and so forth.
The purpose of WTO is to make sure that global trade is commenced in a smooth and predictable manner. The WTO establishes the rules for international trade amongst its member nations offering them a mechanism for global commerce. It is aimed to create economic stability and peace in the world with the help of multilateral system which is based on consenting member states.
The member states have approved the regulations of WTO in their respective countries as well. It pertains that the rules of WTO have become a part of the legal system of the countries. SO, these regulations also apply to the local companies which operate their commercial transactions at the global level. For example, if a country has decided to invest in a foreign country by setting up its office in that particular country then the regulations of WTO which are imbibed in the local laws of that country will regulate how this can be executed.
So, when a country becomes a member of WTO, it local laws cannot be in contradiction to the rules of WTO as it governs almost 97% of the international trade. The Present Director General of WTO is Roberto Azevêdo from Brazil. In WTO, the decisions are made through consensus with the ruling of the majority vote which is in rare cases. The Ministerial Committee which is based in Geneva, Switzerland conducts the meeting once in every two years. The other councils are goods council, intellectual property rights council, service council which report to the general council.
In case of occurrence of any trade disputes, WTO is the resolving authority. If a country creates barriers of trade in the form of customs duty against a particular country, then WTO might issue trade sanctions opposing the violating country. It shall also work for a resolution of the conflicts through negotiation. So, it has an important role to play in the international trade, international political, legal issues and economics which arise in the international business due to globalization.
It has emerged as one of the powerful institutions for reducing the barriers related to trade amongst the member countries and opening new markets. WTO is the only administering body operating internationally which has replaced the General Agreements on Tariffs and Trade (GATT) which was formulated in 1948. The goal of WTO is to provide a platform for its member countries by assisting them in services such as exports, imports and transacting their business in a peaceful way.
Strengths and Weaknesses of WTO
The advantages provided to the member countries of WTO are that they are able to lower their trade relating barriers amongst themselves. In opposition to this, the non-member countries cannot negotiate the trade relating agreements in an independent manner with their partners. So, the role of WTO can be summarized as that it helps in facilitating the administration, implementation and smooth operation of trade-related agreements amongst the member countries.
It helps in providing a forum regarding the negotiations of trade amongst the member countries. It even helps in settlement of disputes amongst the member countries with the help of applicable rules and regulations. It cooperates with the International Monetary Fund and World Bank for unifying all the member countries regarding the formulation of international economic policies.
The strengths of WTO are that the disputes are resolved in a constructive manner. As the trade expands in volume, there are greater chances of emergence of disputes. It helps to resolve these disputes in a constructive and peaceful manner. It also helps in promoting peace amongst the nations. It helps in smooth flow of trade and provides the countries with a fair and constructive outlet for dealing with the disputes over the trade issues. It helps in creating confidence and cooperation amongst its member countries.
WTO helps in balancing the power of all its member countries by giving a voice to smaller countries and freeing the major countries from the complication procedures for negotiating the trade agreements with each of the countries. It also helps in giving more choice to the consumers and a wide range of products to choose from.The trade barriers are lessened with the increase in exports and imports thereby helping the country to earn foreign exchange and income. It also helps in stimulating the economic growth of a country with the help of careful policy-making and giving the power of free trade to its member nations.
Amongst the disadvantages, the WTO is undemocratic. Its policies have an impact on all the aspects of society but it is not democratic and a transparent organization. The rules of WTO are formulated by the institutions which have an inside access to the negotiations. Secondly, the countries with more power dominate the international trade by favoring their personal interests thereby fueling anger and resentment that makes the weaker countries more unsafe.
The labor and human rights are trampled. It puts the rights of the corporations to profit over the labor and human rights. It encourages the workers to fight against each other rather than promoting the international labor standards. Another disadvantage of WTO is that it seeks to privatize the essential public services such as education and health which means selling off these assets to the private corporations which run for profit rather than for the benefit of the public. As a result, it leads to the sufferings of the people who are unable to pay for these services.
The defense of WTO towards Trade Related Intellectual Property Rights that is associated with copyrights, patents and trademarks have come at the expense of lives and health of humans. Many new conditions have been agreed by WTO which would make more difficult for the developing countries to produce the generic drugs or import them if they are not able to produce them.
2. Advantages and disadvantages of arbitration
Most of the specifications of international arbitration are the outcome of its key characteristics namely autonomous nature of the parties. They are free to choose their place of arbitration, the procedure for administering the arbitration, language, kind of evidence the parties wish to permit and the number and identity of the arbitrators who would consult the tribunal. Arbitration is the alternative form of dispute resolution (ADR) which is intended to eliminate high cost and unexpected results which could lead to a lawsuit. It is a private form of resolution of disputes.
Unlike a court case, it is not a matter of public record. Maintaining confidentiality is a crucial feature to either or both of the parties which are involved in the dispute. It also permits the parties to formulate their own rules for the settlement of the dispute. It comprises of what evidence can be presented, experts to be consulted and the concepts which will form the basis of the final decision and agreement. Arbitration is a more formal procedure for dispute resolution and it follows the rule which is more formal.
The arbitrators are third parties who are also legally trained. They have some expertise in the area which is subjected to dispute. The arbitrator is authorized to make decisions and determinations which will be binding on the parties. His job is to listen to both the parties and make decisions on the basis of that which would be binding on both of them. It eliminates the risk that either of the parties won’t agree thereby ending up in a legal procedure as his decision is legally binding on both of them.
The major advantage is with the help of adopting the arbitration procedure, they can save cost and time as well and can have a greater degree of probability regarding the decision making process. The parties are also free to choose a neutral and competent decision maker. The arbitral tribunals are comprised of two or more arbitrators. Either of the parties is free to choose one arbitrator. They can then mutually agree on selecting the chairman.
They can either permit the arbitrators selected by them to choose the arbitrator. In case of failure of those attempts, the chairman can be chosen by the authority who is appointing them. However, the major disadvantage is either of the parties may be not satisfied with the decision. There is an absence of appeal in international arbitrations. There is a limited scope of review for the arbitral awards thereby proving to be frustrating for the parties for not able to have another review of the tribunal.
Sometimes there is a need for intervention of the court as most of the arbitral tribunals lack imperium or intimidating power. As a result, their procedural power is less efficient than the courts and it may be imposed through a special court order. It is recognized that a party can apply to the court for protective measures even though a tribunal has been constituted.
Depending upon the regulations of the place of arbitration, the courts can be requested for the facilitation of the production of evidence comprising of the ordering third parties over whom the tribunal does not have any authority for production and verification of the documents. Such inventions of the court can complicate the arbitral process hence becoming the biggest disadvantage of the international arbitration.
Costs of resolving an international commercial dispute by arbitration in Australia
The courts in Australia have discretion over the costs of all the proceedings and they have the right to charge the amount which is justified as per the circumstances. There are general regulations which govern the exercise of power in this regard. Usually, a party is entitled to costs regarding any issue on which it has been succeeded and evaluated on an ordinary basis. The burden is on the party which has failed, to show the special circumstances which are sufficient for the court to depart from the regulations which impose costs following the specific event.
There are two main categories of cost in this regard:
- Those arisen through the order of the court, either ordinarily or on an indemnity basis. The indemnity costs are those awarded against the third party in situations when it has been engaged in irrational behavior relating to the conduct of the proceeding.
- Those which have been arisen due to the retainer with the client and are administered by contract.
The action proceedings of the class are unique in a number of ways. The successful respondent has the right to recover the costs from the lead applicant because the members of the group have the immunity from cost orders awarded against them. The immunity is supported by policy considerations which also includes the affordable access to justice. However, it also means that the respondents would be forced to defend their actions at considerable costs with their incapability to recover those in case they are successful.
It would impact many aspects of proceedings including negotiating the settlements. It would shift the power balance in favor of applicants. The offer of settlement may authorize the party making the offer for obtaining the costs on the basis of indemnity. It can be a certain factor if not the only issue for determining the decision of the court on the issue.
In this regard, there are two types of offers of settlement viz. informal offers referred to as Calderbank Offers and those which are made according to the rules of the court that are also called offers of compromise. A Calderbank Letter is referred to as an informal order of compromise which is made on the basis of without prejudice amongst the parties and according to the principles which are formulated in Calderbank v Calderbank and its subsequent authorities.
Though such letters are considered to be without prejudice, they may be regarded by the courts in respect of costs and the parties who have rejected the offer of settlement can be ordered for the payment of the legal costs of the successful party.They can be ordered regarding the payment of the legal costs on an ordinary basis up to the time the offer was made and on an indemnity basis with effect from the date on which the Calder bank offer was made. However, the provisions concerning the formal offers of compromise are to be found in the rules of the court.
Although it is up to the courts to decide whether to award costs or not. It has been provided in the rules that the courts upon their discretion can reject a more favorable offer which has been complied with the regulations which will authorize the offeror to a higher proportion of costs from the date on which the offer was made.
The security for orders of cost is sought when the defendant accuses that the plaintiff shall not hold funds to reimburse the order of the cost. The court is requested by the defendant to order the plaintiff to provide a security for safeguarding the defendant from this to happen. The forms of security comprises of money which is to be paid in the court. The payment made to a bank account which is under the control of a third party who has mentioned the circumstances in which the money would be released. A bank guarantee in favor of the court in the control of the court and lastly a deed of guarantee relating to which another entity agrees to guarantee the payment of money so that the court orders can be satisfied.
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