In the trade wars of recent years, Ukraine and Russia have accumulated a critical mass of controversial issues. Since 2014, tensions in bilateral trade have been fostered with the political breakdown triggered by Russia’s military aggression against Ukraine (ie, the occupation of the Crimean Peninsula and the war in the eastern territory of Ukraine). This situation has brought both states to the international dispute settlement fora, including the WTO.
Currently, the WTO Dispute Settlement Body (DSB) is considering five disputes between Ukraine and Russia: DS499 (under appeal pending); DS512 (Panel report adopted by the WTO DSB); DS532 (in consultations); DS493 (under appeal pending); DS525 (in consultations).
Moreover, Ukraine has launched WTO disputes against Russia’s economic allies (DS530 against Kazakhstan, DS569 against Armenia and DS570 against the Kyrgyz Republic). Ukraine’s claims address anti-dumping measures imposed on Ukrainian steel pipes. The roots of these disputes go back to the longstanding anti-dumping measures imposed originally by Russia and further extended by the Eurasian Economic Commission. Currently, Kazakhstan, Armenia and the Kyrgyz Republic being Eurasian Economic Union member states, find themselves as respondents in the WTO disputes initiated by Ukraine.
WTO disputes initiated by Ukraine against Russia
DS499: Russia – Measures Affecting Importation of Railway Equipment
Ukraine filed its first WTO case against Russia on 21 October 2015 by challenging certain measures imposed on the importation of railway rolling stock, railroad switches, other railroad equipment and parts thereof (railway products) from Ukraine. Ukraine raised its claims under the TBT Agreement and the GATT 1994.
On 15 July 2011, the Commission of the Customs Union adopted Decision No. 710 concerning a series of new technical regulations that set forth safety and technical requirements for placing certain railway products in the Customs Union market. According to Decision No. 710, starting from 2 August 2014 all conformity assessment certificates for railway products would have to be registered with the Federal Budgetary Organisation ‘Register of Certification on Federal Railway Transport’ (FBO ‘RCFRT’) in accordance with the new procedures set forth in the technical regulations.
Further amended, Decision No. 710 provided for a transitional period that allowed importation of the railway products until 1 August 2016, subject to conformity assessment certificates issued prior to the entry into force of the above-mentioned technical regulation, and importation of those railway products that were not previously subject to mandatory conformity assessment procedures. Nevertheless, as of late 2013, Russia started suspending the conformity assessment certificates previously registered with the FBO ‘RCFRT’ to Ukrainian producers of railway products. Ukraine claimed in the request for consultation that Russia had failed to provide reasonable explanations for these unwarranted suspensions of the certificates to Ukrainian exporters and to the Ukrainian authorities.
Moreover, the competent authorities in Russia refused to recognise the certificates issued to Ukrainian producers by conformity assessment bodies located in the Republic of Belarus and in the Republic of Kazakhstan pursuant to the respective newly adopted technical regulation of the Customs Union.
Finally, in February 2015, the Russian authorities rejected applications for new conformity assessment certificates submitted under the new procedures by the Ukrainian producers previously affected by the suspension of their conformity assessment. Ukraine claims that Russia failed to provide any reasonable explanation for the grounds for the rejection.
In sum, Ukraine challenged three types of measures at issue:
- suspension of the valid conformity assessment certificates;
- rejection of new applications for conformity assessment certificates, and
- non-recognition of conformity assessment certificates issued by the competent authorities in the other Customs Union (CU) member states if the certificates covered products not produced in a CU country.
On 30 July 2018, the Panel circulated its final report and arrived at the following conclusions:
- regarding the certificates suspension, the Panel found that Russia acted inconsistently with article 5.2.2, third obligation of the TBT Agreement in respect of 13 out of 14 instructions suspending certificates. The Panel dismissed other claims raised by Ukraine in this part;
- regarding the decision rejecting application for certificates, the Panel found that Russia acted inconsistently with article 5.1.2, first and second sentence, and article 5.2.2, third obligation, of the TBT Agreement, in respect of certain decisions through which FBO ‘RCFRT’ returned without consideration applications for certificated submitted by Ukrainian producers under CU Technical Regulation 001/2011. The Panel dismissed several other claims raised by Ukraine in this part; and
- regarding the non-recognition of certificates, the Panel found that Russia acted inconsistently with articles I:1 and III:4 of the GATT 1994. As for Ukraine’s claims under article 2.1 of the TBT Agreement, the Panel considered them to be out of the scope of application of this legal provision. The Panel also exercised judicial economy in respect of Ukraine’s claims under article X:3 (a) of the GATT 1994.
Ukraine also claimed the existence of the systemic import prevention to be in breach with Russia’s obligation under articles I:1, XI:1 and XIII:1 of the GATT 1994, but the Panel dismissed these arguments.
Currently the Panel report in DS499 is under appeal upon the request of both disputing parties.
DS512: Russia – Measures Concerning Traffic in Transit
In September 2016, Ukraine challenged a set of measures imposed by Russia that resulted in a breach of freedom of transit enshrined in article V of the GATT 1994; unnecessary delays and restrictions; and MFN-based discrimination with regard to charges, regulations and formalities that at the end of the day resulted in an import ban of Ukrainian products exported to the territory of countries in Central and Eastern Asia and Caucasus, prohibited by article XI:1 of the GATT1994.
The first group of measures at issue addressed Russia’s ban on international cargo transit through its territory from Ukraine to Kazakhstan by road and rail networks (since January 2016) and Russia’s ban on all road and rail transit to Kazakhstan and Kyrgyzstan of goods subject to non-zero import duties according to the Common Customs Tariff of the Eurasian Economic Union, as well as goods falling under the import ban pursuant to Resolution No. 778 (since July 2016).
The second group of measures at issue addressed instructions of the Federal Service for Veterinary and Phytosanitary Surveillance of the Ministry of Agriculture of the Russian Federation (Rosselkhoznadzor) dated November 2014. These instructions targeted the cargo transit of goods covered by Resolution No. 778 that were exported from Ukraine to Kazakhstan and other third countries. Russia prohibited transit through the checkpoints in Belarus and allowed such entry exclusively through checkpoints located at the Russian part of the external border of the Customs Union.
Remarkably, Russia did not submit any defence in respect of the claims raised by Ukraine and rather invoked security exceptions under article XXI(b) of the GATT 1994.
The Panel report in this case was circulated to the disputing parties on 5 April 2019. The Panel found the actions of Russia to be justified under article XXI(b)(iii) of the GATT 1994. The findings of the Panel are very important for WTO dispute settlement practice as they open Pandora’s Box related to interpretation of article XXI(b) of the GATT.
First of all, the Panel arrived at the decision that article XXI(b)(iii) was not totally ‘self-judging’. While recognising that the ‘chapeau of Article XXI(b) allows a Member to take action “which it considers necessary” for the protection of its essential security interests’, the Panel highlighted however, that ‘this discretion is limited to circumstances that objectively fall within the scope of the three subparagraphs of Article XXI(b)’.
Upon the assessment of certain circumstances and evidence in respect of relations between Russia and Ukraine, the Panel concluded that the ‘situation between Ukraine and Russia since 2014’ was an ‘emergency in international relations’ within the meaning of article XXI(b)(iii), and the measures at issue were taken in time of such emergency in international relations accordingly. It is remarkable that the Panel based its finding, inter alia, on UN General Assembly Resolution No. 68/262 of 27 March 2014 as well as UN General Assembly Resolution No. 71/205 of 19 December 2016, which make explicit reference to the Geneva Conventions of 1949 and apply in cases of declared war or other armed conflict between High Contracting Parties.
According to the legal test proposed by the Panel report, the specific language ‘which it considers’ of the chapeau of article XXI(b) means that a member enjoys its own discretion to define what its ‘essential security interests’ are, and to decide whether its actions are necessary for the protection of its essential security interests. On the other hand the Panel underscored that ‘the discretion of a Member to designate particular concerns as “essential security interests” is limited by its obligation to interpret and apply Article XXI(b)(iii) of the GATT 1994 in good faith’.
Therefore, the Panel’s report in DS512 may be summed up in three key messages:
- by having found that Russia’s measures are justifiable under the GATT 1994 article XXI(b)(iii), the Panel based its conclusion, inter alia, on the fact that the situation between Ukraine and Russia was recognised by the UN General Assembly as involving armed conflict;
- the Panel interpreted ‘emergency in international relations’ within the meaning of the GATT article XXI(b)(iii) as a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state; and
- Russia would have been found in breach of article V:2, first and second sentences, and paragraph 1161 of Russia’s Working Party Report (based on the Ukraine’s prima facie case arguments), ‘had the measure not been taken in time of an “emergency in international relations”’.
The Panel Report in DS512 triggers an important issue as for its consistency with jus cogens. Notably, some experts question an approach that entitles an aggressor state to justify its actions against a victim state by invoking the security exceptions under the GATT 1994 article XXI(b)(iii).
Meanwhile, Ukraine did not appeal the Panel report. According to the Ministry of International Development and Trade of Ukraine (the MEDT), the interdepartmental working group carried out a detailed legal analysis of the Panel report and concluded that it contained a number of substantive findings that were favorable from Ukraine’s perspective. In particular, the MEDT considers the Panel report to be an actual recognition by the WTO of the existence of an armed conflict between Ukraine and Russia.
In addition, according to the MEDT’s official statement, the report enabled Ukraine itself, in accordance with its own interests, to impose sanctions against Russia in light of the Panel’s finding in respect of the existence of an ‘emergency in international relations’ under the GATT 1994 article XXI(b)(iii).
Therefore, according to the MEDT, the Panel’s interpretation provided a legal clarification of the concept of ‘emergency in international relations’ in accordance with the provisions of the WTO agreements, and such an interpretation makes clear to the WTO members their right to ‘substantiate’ their own restrictive actions with the GATT 1994 article XXI(b)(iii). Moreover, according to the MEDT, the Panel’s finding will reduce the likelihood of application of protectionist and discriminatory trade measures that would contradict the fundamental principles of the WTO law and unjustifiably claimed to be taken in time of ‘emergency in international relations’.
Therefore, the MEDT interdepartmental working group decided to refrain from initiating the appellate proceeding, taking into account the positions of all its members and the partner countries of Ukraine regarding the possible consequences of appeal in this case, as well as Ukraine’s priorities in international trade in the long run.
The official statement of the MEDT is available at the website of the Cabinet of Ministers of Ukraine: www.kmu.gov.ua/ua/news/mizhvidomcha-robocha-grupa-pri-minekonomrozvitku-rekomenduvala-utrimatisya-vid-apelyacijnogo-oskarzhennya-u-spravi-pro-obmezhennya-rosiyeyu-tranzitu-z-ukrayini.
Following the decision, the WTO Dispute Settlement Body adopted the Panel report in DS512 at its meeting on 26 April 2019.
DS532: Russia – Measures Concerning the Importation and Transit of Certain Ukrainian Products
In October 2017, Ukraine filed a request for consultations concerning measures imposed by Russia pursuant to article 4 of the DSU, article XXIII of the GATT 1994, article 24.8 of the Agreement on Trade Facilitation (TFA), article 14.1 of the TBT Agreement and article 11.1 of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), allegedly inconsistent with Russia’s obligations under the respective WTO-covered agreements.
Ukraine’s complaint may be divided into four main sections depending on the product line group concerned and the legal basis of the claims.
The first group of measures concerns an import ban and transit ban on confectionery products originating from Ukraine that resulted from a series of inspections executed by Rospotrebnadzor as well as stemming from the relevant decisions of the agency.
The second group of measures challenged by Ukraine encompasses the measures affecting trade in juice products originating in Ukraine on the basis of a series of letters and notices of Rospotrebnadzor prescribing the ban of imports and transit of these products.
The third and forth groups of measures concern import bans on beer, beer-based beverages, other alcoholic beverages and wallpaper and similar coverings respectively.
In conclusion, Ukraine states that all of these measures are based on non-transparent investigations which infringe WTO rules and should be cancelled. Since October 2017, the dispute has been at the consultation stage.
WTO disputes initiated by Russia against Ukraine
DS493: Ukraine – Anti-Dumping Measures on Ammonium Nitrate
In November 2015, Russia challenged anti-dumping duties imposed by the Interdepartmental Commission on International Trade of Ukraine (a public body authorised to adopt trade remedy measures) against the imports of nitrate ammonium originating in Russia.
Ukraine has been applying the antidumping measures at issue since May 2008 at a duty rate of 36.03 per cent (specific rate of 20.51 per cent applied to LSC ‘Dorogobuzh’). Following the sunset review, anti-dumping measures were extended until July 2019. In March 2017, however, the Ministry of Agrarian Policy and Food of Ukraine insisted on an interim review of the measures, claiming that domestic production in Ukraine would not meet the demand for nitrate ammonium on the Ukrainian market. In their turn, domestic ammonium nitrate producers also advocated the interim review, claiming that the anti-dumping duties as applied did not suffice to prevent the damage caused to domestic industry by dumped imports from Russia. Taking into account both positions, on 13 April 2017, the Interdepartmental Commission on International Trade of Ukraine initiated an interim review that resulted in the extension of the application and an increase in the anti-dumping duty rate to 42.96 per cent (individual rate of 29.25 per cent applied to LSC ‘Dorogobuzh’).
Thus, Russia’s claims in DS493 concern, inter alia, both substantive and procedural matters such as the construction of normal value, dumping margin calculation, determination of injury and causation, failure to provide non-confidential summaries to the parties, likelihood-of-injury determination, failure to provide access to non-confidential materials, lack of transparency concerning the publication of the Ministry’s report and disclosure of the essential facts underlying the relevant determinations.
On 20 July 2018, the Panel Report in this dispute was circulated to the disputing parties. On the one hand, the Panel did not find violations concerning the ‘likelihood-of-injury’ determinations made by the Ukrainian authorities (ie, approved consistency with articles 11.2 and 11.3 of the Anti-Dumping Agreement). On the other hand, the Panel upheld Russia’s claims under article 2 (articles 184.108.40.206 and 2.2) of the Anti-Dumping Agreement concerning Ukraine’s cost assessment. In the original anti-dumping investigation (2007–2008), when calculating the normal value, the MEDT refused to take into account the gas costs reported by Russian producers, and replaced them with gas prices at the Russian and German border.
Ukraine’s position before the Panel was that the gas price, being controlled by the Russian government, was artificially lower on the Russian market than the export price of gas from Russia. That is why, according to the MEDT, such domestic prices on the Russian market did not reasonably reflect the production and sales costs accrued by Russian producers.
In Russia’s view, the MEDT examined rather the reasonableness of gas costs, which is not permitted by article 220.127.116.11 (Russia made reference to the panel report in EU-Biodiesel Argentina), and the Panel supported Russia’s position. Ukraine has appealed this finding.
Hence, if the WTO Appellate Body upholds the Panel’s position, this decision will have a far-reaching effect for anti-dumping investigations in Ukraine and other jurisdictions against Russian imports. In fact, the Panel recognised that the system of gas dual pricing in Russia cannot be a basis for normal value construction. Of course, it will be reflected in the lower dumping margin calculated for Russian producers. So the Panel’s findings provide a disappointing message for domestic industries that seek protection from Russian dumped imports in foreign jurisdictions.
The Panel Report has been under appeal since August 2018.
DS525: Ukraine – Measures Relating to Trade in Goods and Services
On 19 May 2017, Russia initiated a WTO dispute against Ukraine over certain measures (challenged both as such and as applied) imposed by Ukraine due to protection of its national security interest. Russia’s request for consultations covers inter alia import bans on certain Russian products as well as economic sanctions against Russian individuals and companies.
It is noteworthy, however, that some claims raised by Russia reflect its own trade policy measures, for instance trade embargoes on food and agricultural products from other WTO members under Resolution No. 778, or arbitrary TBT and SPS restrictions on certain products from Ukraine and EU member states.
In any case, Ukraine may use the Panel’s findings from the report in DS512 in order to justify its actions against Russia as those ‘taken in time of emergency in international relations’ with Russia within the meaning of article XXI(b)(iii) of the GATT 1994.
To sum up, the current WTO disputes between Ukraine and Russia deal with different types of trade-restrictive measures that range from, on the one hand, specific bilateral trade issues such as trade remedies and technical barriers to trade, to, on the other hand, restriction of freedom of transit, trade embargoes and economic sanctions affecting trade in goods and services that have a far-reaching impact on the multilateral trade system.