This working draft first considers issues relating to the philosophy of dispute settlement - what approach works best: one emphasizing settlement of disputes through negotiations or one emphasizing more judicial-like means. Next, it reviews the basis for dispute settlement under the General Agreement on Tariffs and Trade (GATT) and evaluates the successes and shortcomings of the GATT dispute settlement system. The core of the article describes in detail the World Trade Organization (WTO) rules on dispute settlement. In concluding sections, it reviews the operation of the WTO dispute settlement system to date and discusses several proposed reforms, such as the establishment of a permanent panel body and various ways to improve the effectiveness of remedies in cases of noncompliance with WTO decisions.