European Union initiates first WTO-based arbitration proceedings against the Russian Federation
In its annually published Trade and Investment Barriers Report (TIBR), in March 2013 the European Union listed Russia among major states using protectionist measures to prevent the development of European companies. In particular, the European Commission called the recycling tax on imported cars of September 1, 2012 a "purely discriminatory measure".
Customs duties on imported cars have been lowered since Russia's accession to the WTO in August 2012. However, Russian Government's Order "On the Recycling Tax on Wheeled Vehicles" imposed a recycling tax on imported cars from September 1, 2012 as a compensation for the missing part of the customs duty. Moreover, Russian manufacturers and automobile concerns assembling cars in Russia were exempted (only for the models assembled in Russia) from the recycling tax against the guaranty to recycle cars in the future.
EU Trade Commissioner Karel De Gucht said that the recycling tax failed to comply with the WTO baseline rule which prohibits discrimination of imported foods. A draft law which applies the recycling tax to domestic car manufacturers was developed and submitted to the State Duma for consideration in May 2013 after negotiations with the EU Trade Commissioner. The draft law abolishes the currently applicable rules which grant recycling tax exemption to Russian motor-vehicle manufacturers who undertook guarantee obligations to recycle their cars. The document is applied to the cars manufactured in the special economic zone in the Kaliningrad Region, as well as the Customs Union countries. The explanatory note to the draft law reads that when this law takes effect Russia "will fulfill its WTO-member obligations to create equal conditions for domestic manufacturers and importers".
The draft law which streamlines the conditions for levying the recycling tax on domestic and foreign manufacturers should have been adopted until July 1, 2013. However, no amendments were approved by that time, because the State Duma went into recess for the summer. As a result, on July 9, 2013, Reuters news agency1 announced that the European Union filed a suit against Russia to the WTO court with regard to the car recycling tax.
According to the WTO rules, parties in dispute may reach an "amicable" settlement within 60 days, i.e. settle a dispute through consultations. After 60 days the complainant party may demand that an arbitration group be established.
N. P. Volovik, Head of Foreign Trade Department
1 http://ru.reuters.com/article/businessNews/idRUMSE96802U20130709