How Do Prior Rulings Affect Future Disputes?

Abstract

Abstract International dispute systems are often designed so that dispute body rulings do not set precedent. Yet governments have incentives to learn from prior decisions. Past rulings convey important information about how the law is applied. This is especially true in the World Trade Organization (WTO), where disputes frequently occur between the same members and over the same issues. I argue that case law increases the likelihood of early settlement. This helps explain why fifty percent of WTO cases end prior to a formal ruling. I use new data on the direction of ruling on each legal claim made in the first 450 WTO disputes. The results show that litigants are significantly more likely to settle early given the presence of previous legal decisions.