Can the US, EU be sued for sanctions in WTO?

The WTO consists of 160 countries and that 98 percent of world trade is regulated by the body. Source: AFP

The WTO consists of 160 countries and that 98 percent of world trade is regulated by the body. Source: AFP

A roundtable at the International Legal Forum was dedicated to the possibilities of Russia suing Western countries in the WTO for its sanctions in the wake of the Ukraine crisis. RIR spoke to the forum’s participants about Russia’s legal options.

Maxim Medvedkov, Director of the Department of Trade Negotiations at Russia's Ministry of Economic Development, told RIR that Russia's petition is presently being reviewed by WTO's General Assembly. In the future, Moscow is planning more concrete steps for suing the US and any other country that imposed sanctions on Russian companies.

The main protagonists of sanctions were the US, Canada and the EU. America's sanctions were imposed on about 20 companies, belonging mainly to businessmen who, according to the American authorities, belong to Vladimir Putin's inner circle. These companies include the railroad giant Transoil, Rossiya Bank and the producer of Akvanika mineral water among others.

Currently, bringing legal proceedings within the WTO is rigidly regulated. “Should Russia decide to take legal action, it will be necessary to inform the secretariat and conduct consultations within the WTO with countries that imposed the sanctions,” says Swiss Special Ambassador and former chairman and member of several WTO panels on regulating litigations, Luzius Wasescha. “If the negotiations are not successful, a special council will be organized. The experts participating in the council must be participants of the WTO and must determine whether these sanctions breeched WTO norms.”  According to Wasecha, after the council's meeting, experts will prepare a report that will have to be reviewed for consensus, after which the losing party may present an appeal. However, it is unclear how long the entire process will take.

Maxim Medvedkov believes that the grounds for bringing legal action can be the losses that one of the Russian companies experienced due to the sanctions imposed by the US, the EU, Canada or Japan. In this connection, Medvedkov says, Russia, for example, will not be able to take legal action against the US for including Rosneft Chief Executive Igor Sechin in the list, since the sanctions are imposed on the physical person, not on the juridical person.  For taking legal action within the WTO, it is first necessary to demonstrate the losses the company was caused by the sanctions.

Wasescha told RIR, in the history of the WTO there were cases in which countries tried to contest sanctions, such as the lawsuit that Nicaragua initiated against the US, but in the end the efforts proved futile. “The most important thing that the claimant must prove is that the prohibitions on trade do not affect the country's safety, as well as indicate the players faced concrete business damages,” the Swiss expert says. Thus, at a certain stage the WTO members determined that Nicaragua was right. However, due to bureaucratic complications within the organization, the matter never reached its logical conclusion.

Threat to security

“WTO members can impose sanctions in certain cases, for example, in the case of war or a serious escalation in international relations, in which the restrictions are founded on national security interests,” Medvedkov says. However, when the US, the EU and Canada imposed their sanctions in the spring of 2014, they were not at war with Russia and relations did not deteriorate to the point of equating them with belligerent activity. Also, in practice, all countries deal with national security in their own way. Thus, according to WTO's Legal Division's Counselor Jorge Castro, one European country, thinking of its national security, once determined it was necessary to restrict the imports of shoes, another that of horses.

Jorge Castro told RIR that currently the WTO consists of 160 countries and that 98 percent of world trade is regulated by the body. “Joining the WTO, the member states become responsible for withholding trade restrictions on each other. The organization's main purpose is to find a positive solution to trade litigations. There is no room here for theoretical questions; it is a practical system, which must provide for the market's balance,” he says.  Castro also says that most of the WTO litigations are resolved before reaching the panels. Thus, out of 481 litigations initiated within the WTO, only 268 cases were taken to the panel for discussion, and only 18 cases, in the entire history of the WTO, received final verdicts.

Currently, the principal claimant and defendant in the litigations is the US, then the EU. Russia is a claimant in two cases and a defendant in three. “If the sanctions have not only a political effect, but also touch the principles of free trade, then they have an immediate relation to WTO's regulations. Thus Russia's lawsuit can become a legitimate model,” says Wasescha. He adds that the WTO has lots of experience in resolving trade litigations, but very little experience in resolving litigations related to sanctions.  “If the affair remains political, the WTO system will not be able to help,” he adds. 

All rights reserved by Rossiyskaya Gazeta.

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