_ Dmitriy Chekalov, Senior Associate, HG. 2016.
On 29th of May 2014, the Republic of Kazakhstan (Kazakhstan), the Russian Federation (Russia) and the Republic of Belarus (Belarus) have signed the Treaty on the Eurasian Economic Union. Kazakhstan, Russia and Belarus have agreed to create and subsequently sign the Treaty on the Eurasian Economic Union (The Treaty on the Eurasian Union) due to their motivation and willingness to follow the principle of Sovereign equality between the states and the need to unconditionally follow the principle of the supremacy of constitutional rights and liberties of citizens, expressing their assurance that further development of the Eurasian economic integration reflect their national interests. The countries were also guided by the aim to strengthen the economies of the member states of the Eurasian Economic Union and to secure their harmonic development and integration. Apart from the main text of the Treaty on the Eurasian Union, the member states also developed a range of additional documents (protocols, provisions) that regulate various areas of cooperation within the framework of the Union. These are also considered as an integral part of the Treaty on the Eurasian Union. One of the fundamental documents regulating the area of dispute resolution in the Eurasian Union, and in cases when a member state is applying norms of various international agreements is considered to be a Regulation on the Eurasian Economic Commission (Eurasian Commission). And as of 1st January 2015 the Statute on the Eurasian Economic Union Court which replaces the Statute of the Court of Eurasian Economic Community dated 5th July 2010. It also replaces the Treaty on the dispute resolution procedure at the Eurasian Economic Community Court dated 9th December 2010 and the Protocol (amendments) to the Statute of the Eurasian Economic Community Court dated 5th July 2010 and subsequently signed on the 10th day of October 2011. The information below describes the competence of the Eurasian Union Court, the disputes that may be submitted to the Court, and advantages/disadvantages of the Eurasian Economic Union Court, etc.
Regulation on the Eurasian Economic Commission
According to the Regulation on the Eurasian Commission, which comes into force as of 1st January 2015, the Eurasian Commission is the permanent regulating body of the Eurasian Union and consists of the Council and the Board. Its competency includes decision – making process, preparation of instructions and recommendations. The main goal of the Eurasian Commission is to secure the functioning and the development of the Eurasian Union and to generate proposals related to the area of economic integration within the framework of the Eurasian Economic Union. In performing of its duties/activities, the Eurasian Commission is guided by the following principles:
- Provision of mutual benefit, equality and consideration of national interests of the member states
- Economic justification of the decisions
- Openness, publicity and objectiveness
The Eurasian Commission conducts its activities, within the powers prescribed by the Treaty on the Eurasian Union and by the international agreements within the framework of the Eurasian Union, in the following areas:
- customs tariff and non-tariff regulation;
- customs regulation;
- technical regulation;
- sanitary, veterinary and sanitary and quarantine phytosanitary measures;
- enrollment and distribution of import customs duties;
- establishment of trade regimes against third parties;
- statistics of external and mutual trade;
- macroeconomic policy;
- competition policy;
- industrial and agricultural subsidies;
- energy policy;
- natural monopolies;
- governmental and (or) municipal procurement;
- mutual trade in services and investment;
- transport and transportation;
- monetary policy;
- intellectual property;
- labor migration;
- financial markets (banking sector, insurance sphere, the currency market, equity market);
- other fields, defined by the Treaty and international agreements within the framework of the Eurasian Union.
The Eurasian Commission has the right, limited to its prescribed competence, to make decisions that have a statutory – regulatory character and orders that are binding for the member states. In addition, the Eurasian Commission has the right to make non – binding recommendations. The decisions of the Eurasian Commission create a law of the Eurasian Union and are directly applicable on the territories of the member states. Unless otherwise provided in the Treaty on the Eurasian Union and in the international agreements, the decisions of the Eurasian Commission come into force not earlier than 30 days of their official publication. The decisions of the Eurasian Commission, which may require immediate effect, can enter into force earlier, but not earlier than 10 days from their official publication. The members of the Board of the Eurasian Commission monitor the execution of the international agreements that are part of the law of the Eurasian Union. In turn, the Council of the Eurasian Commission reviews the results of the monitoring and control the execution of international agreements that are part of the Eurasian Union law. A member state or a member of the Council of the Eurasian Commission has the right to make a proposal to cancel the decision or to propose amendments to such decision within the 15 calendar days period from the date the decision was published. Then the Council has 10 calendar days to consider and make decision regarding such proposal. Further, in case a member state disagrees with the decision made by the Council of the Eurasian Commission, it may request to examine the issue by the Intergovernmental council and/or the Supreme council of the Eurasian Union. The decision of the Council that is under a revision will be suspended for the time that is required for the consideration of the matter by the Intergovernmental council and or the Supreme council of the Eurasian Union.
The Eurasian Economic Union Court
The Eurasian Economic Union Court (The Court of the Eurasian Union), whi January 2015 is a judicial body of the Eurasian Union, which is formed in accordance with the Treaty on the Eurasian Union and with the Statute of the Eurasian Economic Union Court. The headquarters of the Court will be located in the city of Minsk, Belarus. The Court of the Eurasian Union is replacing the Court of the Eurasian Economic Community, which had been operating until 10th of October 2014. The aim of the Court of the Eurasian Union is to secure a unified application of international agreements by the member states adopted within the framework of the Eurasian Union, international agreements signed between the Eurasian Union and third parties and of decisions of the Eurasian Union bodies. The Statute of the Eurasian Union Court provides that the Court has a competence to hear disputes that arise of the issues related to the implementation of the Treaty on the Eurasian Union, implementation of international agreements formed within the framework of the Eurasian Union and/or decisions of the Eurasian Union bodies. Legal entities, individuals registered in accordance with the legislation of a member state or a third state (Economic entity) and member states may submit their claims to the Eurasian Union Court. The Economic entities may submit the following disputes to the Eurasian Union Court:
- on the compatibility of the decisions made by the Eurasian Commission and its particular provisions which directly affect the rights and legitimate interests of Economic entity in the area of entrepreneurial or other economic activity if such decision or particular provisions lead to the invasion of rights and legitimate interests of the Economic entity;
- on appeal of actions or inactions of the Eurasian Commission which directly affect the rights and legitimate interests of Economic entity in the area of entrepreneurial or other economic activity, if such action or inaction lead to the invasion of rights and legitimate interests of Economic entity under the Treaty on the Eurasian Union.
However, the Court of the Eurasian Union does not have a power to hear disputes related to compensation of losses or other claims of material character. Additionally, it should be emphasized that the Court of the Eurasian Union does not accept claims if the Economic entity did not met the 3-month preliminary dispute settlement procedure with the Eurasian Commission. In performing its duties, the Court of the Eurasian Union is guided by the following provisions:
- generally accepted principles and norms of international law
- Treaty on the Eurasian Union
- International agreements within the framework of the Eurasian Union
- Decisions and orders of the Eurasian Union bodies
- International customs considered as general principles of international law
The Eurasian Union Court charges a fee for the resolution of a dispute submitted by the Economic entity or by a member state. The fee is paid in advance and equals to 37 000 of Russian rubles for the year of 2015. According to the Statute on the Eurasian Union Court, the Court shall review the dispute within 90 days period. After the Eurasian Union Court has issued a decision, the Eurasian Commission has to enforce it no later than 60 calendar days unless otherwise was indicated in the decision. In case the Eurasian Commission does not enforce the decision, the Economic entity has the right to refer to the Eurasian Union Court with a petition on adopting of measures for its enforcement. Then the Court of the Eurasian Union within a 15 calendar day period shall submit the petition to the Supreme Eurasian Union council in order to decide on the matter. The acts of the Eurasian Union Court have to be published in the official bulletin of the Eurasian Union Court as well as on its official web site. The Conception of the establishment of the international arbitration center of the Customs Union The project on the establishment of an international arbitration center of the Customs Union was issued by the Eurasian Commission on the 16th May 2013. The conception assumed that the competence of the International arbitration center of the Customs Union (arbitration center) would be much wider than the competence of any other international commercial arbitration center. In addition, it assumed that the arbitration center would be established in accordance with the law of the Russian Federation and would be located on its territory accordingly. The following disputes were assumed to be under the jurisdiction of the arbitration center:
- disputes arising out of the contractual and civil law relations;
- disputes between shareholders/participants of legal entities related to the establishment, reorganization and liquidation of legal entities;
- disputes related to shares/participatory interests in legal entities, encumbrances over shares/participatory interests;
- disputes arising out of claims initiated by shareholders/participants of a legal entity regarding the recovery of losses, termination of transactions of legal entities;
- disputes related to appointment, election, suspension or termination of powers of individuals that are members of the governing/regulating bodies of legal entities;
- disputes related to security bonds including disputes on the decisions of the governing bodies issuing such securities. These also include transactions conducted in the process of issuing of securities, reports on the results of the issuing of securities;
- disputes arising out of activities of register – holder of securities related to ownership rights on shares and other securities;
- disputes related to appeal of decisions made by the governing bodies of legal entities;
- disputes arising out of the activities of the depositaries related to the ownership rights on shares and other securities;
- disputes related to the protection of reputation in the area of entrepreneurship and other economic activities;
- disputes related to real estate
In order to secure an effective operation of the arbitration center, it was assumed that member states would sign an international agreement, which would clarify the questions on the arbitration center’s competency, include simplified procedure of recognition and enforcement of the decisions of the arbitration center on the territory of the member states. It also had to include a special procedure on enforcement of provisional remedies applied by the arbitration center. It was assumed that an organizational structure of the arbitration center would consist of the president, governing board, secretary -general and a secretariat. The Conception provided that the governing board would consist of two chambers. In turn, each chamber would consist of 6 persons. The first chamber would be considered as an international chamber, which would have to include widely recognized and respected international representatives of legal science and retired foreign judges. The second chamber (inner chamber) would have to include widely recognized representatives of legal science and legal practitioners of the member states of the Customs Union. The inner chamber had to be formed in the way as to provide each member state with two representatives (each of which is completely impartial and acts in a personal capacity, not representing interests of a member state).It also was thought that the composition of a tribunal would be formed by the arbitration center and must include a citizen of one of the member state, international arbitrator and an independent chairman. The question related to the establishment of the arbitration center within the framework of the Customs Union was discussed on the 21st session of the Council of Ministers of Justice of the Eurasian Economic Community in St. Petersburg on the 14th May 2013. According to statement of the Inter – Parliamentary Assembly of the Eurasian Economic Community, arbitration center should be established within the framework of the Court of the Eurasian Union. This would allow to significantly reduce the expenses on its establishment and maintenance. Suleimenov M.K, the chairman of the Kazakhstani International Arbitrage made a proposal to establish an arbitration center similar to the arbitration center under the Arab Convention on Commercial Arbitration (the Amman Convention). The Amman Convention was signed on 14th April 1987 with the aim to create a unified set of rules on commercial arbitration among the Arab countries, which are recognized among the international and national rules of arbitration. Therefore, the Convention applies to the commercial disputes between individuals and legal entities, regardless the citizenship or place of registration, connected to each other under the commercial transactions with one of the contracting states, or with one of its citizens, or with a legal entity that is registered in that state. The parties are entitled to submit any dispute to the arbitration center by including an arbitration clause into their contract or by introducing the arbitration clause after the dispute has arisen.
Case practice of the Court of the Eurasian Economic Community
A review of the Eurasian Community Court’s case law is quite interesting and is informative with respect to the application of the law within the framework of the existing integration on the territory of Eurasia. A below discussed case involves the rejection of the Eurasian Economic Community Court to accept a statement of claim of an Economic entity executed in an appropriate way. In October 2014, an Economic entity has sent a statement of claim to the Eurasian Economic Community Court regarding the Eurasian Commission that failed to issue a binding Notification to one of member states to comply with the provisions of the Customs Union code.After considering the statement of claim, the Eurasian Economic Community Court refused to accept it. The rejection was based on the following grounds:
- the statement of claim did not provide an information with respect to a particular inaction of the Eurasian Commission and violation of rights and legitimate interests of the Economic entity;
- The documents that were presented to the court did not indicate that the claimant communicated with the Eurasian Commission with respect to non-compliance of the international agreements by a state body of a member state;
- There was no confirmation providing that the copy of the statement of claim and other related documents have been sent to the respondent;
- There was no evidence that the required fee was paid personally by the Economic entity. It should be emphasized that one of the tribunal’s judge disagreed with the position of the tribunal and therefore has issued a dissenting opinion. The dissenting opinion was based on the following arguments:
- According to the Statute of the Eurasian Economic Community Court, there are only two grounds for the rejection of dispute resolution applications: non – compliance with the pre-judicial settlement procedure and failure to make an advance payment of the court’s fee. None of these grounds for the rejection correspond to the grounds applied by the tribunal;
- Moreover, according to the statement of claim, it does clearly indicate that customs authority of a member state did not comply with the specific provisions of the Customs Code of the Customs Union and it does indicate the failure of the Eurasian Commission to make an appropriate action in relation to a member state;
- The applicant has clearly indicated that inaction of the Eurasian Commission was a result of failure to send a binding notification to the customs authority of a member state, that resulted a damage to the applicant in the form of the fees for the detained vehicles, fines and penalties for the non – execution of contractual obligations. This constitutes violation of its rights and legitimate interests in the area of entrepreneurial activity;
- Provisions of the Treaty on the Eurasian Commission, rules of the Eurasian Economic Community, the decision of the intergovernmental council of the Eurasian Economic Community do not contain imperative norms that establish a payment fee to be paid by the economic entity personally. According to the provided documents, the required fee was paid by a legal counsel of the economic entity and all the required information was indicated at the respective application;
- The failure to send a copy of the statement of claim to the respondent does not constitute non-compliance with the application procedure set out in the rules of the Eurasian Economic Community Court;
- According to the norms of the Statute on the Eurasian Economic Community Court, the Treaty on the Eurasian Commission and the rules of the Eurasian Economic Community Court, the Court has the duty to resolve disputes but also to protect the rights and legitimate interests of economic entities.
Therefore, the dissenting opinion concluded that the rejection to accept the application of the Economic entity was unreasonable. It should be emphasized that the decision of the Eurasian Economic Community Court is binding and not a subject to appeal. This is also one of the main concerns about the Eurasian Economic Community Court. The above case provides that there is a certain degree of bias even in such respected supreme judicial body of the Eurasian Economic Community. The above reviewed case also demonstrates a level of development of the integration of the Eurasian countries, and the competency of the judges appointed by the member states providing them with the right to represent the state and to bring a justice.
The existing agreements between the member states of the Eurasian Union do not provide an effective
mechanism for dispute resolution process. The Eurasian Union Court’s rules are practically identical to those of the Eurasian Economic Community Court.Based on the analysed documents related to the future activity of the Eurasian Union Court, the documents which related to the current functioning of the Eurasian Economic Community Court, its practical approach, it may be concluded that the Court of the Eurasian Union will not meet the needs and expectations of the modern business community. The law – makers have to meet the expectations of rapidly developing business society and to fulfil the obligations undertaken in the framework of established communities. The reviewed case is a good example when a supreme judicial body of the community fails to perform its duties. This leads to the mistrust from the potential applicants and to the cliché of a lack of practical effectiveness of the discussed judicial institution. In addition, the proposed in 2013 Conception on the establishment of the arbitration center has a number of substantial disadvantages. The proposed establishment may increase a number of private commercial arbitration organizations, established in accordance with the laws of Russian Federation. The proposed mechanism regarding the establishment of two chambers (international and inner), the appointment of governing council for further preparation of the arbitrators list and chairmen of the tribunals is highly bureaucratic process. Additionally, such procedure may create grounds for corruption in relation to the appointment of an arbitrator and puts under threat the universal principals of dispute resolution – independence and impartiality of the arbitrators. Economic entities shall have a right to appoint their own arbitrators but not to be limited by the list. The structure of the arbitration center must be simple and clear to an ordinary businessman. Its rules must reflect the current requirements of professional and impartial dispute resolution, whereas the international agreements regulating functioning and competence of the arbitration center must include a precise procedure for unconditional enforcement of the arbitration center’s decision by the member states. Economic entities must feel free to decide where to conduct the dispute resolution process – either in the capital-cities or other large cities of the member states. Moreover, rules of the arbitration center shall not contain broad provisions in order to exclude a possibility of misleading interpretation or inconsistent application of its provisions. Additionally, I would like to draw an attention to the existing mechanisms of disputes resolution involving a business entity and a state body in countries that are part of the Eurasian Economic Community. The existing order for appeal no longer meets the latest requirements and development-taking place within the framework of integration communities.An Economic entity may suspect the direct bias of the state court in relation to the state body. In such situations, an Economic entity shall has a right to appeal the decision of national supreme court to the court of the Eurasian Union. National supreme courts not always may establish all the relevant facts and to take into account all of the evidence. In such cases, the interests of Economic entities must be protected by the Court of the Eurasian Union (if the grounds are justifiable). Coming back to the discussion regarding the establishment of the arbitration center, I believe that only a truly independent arbitration center having the capacity to review applications of Economic entities of the participating countries that accept its jurisdiction will provide an effective resolution of disputes within the Eurasian Union. The arbitration center shall apply all the internationally recognized recommendations, guiding principles regulating the principles of conducting international arbitration, appointment of arbitrators and experts ,etc. The arbitration center must be established as an independent non – commercial international organization, which for example could be named as Eurasian Chamber of Commerce that would include thousands of associations and companies that are interested in developing of commercial relations on the territory of the Eurasian Union. The Eurasian Chamber of Commerce could assist the companies in resolving various problems within the Eurasian Union. The main aim of such establishment could be a development of the respect to high standards of conducting business in the Eurasian Union. The international arbitration center of the Eurasian Chamber of Commerce would help to get a trust of those national and transnational companies, which today prefer to resolve their disputes abroad. As a result, we can get a powerful, effective and rapidly growing united market within the Eurasia, which will serve as an example for other communities and will attract more investments of the global business community to the Eurasian Union.