EU launches WTO dispute over discriminatory public procurement of Russian state-owned enterprises
Dispute settlement | Brussels, July 19, 2021
The EU calls for consultations with Russia in the World Trade Organization (WTO) regarding certain Russian measures that restrict or prevent EU companies from selling goods and services to Russian state-owned enterprises and to other entities through government procurement for commercial purposes. These practices appear to be contrary to WTO rules which require Russia not to discriminate against foreign companies in this area.
Since 2015, Russia has gradually extended its import substitution policy using various restrictions and incentives. These aim to replace the use of foreign goods and services in public procurement by certain state-linked entities, and by legal persons in state-funded investment projects. The economic impact for EU businesses is very significant. In 2019, the value of tenders published by state-owned enterprises was 23.5 trillion rubles, or about 290 billion euros and the equivalent of 21% of Russia’s GDP.
The EU is challenging in particular three Russian measures which appear to be inconsistent with WTO law, notably with the fundamental WTO principle of national treatment which obliges WTO members to treat foreign and domestic producers in a non-compliant manner. discriminatory. These include:
- Discriminatory evaluations of calls for tenders: during the assessment phase of their markets, certain state-linked entities charge 15% (up to 30% for certain products) of the price offered for the domestic products or services of Russian entities. If the offer with domestic products or services of a Russian entity is subsequently selected, the full price is subsequently always paid. This means that products or services imported from foreign entities are considered less favorably during this assessment phase, as they do not benefit from this 15% price reduction. This results in discrimination against offers with imported goods or services provided by foreign entities.
- Requirements for prior authorizations: Russian companies wishing to source certain engineered products abroad need permission from the Russian Import Substitution Commission. This authorization appears to be given on an arbitrary basis and is not necessary for the purchase of domestic engineered products.
- National procurement quota requirements: for around 250 products, including vehicles, machinery, medical devices and textile products, of which up to 90% must be domestic products.
The dispute settlement consultations the EU has requested are the first step in the WTO dispute settlement procedures.
If they do not reach a satisfactory solution, the EU can ask the WTO to set up a panel to rule on the matter.
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