Balancing law and politics: Judicial incentives in WTO dispute settlement

Abstract

Can international courts ever be independent of state influence? If not, how do courts manage the tension between legal principles and political concerns? We address these questions through an analysis of one of the most independent international adjudication mechanisms – dispute settlement at the World Trade Organization (WTO). We find that the ad hoc nature of WTO panels, judicial hierarchy, and panelists’ concern for compliance create a set of incentives that encourage panelists to moderate rulings against the most powerful WTO members. Our analysis shows that WTO dispute settlement panels limit the negative effects of judgements against the United States and the European Union by reducing the scope of such verdicts through the use of judicial economy. We argue that WTO panels use this practice to balance the demands of the law with the concerns of powerful members, which results in a level of judicial restraint on the part of panels and increased prospects for compliance by the US and EU.