Battlefield WTO: The EU View of the Analysis of the WTO Security Exception and the Application of that View on the European Economic Sanctions on the Russian Federation

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Battlefield WTO: The EU View of the Analysis of the WTO

Security Exception and the Application of that View on the

European Economic Sanctions on the Russian Federation

MA Thesis

Gijs Verhagen

Faculty of Law

University of Amsterdam

Thesis supervisor: Geraldo Vidigal

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Abstract

This piece discusses the legality of the current economic sanctions of the European Union on the Russian Federation in WTO law by seeing if they could be justified by using the security exceptions as found in the GATT and GATS. In order to assess this, the interpretation as proposed by the EU in the case DS512 is used, which sets out a set of requirements to be reviewed by a panel or the Appellate Body. This piece argues this set of proposal set forth by the EU may cause issues for the legality of the sanction policy of the EU itself under WTO law.

List of Abbreviations

Abbreviation Explanation

GATT - General Agreement on Tariffs and Trade WTO - World Trade Organization

GATS - General Agreements on Trade in Services

EU - European Union

RF - Russian Federation

USA or US - United States of America

AB - Appellate Body

EEC - European Economic Community

EC - European Community

ITO - International Trade Organization

CP - Contracting Parties

ICJ - International Court of Justice DSU - Dispute Settlement Understanding DSB - Dispute Settlement Body

UAE - United Arab Emirates

TRIPS - Trade-Related Aspects of Intellectual Property Rights NAFTA - North-Atlantic Free Trade Association

CJEU - Court of Justice of the European Union

UN - United Nations

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Introduction

After WWII, the liberal capitalist West, facing threats from a communist East and in need of rebuilding itself after a destructive war, aimed at breaking down the barriers to international trade in order to stimulate trade between their markets and with that, economic development. This led to the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947, a multilateral agreement that facilitates the rules for liberal multilateral trade, which would regulate the world of multilateral free trade from there on.1_{In the GATT agreement, a so-called ‘security exception’ was included}

(see Annex A), which reflected the idea that Members of the GATT could postpone the obligations of the GATT in order to protect their sovereignty from external security threats.2_{With the establishment of the World Trade Organization (WTO),}

this security exception was also included in numerous other trade-related agreements, such as the General Agreements on Trade in Services (GATS). However, even though there are quite a few examples of the invocation of such articles by Members, the exact interpretation has always been left unsubstantiated, as chapter one will explain. This has led to a lot of uncertainty within the WTO, which is why some members have also called for an interpretation of the provision.3_{So far, no such binding}

interpretation has been given, but as there are multiple panels currently discussing the matter, this might change soon (see chapter two).

In some occasions, this article has also been used to justify economic sanctionsput in place by one Member on another.4_{So far however, it has been unclear whether and}

how economic sanctions can be justified under this article. The European Union (EU) has proposed a possible interpretation of the security exception in the ongoing dispute between the RF and Ukraine, also known as Russia — Measures Concerning Traffic

1 Petros C. Mavroidis, The Regulation of International Trade: The WTO Agreements on Trade in Goods: GATT, (3rd edition, The MIT Press 2016), pp. 1-2.

2 Michael J. Hahn, Vital Interests and the Law of GAYT: An Analysis of GATT's Security Exception, (1991) Michigan Journal of International Law, Vol. 12, p. 558

3 For example, the RF calling for a General Council Decision on the interpretation of the security exceptions - WTO General Council, 4 December 2015, WT/MIN(15)/W/14.

4 Economic sanctions were defined by Jonathan Masters of the Council of Foreign Relations as ‘The withdrawal of customary trade and financial relations for foreign and security policy purposes’ - Jonathan Masters, ‘What are Economic Sanctions?’, (The Council on Foreign Relations, 7 August 2017), found at: https://www.cfr.org/backgrounder/what-are-economic-sanctions [Accessed 07-05-2018].

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in Transit: DS512. This interpretation of the EU gives room to some level of review

of the security exceptions, which is hotly debated topic in the WTO.

In this piece, the question will be asked if economic sanctions are covered by the security exceptions. More specifically, it will focus on the current economic sanctions of the EU on the Russian Federation (RF) - both Members of the WTO - and their compatibility with the security exeptions. Since the start of the conflict in Ukraine in 2014 with the Maidan Revolution, and especially after the RF annexed the Crimean peninsula, there have been (economic) sanctions placed on the RF and certain Russian individuals by the EU.5_{These were first put in place in July 2014 and reinforced in}

September 2014. The European sanctions on the RF are made up of five categories:6

1) Diplomatic measures against the RF;

2) Asset freezes and visa bans on certain Russian individuals;

3) Economic restrictions for business operating in Crimea and Sevastopol; 4) Measures targeting (mainly military) sectorial cooperation with RF; 5) The halting of economic cooperation between the EU and the RF.

The structure of the piece will be as follows: in chapter one, the history of invocations of the security exceptions related to economic sanctions will be summarized, in order to explain why it has been left undefined so far; in chapter two, the ongoing disputes about the security exceptions within the WTO will be explained, and two proposed interpretations by the Unites State of America (USA, or US) and the EU, both (broadly) representing the main lines of thought, will be explained; in chapter three, the European analysis will be used to asses its own economic sanctions currently on place on the Russian Federation, with support by views of academic authors. The piece will end with a conclusion.

It is important to note two aspects of this piece: First, it will only take a look at the security exceptions of the GATT and GATS, even though the sanctions may also violate other agreements between the European Union and the Russian Federation

5 European Commission Newsroom, ‘Highlights: EU sanctions against Russia over Ukraine crisis’ European Commission, 25 May 2018, found at: https://europa.eu/newsroom/highlights/special-coverage/eu-sanctions-against-russia-over-ukraine-crisis_en [Accessed 24-05-2018].

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such as the 1997 Partnership and Cooperation Agreement.7_{Second, because of the}

similarity in wording between the two agreements, when in this piece there is reference to Article XXI, the legal analysis can also be extended to Article XIV of the GATS.

7 European Commission Trade, ‘Russia’ European Commission, 16 April 2018, found at: ‘http://ec.europa.eu/trade/policy/countries-and-regions/countries/russia/’ [Accessed 26-07-2018].

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1: The History of the Security Exception

1.1: Introduction

While the security exception has been an often-discussed part of the WTO body of law, never before has a panel or the Appellate Body (AB) made a final, binding ruling on its interpretation. However, a few situations have taken place during which a Member has invoked Article XXI in the history of the GATT. The following chapter will discuss the history of the Security Exception in relation to economic sanctions, and with the topic of this piece in mind, what the opinion of the European Union (or its predecessors, the European Economic Community (EEC) or the European Community (EC) or of its key individual member states before the formation of the EEC) in the specific matter was.

1.2: The Negotiations of the GATT

At the start of the talks that would latter the form the GATT, the idea was to set up the GATT structure within an organization called the International Trade Organization (ITO). This however never saw the day of light, even though the GATT was realized and the ITO negotiations had progressed quite a bit.8_{From the start of negotiations,}

both the ITO Havana Charter and the GATT contained a security exception. In the initial proposal put forward by the US before any negotiations took place, subparagraphs (c), (d) and (e) of Article 37 of the proposal that later became the GATT included wording very similar to paragraph (II) of Article XXI. This did include however, wording similar to what is now Article XX of the GATT, namely the requirement that ‘such measures are not applied in a manner, which would constitute a means of arbitrary or unjustifiable discrimination, where the same conditions prevail, or a disguised restriction on international trade’.9_{This has notably}

been left out in the current Article XXI.

After remarks made by the delegation of the Netherlands asking for clarity of this provision during the negotiations, the delegate of the US explained its view on the

8 Mavroidis (2016), pp. 1-3.

9 Preparatory Committee of the United Nations Conference on Trade and Employment, 5 March 1947, E/PC/T/34/ Rev. 1.

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exception.1011_{The delegate of the US pointed towards the relevance of the word}

‘essential’, stating that it limited the exception in some way. However, he added that this limitation was mainly regarding the time of the measure (‘in time of war’), as he found it naturally that the Member could decide for itself what it finds ‘essential’. For ‘Other emergencies in international relations’, he used the example of the US’ prewar-period just before WWII. In this period, the US was not officially in a state of war, but was already preparing and trying to safeguard itself from harm. Finally, he continued saying that it is ‘question of balance’.12_{To add onto this, the Chairman of}

the negotiating Council stated that only the atmosphere within the ITO - or the GATT, as the ITO never was formed - could stop this provision from being abused.13_This

was later explained as that the ‘spirit in which Members of the Organization would interpret these provisions was the only guarantee against abuse’, highlighting that Members themselves were given a lot of responsibility in this provision.14

After the negotiations were finalized, the security exception came to life into the form of Article XXI as we now know it. It was almost immediately put to the test in 1947, as Czechoslovakia put forward a request for a decision on whether the US had failed to carry out its obligations by deciding to put export licenses for certain (military) goods to certain countries - mainly Eastern Bloc countries, including Czechoslovakia - while not requiring those licenses for other Members of the GATT.15_{In the meeting}

discussing this issue, the UK delegate stated that because the issue involved Article XXI, the US had the right to decide for itself on questions related to its security. However, the same delegate also stressed that Members must refrain from steps undermining the agreement as whole, reiterating the balance that was mentioned earlier by the US delegate during the negotiations. He finally concluded that a decision by the Contracting Parties (CP) would be useless: A political agreement between Czechoslovakia and the US would be the best way to solve this.16_{In the end,}

10 Preparatory Committee of the United Nations Conference on Trade and Employment, 24 July 1947, E/PC/T/A/SR/33, p. 3.

11 Preparatory Committee of the United Nations Conference on Trade and Employment, 24 July 1947, E/PC/T/A/PV/33, p. 20.

12 Ibid, pp. 20-22. 13 Ibid, p. 22.

14 Preparatory Committee of the United Nations Conference on Trade and Employment, 24 July 1947, E/PC/T/A/SR/3, p.3

15 Third Committee on Commercial Policy of the United Nations Conference on Trade and Employment, 31 December 1947, GATT/CP.3/SR.22, pp. 4-5.

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the request was rejected, which was largely related to factual uncertainties and procedural aspects unrelated to the application of the security exception.17

1.3: Swedish Army Boots

In 1975, Sweden announced that it would be introducing a global import quota system for leather shoes, plastic shoes and rubber boots. The rationale behind this policy was that the increased import of these sorts of footwear was, according to the Swedish delegation, becoming a critical threat to the emergency planning of Sweden’s military, as Sweden would be unable in such a scenario to produce their own required footwear used in its army. The underlying legal justification for this was Article XXI.18

When the issue was discussed in the GATT council, many delegates had ‘expressed their concern’ and ‘expressed doubts on the justification of these measures under the General Agreement’ (GATT).19_{The offer of Sweden to go into consultations on a}

bilateral level with other Members was noted by many of them and many Members reserved their rights under the GATT. Sweden did note that even though it initiated consultations, there was no such requirement in Article XXI to do so.20_{The issue was}

not taken further, as in 1977 the delegate of Sweden announced that the quota system would be discontinued after political pressure.21

1.4: The Falkland Wars

In 1982, Argentina invaded the Falkland Islands and island of South-Georgia, which were at that time dependencies of the British Crown and therefore under the sovereignty of the United Kingdom. This was the start of the war known as the Falkland War between Argentina and the United Kingdom, with more than 1000 casualties combined on both sides and one of the few direct interstate conflicts involving just one Western country in the post WWII-world.22_{This led to the}

European Economic Community (EEC), Australia and Canada putting economic

17 Ibid, p. 7-9.

18 GATT General Council, 17 November 1975, L/4250, pp. 2-3. 19 GATT General Council, 10 November 1975, C/M/109, pp. 8. 20 Ibid, pp. 8-9

21 GATT General Council, 15 March 1977, L/4250/Add. 1.

22 Lawrence Freedman, ‘The War of the Falkland Islands’, (1982), Foreign Affairs, Vol.61, pp. 196-200.

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sanctions on Argentina for non-economic reasons, i.e. in political support of the UK. They used Article XXI as the justifying ground for their actions.23

Argentina later raised the issue before the Council of the GATT, stating that those countries had violated the principles of the GATT by implementing the trade restrictions for non-trade reasons, adding that these sanctions are a ‘new type of colonialism’.24_{Argentina also lamented that these countries had not announced the}

restrictions at the GATT, even though they were covered by GATT provisions and thus needed to be announced.25_{The opinions stated by other Members can be roughly}

divided up into two camps: On the one side, there were the Latin American countries, backed up by the majority of the developing countries, who were in support of the Argentinian side. Their criticism was mainly that it was hard for the EEC to justify that these measures were necessary for ‘its essential security’, as they were not involved in nor immediately threatened by this conflict. According to them, this would endanger the credibility and balance of the GATT, especially as this would allow developed nations to freely sanction developing countries as they see fit.26_The

response of the other side, for example by the EEC, the US, Japan or Norway, was simple: These measures were justified under Article XXI and because of the political nature, this was to be discussed outside of the trade-focused GATT.27_{In the end, the}

Council adopted a general decision which only stated that Members should be informed about trade measures being taken under Article XXI, and that the CP, affected by action under Article XXI, retained their full rights under the GATT. There was no further mention of Argentina, the UK or the economic sanctions themselves.28

1.5: The Embargo of Nicaragua

From 1981-1990, the US made a large effort to overthrow the socialist government of Nicaragua. This ranged from an economic embargo to the notorious funding and active support of rebel groups within the country.29_{From the 1}st_{of May 1985, the US}

23 GATT General Council, 5 May 1982, L/5319/Rev.1.

24 GATT General Council, 22 June 1982, C/M/157, pp. 1-3.

25 Ibid, p. 2.

26 See for example the statements of the representatives of Peru, Brazil, Uruguay, Cuba, Pakistan and Yugoslavia, pp. 4-7.

27 See for example statements of the EEC, US, Japan or Norway, pp. 8-12.

28 GATT Contracting Parties, 30 November 1982, L/5426.

29 William M. Leogrande, ‘Making the Economy Scream: US Economic Sanctions Against Sandinista Nicaragua’ (2010), Third World Quarterly, 17:2, pp. 329-348.

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therefore also installed a full economic blockade on Nicaragua, which encompassed all US imports to and exports from Nicaragua to the US as well as an embargo on Nicaraguan ports and airports.30_{In response to this economic embargo, the}

Nicaraguan delegate to the GATT sent a message to the Council, stating that the embargo and sanctions violated Articles I, II, V, XI, XIII and in in Part IV of the GATT.31_{This prompted the US delegation to pass on a message directly from the}

White House, in which it was explained that this blockade was to combat the ‘unusual and extraordinary threat to the national security and foreign policy of the US’, which Nicaragua had formed according to the US.32

When the Council of the GATT discussed the issue later that month33_{, there were once}

again two main lines of thought. The first was the one set out by Nicaragua and those who supported it, a group consisting of developing countries in mainly South America, such as Argentina, Colombia, Brazil, but also consisting of Poland, Romania and India. This group of Members was firmly against the trade restrictive measures taken by the US, argued such measures should not be taken for non-economic reasons and that this measure can, and should be discussed within the GATT Council or through its dispute settlement procedure.34_{While the US had}

defended its position by pointing to the self-judging nature of Article XXI, that the wording of the Article leaves it up to the Member itself to judge what is necessary, and that GATT was not the appropriate body to discuss such political measures, it was not fully supported by its usual allies, such as the EEC or Australia. This group, mainly consisting of developed Members such as the EEC, Australia, Japan or Norway, made the point that while the US indeed had this right under Article XXI to take measures for national security and that GATT was not the appropriate body to discuss this matter fully, the US should have exercised more prudence when undertaking these measures in order not to harm the system of the GATT as a whole. Later in the discussions, the EEC did actively move against a Nicaraguan draft decision addressing the issue, as the delegate of the EEC said that ‘the application of

30 Ronald Reagan: "Statement by Principal Deputy Press Secretary Speakes on Economic Sanctions Against Nicaragua ,", The American Presidency Project, May 1, 1985, found at:

http://www.presidency.ucsb.edu/ws/?pid=38584 [Accessed: 23-03-2018].

31 GATT General Council, 8 May 1985, L/5802. 32 GATT General Council, 9 May 1985, L/5803. 33 GATT General Council, 28 May 1985, C/M/188.

34 See for example the statements of the representatives of Cuba, Argentina, Peru, Colombia, Poland, Czechoslovakia, India, Romania, Egypt, pp. 5-13.

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dispute settlement procedures to a question which was outside the competence of the General Agreement (sic)’ would set a dangerous precedent.35

Later that year in October, after negotiations within the Council, a decision was taken to set up a panel, but one that was not able to judge the validity of Article XXI or the motivation to invoke the Article by the US.36_{It is important here to note that under}

Article XXIII(2) of the GATT, the ultimate power of the Contracting Parties was to authorize the suspension of the obligations of Nicaragua, but since the embargo covered both imports and exports, this would be without use. A year later, in October 1986, the report came out, which would be never adopted by the Council because of US’ reservations.37_{Nicaragua next to claiming the embargo was violating the GATT,}

also relied on the Ministerial Declaration BISD 29S/9, in which the Contracting Parties had promised ‘to abstain from taking restrictive trade measures, for reasons of a non-economic character, not consistent with the General Agreement’.38_However,

the report also explicitly mentions that the US had demanded the terms of reference of the panel to be limited, and would not include Article XXI, nor that the panel would recommend the removal of the embargo.39_{Because of this, the panel was unable to}

give a clear ruling in this case, only recognizing that ‘the General Agreement protected each contracting party's essential security interests through Article XXI and that the General Agreement's purpose was therefore not to make contracting parties forego their essential security interests for the sake of these aims’.40_{Next to this, it}

chose to ask a general question without answering it: ‘(…), how could the CONTRACTING PARTIES ensure that this general exception to all obligations under the General Agreement is not invoked excessively or for purposes other than those set out in this provision?’ The panel thus chose to ask for a formal interpretation of Article XXI in their report.41

35 Ibid, p. 17.

36 GATT General Council, 10 October 1985, C/M/192, p. 6.

37 United States – Trade Measures Affecting Nicaragua, Panel Report, L/6053, (13 October 1986). 38 GATT Contracting Parties, 29 November 1982, L/5424, Article 7.III, p. 3. (It can be argued however that since Article XXI is part of the GATT, measures falling under XXI are automatically consistent with the GATT, therefore not falling under this promise).

39 Panel Report: United States – Trade Measures Affecting Nicaragua, p. 7.

40 Ibid, p. 18.

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The government of Nicaragua also challenged the legality of the embargo in front of the International Court of Justice (ICJ) in the Hague, invoking the 1956 Treaty of Friendship, Commerce, and Navigation between the United States and Nicaragua.42

The ICJ in this case discussed the similarities and differences between Article XXI of the Friendship Treaty (which was by chance a similar security exception provision) with Article XXI of the GATT. The ICJ argued as follows: Because Article XXI of the Friendship Treaty simply allows measures ‘necessary’ to protect the essential security interests of the party, in comparison with XXI GATT allowing measures ‘it considers necessary’ for the essential security interests of the party, the ICJ was able to judge on the necessity of the measure.43_{This ruling showed the relevance of the}

wording ‘it considers’ of Article XXI GATT, highlighting the self-judging nature of the Article and setting a possible precedent for its interpretation.

1.6: Sanctions against Yugoslavia

In 1991, the declarations of independence of Slovenia and Croatia were the start of what would be commonly known as the Yugoslav civil war, or the Balkan wars of the 1990’s.44_{In response, in November 1991, the EEC would adopt a broad array of}

economic sanctions against Yugoslavia in hopes of ending the bloodshed, invoking Article XXI as justification.45_{Yugoslavia argued in its official response that Article}

XXI was not applicable, as there is no United Nations (UN) resolution on the issue justifying any economic sanctions, that trade restrictive measures taken for political reasons are not consistent with the GATT and that a strict and narrow interpretation of Article XXI is ‘indispensable’.46_{Therefore, Yugoslavia called for the establishment of}

a panel to address this issue. The EEC was unable to stop the establishment of the panel, as a recent change of rules mandated that a panel had to be established at the second Council meeting at which it was requested, unless the Council decided otherwise (in consensus).47

42 Nicaragua v. United States of America, ‘Military and Paramilitary Activities’, ICJ, Judgment of 27 June 1986, pp. 16-17.

43 Ibid, p. 141

44 BBC News Europe, ‘Balkans War: a Brief Guide’, (BBC News, 18 March 2016), found at: http://www.bbc.com/news/world-europe-17632399 [Accessed: 07-05-2018].

45 GATT General Council, 2 December 1991, L/6948, pp. 1-2.

46 GATT General, Council, 10 February 1991, DS27/2, p. 2

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In a Council meeting in March 1992, the issue was raised a second time.48_{During this}

Council, it was widely recognized that Yugoslavia had indeed the right to call for a panel, but the newly founded European Community (EC), together with Canada and the US, did claim that such a panel would only complicate the issue further and not aid the peace process, and the issue was not suitable to be discussed within a panel.49

The whole debate was suddenly stopped in its tracks, as soon after Yugoslavia would be dissolved, and the country that would follow Yugoslavia, also known as Serbia and Montenegro (initially under the same name), would not automatically take over its membership.50

1.7: The Helms Burton Act and Cuba

In February 1996, Cuban military aircraft somewhere in the Florida Strait shot down two civilian aircraft of a Florida-based Cuban humanitarian organization. It is a subject of discussion whether they were flying over international or Cuban territorial waters.51_{This event prompted US President Bill Clinton to sign the Libertad Act, or}

Helms-Burton Act, which not only intensified and lengthened the existing sanctions against Cuba, but also sanctioned any foreign individual who would in some form ‘traffic’ in property that was confiscated by the Cuban government after the Castro revolution. This would expose many foreign corporations that would do business with Cuba to harsh sanctions. The Act also allowed for the refusal of visas to high-level officials of such corporations.52

This led to the EC in July 1996 sending a request of consultations in accordance with Article 4.4 of the Dispute Settlement Understanding (DSU) of the recently set up WTO.53_{In this communication, the EC complained that the US was violating its}

international obligations by implementing the Helms-Burton Act. While consultations were initiated, these were not deemed satisfactory by the EC, which led to the EC requesting a panel to be set up in October 1996.54_{Unlike in the GATT period, the new}

WTO rules demanded that a panel be automatically set up, unless a consensus of all 48 GATT General Council, 18 March 1992, C/M/255, pp. 14-19.

49 Ibid, 14-17.

50 GATT General Council, 17 June 1993, C/M/264, p. 3.

51 Peter Morici, "The United States, World Trade, and the Helms-Burton Act" (1997), Current History, vol. 96, pp. 87-88, see also: Cuban Liberty and Democratic Solidarity (Libertad) Act 1996.

52 Ibid.

53 WTO General Council, 13 May 1996, G/L/71 ; S/L/21 ; WT/DS38/1.

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the Members decides otherwise, which is highly unlikely.55_{Because of these same}

new rules, the terms of reference could also not be changed as had happened in the Nicaragua case.56_{A panel for this issue was set up in February 1997,}57_{which led}

Canada, Japan, Malaysia, Mexico and Thailand to reserve their third-party rights in the dispute.58_{In the end however, the EC decided to suspend the panel proceedings in}

accordance with Article 12.12 of the DSU, because a political agreement had been reached with the US.59_{The US had agreed to indefinitely exempt the EC from the}

majority of the extraterritorial measures of the act, in return for the EC giving up their panel request in the WTO60_{and promising ‘to continue their efforts to promote a}

transition to democracy in Cuba’.61_{The authority of the panel silently lapsed in April}

1998.62

1.8: The Two Main Positions

So while Article XXI has been invoked several times in regards to sanctions, it has never led to a final judgment on the interpretation of the provision. We can however roughly formulate two positions on the issue: the first one, mainly held by developing countries and nowadays supported by the EU, states that adjudication on its invocation and content is possible under the GATT/WTO rules, and some even stating that sanctions cannot be taken for non-economic reasons; the second one, mainly held historically by the developed countries, states that most of the issues concerning sanctions and Article XXI are not fit for discussion under the GATT/WTO rules, and therefore should not be discussed by a panel or the AB. The second line of reasoning therefore argues that ‘drastic’ situations of a security nature are not fit to be discussed within the GATT/WTO rules, limiting the use of those rules to a certain kind of disputes (not related to security) and giving Members the possibility to ‘exempt’ their measure. The balance between the AB being an effective body to solve trade disputes and the Members retaining their sovereignty is a delicate one, and this interpretation

55 Article 6.1 Dispute Settlement Understanding. 56 Article 7.1 Dispute Settlement Understanding.

57 WTO General Council, 20 February 1997, WT/DS38/3.

58 WTO General Council, 24 February 1997, WT/DS38/4.

59 WTO General Council, 25 April 1997, WT/DS38/5.

60 Bert Hoffmann, ‘The Helms-Burton law and its consequences for Cuba, the United States and Europe’ (Latin American Institute at the Free University of Berlin, 1998), found at: http://lasa.international.pitt.edu/LASA98/Hoffmann.pdf [accessed: 07-05-2018], p. 15.

61 Terry Atlas, ‘Clinton Again Suspends Cuban Trade Sanctions’ Chicago Tribune (Washington, 4 January 1997).

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of the security exception can be best likened to Carl Schmitt’s explanation of the concept of sovereignty: ‘Sovereign is he who decides on the exception’.63_{Schmitt, the}

influential German (political) philosopher of the first half of the 20th_{century, argues}

that no neutral adjudication can truly exist in the arena of (international) politics, that everything is politics, and that it is best to still incorporate an option of war into the legal arena which excludes the regular rule of law from being in place.64_This

sovereignty of the state to use force to ‘restore order’ cannot be bound and is therefore unrestricted. A hefty response to this assertion is formulated by one of Schmitt’s main critics, Giorgo Agamben, the contemporary Italian philosopher, who warns that in Western democracies, the ‘state of emergency has become the rule’.65_{He draws on the}

current situation where Western states are perpetually in states of crisis, ranging from terrorism to migrant crises, and therefore constantly make exceptions to their normal legalistic behavior, allowing themselves to perform actions otherwise not allowed.66_If

this analogy is brought to the security exception, Agamben’s position would support having some form of review. What would otherwise stop states from using the security exception whenever it would fit their interest? As we will see in the next chapter, a multitude of situations can be described as fitting within the security exception, and states are not afraid to interpret the security exception to their liking.

1.9: Conclusion

No conclusion has been given so far on the interpretation of the security exception found in the GATT or other WTO agreements. Two main lines of interpretations can be found: one that supports review by the DSB and one that does not support review by the DSB. So far however, a definitive answer has not been given on the issue, but as chapter two will explain, this might change soon.

63 Carl Schmitt, Political Theology, Four Chapters on the Concept of Sovereignty, George Schwab (trans.) (Chicago: University of Chicago Press, 2005), p. 5.

64 Seyla Benhabib, ‘Carl Schmitt's Critique of Kant: Sovereignty and International Law’ (2012), Political Theory, vol. 40, no. 6, pp. 699–700.

65 Giorgio Agamben, Homo Sacer: Sovereign Power and Bare Life, (Stanford University Press, 1998), pp. 9-12.

66 Daniel McLoughlin, ‘Giorgio Agamben on Security, Government and the Crisis of Law,’ (2012), Griffith Law Review, vol. 21, no. 3, pp. 682-684.

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2: The Current Panel Cases Invoking the Security Exception

As explained in chapter one of this piece, so far there has been no final binding judgment from an authoritative body on how Article XXI is to be interpreted. Unlike in the GATT period however, no single Member can stop the panels from delivering a judgment on Article XXI and the terms of reference cannot be edited like what happened in the Nicaragua case.67_{Especially in WTO law, the question of the}

standard of review is often seen as controversial. In WTO law, the legal question put before the panel (or AB) is whether the measure taken by the Member in that case is in conformity with the WTO obligations undertaken by the Member.68_{Therefore, the}

less a WTO panel can review under the standard of review, the more the Member can decide for itself whether or not it adheres to its obligations or not. To add to this, the AB in the case Mexico – Soft Drinks explicitly stated that a panel cannot decline to exercise its jurisdiction in case that is before it, and that its terms of reference are set out by Article 7 of the DSU.69

There are however three different developments taking place within the world of international trade that indicate that such a final judgment may be on its way. Currently, two of these have already led to panels being established, while the third one was started very recently, in April 2018, and has so far only led to a request for consultations.70_{In this chapter, a background and summary of the cases at hand will}

be given, and the US and the EU submissions for the DS512 case will be explained and discussed.

2.2: Russia — Measures Concerning Traffic in Transit: DS512

While this piece is about the sanctions between the European Union and the Russian Federation as a result of the conflict in Ukraine (see chapter three for further explanation), the conflict in Ukraine has already led to a different dispute at the WTO

67 See paragraph 1.7 ‘The Helms Burton Act and Cuba’.

68 Sharif Buiyan, National Law in WTO Law: Effectiveness and Good Governance in the World Trading System (Cambridge University Press, 2007), p. 144

69 Mexico - Soft Drinks, WTO Appellate Body, WT/DS308/AB, (6 March 2006), Para. 46-49. 70 WTO DSB, 5 April 2018, WT/DS544/1.

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concerning the Russian Federation.71_{In September 2016, the delegation of Ukraine}

sent a request for consultations to the DSB concerning restrictions the RF had set up for transit of goods from Ukraine to third countries through the territory of the RF. The RF had according to Ukraine done this in response to Ukraine signing the Deep and Comprehensive Free Trade Agreement with the EU, and had a detrimental effect on Ukrainian export to countries which could only be reached through the RF, such as Kazakhstan, Azerbaijan or Tajikistan.72_{Most of these goods were now forced to go}

through the Belarusian-Russian border, adding huge costs to the transport of such goods. Ukraine claimed that these measure were in violation of several of the GATT and certain parts of the Accession Protocol of the Russian Federation.73_{The EU}

officially requested to join the consultations, arguing that its export to countries such as Kazakhstan and Azerbaijan were also affected by these measures.74

The consultations took place in November 2016, but unsurprisingly, these did not lead to satisfactory result for Ukraine, as it sent a request for the establishment of a panel in February 2017.75_{The RF responded in the meeting of the Dispute Settlement Body}

(DSB), stating its ‘strong disappointment’ with Ukraine requesting the panel, its continuing respect for its WTO obligations, but also casting doubt on the feasibility behind Ukraine’s request (probably implying the self-judging nature of the security exceptions) and its opposition against the establishment of a panel.76_Ukraine’s

request was then honored at the DSB meeting in March 2017, during which twenty countries, including the EU, Saudi Arabia and the USA reserved their third-party rights for the upcoming panel case. This panel was subsequently formed in June 2017 (the Director-General had to compose the panel as under Article 8.7 of the DSU, as the parties could not reach an agreement).77_{As the panel expected not to finish its}

report within six months as mandated under 12.8, it announced in November 2017 to the DSB that it expected to issue its final report only at the end of 2018.78

71 WTO DSB, 14 September 2016, G/L/1151 ; WT/DS512/1 (see as well: WTO DSB, 23 September 2016, G/L/1151/Corr.1 ; WT/DS512/1/Corr.1).

72 Ibid, ‘Background’.

73 Ibid, ‘Legal Basis for the Complaint’.

74 WTO DSB, 30 September 2016, WT/DS512/2 75 WTO DSB, 10 February 2017, WT/DS512/3. 76 WTO DSB, 20 February 2017, WT/DSB/M/392, p. 7. 77 WTO DSB, 7 June 2017, WT/DS512/4.

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2.3: United Arab Emirates — Measures on goods, services and IP rights: DS526

In June 2017, Saudi Arabia, the United Arab Emirates (UAE) and Bahrain severed diplomatic relations with Qatar, alleging that Qatar had been sponsoring terrorism and angered by Qatar’s relatively good relations with Iran. Soon after, a full (economic) embargo was placed on Qatar by these neighbors, and more countries such as Egypt and Yemen followed suit in breaking off diplomatic relations.79_{In response, Qatar}

requested consultations with the UAE, Bahrain and Saudi Arabia about these measures, arguing that they violate several provisions of the GATT, GATS and the Trade-Related Aspects of Intellectual Property Rights (TRIPS).80_{After none of these}

countries were willing to enter into consultations with Qatar, it decided to request to establish a panel aimed at the measures installed by the UAE in October 2017 at the DSB, and a second time in November 2017.81

During these meetings, a series of countries expressed their opinions regarding the matter. Qatar complained of the UAE violating its WTO obligations, and argued that the DSB is the appropriate body to discuss this matter.82_{The UAE, backed by}

Bahrain, Saudi Arabia, Egypt, Yemen and even the US, said that these measures were needed for the security interests of the UAE, and that GATT Article XXI, GATS Article XIVbis, and TRIPS Article 73 (similar wording) justified this course of action. Because of the invoking of these security exceptions and the self-judging special nature of these Articles, there could be no judging of validity of invoking these Articles, including their ‘necessity’ or if there is an ‘emergency in international relations’.83_{Saudi Arabia went as far as to challenge the ‘jurisdiction of treaty’ of the}

WTO to discuss this matter,84_{and the US argued that if Article XXI is formally}

invoked before a panel, that panel lacks any further authority to discuss that matter. While Korea, China and Canada expressed diplomatic language and their preference for a political solution, they still recognized the right of a Member to request a panel on this matter. China also called upon Members to assess for themselves if the WTO is the proper forum to discuss this, to think whether they should not restrain

79 BBC News, ‘Qatar crisis: What You Need to Know’, BBC, 19 July 2017, found at:

http://www.bbc.com/news/world-middle-east-40173757 [accessed 17-05-2018].

80 WTO DSB, 31 July 2017, G/L/1180 ; IP/D/35 ; S/L/415 ; WT/DS526/1, ‘Legal Basis of the Complaint.’

81 WTO DSB, 4 April 2017, WT/DS526/2

82 WTO DSB, 23 October 2017, WT/DSB/M/403; WTO DSB, 6 March 2018, WT/DSB/M/404. 83 WTO DSB, 22 November 2017, WT/DSB/M/404, pp. 6-7.

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themselves from discussing it at the WTO DSB and to only invoke the security exceptions on a bona-fide basis.85_{Qatar then stated that it did not dispute Members’}

rights to take bona-fide measures, but disagreed that the security exceptions were completely self-regulating and argued for some level of multilateral oversight. The UAE disagreed with this, and noted the fundamental difference of the security exceptions in their wording with other WTO-exceptions. Subsequently, a panel was still established and 21 countries reserved their third-party rights, including the RF, the EU, Ukraine, the USA and China.86_{There has been no indication yet of when the}

panel report will be finished.

2.4: United States - Certain Measures on Steel and Aluminum Products: DS512

In 2016, the USA surprised the world by electing a president that had actively campaigned on a platform that doubted the ‘fairness’ of the WTO and complained of unfair trade policies conducted by China (and others).87_{As a follow-up, the Trump}

administration in March 2018 announced a 25% tariff on steel imports,88_{and a 10%}

tariff on aluminum imports.89_{A series of countries were exempted from these tariffs,}

initially only Canada and Mexico as part of (North American Free Trade Agreement) NAFTA, but later also the countries of the EU, Australia and some others. However, it is still uncertain whether these exemptions will hold or not.90_{As the legal basis for}

these increase in tariffs, the Trump administration mainly uses section 232 of the Trade Expansion Act of 1962, which authorizes the President to take action if imports of a certain article or a quantity of a certain article threatens to impair the national security of the USA.91_{As the obvious target, it was no surprise that in April 2018,}

China requested consultations at the DSB on these tariffs, stating that these measures violate several Articles of the Agreement on Safeguards and the GATT.92_{This is}

85 Ibid, pp. 7-8. 86 Ibid, p.p 8-9.

87 Andrew Walker, ‘Is Trump the WTO’s Biggest Threat’, BBC World Service, 8 December 2017, found at: http://www.bbc.com/news/business-42200390 [accessed 16-05-2018].

88 Donald J. Trump, ‘Presidential Proclamation on Adjusting Imports of Steel into the United States’, The White House, 8 March 2018, found at:

https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states/ [accessed 17-05-2018]. 89 Donald J. Trump, ‘Presidential Proclamation on Adjusting Imports of Aluminum into the United States’, The White House, 8 March 2018, found at: https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states/ [accessed 17-05-2018]. 90 David Lawder, ‘Trump delays metal tariffs on Canada, EU, Mexico, exempts some others’, Reuters, 30 April 2018, found at: https://www.reuters.com/article/us-usa-trade-metals/trump-delays-metal-tariffs-on-canada-eu-mexico-exempts-some-others-idUSKBN1I1164 [accessed 17-05-2018]. 91 Trump, supra at 84 and 86.

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interesting, as China is treating the case as a safeguard issue, while the USA has not explicitly made use of these agreements to rationalize the tariffs. While this case has not progressed substantially yet, its political relevance is already enormous. Some argue that if the USA would be faced by a panel or AB dismissing their tariffs, it would give the Trump administration a perfect excuse to announce their departure from the WTO.93_{The USA has already made perfectly clear that it is not content with}

some of the aspects of the WTO, especially the DSB, and that in combination with a more protectionist economic course could lead to them to decide to leave the global trade-liberalizing organization. 94

2.5: The US Submissions in DS512

As explained previously in this chapter, while the EU and the USA are not (officially) on either side of the case DS512 (the EU supports Ukraine in this matter), the EU and the USA are deeply involved and interested in how Article XXI will be assessed and they have therefore reserved their third-party rights. More interestingly, they have also both released their written and oral submissions to the public, which enables an assessment of what their thoughts are on how Article XXI of the GATT should be interpreted. It is even more useful when considered that the US and the EU have two very divergent views on the issue. While their views may very well represent both the side of the RF and of Ukraine, they may also in general represent the two main possibilities for what the eventual panel report might entail. That the views of the USA are (in outcome) similar to what the RF thinks is also evidenced by the constant referencing in both the EU and the US documents to the (unreleased) Russian submission.95

First, this chapter will discuss the US argument.96_{The USA is straight and simple in}

their position: ‘Issues of national security are political matters not susceptible for

93 Edward Alden, 'Trump, China, and Steel Tariffs: The Day the WTO Died', (Council on Foreign Relations, 9 March 2018), found at: https://www.cfr.org/blog/trump-china-and-steel-tariffs-day-wto-died [accessed 22 May 2018].

94 See for more explanation on the Dispute Settlement Crisis: Tetyana Payosova, Gary Clyde Hufbauer, and Jeffrey Schott ‘Policy Brief: The Dispute Settlement Crisis in the World Trade Organization: Causes and Cures’, (Peterson Institute for International Economics, 5 March 2018), found at: https://piie.com/system/files/documents/pb18-5.pdf [accessed 21-05-2018].

95 See for example just the first three pages of the EU Written Submission.

96 Office of the Unites States Trade Representative, 'Russia – Measures Concerning Traffic in Transit (Ukraine)', United States Trade Representative, 2 February 2018, found at: https://ustr.gov/issue-areas/enforcement/dispute-settlement-proceedings/wto-dispute-settlement/pending-wto-dispute-35 [Accessed 22 May 2018].

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review or capable of resolution by WTO dispute settlement’.97_{It agrees with the}

Russian position on this matter, namely that invoking Article XXI is an inherent right of an individual Member. According to the USA, the terms of reference are therefore automatically limited to not including a ruling on Article XXI, as it is not possible that a Member has acted inconsistent with a WTO-obligation. The panel can only recognize that Article XXI has been invoked, and then encourage parties to resolve the issue outside the context of WTO dispute settlement in light of Article 11 of the DSU.98

The USA supports its line of thought that it is self-judging with three arguments related to the text of Article XXI itself.99_{First is the use of ‘it considers’, referencing}

the discretion of the Member. Second is the context of Article XX, which lacks the ‘it considers’ and has a chapeau that explicitly requires review of a Member’s actions, which Article XXI does not have. Third is the use of the words ‘it considers’ in other provisions of WTO agreements. According to the USA, the use of these words means that the discretion is left to the named actor. Two examples it uses are Article XXIII and a series of DSU articles with similar wording. These mainly involve situations where a Member can initiate a case at the DSB, reserve its third-party rights or a panel can mandate something. In those cases, it is widely accepted that the actor can decide to do something without any reason. After presenting these three arguments about the text, the USA then goes into the drafting and state practice history (see chapter one of this piece) to show that so far, the self-judging nature of the provisions has been leading.100

An interesting debate is on the interpretation of the EC-Bananas approach. This approach, developed in an arbitration case, assessed the meaning of the wording ‘if that party considers’. 101_{In that case, the arbitrators decided that such wording means}

97 United States Delegation, ‘U.S. Third-Party Submission Regarding GATT Article XXI’, United States Trade Representative, 7 November 2017, found at:

https://ustr.gov/sites/default/files/enforcement/DS/US.3d.Pty.Sub.Re.GATT.XXI.fin.%28public %29.pdf [Accessed: 22-05-2018], Point 2.

98 Ibid, p. 1-2.

99 United States Delegation, ‘Third-Party Oral Statement’, United States Trade Representative, 25 January 2018, found at: https://ustr.gov/sites/default/files/enforcement/DS/US.3d.Pty.Stmt.%28as %20delivered%29.fin.%28public%29.pdf [Accessed: 22-05-2018], pp. 8-9

100Ibid, pp. 9-13.

101 EC - Bananas, Recourse to Arbitration by the European Communities Under Article 22.6 of the DSU: Decision by the Arbitrators, WT/DS27/ARB/ECU (Mar. 24, 2000)

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that while a certain amount of discretion is left to the Member in question, the arbitrators still could ‘broadly judge whether the complaining party in question has considered the necessary facts objectively and whether, on the basis of these facts, it could plausibly arrive at the conclusion’.102_{The EU takes this ruling and alleges that}

this supports their idea that some form of limited review is acceptable.103_{The USA}

however, interprets this ruling differently, and asserts that only because in those other provisions, ‘if that party considers’ is ‘preceded by mandatory language in the chapeau (“the complaining party shall apply the following principles and procedures”) and followed by permissive language in the subsection (“it may seek to suspend concessions or other obligations”)’104_{, such a review is possible. This notably lacks in}

Article XXI, and therefore it is substantially different according to the US.

2.6: The EU Submission in DS512

The EU has set out one proposal what a possible review of Article XXI of the GATS may look like.105_{In their written submission, the main pleading document, the first}

legal question regarding the interpretation of Article XXI (and maybe the most relevant one) goes into is the justiciability. Since the RF claims that ‘neither the Panel nor the WTO as an institution has a jurisdiction over’ the issue in DS512, but according to the EU does not support this with legal reasoning, the EU submits that the panel does in fact have jurisdiction over cases where Article XXI is invoked. In support for their position, the EU has five arguments: The first is that Article XXI does not provide for an exception to Articles XXII/XXIII or the DSU, and therefore those rules still apply; the second is that Article XXI cannot be a non-justiciable provision because it is included in the terms of reference (which is a big difference with the old case between Nicaragua and the USA);106_{the third is that Article 11 of}

the DSU demands of the panel to make an ‘objective assessment of the matter before it’, which includes Article XXI; fourth is that it would undermine the fundamental objective of the DSU to settle disputes; lastly, the fifth is that non-justiciability of this

102 Ibid, para. 52.

103 Directorate Trade, ‘Third-Party Written Submission’, European Commission, 8 November 2017, found at: http://trade.ec.europa.eu/doclib/docs/2018/february/tradoc_156602.pdf, [Accessed 22-05-2018], p. 14-15.

104 United States Delegation, ‘Third-Party Oral Statement’, p. 6-7.

105 Directorate Trade, ‘WTO Cases: Cases Involving the EU’, European Commission, 9 February 2018, found at: http://trade.ec.europa.eu/wtodispute/show.cfm?id=663&code=3 [Accessed 22-05-2018].

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matter would allow individual Members to decide on the outcome of the case, which should be decided by the panel.107

Afterwards, the EU went into how the content of the provision should be interpreted. First the EU makes clear that the RF is invoking Article XXI(b)(iii) more specifically, which makes the text read: ‘Nothing in this Agreement shall be construed (b) to prevent any contracting party from taking any action which (1)108_{[it considers}

necessary] (2) [for the protection] of (3) [its essential security interests] (iii) (4)

[taken in time of war or other emergency in international relations.]’. The biggest source of inspiration for their analysis are the general exceptions of Article XX and its two-tier test for its similarity in ‘structure and function’.109_{Even though there is no}

chapeau as in Article XX, it argues that a similarly structured test can be found in Article XXI, also including two elements. Certain aspects of these two elements should then be fully reviewed, and certain aspects should only be assessed whether they were fulfilled ‘in good faith’.

The first element to be tested in that aspect is whether the measure addresses the interest that is protected, which is then further split up in three tests:110_{First, the}

measure must be taken in ‘time of war or other emergency in international relations’. The EU argues that this should be fully reviewed, as it is part of a limited list of circumstances (either under ‘i’, ‘ii’ or ‘iii’), that there should be a sufficient nexus between the measure and the situation. The word ‘emergency’ also implies that there has to be some form of time pressure, so the situation (or happening) calling for the measure therefore cannot be too long ago, except if it is an ongoing threat.111

Second, the interests protected must be ‘essential’ and genuinely related to ‘security’, and not protectionist reasons or security reasons of ‘minor importance’. This is however only a review whether that can reasonably or plausibly have been established by the Member (due to ‘it considers’ and ‘its’), in order to avoid abuse of rights in light of the principle of good faith. This however cannot be a value judgment on whether the interest is legitimate, and the EU refers back here to the case law for EC

107 Directorate Trade, ‘Third-Party Written Submission’, pp. 3-5. 108 Numbers 1-4 are added for having a clearer overview, see the table. 109 Directorate Trade, ‘Third-Party Written Submission’, p. 7.

110 Ibid, p. 9. 111 Ibid, p. 10-11.

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– Seal Products, to reaffirm that Members themselves can determine the level of

protection they consider appropriate.112_{Third, the measure must be designed ‘for the}

protection of’, which means that the measure must be ‘capable’ of protecting the relevant security interest, following the case law of Article XX,113_{which means at}

least that if the measure is ‘incapable’ of furthering the interest, this nexus is automatically missing.114

The second element of XXI(b)(iii) is whether there is a sufficient nexus between the measure and the interest protected, which is reflected in the word ‘necessary’. Here the EU again reaches back to Article XX,115_{and therefore concludes that the}

‘challenged measure should, in most cases, be compared with reasonably available alternative measures that are less trade restrictive, while making an equivalent contribution to achieving the desired level of protection of the relevant objective.’116

Because of the discretion provided by the phrasing ‘it considers’, it can however only be established if the Member can reasonably consider the measure to be necessary in good faith. The EU backs this second element up with case law of the AB,117_{ICJ and}

even the Court of Justice of the EU (CJEU) about the wording ‘if that party considers’ used in several treaty provisions. All of these examples support using the principle of good faith for review instead of granting ‘unfettered discretion’ to the Member or country in that case.118_{For an easier overview of the analysis proposed by the EU and}

which part of Article XXI translates into which requirement, see Figure 1.

112 Ibid, p. 12.

113 For example: Korea – Beef, Appellate Body Report, WT/DS161/AB/R and WT/DS169/AB/R, (11 December 2000), para. 157.

114 Directorate Trade, ‘Third-Party Written Submission’, p. 12-13.

115 For example: US v. Section 337, Panel Report, L/6439 - 36S/345, (7 November 1989), para. 5.26 116 Directorate Trade, ‘Third-Party Written Submission’, p. 5.

117 Please consult paragraph 2.5 ‘The US Submissions in DS512’ at the end of the paragraph. 118 Ibid, p. 13-17.

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Figure 1: The analysis as proposed by the EU in DS512. (Source: the author based on the EU submission.)

2.7: Conclusion

The upcoming panel reports on the security exceptions and their respective underlying matters show that the interpretation of these provisions is a dispute that is, even today, highly political and controversial. The US and EU submissions to DS512 show two very divergent views on the issue. While the USA is still fully in support of the self-judging nature of the provision, the EU has shifted from that perspective and now advocates a limited review of measures taken under one of the security exceptions. This is especially interesting considering the traditional alignment of the EU (or before its individual Member States) with the USA on this issue, which is now wholly different, next to the fact that the USA and the RF have become tactical allies in this matter due to their positions.

Article XXI(b)(iii)

Does the measure protect the interest?

(4) Is the measure taken in time of war or other emergency in international

relations? (full review) (3) Is the measure taken for

an 'essential security’ interest?

(plausibly/reasonably) (no value judgment)

(2) Is the measure designed 'for the protection of'? (good

faith)

(1) Can the measure be considered 'necessary

(by the Member)'?

Possibility for desired level of protection with reasonable available alternative less trade

restrictive measures? (good faith)

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3: The European Sanctions and the Security Exception

Since the start of the conflict in Ukraine, the EU has initiated several rounds of (economic) sanctions or import restrictions (referred to collectively as ‘sanctions’ from now on) against the RF. This chapter will assess what these sanctions exactly entail, which GATT articles they could possibly prima facie violate, and whether or not the analysis as proposed by the EU in its submission for DS512 would allow the continuation of the economic sanctions of the EU on the RF. Despite the lack of an official panel report or other official interpretation on the security exception (or maybe even because of the lack of), an active academic debate has taken place on how Article XXI of the GATT or similar security exceptions should be interpreted. This chapter will use this academic input to further interpret the submission as construed by the EU. Most authors also describe what can be seen as the basic summary of the values in question of the debate: The weighing of the freedom of the parties to take measures needed for their security against making sure that the national security exception is not interpreted too wide so that country will misuse, for example for commercial purposes.119_{Although relevant, the position taken by some authors}

that the security exception is simply not reviewable, in line with the position of certain Members taken in the history of the security exception, will not be discussed.120_{The US submission for DS512, discussed in chapter two, will serve to}

show an alternative position on the possibility of review.

3.2: The Current European Sanctions on the Russian Federation

This chapter will start off by taking a look at which sanctions were put in place by the EU over the last few years against the RF. Since the annexation of the Crimean peninsula was the main reason the EU installed the sanctions in the first place, the EU has placed a special focus on it for its sanctions regime.121_{In March 2015, the}

119 Wesley, A. Cann, ‘Creating Standards and Accountability for the Use of the WTO Security Exception: Reducing the Role of Power-Based Relations and Establishing a New Balance between Sovereignty and Multilateralism (2001), Yale Journal of International Law, Vol. 26, Issue 2. p. 421-422

120 See for example: Roger Alford, ‘The Self-Judging WTO Security Exception’ (2011) Utah Law Review, vol 3, p. 697.

121 European Commission Newsroom, ‘Highlights: EU sanctions against Russia over Ukraine crisis’ European Commission, 24 May 2018, found at: https://europa.eu/newsroom/highlights/special-coverage/eu-sanctions-against-russia-over-ukraine-crisis_en [Accessed 24-05-2018].

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duration of these sanctions were linked to the complete implementation of the Minsk Agreements, a peace deal between Ukraine, Russia and the separatists (named after the Belarusian capital where it was negotiated).122_{Because so far the EU believed that}

that this has not taken place, these sanctions have been continued several times already, the last time being July 2018 for another half a year.123_{The EU recognizes}

five categories of sanctions: Diplomatic measures, restrictive measures (asset freezes and visa bans), restrictions for Crimea and Sevastopol, measures targeting sectoral cooperation with RF (also known as ‘economic sanctions’) and measures targeting economic cooperation.124_{Since the diplomatic measures and the measures targeting}

economic cooperation do not affect international trade directly, those will not be discussed further.

Restrictive measures. These measures are composed of asset bans applying to 149

individuals, while the assets of 38 entities were frozen. These are all persons or entities involved in the annexation of Crimea in some way, such as high-ranking politicians in the Kremlin, leading Crimean officials or entities such as the so-called Lugansk and Donetsk separatist ‘governments’ or the Russian National Commercial Bank, which became fully owned by ‘the Crimean Republic’ after the annexation.125

The restrictions for Crimea and Sevastopol. In Article 2 and its corresponding sub

articles of the implementing Council regulation,126_{it is explained that the following}

activities are now illegal: The import of goods originating in the Crimea (including Sevastopol) (article 2(a)), to provide financial assistance to Crimean goods (2(b)), acquire ownership, invest in or financially support entities or real estate on the Crimea (2a), sell certain goods or technology suited to use in the transport, energy,

122 Steven Pifer, ‘Minsk II at Two Years’, (Brookings Institute, 15 February 2017), found at: https://www.brookings.edu/blog/order-from-chaos/2017/02/15/minsk-ii-at-two-years/ [Accessed: 24-05=2018].

123 General Secretariat of the Council of Europe, ‘Russia: EU prolongs economic sanctions by six months’, Council of Europe, 5 July 2018, found at: http://www.consilium.europa.eu/en/press/press-releases/2018/07/05/russia-eu-prolongs-economic-sanctions-by-six-months/ [Accessed 18-06-2018]. 124 European Commission Newsroom, ‘Highlights: EU sanctions against Russia over Ukraine crisis’ European Commission, 24 May 2018, found at: https://europa.eu/newsroom/highlights/special-coverage/eu-sanctions-against-russia-over-ukraine-crisis_en [Accessed 24-05-2018].

125 Press Department, ‘List of Persons and Entities under EU Restrictive Measures over the Territorial Integrity of Ukraine’, Council of the European Union, 14 September 2017, found at:

http://www.consilium.europa.eu/media/21891/20170914-list-of-designated-persons-and-entities.pdf [Accessed 24-05-2018].

126 Council Regulation (EU) No 692/2014 concerning restrictive measures in response to the illegal annexation of Crimea and Sevastopol, [2014] OJ L 183.

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telecommunications or fossil fuels exploration and extraction on the Crimea (2b), to provide (technical) assistance to those sectors on the Crimea (2c) and a ban on providing tourism services (2d).

Measures targeting sectoral cooperation with RF (‘economic sanctions’). Next to the

targeted sanctions explained above, the EU also put in place a set of sanctions aimed at the RF as a whole. The guiding regulations127_{explain that the following actions are}

now illegal: to provide dual-use goods and technology for military use for use in the RF (article 2 833/2014), to export equipment, technology and certain services for fossil fuels exploration and extraction to the RF (3), to import or export (almost all) military equipment and arms to or from the RF (4) and to buy or sell financial instruments (with a maturity exceeding 30 days) from or provide financial advice to a select list of Russian banks and companies (5).

These measures can be summarized into an import ban for Crimean goods, an export ban of technology and equipment in certain sectors, import and exports bans on military equipment and technology, import and export bans on financial products and a ban on providing services in certain sectors, such as finance and gas and oil.

3.3: The Possibly Violated Articles

There are a couple of Articles that the implementation of these sanctions may possible violate of the GATT and GATS. There are four articles of the GATT that are probably violated: First is the most-favored nation rule, found in Article I. Second of all are the national treatment obligations found in Article III. Third of all is the general elimination of quantitative restrictions found in Article XI and with that also the non-discrimination with such quantitative restrictions in Article XIII of GATT 1994. For GATS, there are also four different articles that these sanctions may violate. First is Article II, the most-favored nation clause. Second is possibly Article VI, calling for reasonable, objective and impartial treatment of services. Third is the violation of market accession, in which financial services are included, as found in XVI and therefore the national treatment found in Article XVII. In summary, Articles I, III, XI

127 Council Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine [2014] L 229/1. (The package was further extended on 8

September 2014 by the adoption of the Council Regulation (EU) No 960/2014 and amended on 4 December 2014 by the adoption of the Council Regulation (EU) No 1290/2014.)

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and XIII GATT can possibly be violated by the sanctions, just like Articles II, VI, XVI and XVII GATS.

3.4: The Different Provisions of Article XXI

It is also important to distinguish the five different invocations that are possible within Article XXI, and to explain why paragraph (b) and also subparagraph (iii) are mostly applicable to economic sanctions, also in the case of the European sanctions on the RF. Paragraph (a) of Article XXI is only related to any information a party would need to disclose, and would allow a Member to abstain from doing so. Paragraph (c) is about any obligation a Member may have due to the UN Charter for the maintenance of international peace and security, and is most related to any sanctions or actions that the UN Security Council has mandated. However, this is usually not very problematic, because obligations coming from such resolutions of the Security Council are mandatory for a UN Member State to follow in any event (and would even trump WTO obligations under Article 103 UN Charter), so what would lead to almost all WTO Members implementing them anyway.128_{However, the European}

sanctions are (mainly due to the RF being a permanent member of the Security Council), no sanctions currently exist on the RF of the Security Council. Paragraph (b) could allow a Member to take action and therefore could impact another Member directly and on one’s own initiative, which has therefore been the most debated paragraph, and the one most relevant to economic sanctions in general.

In regards to the subparagraphs of (b), there is a clear difference between (i) and (ii) on the one hand, and (iii) on the other hand. Both (i) and (ii) are related to specific military or fissionable goods (or services when it comes to GATS) while (iii) only specifies a situation: In case of war or an ‘other emergency in international relations’, and therefore is far broader and far more difficult to interpret. Military exceptions can easily be seen as justifiable under Article XXI (b)(ii), it has been agreed that this provision should be interpreted widely and that even dual-use goods can fall under that.129_{It can be determined that the import and export ban on military and dual-use}

goods fall under this provision of the security exception. It can even be argued as well

128 Article 24(1) and Article 25 United Nations Charter. See also article 103: obligations under UN Charter shall prevail.

Battlefield WTO: The EU View of the Analysis of the WTO Security Exception and the Application of that View on the European Economic Sanctions on the Russian Federation