Tea for all

The World Trade Organisation embraces anti-trust practices, advice to private-sector companies, and dispute resolution.

but it may not have the muscle to resolve trade rows, Philip Hoult discovers

The hostilities between the US and the European Union over President Bush's imposition of punitive tariffs on steel imports has put the World Trade Organisation (WTO) firmly under the spotlight.With the EU planning to impose immediate retaliatory measures, controversially citing untested WTO rules as its authority, there are many who fear that the dispute between the world's two largest trading blocks threatens completely to undermine the organisation.However, that is not a view shared among the select number of UK law firms which practise WTO law.

As Craig Pouncey, Brussels-based lead partner of Herbert Smith's WTO team, argues, the situation would be a great deal worse if the organisation did not exist.

'They [the US and the EU] would have done this without the WTO,' he says.

'The US knew what they were doing and probably knew what the rest of the world would do about it.'For the likes of Herbert Smith and other City firms which have set up dedicated WTO practices, the work is an area that continues to be worth the investment.

'For us, WTO work is part and parcel of a global anti-trust practice,' says the joint head of Linklaters' WTO team, Gavin Robert.This is in part because in 2001 alone more than a quarter of the world's population was welcomed into membership with the much-heralded accession of China and other countries such as Chinese Taipei, Lithuania, and Moldova.

And the organisation's growth will not stop there.

Among the other 28 accession candidates in 2002 are such key countries as Russia, Saudi Arabia, Vietnam and the Ukraine.

'Now that the Chinese have acceded it is an area that any serious practice should be devoting resources to,' says Mr Pouncey.The WTO can also directly benefit law firms by opening up markets for legal services, as has happened to a degree in China.WTO work can range from advising private-sector companies on their rights of access to particular markets, to governments which are looking to join the organisation.

If, for example, a UK company wants to invest in Malaysia, its lawyers would advise on whether the investment complies with WTO rules and whether or not any conditions the state might want to apply would be permitted under WTO agreements.

Firms will also be involved in advising on litigation remedies when governments fail to implement or comply with WTO rules.

This would include, say, advising a US exporter, which is in line to be hit by the retaliatory actions proposed by the EU, on whether those actions are legal and what can be done if they are not.

Therefore, a well-balanced WTO team will combine legal expertise, particularly in anti-trust and litigation, with an advanced understanding of economics.However, it is advising private-sector clients about market access that is seen as the main potential growth area.

Mr Pouncey says there is still a perception among clients that WTO law is not something that really affects them as private companies.In this, he argues, there is a disparity between EU companies and US companies, which have engaged in the trade debate for a considerably longer period of time.

'That will change,' Mr Pouncey says.

'The WTO is all about access to markets for private companies.'But interpreting the WTO's rules on behalf of clients is a potential minefield.

Criticised by many for their 'constructive ambiguity', which allows governments to hide policy differences, the rules are also complex and lengthy.

According to Linklaters' Mr Robert, the rulebook is 'a mess'.

He says: 'You have got the agreements themselves and then a whole load of schedules that have additional multilateral or bilateral agreements.

The schedules will run to thousands of bilateral agreements by the different countries.

That's why the agreements take years to come into existence.'Mr Pouncey, whose team includes former EU trade commissioner Lord Brittan of Spennithorne, agrees, but he says that such ambiguity is 'simply unavoidable in such an organisation'.

He points out: 'You simply can't have everyone agreeing on every single word.'The other significant, though less predictable, area of work is dispute resolution through the WTO's adjudication system.

Philippe Ruttley, international trade law partner at Clyde & Co and founder of the World Trade Law Association, admits WTO litigation is still 'a nascent field' for the private sector.When the WTO was launched in January 1995, there was much hope in some quarters that it would allow companies to sue countries which had breached the rules.

'One of the disappointments that has dampened opportunities for law firms has been the series of rulings by the European Court of Justice that the WTO rules are not directly effective,' says Mr Ruttley.

'There has been a political series of judgments - the reasoning given was basically that many other countries such as the US and Japan did not allow it.'It has been a big blow because it has effectively confined the area to government-to-government litigation.

Had it gone the other way that would have opened up a whole area of practice.'Although slowly increasing in their number, complaints - made by EU companies through the director-general for trade's trade barriers regulation unit at the European Commission - are still rare.

Many private-sector clients wonder whether it is worth going through the procedure.

The relative lack of cases has made it difficult for law firms to develop WTO litigation properly as a practice area.

At one stage, it was even thought that only a government's civil service lawyers could appear before the WTO panel as it was government-to-government litigation.

A WTO ruling two years ago rejected this EU-promoted argument.

However, the ruling has opened limited opportunities for private practice lawyers because it is only developing countries that lack the necessary resources and expertise, and will therefore instruct outside lawyers.Instead, the majority of litigation work remains confined to helping private-sector clients prepare information for their government to pursue the case.

This type of indirect litigation can be substantial, particularly when, as is often the case, a dispute involves just one or a handful of companies on either side.

Examples of such disputes include Kodak's allegations that it was being denied access to the Fuji-dominated Japanese market or the spat between Brazil and Canada over state aid to its respective aircraft manufacturers, Embraer and Bombardier.

Much of a government's evidence for proving the claim in these cases will have come from the companies affected - and in some cases those companies will be asked to comment on any pleadings.A further avenue of potential advisory work that has emerged - albeit again in a limited way - is to help non-governmental organisations intervene in disputes.

Although the intervention cannot be direct, one way this can be done, says Mr Ruttley, is by sending an open letter to a government, which can then include that letter as an annexe to its pleadings.

Mr Ruttley recently helped the Consumers' Association intervene in a dispute over sardine exports from Peru in this way, with the association arguing that it was in the interests of consumers to have a cheaper and wider range of products.

Although the holy grail of direct enforcement continues to be a long way off - 'not in my lifetime,' according to one leading practitioner - WTO law and practice is nevertheless set to grow steadily.

Hammond Suddards Edge partner Konstantinos Adamantopoulos, whose firm is advising the Russian government on its plan to join the WTO next year, says the organisation has in fact been a victim of its own success.Mr Adamantopoulos identifies a lack of resources to help the WTO deal with its increasing caseload as the main weakness with the system.

Countries such as Brazil - fresh from winning the aircraft manufacturers dispute with Canada - are now expected to launch other challenges.

As a result, the judicial arm of the WTO, which is widely respected for its competence, is expected to be strained under the weight of new cases.Mr Adamantopoulos adds: 'Since 1996, when the WTO was set up, we have witnessed a marked increase in cases referred.

There is more trust in the system than there used to be.'Philip Hoult is a freelance journalist