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WTO Explores Limits of Trade Actions Based on National Security

Aug. 2, 2020
By: Mert Ermen Arkan


Under Article XXI of the General Agreement on Tariffs and Trade (“GATT”) Member States may adopt trade sanctions against another Member State where the “essential security interests” of the sanctioning country are threatened. On April 5, 2019, the WTO issued its first substantive interpretation of this provision and the limits of its use. The Panel decision in DS512: Russia — Measures Concerning Traffic in Transit, which remains subject to review by the Appellate Body, found in favor of Russia’s invocation of Article XXI, but, ultimately concluded that the provision was not unlimited, was reviewable, and required the existence of an objective “situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state.”

The dispute arose following a deterioration of relations between Ukraine and Russia precipitated by Russia’s incursion into sovereign Ukrainian territory in a series of military actions that included the Crimean Peninsula and the Donbas region. In the wake of these developments, from 2014 and 2018, Russia adopted a series of measures restricting Ukraine’s use of transit routes across Russia to markets in Central Asia. Ukraine formally initiate a dispute before the WTO claiming that these transit measures violated Russia’s GATT obligations under Article V (freedom of transit) and Article X (publication and administration of trade regulations). The Russian government argued that its measures were among those necessary for the protection of its essential security interests as covered by Article XXI(b)(iii), and further, that the WTO lacked jurisdiction to decide the matter. This was the first time since the WTO’s founding that a WTO Member had invoked the Article XXI Security Exceptions provision in a dispute.

Article XXI(b)(iii) states that “Nothing in [GATT] shall be construed…to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests…taken in time of war or other emergency in international relations.” Crucially, the language of the provision, and in particular the phrase “which it considers necessary,” left open the possibility that the provision might be entirely self-judging by the WTO Member invoking the exception.

When the dispute came before the WTO, Russia asserted that Article XXI was self-judging and that the dispute involved a national security matter- its corresponding actions, taken ostensibly in furtherance of its essential national security interests, were not of a category that the WTO was intended to adjudicate or otherwise limit. The United States filed its own brief as a third-party participant in the dispute, largely agreeing with the Russian position that the WTO couldn’t judge Russia’s national security decisions. The United States took the position that each individual WTO Member had the “inherent right” to take actions it considers necessary for the protection of its essential security interests and that there were no legal criteria for the WTO to judge a Member’s essential security interests.

The panel rejected these arguments and found they could render judgment on the issue. The Panel found that WTO Members are required to apply Article XXI in “good faith,” with the implication that WTO panel may review whether the challenged measures were “not implausible” and within the scope of Article XXI(b). The Panel found that Russia had met the requirements for invoking Article XXI(b)(iii) because Russia had imposed the challenged measures in the time of an emergency in international relations which objectively involved a “situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state.”

What are the larger implications of this decision for international trade law? In short, Member States do have wide discretion to adopt such trade actions as they view as necessary for the protection of their essential security. However, such actions are subject to WTO challenges and must be justified on an objective basis as plausibly relating in fact to “essential security interests.”

Please contact any Barnes, Richardson & Colburn attorney if you have questions about national security provisions and trade.