Procurement rules will be challenged in the WTO // The European Commission saw discrimination in Russian import substitution

The European Union intends to challenge in the WTO the measures of the Russian authorities regarding import substitution in the procurement of companies with state participation. The reason is “discrimination against European suppliers” who cannot offer their goods and services to Russian state-owned companies on an equal footing. When adopting the contested norms, the Russian authorities assumed that they did not comply with the WTO norms, but took into account the fact that Russia did not join the agreement of this organization on access to procurement, and therefore there is no clear regulation of restrictions in this area for it. In addition, since the work of the WTO appellate instance is still blocked, the implementation of the decisions of this organization is now exclusively voluntary.

The European Union is requesting consultations with Russia within the framework of the World Trade Organization (WTO) mechanisms due to the protectionist measures previously introduced by the Russian Federation, which restrict the participation of European companies in the procurement of companies with state participation (FZ-223). As the European Commission (EC) said yesterday, “this practice is likely to contradict WTO rules, which require Russia not to discriminate against foreign companies in this area.”

Three norms have caused concern among Europeans. First of all, this is a mechanism of price preferences for Russian suppliers – when evaluating bids for participation in the purchase, Russian goods are considered 15% (up to 30% for certain items) cheaper than indicated in the application. The second rule concerns the receipt by state-owned companies of preliminary permission for the purchase of engineering products abroad, it is issued by the government commission on import substitution. “The permit is issued on an arbitrary basis and is not required for the purchase of domestic engineering products,” the EC said in a statement. The third block concerns the obligations of state-owned companies on the minimum share of purchases of Russian products – the norm has been in effect since 2020 and applies to 250 goods, including cars, equipment, medical devices and textiles (see “Kommersant-Online” dated December 7).

Note that even at the stage of discussion of these rules, the State Legal Department of the President criticized them precisely because they did not comply with the WTO norms (see Kommersant of May 19). Russia, upon joining this organization, did not join the agreement on public procurement (participation in it is voluntary), which allows the introduction of quotas when forming a government order, but for state-owned companies there is no such unambiguity. Vladimir Putin noted that there were no violations of the WTO rules, but he recommended that the government think over a “thinner” mechanism for companies with state participation (see Kommersant of June 4).

However, it is now impossible to challenge the rules within the WTO, since after the decision of the panel of arbitrators (taking into account official consultations, at least two years pass before the decision is made), the other party can appeal – and in the conditions of a shortage of judges in this instance, the final decision will be postponed. In 2020, countries submitted only five requests to the WTO (in 2019 there were 20) – the absolute minimum for the entire period of the organization’s work. In addition to the impact of the pandemic, such a decrease in activity is also explained by the fact that the United States continues to block the appointment of new judges of the organization’s appellate body. Its work has been suspended since December 10, 2019, when the term of office of the next judge expired (in order to make a decision, the claim must be considered by at least three judges). Now, despite the fact that the main body for resolving disputes of the WTO continues to work, the implementation of its decisions actually becomes a voluntary matter, because the decision of the appellate instance is considered the final one.

Diana Galieva, Tatiana Edovina

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