City Research Online

Efficient Breach, Reliance and Contract Remedies at the WTO

Collins, D. A. (2009). Efficient Breach, Reliance and Contract Remedies at the WTO. Journal of World Trade, 43(2), pp. 225-244.


Purpose - To propose a remedy of monetary damages for efficient trade agreement breaches within the World Trade Organization (WTO). Design/methodology/approach - Defines the concept of an efficient breach as one where breach of an obligation leads to more optimal allocation of resources than compliance with the obligation. Discusses WTO remedies and monetary damages for efficient breach, the expectation measure, the reliance measure, WTO violations as tort, and enforcement. Findings - The main remedies for WTO violations are non-monetary compensation and retaliation. However, the problems facing a doctrine of efficient breach are that the parties mainly injured by such breaches are private third party exporters rather than Member States, and that it is difficult to calibrate counterfactually a suitable remedy based on foregone trade. To overcome these problems, the proposed reliance-based monetary remedy would institute a periodic decreasing payment which corresponds to the out of pocket expenses incurred, in anticipation of liberalized trade, by exporters in the injured state. This quantifiable and verifiable method of assessing compensation is in harmony with the common law of contract and can be used to establish third-party contractual rights; it also has parallels in international law, which should encourage compliance with it, while WTO violations are similar to the law of tort, which typically uses a restorative remedy. Originality/value - The proposed method fulfils the WTO's Dispute Settlement Understanding's goal of predictability, and it is both fair and welfare maximizing.

Publication Type: Article
Publisher Keywords: Dispute Procedures, Disputes, International Trade, World Trade Organization
Subjects: H Social Sciences > HF Commerce
J Political Science > JX International law
Departments: The City Law School > Academic Programmes
The City Law School > International Law and Affairs Group
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