In April 2019 the World Trade Organization issued its panel report Russia - Traffic in Transit,1 which contained the first WTO panel ruling on the security exception in the 1994 General Agreement on Tariffs and Trade. Prior to this decision, the security exception had never been interpreted and its role in WTO dispute settlement was unclear and perhaps controversial. This decision is also notable for its potential bearing on two ongoing, politically sensitive WTO disputes in which the security exception has been invoked. Below, a brief review of the security exception is provided, followed by a summary of the key passages, discussion and analysis.
Overview of GATT XXI
The security exception is found at GATT Article XXI. It provides that a member may derogate from its GATT obligations where doing so is necessary for a security purpose. It reads:
Nothing in this Agreement shall be construed
[…]
(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests
(i) relating to fissionable materials or the materials from which they are derived;
(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;
(iii) taken in time of war or other emergency in international relations; or
[…]
Subparagraph (b) has been the subject of competing proposed interpretations, centring on the “it considers” language. One approach holds that this provision is “self-judging,” such that the invoking member alone determines which measures are necessary to protect its security interests. Further, because it is self-judging, it is not subject to review by a WTO panel and is therefore “non-justiciable.” The United States has consistently advanced this interpretation and made third-party submissions to this effect in this dispute. In its third-party submissions, Canada submitted that while each country ought to be allowed to determine its essential security interests, it is subject to a good-faith requirement.
Facts, measures at issue and arguments of the parties
Ukraine challenged a set of Russian measures that severely restricted the flow of goods from Ukraine through Russia, destined for Kazakhstan and the Krygz Republic. For example, certain shipments had to enter through designated check points at the Belarus-Russia border (effectively detouring north instead of travelling the quickest easterly route) or had to be equipped with identification seals and registration cards. Ukraine claimed that these measures violated GATT Article V (Freedom of Transit) and Russia’s Accession Protocol.
Russia based its defence on Article XXI(b)(iii) and argued that the provision was self-judging and non-justiciable. Though it provided little detail on what “emergency in international relations” it was referring to, it vaguely referred to a situation in Ukraine that arose in 2014 and continued to exist. Importantly, it submitted that the panel could only note that the security exception had been invoked, as it lacked jurisdiction necessary to evaluate measures taken under it.
The panel’s findings on Article XXI and overall conclusions2
The panel rejected Russia’s approach. According to the panel, for a measure to fall within the scope of any of the XXI(b) subparagraphs, it must be objectively found to meet the requirements of that paragraph. A measure justified under subparagraph (iii) will be reviewed to ensure that an “emergency in international relations” in fact exists, and that the measure was “taken in time of” that emergency. Further, though the “it considers” language in paragraph (b) permits members to determine what it considers an essential security interest, that determination is subject to a good-faith requirement, consistent with international treaty law. That is, a measure will be reviewed to ensure that a member is not simply trying to evade its GATT obligations. Further, the good-faith obligation applies not only to the definition of essential security interest, but that interest’s connection to the measure at issue. The measure must not be too remote from, or unrelated to, the essential security interest identified.
Working with the above analysis, the panel first examined whether the requirements of subparagraph (iii) had been met. The panel defined “emergency in international relations” as 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.”3 The panel took notice of deteriorating relations between Ukraine and Russia since March 2014, and UN General Assembly resolutions on that situation in finding that the emergency requirement had been met. Because the measures at issue were issued during that emergency, the “taken in time of” requirement had been satisfied as well. Accordingly, the objective requirements of XXI(b)(iii) had been met.
Regarding the good-faith requirement, the panel noted that the emergency identified by Russia is “very close to the ‘hard core’ of war or armed conflict.”4 And despite Russia’s allusiveness in describing that emergency, it was “minimally satisfactory” in evincing good faith. The panel did not find that Russia’s characterization of its essential security interests was intended to circumvent its GATT obligations. The panel also found that there was a correlation between the measures at issue and the emergency in international relations, thus satisfying the second component of the good-faith requirement. Accordingly, the good-faith requirement of Article XXI(b) had been met.
Having found that the measures were justified under GATT XXI, the panel concluded that Russia had not acted inconsistently with its GATT or Access Protocol commitments.
Implications
This ruling may have important implications. First, in rejecting Russia’s interpretation of Article XXI, the panel has effectively rejected the interpretation historically put forward by the U.S. This is significant because the U.S. has invoked Article XXI in the ongoing series of WTO disputes arising from its steel and aluminum tariffs. The U.S. position, if accepted, would have allowed it to block panel review of those tariffs that are the subject of six ongoing WTO disputes. Also, the test under Article XXI arguably presents problems for the U.S.’s defence of those measures. For example, satisfying the good-faith requirement may be difficult given that President Trump has arguably created a record of bad-faith motivations through his tweets.5 It is also difficult to see how the U.S. can satisfy the objective requirements of subparagraph (iii) given the panel’s definition of “emergency in international relations.”
Second, the security exception figures prominently in a series of disputes relating to the land, sea and air blockade imposed on Qatar by its neighbouring countries. In United Arab Emirates-Goods, Services and IP Rights, which is still being adjudicated, the UAE has, along with Bahrain, Saudi Arabia and Egypt, adopted the position that XXI(b) is entirely self-judging. Consequently, a second panel ruling on the justiciability of GATT Article XXI may be on the horizon.
Caveats apply, and the significance of this ruling should not be overstated. Adopted reports are not binding precedent for subsequent panels or the appellate body (though in practice they are generally followed). Also, if this report is appealed, it is unclear when – if ever – the appeal will be heard. As of October 2018, the appellate body currently has been reduced to three members - the minimum allowable for an appeal - with no appointments forthcoming. However, for now, the ruling has provided much-needed clarity on a provision that members appear increasingly willing to invoke.
Jeremy D’Souza is an associate at Conlin Bedard.
End notes
- Russia- Measures Concerning Traffic in Transit (2019) WTO Doc WT/DS512/R (Panel Report), online: WTO <https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds512_e.htm> [Russia- Traffic].
- See Russia-Traffic, ibid, at paras 7.101-7.103 for a succinct summary of the panel’s interpretation of XXI(b)(iii). For the subparagraph (iii) analysis, see starting at para 7.111; for the XXI(b) analysis, see starting at para 7.127.
- Russia-Traffic, supra note 1 at para 7.76.
- Russia-Traffic, supra note 1 at para 7.136.
- For example, see: https://twitter.com/realdonaldtrump/status/970451373681790978; https://twitter.com/realdonaldtrump/status/972585290857672704; or https://twitter.com/realdonaldtrump/status/1069970500535902208.