Russian Mining companies squeezed between WTO and Customs Union, lawyers say

24.07.2013

Russian mining companies will find it increasingly difficult to secure additional protectionist measures due to the country’s membership of the Customs Union and the World Trade Organisation (WTO), international lawyers told PaRR.

Instead, Russia is likely to confine itself to a right to impose provisional duties 60 days after the initiation of any anti-dumping investigation, the lawyers said.

Last week, Russian Prime Minister Dmitry Medvedev said that the government is planning to prepare measures designed to support Russian mining companies.

At a meeting at Chelyabinsk Metallurgical Plant, representatives of the country’s mining companies, including Aleksei Mordashov, the CEO of Severstal, lobbied for the introduction of retroactive anti-dumping measures, in addition to the preliminary protective measures which Russia, in theory, can use.

The Introduction of such measures are important for mining companies. Currently, mining firms are experiencing problems because the volumes of steel consumption are decreasing, Victor Drozdov, a sector analyst from VTB Capital said. Consequently selling prices are low, he added. The financial results of mining companies in 2013 are expected to be at the same level as in 2009, when they reached their lowest results ever, Drozdov said.

Russia no longer has competence in the area of anti-dumping, because these powers have been delegated to the Customs Union (between Russia, Belarus and Kazakhstan) and are exercised by the Eurasian Economic Commission (EEC). The EEC member states adopt definitive decisions in similar way to the EU, according to Edward Borovikov, a Partner at Dentons in Brussels and head of the firm’s Europe trade team.

Special duty procedure is set out in Article 6, and provisional anti-dumping duties are in Article 14 of the "Agreement on the application of special protective, anti-dumping and countervailing measures against third countries", said Vladimir Tchikine, a partner in charge of customs and international trade at Goltsblat BLP, the Moscow branch of the Berwin Leighton Paisner law firm. This Agreement was concluded in Moscow on 25 October 2008 and amended on 18 October, 2011.

Tchikine added that the Agreement does not allow for the introduction of preliminary measures immediately after the start of an anti-dumping investigation. The agreement clearly sets (in Section 2, Article 14) that "the provisional anti-dumping duty cannot be introduced earlier than 60 calendar days from the date of initiation of the investigation", he added.

The EEC has already used its right to apply preliminary protective measures. The body's trade minister, Andrey Slepnev, previously told PARR that at the end of 2012 a decision to apply a provisional safeguard duty on combine harvesters and another one introducing a provisional anti-dumping measure against cast iron baths from China were adopted by the commission based on evidence that the customs union industries producing the respective goods suffered injury.

Preliminary measures limited by WTO, retrospective by the Customs Union

A more ambitious simplification of anti-dumping practice would require changes in the treaties on which the Customs Union of Belarus, Kazakhstan and Russia is based, said Borovikov.

Such simplification would also need to comply with WTO rules and Russia’s individual WTO commitments, he added.

According to Tchikine, the WTO Agreement states that temporary measures cannot be applied sooner than 60 days from the date of the initiation of an investigation.

Hence, the agreement cannot be changed in this context, because then it would conflict with the WTO Agreement. In any case, it is necessary to wait for 60 days, concluded Tchikine. Russia is likely to use this right to impose provisional duties 60 days after the initiation of the investigation, while staying within the existing legal framework, he added.

The earlier imposition of provisional anti-dumping measures and so-called retroactive application of duties from the date of initiation of an anti-dumping case is in line with WTO rules and has been considered previously by various trading partners, including in the EU, said Borovikov. According to the WTO website, Article 10 of the WTO Agreement contains rules for the retroactive imposition of dumping duties in specific circumstances. If the imposition of anti-dumping duties is based on a finding of material injury, as opposed to a threat of material injury or material retardation to the establishment of a domestic industry, anti-dumping duties may be collected as of the date provisional measures were imposed.

If provisional duties were collected in an amount greater than the amount of the final duty, or if the imposition of duties is based on a finding of threat of material injury or material retardation, a refund of provisional duties is required.

Article 10.6 provides for retroactive application of final duties to a date not more than 90 days prior to the application of provisional measures in certain exceptional circumstances involving a history of dumping, massive dumped imports, and potential undermining of the remedial effects of the final duty.

The problem for the Russian mining companies is that the Customs Union doesn't allow retrospective measures.

According to Article 54 of the Constitution of Russia, the law establishing or increasing liability shall not have retroactive effect, Tchkine said. In order to apply retrospective duties, the Constitution of Russia would need to be changed or the Constitutional Court of Russia would have to formally confirm that the concept of retrospective duty does not run counter the Russian Constitution.

by Natalia Lapotko in London

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