Volume 47 (2013) / Issue 5
This article focuses on a less scrutinized aspect of the WTO dispute settlement system - non-litigated disputes. Legal rules concerning consultation and settlement during the panel proceedings are analysed with the case laws. We then propose, and empirically analyse, several key economic determinants of non-litigation in the WTO dispute settlement system that are motivated by the theory of bargaining with informational asymmetry. In particular, our logistic regressions show that a greater difference in the size of the pair of disputing countries reduces the likelihood of voluntary settlement or non-litigation. WTO members also tend to prefer non-litigation when the respondent is smaller than the complainant, has less reputational concern, and faces less retaliatory capacity of the complainant. Our findings suggest a case for reforming the legal rules of the consultation process towards mitigating informational asymmetry or improving communication between disputing parties in the WTO.
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