WTO Rules in Favor of Russia on “National Security” Dispute with Ukraine
A panel of the World Trade Organization (WTO) has ruled in favor of Russia in a dispute with Ukraine over Russia’s invoking of “national security” to bar Ukrainian products from accessing Central Asia via rail lines running through Russian territory. However, the panel, which issued a report of its findings on Apr. 5, 2019, also rejected the Russian position that claims of “national security” are not justiciable by the WTO. This move appears to undermine the positions put forth by other countries to justify protectionist measures — most notably, the tariffs on steel and aluminum imposed by the United States since the start of US President Donald Trump’s administration.
While relations between Moscow and Kiev have fluctuated between nominal cooperation and outright hostility since the collapse of the Soviet Union in 1991, the dispute at hand stems from the 2014 unrest in Ukraine that culminated in an open conflict in eastern Ukraine. The conflict resulted in Russian military intervention and the internationally condemned annexation of Crimea in March 2014.
On Jan. 1, 2016, Russian President Vladimir Putin signed a decree suspending the free trade agreement between Russia and Ukraine and imposing restrictions on the transport of Ukrainian products through Russia to Kazakhstan, Tajikistan, Turkmenistan, Uzbekistan, and Mongolia. These measures, implemented in the name of securing the “economic security and the national interests of Russia,” essentially barred Ukraine from using any overland transit routes to transport goods to Central Asia in a de facto blockade. By the end of 2017, Ukraine had lost around 400 million USD worth of exports to Kazakhstan and Kyrgyzstan alone, with steeper losses forecast for following years.
Ukraine formally engaged the WTO in resolving the dispute by requesting consultations with Russia in mid-September 2016. However, talks held two months later failed to resolve the dispute, with Russia citing Article 21 of the 1947 General Agreement on Tariffs and Trade (GATT) — the so-called “national security exception” — as the legal justification for not observing its obligations to Ukraine and the GATT.
Ukraine, unsatisfied with the results of the initial consultation and contesting Russia’s invoking of Article 21, requested a panel be convened to examine the matter, determine the validity of the claims of both sides, and decide whether or not to refer the dispute to the full Dispute Settlement Body (DSB) for final resolution. The panel was ultimately convened by June 2017, with 16 other countries — including China and the United States — and the European Union expressing their “interest in participating in the Panel proceedings as third parties.”
Dividing its ultimate findings into three sections, the panel first dealt with the matter of whether or not it (and by extension, the WTO as a whole) had jurisdiction to review Russia’s invoking of Article 21. The panel read the language of Article 21 narrowly to limit WTO members’ right to invoke the article only if there objectively were circumstances “to meet the requirements” of the subclauses, with WTO panels vested with the power to evaluate if such requirements were met. The panel thus rejected Russia’s interpretation — an interpretation also backed by the United States — of “leaving it to the unfettered discretion of the invoking [WTO member].”
The panel then considered whether or not Russia’s measures were “taken in time of war or other emergency in international relations,” per the stipulations of Article 21(b). While the panel declined to evaluate “which actors or actors bear international responsibility” for the situation in Ukraine, the panel nonetheless cited ongoing international political developments that recognized the serious deterioration of relations between Moscow and Kiev and the existence of an “emergency in international relations” that falls under the purview of Article 21(b).
Accordingly, as Russia had imposed the measures after 2014, the panel’s third overall conclusion found that the measures did not contravene Russian obligations to the GATT, WTO, or Ukraine, given Moscow’s successful invocation of Article 21(b). The panel thus also declined to make a recommendation to the full DSB regarding any escalation of the dispute.
The two parties now have 60 days to decide whether or not to appeal any of the findings produced by the panel. The long-term implications of such a ruling by a WTO panel — should it survive an appellate process — may pose an existential threat to the WTO as several other disputes regarding the invocation of Article 21, all highly controversial and politically charged, wind their way through the WTO’s lengthy dispute resolution process.