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Ukraine Changes Approach to Disputes in the WTO. What Will Change for Business

Date of publication: 13 June 2016

Olena Omelchenko, Partner, Attorney at Law, Head of International Trade Practice

Source: European Pravda

Ukraine has been a member of the World Trade Organization (WTO) for eight years, but it has insignificant experience in settlement of trade disputes, especially as a plaintiff.

Obviously, the number of cases does not evidence unwillingness of the state of Ukraine to protect own interests through the WTO mechanisms.

It is prevented by a whole range of problems, firstly, internal ones.

Adoption by the Cabinet of Ministers of resolution “On approval of the Procedure for ensuring protection of rights and interests of Ukraine in the trade and economic field within the framework of the World Trade Organization” can change the current situation essentially.

This decision will permit the Ministry of Economic Development to provide real effective protection of national trade interests of Ukraine in the WTO. At least two reasons that prevented it should be mentioned:

Firstly, Ukraine lacks internal legal regulation aimed at implementation of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes.

Unfortunately, since the entry of Ukraine into the WTO not any regulatory legal act was approved, which would establish the procedure for adoption of decision on initiating a lawsuit in the WTO, the need for harmonization of such a decision on the level of public authorities, the ability to gather evidence and ensure confidentiality in the framework of the case.

According to the approved resolution the Ministry of Economic Development was charged responsible for protection of rights and interests of Ukraine in the trade and economic sphere. It also allocated the role to the interested businesses that must report violations of the WTO rules by other member states and may qualify for membership in the Interagency Working Group (IWG).

It is envisaged that the IWG will be convened to ensure coherence of interested bodies and organizations, preparation of proposals, responses and recommendations for institutional, procedural and other matters.

Presumably, a separate IWG will be created in each case and its composition will be approved by order of the Minister of Economic Development and Trade.

The Resolution envisaged the need to preserve confidential information and the possibility of holding consultations on compensation, suspension of concessions and other obligations with the WTO members.

Obviously, the Procedure did not resolve all issues arising during implementation of the understanding, but it is a significant step forward to settlement and creation of a transparent and effective practice.

The second reason is lack of legal grounds of the Ministry of Economic Development to engage legal advisers and experts for protection of rights and interests of Ukraine in the WTO.

It is the main reason why Ukraine still does not actively respond to violation of its rights by other WTO member states, including the Russian Federation.

It should be noted that in the second half of 2015 the Ministry of Economic Development for the first time had a separate structural unit responsible for settlement of disputes in the WTO, which will protect trading interests of Ukraine in the framework of the existing disputes.

However, it is difficult to count on a proper legal support of cases in the absence in Ukraine of legal practitioners with experience in the WTO and still non-market salaries of civil servants.

The only correct decision in this situation is engagement by Ukraine of external legal advisers in the WTO cases.

Taking into account a high cost of legal support in such cases, many countries engage as legal advisors the national and international law firms at the expense of business.

As practice shows, the Ukrainian business is not ready to finance such cases and the Ministry of Economic Development can not engage lawyers either free of charge or at the expense of business – it is prohibited by the Law “On combating corruption”.

Legal service of one case, not to taking into account the appeal stage, by the international law firm with a high rating may cost $ 0.5-1 mln, and with a lower rating – $ 0.3-0.5 mln.

The same services of the Advisory Centre on WTO law are estimated at $ 150-250 thousand, but before that you need to make a one-time membership fee and sign a relevant protocol of accession.

Adoption of the resolution enables the Ministry of Economic Development in the future to plan in the state budget the funds for public procurement of legal services of international companies to protect the interests of the state.

This way was earlier followed by the Ministry of Justice and the Ministry of Foreign Affairs that buy services of legal advisors for public funds according to the negotiating process to protect interests of Ukraine in international arbitrations, foreign courts and the International Court of Justice.

The Ministry of Finance and the government are expected to support the Ministry of Economic Development and provide the appropriate funding for these purposes.

Then we will see the new cases in the WTO, where Ukraine will sue actively protecting the trade interests.

Once this mechanism begins to work, the procedure can be expanded to other trade regimes, in particular, to consideration of disputes within the framework of the Association Agreement between Ukraine and the EU.