Introduction

In the International trade scenario, World Trade Organization (“WTO”) provides an operating framework which facilitates free trade between its member-countries. The Dispute Settlement Understanding (“DSU”) is a legal text containing the rules for dispute settlement in the WTO. The Dispute Settlement Body (“DSB”) comprising of representatives of all WTO Members, administers the DSU and is responsible for overseeing the entire dispute settlement process. Once the Panel and/or Appellate Body issues their reports in a given dispute, the DSB adopts the report(s), and issues a ‘recommendation and ruling’ to the country who has violated the WTO law, to bring itself into compliance with the WTO law. These recommendations and rulings are preferably to be adopted immediately after the concerned country communicates its intentions to implement them. However, if the same is not possible, the country is granted a ‘reasonable period of time’ for such implementation and subsequent compliance.

Article 21.3 of the DSU envisages three different ways in which the reasonable period of time can be determined:

• the period of time proposed by the Member concerned, provided that such period is approved by the DSB; or, in the absence of such approval,
• a period of time mutually agreed by the parties to the dispute within 45 days after the date of adoption of the recommendations and rulings; or, in the absence of such agreement,
• a period of time determined through binding arbitration within 90 days after the date of adoption of the recommendations and rulings. In such arbitration, a guideline for the arbitrator should be that the reasonable period of time to implement panel or Appellate Body recommendations should not exceed 15 months from the date of adoption of a panel or Appellate Body report. However, that time may be shorter or longer, depending upon the particular circumstances.”

It is interesting to note that the period of time proposed by the Member concerned has never been the approved reasonable period of time. In case the disputing countries cannot reach a mutually agreed upon time-period for implementation, they may resort to arbitration under Article 21.3(c) of the DSU. The reasonable period of time awarded by arbitrators have ranged from 6-15 months.

Ukraine-Russia dispute on reasonable period of time

Article 21.3(c) of the DSU was recently invoked in Ukraine - Anti-Dumping Measures on Ammonium Nitrate. In the dispute, following inconsistencies were noted by the Panel and Appellate Body in the anti-dumping investigation conducted by Ukraine against Russia:

• Ukraine acted inconsistently with Article 2.2.1 of the Anti-Dumping Agreement because it took into account wrongly calculated costs while conducting its ordinary-course-of-trade-test;
• Ukraine failed to calculate the cost of production in the country of origin, i.e. Russia, by using the export price of gas from Russia at the German border adapted for transportation expenses, for the purpose of constructing normal value, as per Article 2.2 of the Anti-Dumping Agreement
• Ukraine failed to disclose essential facts and give interested parties sufficient time to comment on its disclosure in the interim and expiry reviews, which is in violation of Article 6.9 of the Anti-Dumping Agreement; and
• Ukraine did not exclude EuroChem from the scope of the original anti-dumping measures and from the interim and expiry review determinations, which is in violation of Article 5.8 of the Anti-Dumping Agreement.

The DSB adopted the Panel and Appellate Body Reports on 30th September 2019, and Ukraine informed the DSB that it intended to implement the DSB’s recommendation and rulings in this dispute. However, it stated that it would need a reasonable period of time to do the same. Russia requested that the ‘reasonable period of time’ should be determined through a binding arbitration pursuant to Article 21.3(c) of the DSU, and Mr. Ramirez Hernandez was appointed to act as an arbitrator.

Ukraine argued that there was a two-step process which had to be followed by it in order to implement the recommendations and rulings effectively, for which it needed 27 months. It argued that since this is the first time Ukrainian anti-dumping measures have been found to be inconsistent with WTO law, Ukrainian legislation does not contain a specific procedure to bring the anti-dumping measures in conformity with the DSB’s recommendations and rulings. Therefore, firstly, it argued that it would be required to adopt a new law which enables the investigating authorities in Ukraine to conduct a review. Secondly, it would be required to conduct the said review investigation to comply with the rulings.

Russia, on the other hand, argued that Ukraine unduly sought to limit the role of the Arbitrator, since the role of the arbitrator is not limited to validating the timetable proposed by Ukraine. The role of the Arbitrator is to ensure that the shortest period of time is established as the reasonable period of time as a part of “prompt compliance” within the meaning of Article 21.1 of the DSU. Further, Russia stated that the amendment of the existing Ukrainian Anti-Dumping Law is not necessary, since it already incorporates provisions to implement the DSB’s recommendations and rulings within two months. Even if a legislative change is warranted, Russia argued that the timeline provided by Ukraine was too long and could be expediated.

The Arbitrator’s Award, circulated on 8th April 2020, clarified that while Ukraine has a measure of discretion in choosing the means of implementation, the discretion is not unfettered, and the method should bring Ukraine in compliance with WTO within a reasonable period of time.

It is pertinent to note that Article 21.3(c) states that the period of time recommended by the Arbitrator should not exceed 15 months, subject to ‘particular circumstances’. Ukraine submitted that is was facing ‘emergency in international relations’ since 2014. Such an emergency affects daily life and leads to extraordinary and unexpected delays in procedural actions. While, the Arbitrator’s Award accepts the possibility of such a situation qualifying as a ‘particular circumstance’, however it states that Ukraine’s argument was unsubstantiated since no relevant evidence was submitted by it for the same.

With that being said, the Arbitrator’s Award went on to note that Ukraine’s law allows for the initiation of an administrative review of the anti-dumping measures for the purposes of implementation, through the request of an executive authority, thereby not requiring any legislative changes. Therefore, the Arbitrator’s award did not account for the legislative changes that Ukraine proposed to undertake.

Therefore, with only the administrative review left to conduct by Ukraine, in order to ensure compliance, the reasonable period of time which was moot was brought down to 12 months, which was the maximum amount of time foreseen under Ukraine’s domestic legislation for an interim review. Ukraine, in this review, is not required to issue new questionnaires, conduct verification visits, or hold a hearing. Given the limited scope of the contemplated administrative review, which will focus on calculating normal value and complying with certain disclosure requirements, the Arbitrator held that 12 months is more than what is reasonably needed for implementation in this dispute. However, taking into account the recent developments in Ukraine relating to the COVID-19 pandemic, the Arbitrator granted Ukraine 11 months and 15 days, from 30 September 2019, to adopt the rulings and recommendations as made by the DSB.

Way forward

Through the said arbitration, it is clear that the ‘reasonable period of time’ must be as short as possible. In order to achieve the same, it is permissible for countries to eliminate procedures which are not essential, and to expediate the said process. The inability to implement the rulings and recommendations by the DSB in the determined reasonable period of time can result in a compliance dispute against the implementing country under Article 21.5 of the DSU. In order to prevent the same, it is recommended that all Member Countries should have provisions in their trade-remedy legislations to incorporate such compliance requirements.

[The author is an Associate in International Trade Practice, Lakshmikumaran & Sridharan, New Delhi]