TBT jurisprudence: on track or off the rails?

The case of Russia – Railway Equipment

The WTO’s recent Panel report in Russia – Railway Equipment is the latest development in a series of WTO disputes between Russia and Ukraine. It concerns a complaint by Ukraine regarding the rejection and cancellation of certificates that were required by Russian law to import railway products like rolling stock and switches. This post focuses on the issues arising under the Technical Barriers to Trade Agreement (“TBT”).

The TBT Agreement attempts to discipline Members’ regulations (mandatory requirements), standards (voluntary requirements) and conformity assessment procedures (which ensure that products meet the relevant regulations and standards). All of Ukraine’s claims under the TBT Agreement in this case concern Russia’s application of conformity assessment procedures (“CAP”): in a nutshell, Ukraine alleged that Russia’s inspection system discriminated against Ukraine’s products compared with like products from Russia, European Union (“EU”) and Kazakhstan.

The legal provision in question is TBT Article 5, within which three obligations were examined. 

TBT Article 5.1.1 – interpreted for the first time – requires Members to apply CAPs in a manner that grants “no less favourable” treatment to countries in comparable situations. These underlined words were key to the report’s analysis. In short, the Panel found that Russia’s differential treatment of Ukrainian products was justified on account of the security situation in Crimea, which meant that Ukrainian suppliers were not in a “comparable situation” compared with those in Russia and other exporting countries. Significantly, while the Panel devoted substantial time in establishing whether such a situation exists (using, among other things, a report from the UN High Commissioner for Human Rights, and travel advice on Ukraine from the Russian Ministry of Foreign Affairs – see para 7.310 – 7.370), the Panel did not look into the reasons behind the security situation. In other words, the Panel did not consider what caused the situation in the first place. No doubt such an inquiry was considered outside the Panel’s legally limited mandate. In any case, Russia’s argument was that the situation was such that it made it impossible for Russian authorities to conduct conformity checks on Ukrainian products without substantial threats to their life: Russia went so far as to claim that it was excused from its obligation to conduct such checks by virtue of GATT Article XX(b) – which allows Members to implement measures which, while trade-restrictive, further the purpose of protecting human life and health. 

On the interpretation of Article 5.1.1, there were two interesting developments. First, as to “likeness” of products, the Panel directly (and without any elaboration) imported the criteria developed under General Agreement on Tariffs and Trade (“GATT”) jurisprudence. While this specific kind of cross-fertilization is becoming more and more common, it is opposed by some who believe that it ignores a fundamental difference in the underlying ideologies of the GATT (market access) and TBT (harmonisation). In fact the Panel, while dealing with this issue, quite explicitly (paras 7.248 – 7.260) referred to the aim of preserving “competitive conditions”, something that is more of a concern for market access than for regulation. 

Secondly, as to “less favourable treatment” (“LFT”), the Panel rejected the transposition of the “legitimate regulatory distinction” test to Article 5.1.1. This concept had been introduced into the non-discrimination rule in TBT Article 2.1 by the Appellate Body, drawing on recital 6 of the preamble of the TBT Agreement. It functions as an exception to the non-discrimination rule in Article 2.1. The Panel reasoned that the policy flexibility granted by LFT in TBT Article 2.1 is provided, in TBT Article 5.1.1, through the phrase “in a comparable situation”. The Panel found that while Russian actions had indeed resulted in a loss of market access for Ukrainian goods, these were justified, on balance, because of the security situation. Much the same logic was applied by the Panel while examining Russia’s decision to reject new applications for certificates. 

TBT Article 5.1.2 disallows Members from creating “unnecessary obstacles to international trade” through their CAPs: they must not be more trade-restrictive than necessary to give the importing Member “adequate confidence” that the products conform with the relevant standards. The Panel noted similarities, as well as differences, between this provision and TBT Article 2.2, centring on the concept of “necessity”. The Panel ruled that it would “weigh and balance” (again adopting terminology from GATT jurisprudence) three factors to determine whether there was an “unnecessary obstacle”: (a) the contribution of Russia’s CAPs in giving Russia “adequate confidence”, (b) the strictness (including trade-restrictiveness) of Russia’s application of CAPs, and (c) the “nature and gravity” of the risks of non-conformity. Russia claimed that the suspension of certificates was in satisfaction of its legitimate requirement for the “highest possible level of assurance” of conformity with safety regulations. The Panel observed that while suspension of certificates was fairly strict (as it prevented exports to Russia), it was not the strictest manner of applying Russian CAPs, since certificates could have been withdrawn (i.e. terminated) instead. The procedure chosen by Russia was compared with four alternatives proposed by Ukraine – all of which were found to be insufficient replacements. Both parties also agreed that there would be “high risks” associated with non-conformity with safety regulations. Thus the Panel concluded that Ukraine failed to prove that Russian CAPs were more trade restrictive than necessary. Essentially the same approach (leading to the same result) was employed to examine the WTO-consistency of Russia’s rejection of new certificates for Ukraine. 

Finally, TBT Article 5.1.2 requires the results of CAPs to be transmitted (along with identified deficiencies), as soon as possible, to the applicant. Importantly, the Panel clarified that a “result” within the meaning of this provision would also include an “outcome” – as in the present dispute – where, due to circumstances, only an “attempted or incomplete” assessment could take place. In other words, even if the assessment did not yield a substantive “yes” (approval) or “no” (rejection), the consequence could still be considered a “result”. The Panel also cautioned that the completeness of examination was not a prerequisite for transmission of information; as soon as “any results” became available, the competent authority was under an obligation to inform the applicants. Ukraine argued that the “generic reason that there were no conditions for carrying out the inspection controls does not amount to full and accurate information”. The Panel agreed: while Russia could not be faulted for timely transmission of results, TBT Article 5.1.2 also requires that the results must be transmitted in a “precise and complete manner”, so that applicants could take corrective action, if necessary. The Panel found that Russia should have provided “fuller and more detailed information” as to whether the circumstances disallowing inspection were outside Ukraine’s control or whether there was some corrective action that they could undertake in order to allow the inspection to continue. With this the Panel concluded that Russia had violated the third obligation contained in TBT Article 5.1.2.

Ukraine has appealed various parts of the analysis, including a violation of Article 11 of the Understanding on Dispute Settlement, alleging an incorrect allocation of the burden of proof in the “comparable situation” and “no less trade-restrictive alternatives” arguments. For its part, Russia has limited its appellate claims to procedural matters. Citing reasons of previous overload and current case complexity, the Appellate Body, on 24 October 2018, declared that it would not be “able to circulate its report within the 90-day timeframe provided for in the last sentence of Article 17.5 of the DSU”. The AB stated that as soon as it knew “more precisely when the division [could] schedule the hearing in this appeal, [it would] inform the participants and DSB Members”. Watch this space.


Written by Akhil Raina, Marie-Curie Fellow and PhD candidate at the Leuven Centre for Global Governance Studies.

Edited by the Linklaters Trade Practice. The views and opinions expressed here are the personal opinions of the author(s) and do not necessarily represent the views and opinions of Linklaters.