Russia's disputes at the WTO

Russia has been a WTO member for now more than two years, the date of accession being 22 August 2012. Russia has become an active user of the WTO dispute settlement mechanism first as a third party. Less than a year after Russia’s accession, unlike in many other cases of newly acceded WTO members, Russian measures got challenged at the WTO by some other WTO members.

As of now, Russia is a respondent in 6 disputes, two of which were brought by different WTO members regarding the same matter – Japan and the EU – in respect of Russia’s vehicle recycling fees, but since the Russian legislation in question has in the meantime been amended, the complainants seem no longer to pursue this claim. Other disputes concern Russia’s SPS measures imposed on live pigs and pork, antidumping measures imposed on light commercial vehicles and bound tariffs (in all these cases the complaining party is the EU).

Russia has also initiated two disputes, both against the EU, challenging its energy cost adjustment methodologies used in antidumping investigations and the EU’s Third Energy Package.

Statistics show that Russia participates in WTO disputes by far more frequently than other WTO member countries of the Region of Caucasus/Central Asia (Armenia, Georgia, Kyrgyz Republic, and Tajikistan).

Russian Parliament considering expropriation of foreigners in Russia

The Federation Council of the Russian Federation (upper house of the Russian Parliament) considers the possibility to expropriate foreign companies and private persons in the Russian Federation as reaction to the possible sanctions from western states. RIA Novosti informs, that at the moment the experts are checking the confirmity of such expropriation with the Constitution of the RF.

Russia v. the EU: Russia files its first WTO dispute

On 6 January 2014, Russia filed its first WTO dispute, the respondent being the European Union. The dispute concerns antidumping measures imposed by the EU on ammonium nitrate and certain steel products, more precisely – the methods of calculation of the dumping margin. Russia claims that the EU uses cost adjustments ignoring the fact that energy prices in Russia are lower than in the EU, which is Russia’s natural advantage.  The parties to the dispute have now 60 days for consultations.

Russia is already the respondent in another WTO dispute, which has been initiated by the EU and which concerns the Russian recycling fee for vehicles. In this dispute, the WTO panel has been established, but not yet composed.  As on 1 January 2014  amendments to the relevant Russian legislation have entered into force, which seems to make the law non-discriminative,  one wonders whether the EU will pursue the proceeding.

EU and Ukraine: partnership postponed?

 

The Ukrainian Government announced on 21 November 2013 that there would be no initialing of the EU-Ukraine Association Agreement (AA) with a DCFTA chapter at the EU Summit in Vilnius (to be held on 28-29 November 2013). Just a day before, the Ukrainian Parliament did not pass the bill which would have allowed Ms. Timoshenko to go abroad for medical treatment. This was the EU’s condition for initialing the Association Agreement.

Many commentators believe however that the real reasons are different: gas prices, close connections with the Russian market (including an FTA with Russia) which would become more complicated in case of an agreement with the EU, etc.

Such a step back just one week before the planned initialing is almost more surprising than the Armenian decision to join the Customs Union of Belarus, Kazakhstan and Russia (and not to conclude a DCFTA with the EU) two months ago. The question whether Ukraine is going to join the Customs Union remains, however, still open.  

     

New Tajik Law on investment contracts

On 28 February 2013, the Parliament of the Republic of Tajikistan enacted the Law “On the Investment Agreement”. The Law was signed by the President on 14 March 2013. The Law provides for rules on investment contracts between the Government of Tajikistan and investors for investment projects of a “strategic” character. Such contracts are to be signed by the Government of the Republic of Tajikistan and ratified by the Parliament (Art. 12 and 13 respectively). The contract may establish rules, which are not provided for under the legislation of Tajikistan, as well as a strong grandfathering clause (Art. 6 sec. 3 of the Law). The ratification of such contracts by the Parliament elevates the special contractual regime to the level of formal legislation with a character of lex specialis. The Law foresees the possibility to agree on a very broad arbitration clause covering all disputes out of the investment contract, also in public matters (Art. 21 Sec. 2 of the Law). Tajikistan can give its consent to waive its state immunity including immunity against enforcement of arbitral awards.

The above-mentioned provisions are just examples from a long list of concessions made by Tajikistan to investors. Legislation providing for the internationalization of contracts, restrictions on sovereign rights and state immunity waivers was typical for the investment legislation of developing countries in the 1960-70s (e.g. Indonesia) and also for some post-Soviet countries in the early 1990s (e.g. Azerbaijan, Kazakhstan). The experience of these countries shows that extensive restrictions of sovereign rights very often sooner or later lead to disputes with investors. The State needs at least the right to react to changes of external circumstances and to adapt its legal framework. Investors are often not interested in such amendments and make use of the rights given to them by the State (e.g. under the grandfather clause).

The above-mentioned Law was drafted with the support of the International Finance Corporation. Probably many other international experts and organizations (e.g. UNCTAD) would advise Tajikistan to drop or at least to amend some of the provisions of this Law.

Armenia: the Customs Union v. DCFTA with the EU?

On 3 September 2013, the President of Armenia Mr. Serzh Sargsyan said at a meeting with the Russian President Mr. Vladimir Putin that Armenia would join the Customs Union of Russia, Kazakhstan and Belarus.
On the one side, this can be regarded as a reasonable step as Russia is probably the main trading partner of Armenia, and joining the Customs Union could encourage Armenia’s foreign trade activities. However, Armenia has just finished negotiations of an Association Agreement with the EU including a DCFTA Agreement. The latter has been announced to be initialed at the EU Summit in Vilnius in late November 2013.  
The problem is that in such a case Armenia would be in an FTA with the EU and at the same time a member of a customs union with non-WTO members, in which a big part of national foreign trade competencies is delegated to the customs union bodies. This combination seems to be impossible, at least as of now. Does it mean that there will be no DCFTA initialing with Armenia in Vilnius?

Ukraine and Russia: Customs formalities or political pressure?

The second half of August 2013 was not easy for Ukrainian trade with Russia: the latter has suddenly started to apply very strict control measures for Ukrainian goods at the Ukrainian-Russian border. As a result, thousands of tons of goods stood at the border and waited for completion of customs administration procedures. Some Ukrainian sources called this “an economic war against Ukraine”, but both Russian and Ukrainian officials said it was just a difficult situation with customs administration. The situation was deescalated after political contacts at the highest level had taken place. It is reported that the customs is working in a normal regime, also for Ukrainian goods. 

A little bit earlier, the production of a big Ukrainian candy producer was tested and prohibited for sale in Russia (as tests indicated that there were dangerous substances in the sweets).  There were also other disputes between Russia and Ukraine earlier this year.

Many experts believe that Russia wanted to show Ukraine that it could lose the big Russian market if it did not pursue its cooperation with the Customs Union (of Belarus, Kazakhstan, and Russia) and instead strengthened cooperation with the EU. The best position for Ukraine would be to intensify cooperation with both trade partners. This, however, seems not to be easy: if Ukraine joined the Customs Union, an EU-Ukraine Association Agreement with DCFTA would not be possible. Will Ukraine be able to balance these interests?

EU launching WTO consultations with Russia

On 9 July 2013, the European Union has launched consultations with the Russian Federation under the WTO dispute settlement procedure concerning the Russian vehicle recycling fee

Shortly after its accession to the WTO (on 22 August 2012) Russia introduced a vehicle recycling fee. According to applicable legislation, all vehicle producers have to pay this fee. However, an exception is made for Russian producers as well as for producers from Belarus and Kazakhstan (members of the Customs Union) who can give a guarantee of recycling their vehicles in the future. In this case they do not have to pay the recycling fee. Producers from other countries are not entitled to this guarantee option.
The European Union and a number of other WTO members find this provision discriminatory under WTO rules and tried to persuade Russia to change its laws. After several months of negotiations Russian officials said the issue would be solved and reported that necessary amendments were under way. The EU has set a deadline for such amendments on 1 July 2013, but the Russian Parliament was not able to complete the necessary parliamentary procedures before this date. The dispute is still pending.      

Tajikistan in the WTO

On 10 December 2012, the WTO General Council approved the accession package of Tajikistan. This country applied for WTO membership on 29 May 2001. The accession negotiations were concluded on 26 October 2012.
Tajikistan managed to complete its domestic ratification procedures very quickly, and became the 159th WTO member on 2 March 2013.
Tajikistani experts expect that this step will help to integrate Tajikistan into the world economy and attract foreign investors.
There exists however another point of view which regards the Tajikistani WTO accession rather as a matter of prestige than economic sense. According to this perspective, at this stage, joining the Customs Union of Belarus, Kazakhstan, and Russia would bring Tajikistan more economic benefits than accession to the WTO, bearing in mind that the CIS market (the biggest share of which belongs to the Customs Union member states) is now most important for Tajikistan.
In any case, Tajikistan is now a WTO member and should try to use the relevant WTO instruments to develop its economy.