THE DEVELOPMENT OF THE ASEAN TRADE DISPUTE SETTLEMENT MECHANISM: FROM DIPLOMACY TO LEGALISM KOESRIANTI  THE DEVELOPMENT OF THE ASEAN TRADE DISPUTE SETTLEMENT MECHANISM: FROM DIPLOMACY TO LEGALISM KOESRIANTI A thesis submitted in accordance with the requirements for the award of the Degree of Doctor of Philosophy, Faculty of Law, University of New South Wales 2005 II ABSTRACT In the late twentieth century international trade moved from a political multi-polar system based on the nation-state to a system featuring unified regional trading regimes. An inevitable feature of increased cooperation through bilateral, regional and international arrangements is the emergence of disputes over the interpretation and implementation of the agreed upon commitments. Accordingly, reliable mechanisms for the settlement of trade related disputes have become necessary to ensure the effective and continued functioning of these arrangements. Over the years these dispute settlement mechanisms have evolved from the relatively simple, diplomacy based structures called for in the GATT, to the detailed, legalistic, adjudication based mechanism found in the WTO. Bilateral and regional initiatives, such as NAFTA and MERCOSUR, as well as the EU, have similarly adopted dispute settlement mechanisms which adopt, in varying degrees, legalistic adjudicatory processes. Since 1967 ASEAN has spearheaded the creation of a regional trading bloc in the South East Asian region. As in other trading blocs, this has inevitable led to the need to develop effective and workable dispute settlement mechanisms. This thesis examines the development of trade dispute settlement mechanisms in ASEAN tracing its development from a model based on pragmatic diplomacy to a legalistic adjudicatory system with particular reference to the ASEAN context. It examines the extent to which the ASEAN context has influenced the content and the adoption of trade dispute settlement mechanisms in the region, as well as the extent to which the recently adopted 2004 Enhanced Protocol on Dispute Settlement can adequately address trade disputes in the region while remaining sensitive and responsive to the ASEAN context. Based on a comparative examination of dispute settlement mechanisms in other trade agreements, a range of key procedural issues are identified and examined with a view to identifying the prospects and challenges which ASEAN faces in the implementation of its dispute settlement mechanism. The thesis analyses the prospects and challenges of implementation the 2004 Enhanced Protocol on DSM. III Acknowledgements I acknowledge my gratitude to my supervisors, Associate Professor Rosemary Rayfuse and Mr Bryan Mercurio for their encouragement, patience and invaluable guidance. Also, I would like to thank the following: Professor David Dixon, Associate Dean (Research) and Mr Angus Corbett, Associate Dean (Coursework) of the Law Faculty the University of New South Wales for their support during the writing of my thesis; Kerry Daley, Dawesh Chand, Gaha Reef, Annabel Sutherland, Tony Antoniou, and Reg Potter for their assistance on administrative and IT support: Emily McCarron and Nikki Chong for their assistance in proof reading this thesis; Mr Smara Dahana for information on ASEAN. I also thank Mr Machsoen Ali, Dean of the Law Faculty of the Airlangga University and his staff for their support during my study; my friends, Laylee Tang, Dan Svantesson, Robin Huang, Marie Ange, Scot Calnan, Cathy Hunter and Cassandra Goldie for making the Julius Stone PG room like home. I wish to record my gratitude to my friends, including but not limited to, Umi, Maria and Sony, Diah, Zaafri and Ayu, Made Andi, Srie and Richard, Nurul and Yudi, and Nestri for their support in making my stay in Sydney as a PhD student as enjoyable and lively as possible. Thanks also go to my friend Dina Sunyowati and my sisters and brothers, in particular, my sister Tri Andjarwati for their help while I was away from home. Finally, special thanks go to my beloved husband, Saiffudin Zuhri and my inspiring children, Andin and Avi who have supported me throughout my study. They are everything to me. IV ABSTRACT II ACKNOWLEDGEMENTS III FIGURES X FLOWCHART X APPENDICES X LIST OF SELECTED ABBREVIATIONS XI TABLE OF CASES XIII ASEAN TIME LINES XVI TABLE OF TREATIES AND DECLARATIONS XVII INTRODUCTION 1 FORMULATION OF THE PROBLEM 1 THE OBJECTIVE OF THE STUDY 3 THE FRAMEWORK FOR ENQUIRY 4 THE OUTLINE AND SCOPE OF THE STUDY 4 CHAPTER 1 – THE HISTORY, DEVELOPMENT AND STRUCTURE OF ASEAN 7 1.0 Introduction 7 1.1 The ‘South East Asian’ Area 8 1.1.1 Early History 8 1.1.2 The meaning of ‘South East Asia’ 10 1.1.3 The development of a ‘South East Asian’ identity- the SEATO Years 11 1.2. The Formation of ASEAN 13 1.2.1 The early years 13 1.2.2 The Bangkok Declaration, 1967 14 1.2.3. The Bali Summit of 1976 15 1.3 The ASEAN Profile 17 1.4 The Organizational Structure of ASEAN 24 1.4.1 The ASEAN Heads of Government Meeting (ASEAN Summit Meeting) 25 1.4.2 Ministerial Level Meetings 26 V 1.4.3 ASEAN Standing Committee (ASC) 28 1.4.4 ASEAN Secretariat 29 1.4.5 The ASEAN National Secretariats 30 1.4.6 Other Organs 31 1.4.7 ASEAN committees in third countries (‘Dialogue Partners’) 31 1.5 Decision making in ASEAN 32 1.5.1 The musyawarah and muafakat 32 1.5.2 The ASEAN Way: Consensus in ASEAN 34 1.5.3 Implementation of decisions 39 1.6 The legal personality of ASEAN 41 1.7 Conclusion 49 CHAPTER 2 – ASEAN AS A REGIONAL ECONOMIC ORGANIZATION 52 2.0 Introduction 52 2.1. The Beginnings of Trade Liberalization in ASEAN 53 2.1.1 The Bali Concord I 1976 53 2.1.2 ASEAN Industrial Project, the ASEAN Industrial Complementation Scheme and the ASEAN Industrial Joint Venture 55 2.1.3 ASEAN Preferential Trading Arrangements Agreement 1977 58 2.1.4. Formation of the ASEAN Free Trade Area (AFTA) 61 2.1.5. The ASEAN Industrial Cooperation Scheme (AICO) 66 2.1.6 The ASEAN Investment Area (AIA) 68 2.1.7. The ASEAN Framework Agreement on Services (AFAS) 71 2.2 Development of the ASEAN Economic Region 73 2.2.1 The Asian financial crisis 73 2.2.2 The ASEAN Vision 2020 76 2.2.3 The Hanoi Plan of Action (HPA) (1997-2004) and its succeeding plans 78 2.3 Free Trade Agreements with external countries 85 2.4 Towards an ASEAN Economic Community 87 2.4.1 The Bali Concord II of 2003 87 2.4.2 The ASEAN Security Community (ASC) 88 2.4.3 The ASEAN Socio-Cultural Community (ASCC) 91 2.4.4 The ASEAN Economy Community (AEC) 92 2.4.5 The deadline for the establishment of the ASEAN Community 97 2.5 Conclusion 99 CHAPTER 3 – DISPUTE SETTLEMENT MECHANISMS IN OTHER MAJOR ECONOMIC ORGANIZATIONS 102 3.0 Introduction 102 3.1 The European Community (EC) 104 3.1.1 Brief Introduction to the organisation and its goals 104 3.1.2 The EC dispute settlement system 106 VI 3.1.3 Permanent vs. ad hoc panels 107 3.1.4 Independence of judicial officers 109 3.1.5 Private party rights to appear 110 3.1.6 The precedential value of decisions 112 3.1.7 The adoption of decisions 113 3.1.8 The enforceability of decisions 114 3.2 The General Agreement on Tariffs and Trade (GATT) 117 3.2.1 Brief introduction to the organisation and its goals 117 3.2.2 The GATT dispute settlement system 119 3.2.3 Permanent vs. ad hoc panels 122 3.2.4 The independence of panellists 123 3.2.5 Private party rights to appear 125 3.2.6 The precedential value of decisions 125 3.2.8 The enforceability of decisions 127 3.3 The World Trade Organization (WTO) 128 3.3.1 Brief introduction to the organisation and its goals 128 3.3.2 The WTO dispute settlement system 129 3.3.3 Permanent vs. ad hoc panels 130 3.3.4 The independence of panellists 132 3.3.5 Private party rights to appear 133 3.3.6 The precedential value of decisions 134 3.3.7 The adoption of decisions 135 3.3.8 The enforceability of decisions 136 3.4 North American Free Trade Agreement (NAFTA) 137 3.4.1 Brief introduction of the organisation and its goals 137 3.4.2 The NAFTA dispute settlement system 138 3.4.3 Permanent vs. ad hoc panels 139 3.4.4 The independence of panellists 141 3.4.5 Private party rights to appear 143 3.4.6 The precedential value of decisions 144 3.4.7 The adoption of decisions 146 3.4.8 The enforceability of decisions 147 3.5 The Mercado Comun del Sur or Common Market of the Southern Cone (MERCOSUR) 148 3.5.1 Brief introduction to the organisation and its goals 148 3.5.2 The MERCOSUR dispute settlement system 149 3.5.3 Permanent vs. ad hoc panels 151 3.5.4 The independence of panellists 152 3.5.5 Private party rights to appear 153 3.5.6 The precedential value of decisions 154 3.5.7 The adoption of the decisions 155 3.5.8 The enforceability of decisions 155 3.6 Conclusion 156 CHAPTER 4 – KEY PROCEDURAL ISSUES OF DISPUTE SETTLEMENT MECHANISMS: TOWARDS A RELIABLE MECHANISM 158 4.0 Introduction 158 4.1 Diplomatic dispute settlement processes 160 VII 4.1.1 Consultation 160 4.1.2 Good offices, conciliation and mediation 163 4.2 Adjudication Dispute Settlement Processes 164 4.2.1 Ad hoc vs. Permanent Panels 164 4.2.2 Qualifications of panellists 170 4.2.3 The independence of panellists 172 4.3 The Issue of Transparency 174 4.3.1 Transparency in trade organisations 174 4.3.2 Transparency in panel proceedings 176 4.3.3 Transparency and the parties’ submissions 178 4.3.4 Transparency and public meetings 179 4.4 Participation of private individuals 181 4.4.1 As counsel 181 4.4.2 As litigant 183 4.4.3 As amicus curiae 186 4.4.4 As third party intervenor 196 4.5 The Precedential effect of decisions 199 4.5.1 Stare decisis and the Doctrine of Precedence 199 4.5.2 Precedential effect of decisions 201 4.6 The Desirability of appeal processes 203 4.7 Enforceability of Decisions 205 4.7.1 Adoption of decisions 205 4.7.2 The binding effect of decisions 205 4.7.3 Implementation of decisions 210 4.7.4 The effect of non-compliance with decisions 211 4.8 Conclusion 219 CHAPTER 5 – TRADE DISPUTE SETTLEMENT IN ASEAN UP TO AFTA AND THE 1996 PROTOCOL 222 5.0 Introduction 222 5.1 The Early Approach to Trade Dispute Settlement in ASEAN 223 5.2 Dispute settlement under AFTA 229 5.2.1 The need for trade dispute settlement mechanism 229 5.2.2 The AFTA dispute settlement regime 230 5.2.3. The AFTA dispute settlement machinery 233 5.2.4 An Assessment of the AFTA regime 234 5.3. The 1996 Protocol on Dispute Settlement Mechanism (the 1996 Protocol) 237 5.3.1. Consultations 239 5.3.2 Good Offices, Conciliation and Mediation 241 5.3.3 Panels 241 5.3.4 Appellate Review 245 5.3.5 The Implementation of Recommendations/Rulings and Time Limits 246 VIII 5.3.6 An assessment of the 1996 Protocol 246 5.6 Conclusion 249 CHAPTER 6 – THE ASEAN PROTOCOL ON ENHANCED DISPUTE SETTLEMENT MECHANISM (THE 2004 PROTOCOL) 250 6.0 Introduction 250 6.1 Dispute resolution under the Bali Concord II 250 6.1.1 ASEAN Legal Unit (Advisory Mechanisms) 252 6.1.2. The ASEAN Consultation to Solve Trade and Investment Issues (ACT) stage (Consultative mechanisms) 253 6.1.3 The ASEAN Compliance Monitoring Body (ACMB) or the ASEAN Compliance Board (ACB) - (Compliance mechanisms) 254 6.2 An assessment of the dispute settlement mechanisms under the Bali Concord II 255 6.3 The ASEAN Protocol on Enhanced Dispute Settlement Mechanism (the 2004 Protocol) 256 6.3.1 Consultations 257 6.3.2 The Panel Process 260 6.4 Appeal procedure 267 6.4.1 Appeal review process 269 6.4.2 Adoption of appellate review report 271 6.5 Transparency 272 6.5.1 Written submissions 273 6.5.2 Public meetings 275 6.5.3 Amicus Curiae 276 6.6 Implementation 278 6.6.1 The surveillance of implementation of findings and recommendations 278 6.6.2 Compensation and the suspension of concessions 279 6.6.3 Arbitration 281 6.6.4 Surveillance 281 6.6.5 Fund/Cost 282 6.6.6 Time Frame 283 6.6.8 The independence of the system 284 6.7 Conclusion 285 CHAPTER 7 – CONCLUSION 287 APPENDIX I 301 APPENDIX II 308 APPENDIX III 318 IX BIBLIOGRAPHIES 335 [...]... adoption of decisions; and the enforceability of the decisions Part Three consists of the final three chapters which analyze and illustrate the development of the ASEAN trade dispute settlement mechanism from diplomacy to legalism Chapter 5 examines the early approaches to settling trade disputes in ASEAN, including trade disputes prior AFTA agreement, trade disputes under AFTA Agreement, and the period... WTO DSU model to dispute settlement, adopting a method and process suitable to the conditions and political situation in the ASEAN THE OBJECTIVE OF THE STUDY The objective of this study is to examine the development of the trade dispute settlement mechanism in ASEAN from its essentially diplomacy- based origins to its recent incarnation as a legalistic adjudicatory process with particular reference to. .. adequately address trade disputes in the region while remaining sensitive and responsive to the ASEAN context THE FRAMEWORK FOR ENQUIRY The framework for the enquiry will be based on three pillars First, the thesis will examine the development of ASEAN as a regional trade organisation Second, the thesis will examine the development of trade dispute settlement mechanisms in five other major trade organisations,... Dispute Settlement Mechanism of 19962; the first formal mechanism for the resolution of trade disputes and later, in 2004, by adoption of the ASEAN Protocol on Enhanced Dispute Settlement Mechanism which is, in all major respects, similar to the WTO DSU Additionally, the 38th joint communiqué of the ASEAN Economic Ministers, issued at Vientiane on 26 July 2005, supported the effort to ‘strengthen the institutional... after the AFTA agreement It also discusses and assesses the 1996 ASEAN dispute settlement mechanism Protocol Chapter 6 then analyses the 2004 Protocol Chapter 7 concludes the thesis with an assessment of the 2004 Protocol and it likely efficacy in the ASEAN context It examines the 2004 Protocol on the basis of the power-based and rulebased oriented dichotomy and discusses the relevance of the ASEAN. .. personality Chapter two examines the development of 4 ASEAN as a regional economic organization It discusses the processes of ASEAN economic liberalization from its early days to the most recent phase, the move towards the establishment of the ASEAN Economic Community as one pillar of the proposed ASEAN Community Part Two describe and analyses the trade dispute settlement mechanisms in other international economic... As in other trading blocs, moves to closer economic integration inevitably meant that ASEAN would need to develop effective and workable dispute settlement mechanisms In the ASEAN context, the development of these mechanisms has been influenced by a range of historical and cultural factors unique to the region Traditionally, the emphasis of ASEAN nations has been placed on the need to settle disputes... efficacy in and sensitivity to the ASEAN context THE OUTLINE AND SCOPE OF THE STUDY Given the above, this study is divided into three parts containing seven chapters Part one sets out the history, development, and structure of ASEAN Chapter one begins with the early history of ASEAN and the formation of the ASEAN identity, including the meaning of South East Asia It then discusses ASEAN s institutional structure,... ASEAN context to the implementation of the Protocol It concludes with a discussion of the potential obstacles to the effective implementation of the Protocol and some suggestions as to how those obstacles may be overcome 5 PART I THE ASEAN CONTEXT 6 CHAPTER 1 – THE HISTORY, DEVELOPMENT AND STRUCTURE OF ASEAN 1.0 Introduction The establishment of the Association of South East Asian Nations (ASEAN) in 1967... examined with a view to relating these experiences to the ASEAN context Key procedural issues to be explored include: the establishment of permanent or ad hoc panels, the independent of panellists, private and non-governmental rights to appear, the transparency of the dispute settlement mechanism, the presence of binding precedent of the panel decisions, and the enforcement of the decisions It should . THE DEVELOPMENT OF THE ASEAN TRADE DISPUTE SETTLEMENT MECHANISM: FROM DIPLOMACY TO LEGALISM KOESRIANTI  THE DEVELOPMENT OF THE ASEAN TRADE DISPUTE SETTLEMENT. It examines the extent to which the ASEAN context has influenced the content and the adoption of trade dispute settlement mechanisms in the region, as well as the extent to which the recently. CHAPTER 5 – TRADE DISPUTE SETTLEMENT IN ASEAN UP TO AFTA AND THE 1996 PROTOCOL 222 5.0 Introduction 222 5.1 The Early Approach to Trade Dispute Settlement in ASEAN 223 5.2 Dispute settlement