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Trade

Russia and Europe will engage WTO in sanctions dispute

The Russian agricultural embargo against EU countries has hit some nations hard. Poland is considering bringing a complaint against Russia's refusal to buy Polish produce to the World Trade Organization.

Poland's agriculture minister went on television to announce the country was taking action against Russia's new import ban. "We believe Russia has broken international law in both its embargo against Poland and its embargo against the EU," Marek Sawicki said.

Russia banned the import of Polish fruit and vegetables in early August - a move Sawicki said would cost Poland 0.6 percent of GDP.

Last Thursday (07.08.2014), Russian Prime Minister Dmitry Medvedev announced a one-year ban on imports of food from the rest of the EU and the US. Russia also said it was considering turning to the WTO to challenge the legality of EU and US sanctions imposed on Russia following its intervention in Ukraine.

"If a WTO member state believes another WTO member state has taken a measure that is not in conformity with WTO rules, the affected WTO member state may request mediation," attorney and WTO expert Eric Pickett said.

If these consultations do not lead to a peaceful settlement, he said, Poland could request that the WTO's Dispute Settlement Body (DSB), convene a panel to look at the case. The DSB is made up of representatives of all WTO member states.

Multi-stage arbitration

Dmitry Medvedev
(Photo: REUTERS/Yekaterina Shtukina/RIA Novosti/Kremlin )

Russian Prime Minister Dmitry Medvedev announced a ban on EU food imports

It's the panel's job to examine the contested facts and prepare a report on whether the disputed measure violates WTO rules.

If the complaining country objects to the report's findings, it can appeal to the WTO's Appellate Body, a permanent seven-member group that can uphold, modify or reject the DSB panel's report. The Appellate Body then sends its own report back to the DSB.

"The DSB has the opportunity to accept or reject the Appellate Body's report," Pickett said. "This is according to the principle of 'negative consensus' - which means that a report will be accepted if there is no objection to it."

Other WTO members would likely offer support. The EU has also been hit by the Russian sanctions. Agricultural products - especially fruit, cheese and pork - are the bloc's fourth-largest source of trade income with Russia, behind machinery, chemicals and medicines.

Last year, sales amounted to 12 billion euro. Poland, whose mainstay in trade with Russia is apples, is the EU's second-biggest exporter to Russia, behind Lithuania and ahead of Germany.

"Warlike situations" in Moscow?

Apples
(Photo: Julian Stratenschulte/dpa)

Poland exports large numbers of apples to Russia

But nothing has yet been decided. "The biggest legal question is whether a panel will decide that a major security concern exists for Russia - and whether the sanctions are necessary to meet its security needs."

Here, there is very little case law. Pickett said the last comparable cases were in the 1940s: "In the pre-WTO era - which would fall under the General Agreement on Tariffs and Trade of 1947 - there are a few examples of such panels, but they are not particularly meaningful."

Russia is also arguing on the basis of article 51 of the UN Charter: "That gives each state the right to self-defense," Pickett said. "I think, however, that Russia will have great difficulty making that legal case."

Russia must establish either that the sanctions constitute a necessary measure in times of war, he said, or that a "special crisis in international relations" exists.

Greece also hard-hit

Although about 70 percent of the Russian population approve of its sanctions, Pickett said the odds are good that the complex WTO mechanism will uphold Poland's complaint.

"In my view, war-like conditions must either prevail or be imminent. Russia argues that this is a matter of food safety. I doubt that will be legally sufficient."

Lithuania, Germany and Greece also benefit from trade with Russia: Last year, Germany exported agricultural products worth almost 600 million euros, while Lithuania sold more than 900 million euros of food to Russia. Greek farmers export large quantities of peaches and fish, especially during the summer months.

According to the "Süddeutsche Zeitung" daily, if the WTO mechanisms do not work, or do not take effect quickly enough, this could mean a loss of 178 million euros for Greek vegetable and fruit farmers. Athens has therefore already begun to hold bilateral negotiations with Moscow.

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