All WTO Members are obligated to implement the subsidy provisions of the WTO Agreements. But they are also the initial judges of the best way to implement them. No multilateral mechanism exists to determine whether a particular subsidy is prohibited, actionable or not. For that, and other disputes, the WTO's Dispute Settlement Mechanism was created.
Disputes are expected to be the exception rather than the norm. Dispute settlement is cumbersome, requiring a domestic process to determine adverse effects, followed by a demanding WTO process that will typically include both a panel and an Appellate Body phase. Nonetheless, there have been a significant number of disputes concerning the SCM since 1995. The AoA included a "peace clause" that provided that most disputes would not be initiated during a six-year transition period, which expired at the end of 2003.
Dispute settlement at the WTO proceeds in stages, starting with a request for consultations between the disputing parties. If a mutually agreed solution is not reached within 60 days (30 days if it involves an alleged prohibited subsidy), any party may refer the matter to the WTO's Dispute Settlement Body (DSB).
The next step is the formation of a panel. If the panel accepts to review the matter it conducts formal hearings, culminating in the submission of a final report. The report is then accepted by all, or appealed by one of the parties. If the Appellate Body determines that the subsidy has resulted in adverse effects to the interests of another, the Member granting or main?taining the subsidy must "take appropriate steps to remove the adverse effects", or simply withdraw the subsidy. If the Member does conform within six months from the date when the DSB adopts the panel report or the Appellate Body report, and in the absence of agreement on compensation, the DSB shall grant authorization to the complaining Member to take countermeasures. These are to be "commensurate with the degree and nature of the adverse effects determined to exist, unless the DSB decides by consensus to reject the request."
