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ABSTRACT
In this thesis, the role of the World Trade Organization in international trade, its importance in the peaceful settlement
of disputes between countries, its difficulties and successes are analyzed.
KEYWORDS
GAAT, Dispute Resolution, enforcement, Appellate Body.
INTRODUCTION
The World Trade Organization (WTO) plays a critical
role as a global dispute resolution mechanism,
ensuring that international trade flows smoothly by
helping its members settle disputes based on agreed-
upon trade rules. The World Trade Organization
(WTO), established in 1995, plays a crucial role in
maintaining a rules-based international trading system.
At the heart of its operations lies the dispute
settlement mechanism, which has been hailed as the
"jewel in the crown" of the WTO. The WTO's dispute
settlement system is considered one of the most
advanced and binding systems of its kind, designed to
handle conflicts among member states in a structured,
rule-based manner.
Importance of the WTO as a Dispute Resolution
Mechanism
Research Article
IMPORTANCE OF WTO AS DISPUTE RESOLUTION MECHANISM:
SUCCESSES AND CHALLENGES
Submission Date:
October 26, 2024,
Accepted Date:
October 31, 2024,
Published Date:
November 05, 2024
Crossref doi:
https://doi.org/10.37547/ijlc/Volume04Issue11-02
Nematov Umidjon Uktam ugli
Master’s student of Tashkent State University of Law
, Uzbekistan
Nurilloev Shavkat Shukhrat ugli
Master’s
student of Tashkent State University of Law, Uzbekistan
Journal
Website:
https://theusajournals.
com/index.php/ijlc
Copyright:
Original
content from this work
may be used under the
terms of the creative
commons
attributes
4.0 licence.
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The WTO's dispute resolution mechanism is vital for
maintaining the stability and predictability of
international trade. Through its formalized procedures,
countries are able to bring trade disputes to a neutral
div for review, which ensures that trade conflicts are
managed based on agreed-upon principles rather than
unilateral actions.
The WTO's dispute settlement system is designed to
provide a structured framework for resolving trade
disputes between member countries. It operates
through the Dispute Settlement Body (DSB), which
oversees the entire process from consultations to
implementation of rulings.
The world trade organization (WTO) has been in
existence for slightly more than five years. Its
predecessor, the General Agreement on Tariffs and
Trade (GATT), operated for almost fifty years as a
provisional treaty and institution, but the WTO has a
definitive organizational structure recognized under
international law. By most accounts, the WTO has been
an enormous success, and it has provided and begun
to implement the appropriate infrastructure for the
massive treaty results of the Uruguay Round of
multilateral negotiations (1986
–
94). The WTO has the
unparalleled responsibility of overseeing a treaty of
some thirty-thousand pages, including approximately
one thousand pages of dense and often ambiguous
treaty text. (The remainder largely comprises
schedules of concessions regarding goods and
services.) However, increasing concerns have arisen
about the direction and the long-term viability and
strength of the WTO, particularly during the last year
or two, accentuated by the failure of the 1999 Third
Ministerial Conference in Seattle.
A central feature of the WTO is its dispute settlement
mechanism. Indeed, the statesmen involved in the
Uruguay Round, as well as current WTO officials and
ambassadors, take considerable pride in this feature.
The WTO dispute settlement system has had an
enormous impact on the world trade system and trade
diplomacy. It is unique in international law in its juridical
and legalistic system for disputes, with virtually
automatic, binding application of its decisions and
reports to its members. Unlike some of the more
specialized systems of this type, these attributes are
nested in an extraordinarily broad and comprehensive
jurisprudence. In addition, the questions posed to the
dispute settlement system often strike at the heart of
the tension between the protection of nation-state
sovereignty and the globalization of national
economies, which require more expansive cooperative
mechanisms in order to succeed internationally.
The WTO dispute settlement system builds upon the
GATT dispute settlement procedures, a mechanism
inherently flawed in part because GATT was intended
to be part of an International Trade Organization that
never came into being. The International Trade
Organization’s draft charter called for a rigorous
dispute settlement procedure that contemplated the
use of voluntary arbitration, while providing for appeal
to the World Court in some circumstances.
In general, a WTO dispute settlement procedure
(outlined in figure A-1) is launched at the request of one
or more member governments for a consultation
regarding complaints against defending members. This
process is entirely government-to-government and
available only to WTO members in procedures against
other members. The DSU provides that all members
will settle their differences regarding the covered
agreements by referring those disputes to the
procedures of the WTO as elaborated in the DSU.
When such a request is made and transmitted to the
secretariat, a DS number is assigned to the dispute, and
all documents relating to that particular process will
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bear that DS number. On some occasions, other
complaints will be combined for a proceeding, and, in
such a case, there may be more than one DS number to
a particular set of issues involving complaints against
different WTO members. If more than one country
brings a complaint against the same measure, the
complaints are consolidated and reviewed by a single
panel.
In some books, it is provided that throughout GATT's
history, there was disagreement over whether its
dispute settlement system should be more or less
"judicial" in nature. Some critics of the system argued
that it should be more judicial so as to promote more
precise decisions on the merits of disputes and more
effective implementation of decisions. At the same
time, other critics argued that the nature and basic
philosophy of GATT dictated that the system should be
used only to the extent it facilitated negotiated
settlements of trade disputes. These two conflicting
viewpoints are often referred to as the "legalistic"
model, which stresses adjudication, and the
"pragmatic"
or
"anti-legalistic"
model,
which
emphasizes negotiation and consensus. Put simply, the
legalistic view is that the GATT and now the WTO
Agreement are codes of conduct and emdiv a
balance of concessions.
If a WTO Member violates the code or tips the balance,
it is appropriate to penalize such behavior and put
pressure on that Member to conform to the code or
right the balance, if necessary by allowing the
complaining
Member
to
take
offsetting
countermeasures. On the other hand, the anti-legalistic
position is that the WTO Agreement is not a code of
conduct per se, but more of a commitment by the
Members to deal with each other in trade matters so
as to work out mutually acceptable solutions to any
disagreements. As discussed below, until the closing
period of the Uruguay Round, the United States was
generally perceived to have supported the legalistic
position, while Japan and the EC were considered
supporters of the opposing position. Many smaller
countries tended to support the legalistic position
because they saw that approach as a more effective
protector of small-country rights.
The hallmark of WTO dispute settlement is its
automaticity. A WTO Member has a right to bring a
case against any other Member. By becoming a party
to the WTO agreements, Members have accepted in
advance the jurisdiction of the WTO dispute settlement
process. Once brought, the case is heard in accordance
with a relatively strict timetable and the ultimate
decision, whether by a panel or the Appellate Body, is
binding. Of course, delays can occur in selecting panel
members and in handing down panel or Appellate
Body rulings, but a Member that claims that another
Member is in violation of its WTO obligations will be
able to pursue the matter to a binding decision. This is
a consequence of the reverse consensus rule.
Implementation of WTO rulings is less automatic and
considerable delays can occur before implementation
takes place, or before compensation or retaliation are
authorized and carried out. Nonetheless, WTO dispute
settlement is binding dispute settlement and as such
was a major step, moving the WTO well beyond the
GATT, and, in fact, well beyond most other forms of
dispute settlement between states.
There are a number of key features of the WTO dispute
settlement system. First, the system is used frequently,
perhaps far more frequently than originally
anticipated, by both developed and developing states.
This includes both the initiation of cases before panels
and appealing the outcome to the Appellate Body.
Second, treaty interpretation in the WTO is driven by a
common methodology articulated by the Appellate
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Body on the basis of the customary principles of
interpretation of public international law as reflected
in Article 31 of the Vienna Convention on the Law of
Treaties: words in an agreement are to be given their
ordinary meaning in their context and in the light of the
object and purpose of the agreement as a whole. This
has resulted in an orderly approach to the process of
interpreting the WTO agreements. It has provided
guidance to Members both on how they should
interpret their own obligations and on what basis they
should decide whether another Member is in breach
and should be brought to dispute settlement.
The World Trade Organization (WTO) plays a critical
role in international trade by providing an organized
and rule-based system for resolving disputes between
its member states. Its dispute resolution mechanism,
known as the Dispute Settlement System (DSS), is vital
for maintaining fairness and stability in global
commerce. This system offers countries a platform to
resolve trade disagreements through a structured
legal process that includes consultations, panel
reviews, and appellate procedures.
One of the key strengths of the WTO's DSS is its
capacity to handle disputes based on legal
frameworks, ensuring that trade disputes are resolved
according to agreed-upon rules rather than through
political or economic coercion. The system has
successfully managed numerous disputes since its
inception in 1995, with a high resolution rate. For
example, data from 1995 to 2000 showed that of the
219 disputes raised, 154 were resolved, demonstrating
the mechanism's effectiveness in settling international
trade disputes peacefully and predictably.
However, there are limitations. Enforcement of rulings
can be problematic, particularly for developing
countries that may lack the economic or political
power to compel compliance from stronger trading
partners. The system also lacks traditional remedies
like reparation for past damages, which can undermine
its authority in ensuring compliance. Despite these
challenges, the WTO's dispute resolution mechanism
remains a cornerstone of international trade
governance, helping prevent trade conflicts from
escalating into more severe economic or diplomatic
confrontations.
Successes of the WTO Dispute Settlement Mechanism
Since its inception in 1995, the WTO dispute settlement
mechanism has received over 600 complaints. As of
2024, the exact number stands at 614 disputes. This
high volume demonstrates the trust member countries
place in the system and its effectiveness in addressing
trade concerns.
Unlike its predecessor, the General Agreement on
Tariffs and Trade (GATT), the WTO’s dispute
settlement system provides binding rulings that must
be complied with. This is a significant advancement as
it ensures that member states adhere to international
trade rules.
The WTO’s framework for dispute resolution reduces
the risk of trade disputes escalating into trade wars.
Through formal consultations, panel hearings, and
appellate reviews, it offers multiple stages for parties
to negotiate and reach a resolution before
implementing retaliatory measures. Moreover, the
vast majority of WTO rulings are respected by member
states, with countries making efforts to align their
trade practices with WTO recommendations. This high
compliance
rate
underscores
the
system
’s
effectiveness in enforcing international trade rules.
By providing a rules-based system for resolving
disputes, the WTO mechanism has helped prevent the
escalation of trade conflicts into full-blown trade wars.
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For example, the long-standing Boeing-Airbus dispute
between the US and EU, while protracted, was largely
contained within the WTO framework, preventing
unilateral actions that could have severely disrupted
global trade.
On top of that, the dispute settlement process is
transparent, with rulings published for public access.
This ensures accountability and reinforces the
legitimacy of the WTO as an institution that upholds
the rule of law in international trade.
Professor Hudec has made a careful statistical analysis
of the results of GATT dispute settlement in an attempt
to answer assess the effectiveness of the system. He
concludes that the system yielded positive results
–
full
or partial satisfaction for the complainant
–
in almost
90% of all cases. Interestingly, he found that there was
a marked increase in negative outcomes in the 1980's,
a period that has often have been considered by many
to be one of the more successful periods of GATT
dispute settlement. His analysis indicates, however,
that there was a great increase in the volume of
disputes considered in the 1980's and that in the first
half of the decade, there were many successes.
By the end of the decade, the situation had changed
and he found an increasing number of cases with were
negative outcomes, i.e., a respondent had been found
to have violated GATT rules but either did not accept
the loss (by blocking adoption of the panel report) or
did not implement corrective action to remove the
offending measure. Professor Hudec's study ended as
of the end of 1989, and it appears that the trend
toward more negative outcomes that he identified in
the later 1980's became even more pronounced in the
early 1990's, in part because of the bringing of more
controversial cases into the system and in part because
of the pendency of negotiations on some issues.
Nonetheless, for most of its history, the GATT system
scores quite well in terms of providing for the effective
vindication of rights.
The GATT dispute settlement system also contributed
greatly to clarifying GATT obligations. GATT dispute
settlement panels had the occasion to consider all of
the basic obligations of the General Agreement and
their decisions led to a great refinement of those
obligations. Moreover, panel reports frequently cited
other panel reports, thereby leading to the creation of
a system of precedent that reinforced their
interpretations of GATT obligations. While the notion
of precedent does not mean that panels never reached
conclusions differing from those of prior panels, panels
generally followed past panel decisions so long as they
were well reasoned and were accepted in the GATT
system as correct. Thus, from this perspective
–
the
creation of a legal system of relatively stable
precedents
interpreting
and
clarifying
GATT
obligations
–
the GATT dispute settlement system was
quite successful.
One commonly held view in the literature is that the
success of early settlement under the GATT is
increasingly less evident under the WTO, especially in
consultations. While bargaining in the shadow of the
law proved efficacious
under the GATT’s more
diplomatic system, the argument is that the DSU’s
reforms may have made litigation attractive,
motivating complainants to push for a definitive
verdict. As evidence, many observers point not only to
the caseload at the panel stage, but the frequency of
appeals to the AB. Moreover, the received wisdom is
that consultations are pro forma at best.
In fact, the proportion of cases paneled differs little
across the GATT/WTO years; the WTO’s greater
caseload reflects growth in the instituti
on’s
membership and in the volume of world trade. In terms
of the transatlantic relationship, more specifically,
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early settlement is perhaps more important than ever,
a point quite evident in Figure 3, which graphs the level
of concessions achieved in WTO disputes ending at
various stages of escalation.
As Robert Hudec's work has discussed in depth, GATT
began handling disputes at its inception and by 1949
had developed the practice of referring disputes under
Article XXM:2 to working parties. A working party is a
negotiating div that includes the parties interested in
an issue, that does its business by face-to-face
interaction, and whose objective is agreement. In the
early years, almost all GATT business was conducted
during month-long sessions that took place
approximately annually. Pushed by the GATT
Secretariat, working parties began to act like third-
party adjudicators, drawing up reports recording the
views of the two disputing parties but treating the
votes of the neutral members as dispositive. Starting
in 1952, the working party format mutated into a
standing group of neutrals, which would hear
complaints and then draw up its report in camera with
Secretariat assistance. Bit by bit, through small
successes, the procedures gathered legitimacy and
began to make a difference in persuading defending
governments to remove problem measures. Dispute
settlement was still a process conducted between
repeat players in an occupational community, and
dependent on the defending party's cooperation. Very
many cases were settled bilaterally and only the hard-
core cases were referred to panels.
A case may also be settled when the complaining party
abandons some or all of its claims after it discovers that
the claims lack sufficient factual basis, the measure no
longer exists, or the legal arguments supporting the
claim are not likely to prevail. A defending party may be
able to persuade the complaining party that success in
litigation will be more difficult than predicted, that
success in litigation may be fruitless, or that a practical
solution to the trade problem at issue is better
achieved through a negotiated solution.
Since there is usually more than one way to comply
with a given WTO obligation, it may be entirely rational
to abandon a claim if the complaining party believes
that it cannot prevent the defending party from
complying in a manner that is useless to the
stakeholder. In another variation, a defending party
may change its law to provide the same protection in a
manner that it believes is more defensible. Claim
abandonment may also, of course, reflect pure arm-
twisting and pressure politics.
DSU Article 5 does provide for good offices,
conciliation, or mediation if the parties to a dispute
agree-implicitly limiting these forms of settlement to
situations in which a complainant has already
committed itself to bringing a dispute. A July 2001
proposal from the WTO Director-General for
procedures to operationalize Article 5 noted that
Article 5 had never been used. There has still been no
mediation to date within a dispute. The only known
mediation to date, regarding EC preferences for
canned tuna, occurred instead of dispute settlement
proceedings. The mediation successfully settled the
differences between the parties, due to a number of
factors: the use of unique leverage by the
complainants to get the EC's attention to their
problem, skilled mediation by a veteran dealmaker
who suggested a practical solution, goodwill on the
part of the EC in promptly implementing the solution
increasing the complainants' market access, and the
fact that the problem was framed not in terms of legal
rights but as a question of impairment of interests.
Challenges Facing the WTO Dispute Resolution
Mechanism
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The growing number of trade disputes has placed
significant pres
sure on the WTO’s dispute settlement
mechanism. Delays in the resolution process,
particularly at the appellate level, have been a
recurring problem.
Despite having fixed timetables, WTO disputes often
take years to resolve. On average, the process from the
request for consultations to the adoption of a panel
report takes about 14 months, with appeals adding
another 3-4 months. Complex cases can take much
longer, stretching over several years.
One of the most significant challenges the WTO faces
is the paralysis of its Appellate Body, which has been
unable to function since 2019 due to the United States
blocking appointments to it. This has weakened the
entire dispute resolution system, as countries can no
longer appeal panel rulings, leading to a backlog of
unresolved cases.
Besides, while the system is structured and thorough,
some countries find the procedures complex, time-
consuming, and costly. For smaller or developing
nations, navigating the WTO’s legal intricacies can be
challenging without sufficient resources. Additionally,
while the system is rule-based, geopolitical pressures
can sometimes influence the process. Larger
economies may exert political leverage to delay
compliance or avoid unfavorable rulings, undermining
the system's neutrality.
While compliance rates are high, the WTO lacks strong
enforcement mechanisms for cases where countries
do not comply with rulings. The primary recourse is
allowing the complainant to impose retaliatory
measures,
which
can
sometimes
harm
the
complainant's own economy.
The WTO struggles to address new and complex trade
issues arising from technological advancements and
changing global economic structures. Areas such as
digital
trade,
state-owned
enterprises,
and
environmental concerns pose challenges to the
existing framework.
The challenge, then, both domestically and within the
WTO system is to balance the independence and
objectivity of a judicial div capable of making final
and binding decisions with public perceptions of the
legitimacy of the results of the judicial process. Where
there is a widespread perception of illegitimacy of the
results of judicial decision-making, change is likely to
occur. But this is not so in the case of WTO dispute
settlement.
Decisions regarded by some Members as ‘judicial
a
ctivism’ are regarded by others as proper
interpretations of the relevant agreement. The
perception by some that safeguard measures have
been rendered unusable through Appellate Body
interpretation is countered by the perception by others
that Appellate Body rulings have given appropriate
content to the provisions of the Safeguards
Agreement and thus made the taking of safeguard
measures subject to proper discipline. On this issue,
concerns about legitimacy are not universal.
Besides, the inability of WTO Members to mount
jurisdictional challenges to cases brought against them
has meant that much of the jurisprudence of these
other international dispute settlement bodies is simply
irrelevant to the WTO.23 Moreover, it is interesting to
note that the procedural developments introduced by
the Appellate Body, such as burden of proof, judicial
economy and ‘completing the analysis’, were not
based on procedural law developed in other
international tribunals. WTO dispute settlement had
GATT law and practice to provide context for the rules
of the DSU, but apart from that there was essentially a
clean slate. In respect of substantive law, there is, of
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course, the whole corpus of customary international
law on which to draw, and the Appellate Body has done
this.24 But the scope for supplementing the
obligations of the WTO agreements with rules of public
international law remains controversial.
While having significant success, the WTO dispute
settlement process is also undergoing difficulties that
are common to processes of binding third-party
dispute settlement. Many of these are irritants that
impair the functioning of the system but do not pose a
fundamental challenge to it. Resolving them would be
helpful but not essential to the long-term survival of
WTO dispute settlement. There are, however, some
particular challenges that face the WTO. In the short
term there are challenges relating to trade remedies
and transparency. In the longer term there are
challenges relating to the adequacy of third-party
settlement and challenges arising from changes within
the international system itself.
The second major short-term challenge for WTO
dispute settlement is the issue of transparency. The
failure to open panel and Appellate Body hearings to
the public and to allow public access to the pleadings
of the parties undermines the legitimacy of the system.
Furthermore, there is no rational basis for it. It cannot
be justified on the ground of confidentiality because
other judicial bodies can successfully negotiate a path
between transparency and confidentiality. Nor is the
argument
that
closed
sessions
encourage
governments to speak frankly particularly compelling.
As participants in WTO dispute settlement know, the
proceedings
are
more
stylized
than
frank.
Presentations are made on the basis of prepared texts,
and even in the Appellate Body where there is a
continuous exchange of views between Appellate
Body members and counsel, there is little deviation
from prepared positions. The idea of governments
‘grandstanding’ before a publi
c audience in a panel or
Appellate Body hearing seems highly implausible.
The longer-term challenges for WTO dispute
settlement are both internal, relating to the process of
WTO dispute settlement, and external, involving
political factors in the broader international system.
Although these considerations are separate, they are
also linked. The internal challenge concerns the
viability of the system as it presently functions, but in
part this results from the failure of Cancun which itself
is linked to broader political considerations.
The submission of cases involving either untested
areas of the agreements or public policy questions that
are controversial also poses challenges for WTO
dispute settlement. The approach of the Appellate
Body has been to interpret the agreements in any case
brought before it. It has not refused to decide a case
because the issue was also before a political organ of
the WTO or because it was a matter of controversy
between WTO Members. But this raises the question
whether all issues of controversy are appropriate for
submission to third-party dispute settlement. At the
time that the WTO was coming into effect, Joel
Trachtman wrote, ‘The flow of human history is not
unidirectional toward strongly enforceable legal rules.’
He went on to say that there are some circumstances
where reduced binding force is called for. Similarly,
more recently Robert Howse and Susan Esserman have
commented that not every case can be resolved
appropriately through judicial decision-making.
A turning away from dispute settlement processes as a
consequence of a greater resort to unilateralism in
international affairs will represent a challenge for WTO
dispute settlement. Equally, turning to bilateral and
regional approaches to trade liberalization could lead
to a proliferation of dispute settlement organs and
conflict between WTO and other dispute settlement
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bodies. But a challenge will also result from increased
multilateralism, with more frequent resort to WTO
dispute settlement. Whether the existing system could
handle substantially more cases is doubtful.
CONCLUSION
The WTO’s dispute resolution mechanism is a
cornerstone of the global trading system, helping to
maintain order, predictability, and fairness in
international trade relations. Its successes in delivering
legally binding, transparent decisions have made it a
critical tool for resolving trade conflicts and preventing
the escalation of disputes. However, the challenges it
faces, particularly the Appellate Body crisis, risk
undermining the credibility and functionality of the
system. Resolving these challenges will be essential for
the WTO to continue playing its central role in global
trade governance.
The WTO's dispute settlement mechanism has played
a vital role in maintaining order in the global trading
system. Its successes in handling a high volume of
cases, ensuring diverse participation, and maintaining
a high compliance rate are commendable. However,
challenges such as the lengthy process, the Appellate
Body crisis, and difficulties in addressing new trade
issues threaten its effectiveness. As global trade
continues to evolve, reforming and strengthening this
crucial mechanism will be essential for the future of
international trade relations.
Trade agreements play a vital role in reducing or
eliminating barriers to trade, such as tariffs and quotas,
and establish guidelines for the exchange of goods,
services, and investments. However, despite the
benefits of international trade, disputes inevitably arise
due to differing legal systems, policies, and interests
among nations. Issues such as tariffs, non-tariff
barriers, intellectual property protection, and
regulatory compliance create significant challenges for
businesses and governments alike.
The effectiveness of international dispute resolution
mechanisms,
including
arbitration, negotiation,
litigation, WTO's Dispute Settlement Mechanism
(DSM), and bilateral or multilateral agreements, is
crucial for maintaining trust and stability in
international trade. However, enforcement of
decisions, especially arbitral awards, remains a
persistent challenge, particularly when parties are
reluctant to comply due to political or economic
reasons.
While mechanisms like the New York Convention have
facilitated greater enforcement of arbitral awards,
gaps still exist, as demonstrated in various
enforcement cases. The continued evolution of
international trade dispute resolution mechanisms will
be essential in addressing these challenges and
ensuring a stable, fair, and efficient global trading
system.
REFERENCES
1.
Jackson, J. H., Hudec, R. E., & Davis, D. (2000,
January). The role and effectiveness of the WTO
dispute settlement mechanism [with comments
and discussion]. In Brookings Trade Forum (pp. 179-
236). Brookings Institution Press.
2.
Final Act of the United Nations Conference on
Trade and Employment, Havana Charter for an
International Trade Organization, arts. 92
–
97
(1948) (governing the settlement of disputes). See
also Wilcox (1949, pp. 159, 305
–
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