Dispute Settlement

General rules on dispute settlement

The association agreements provide for general rules for dispute settlement and specifi c rules for dispute settlement for the DCFTA part. While the general rules apply to the whole framework of association agreements, disputes concerning the interpretation, implementation or the application in good faith of provisions of the DCFTA part are excluded from the scope of the general dispute settlement system. This kind of disputes should be resolved within the specifi c dispute settlement mechanism provided for in the DCFTA part itself (EU-Georgia AA: Art. 421 (1); EU-Moldova AA:

Art. 454 (1); EU-Ukraine AA: Art. 477 (1)).

First step under the general dispute settlement system (EU-Georgia AA: Art. 420–421; EU-Moldova AA: Art. 453–455; EU-Ukraine AA:

Art.  476 – 478) provided for in the association agreements is consultation between the parties on any matter that concerns the interpretation, implementation or the application in good faith of these agreements and other relevant aspects of the relations. If the relevant issue crystallises into a dispute, it should be referred to the Association Council with a formal request to resolve it.

The progress in consultations within the Association Council will require and depend upon the good faith efforts of the parties in order to reach a mutually acceptable solution in the shortest time possible. Accordingly, the association agreements call upon the parties to endeavour to resolve a dispute by entering into good faith consultations (EU-Georgia AA:

Art. 421 (2); EU-Moldova AA: Art. 454 (2); EU-Ukraine AA: Art. 477 (2)).

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This also includes the willingness of the parties to provide the Association Council with all relevant information needed for thorough examination of the situation (EU-Georgia AA: Art. 421 (3); EU-Moldova AA: Art. 454 (3);

EU-Ukraine AA: Art. 477 (3)).

In the end, the Association Council is fully responsible for handling the dispute at this stage. It will either declare that the dispute is at an end or resolve the matter by taking a decision. Regardless, the decision of the Association Council on settlement of a dispute is binding (EU-Georgia AA: Art. 420  (3); EU-Moldova AA: Art. 453 (3); EU-Ukraine AA:

Art. 476 (3)). One way or another, the Association Council shall discuss the relevant dispute until it is no longer an issue (EU-Georgia AA: Art. 421 (4);

EU-Moldova AA: Art. 454 (4); EU-Ukraine AA: Art. 477 (4)).

However, if the dispute is not resolved within three months of the date of notifi cation of a formal request for dispute settlement, the complaining party is free to take “appropriate measures”. In the selection of such measures, priority must be given to those which cause the least disturbance to the functioning of the association agreement. In any case, such measures may not include the suspension of any rights or obligations provided for under the DCFTA part of the agreement, except in cases when denunciation of the agreement is not sanctioned by the general rules of international law or the other Party violates any of the essential elements of the association agreement (EU-Georgia AA: Art. 422; EU-Moldova AA: Art. 455;

EU-Ukraine AA: Art. 478). The same exceptional cases allow a party to waive the requirement for a three-month consultation period and take appropriate measures before the expiration of this period (EU-Georgia AA:

Art. 422 (1); EU-Moldova AA: Art. 455 (1); EU-Ukraine AA: Art. 478 (1)).

As for the essential elements of the association agreements, these are: respect for the democratic principles, human rights and fundamental freedoms, as proclaimed in the United Nations Universal Declaration of Human Rights of 1948 and as defi ned in the European Convention for the Protection of Human Rights and Fundamental Freedoms of 1950, the Helsinki Final Act of 1975 of the Conference on Security and Cooperation in Europe and the Charter of Paris for a New Europe of 1990, countering the proliferation of weapons of mass destruction, related materials and their means of delivery (EU-Georgia AA: Art. 2 (1); EU-Moldova AA: Art.  2  (1); EU-Ukraine AA: Art. 2). It should be mentioned that the list of the essential elements provided for in the EU-Ukraine Association Agreement also includes respect for the principle of the rule of law, whereas under the EU-Georgia and EU-Moldova Association Agreements, the parties “only” reaffi rm their

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respect for the principle of the rule of law (EU-Georgia AA: Art. 2 (2);

EU-Moldova AA: Art. 2 (2)).

Dispute settlement mechanism under DCFTA

The DCFTA part of the association agreements differentiates between two types of consultations into which the parties can enter. The fi rst type of consultation is a means to clarify any matter arising under the DCFTA chapter through communication between the parties. The second is part of the dispute settlement mechanism. The former starts when a party requests consultation with the other party regarding any matter arising under the DCFTA chapter of the association agreement by delivering a written request to the other party (EU-Georgia AA: Art. 242; EU-Moldova AA: Art. 378;

EU-Ukraine AA: Art. 300 (4)). After entering into consultations the parties are under an obligation to make every effort to achieve a mutually satisfactory resolution to the matter. The Trade and Sustainable Development Sub-Committee may also be involved in this process if a party considers the matter to need further discussion and delivers the corresponding request in written form to the other party. Following this, the Sub-Committee shall convene promptly and make efforts to fi nd a resolution of the matter.

Furthermore, a Panel of Experts (EU-Georgia AA: Art. 243;

EU-Moldova AA: Art. 379) or a Group of Experts as it is called under EU-Ukraine Association Agreement (EU-Ukraine AA: Art. 301) can be convened upon request of a party to examine the matter that has not been satisfactorily resolved through consultations. Such a request can be made only 90 days after starting the initial consultations. The list of experts shall be established by the Trade and Sustainable Development Sub-Committee and comprise 15 individuals, of whom at least fi ve shall be non-nationals of either party, with expertise on the issues covered by the DCFTA, who are independent, serve in their individual capacities and do not take instructions from any organisation or government with regard to issues related to the matter at stake. The Panel of Experts shall comprise three persons, two of them selected by the parties and one selected by the latter two. The panel presents its report to the parties, discribing the fi nding of facts, analising the applicability of relevant provisions and setting out recommendations.

As mentioned above, the DCFTA has its own system of dispute settlement (EU-Georgia AA: Art. 244–270; EU-Moldova AA: Art. 380–406;

EU-Ukraine AA: Art. 303–326) and any matter arising under this part of the agreement should be discussed and solved on the basis of the procedures provided for in the DCFTA Title itself (EU-Georgia AA: Art. 421 (1) in

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conj. with Art. 245; EU-Moldova AA: Art. 454 (1) in conj. with Art. 381;

EU-Ukraine AA: Art. 477 (1) in conj. with Art. 304). There are three main stages to the dispute settlement system: consultations between the parties (EU-Georgia AA: Art. 246; EU-Moldova AA: Art. 382; EU-Ukraine AA:

Art. 305); adjudication by panels (EU-Georgia AA: Art. 248–253, 261–267;

EU-Moldova AA: Art. 384–389, 396–403; EU-Ukraine AA: Art. 306–310, 317–322) and implementation of the ruling (EU-Georgia AA: Art. 254 – 260;

EU-Moldova AA: Art. 390–395; EU-Ukraine AA: Art. 311–316). At any time the parties may reach a mutually agreed solution to a dispute. In this case, the arbitration procedure will be suspended (EU-Georgia AA:

Art. 362; EU-Moldova AA: Art. 398; EU-Ukraine AA: Art. 317).

The consultation stage aims at giving the parties the opportunity to settle their differences by themselves. Progress in consultations between the parties will depend upon the good faith efforts of the parties in order to reach a mutually agreed solution. Therefore, association agreements urge the parties to endeavour to resolve a dispute by entering into good faith consultations (EU-Georgia AA: Art. 246 (1); EU-Moldova AA: Art. 382 (1);

EU-Ukraine AA: Art. 305 (1)).

Consultations shall be held and deemed concluded within 30 days of the date of receipt of a written request from the other party. In case of consultations on matters of urgency, thisperiodisreducedto 15 days (EU-Georgia AA: Art. 246 (4); EU-Moldova AA: Art. 382 (4); EU-Ukraine AA: Art. 305 (4)). Furthermore, this timeframe is reduced to 3 days if consultations concern the transport of energy goods through networks and one party considers the resolution of the dispute as urgent because of an interruption, in full or in part, in the transport of natural gas, oil or electricity between the parties (EU-Georgia AA: Art. 246 (7); EU-Moldova AA: Art.  382 (7); EU-Ukraine AA: Art. 305 (5)). However, the parties can also decide to continue consultations after the end of these terms. If consultations fail, the complaining party may request the establishment of an arbitration panel (EU-Georgia AA: Art. 246 (5) and 248 (1); EU-Moldova AA: Art. 382 (5) and 384 (1); EU-Ukraine AA: Art. 305 (6) and 306 (1)).

The request shall also be made in writing but addressed not only to the other party, but also the Association Committee in Trade confi guration. In the request, the legal basis for the complaint should be clearly indicated.

An arbitration panel comprises three arbitrators (EU-Georgia AA:

Art. 249 (1); EU-Moldova AA: Art. 385 (1); EU-Ukraine AA: Art. 307 (1)).

It is worth mentioning that the EU-Georgia and EU-Moldova Association Agreements give the parties 5 days from providing the request for the

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establishment of a panel for reaching an agreement on its composition (EU-Georgia AA: Art. 249 (2) and (3); EU-Moldova AA: Art. 385 (2) and (3)). In contrast, the EU-Ukraine Association Agreement provides for 10 days for the same purpose (EU-Ukraine AA: Art. 307 (2)).

If an agreement on the composition of a panel cannot be reached, either party may request to apply the formal procedure for panel composition, according to which arbitrators are appointed from the list of arbitrators established by the Association Committee in Trade confi guration. The list of arbitrators is composed of three sub-lists, each including fi ve individuals in the case of the EU-Ukraine Association Agreement and at least 5 individuals in the case of the EU-Georgia and EU-Moldova Association Agreements: one sub-list for each party and one sub-list of individuals that are not nationals of either party and who will act as chairperson to the arbitration panel. The arbitrators shall have expertise on the issues covered by the DCFTA, be independent, serve in their individual capacities and not take instructions from any organisation or government (EU-Georgia AA: Art. 268; EU-Moldova AA: Art. 404; EU-Ukraine AA: Art. 323). The provisions of the EU-Georgia and EU-Moldova Association Agreements on the one hand and the EU-Ukraine Association Agreement on the other hand differ in regard to the procedure of appointment of arbitrators. Under the EU-Georgia and EU-Moldova Association agreements, the parties have 10 days from the date of request to apply this procedure to appoint an arbitrator from the list of arbitrators. Only if any of the parties fail to appoint the arbitrator, he/she will, upon request of the other party, be selected by lot by the chair or co-chairs of the Association Committee in Trade confi guration, their delegates to be selected by lot within 5 days of the request. The same applies if the parties fail to reach an agreement concerning the chairperson of the arbitration panel (EU-Georgia AA: Art. 249 (3) and (4); EU-Moldova AA: Art. 385 (3) and (4)). Under the EU-Ukraine Association Agreement, the parties do not have additional 10 days after requesting the formal procedure. The chair of the Trade Committee (or the chair’s delegate) shall select all three arbitrators (or any remaining arbitrator or arbitrators, if the parties agreed on one or more of them) by lot within 5 days of the request to apply the formal procedure of composition of the arbitration panel (EU-Ukraine AA: Art. 307 (3), (4) and (5)). Similar to the stage of consultations, a special norm shall be applied in regard to trade-related energy, according to which if a party considers a dispute to be urgent because of an interruption, in full or in part, in any transport of natural gas, oil, or electricity or a threat thereof between the parties,

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the parties will not have 10 days under the EU-Georgia and EU-Moldova Association Agreements and 5 days under the EU-Ukraine Association Agreement respectively, prior to beginning the formal procedure for panel composition and besides, the timeframe of the latter will be reduced to 2 days (EU-Georgia AA: Art. 249 (7); EU-Moldova AA: Art. 385 (8); EU-Ukraine AA: Art. 307 (8)).

The arbitration panel has to prepare an interim report with all fi ndings and recommendations within 90 days after the date of its establishment.

This term may be prolonged in case the arbitration panel is in delay.

However, the term for the arbitration panel to submit an interim report to the parties shall not exceed 120 days (EU-Georgia AA: Art. 251 (1);

EU-Moldova AA: Art. 387 (1); EU-Ukraine AA: Art. 308 (1)). In cases of urgency, the arbitration panel shall endeavour to prepape its interim report within 45  days and, when in delay, no later than within 60 days (EU-Georgia AA: Art. 251 (3); EU-Moldova AA: Art. 387 (3); EU-Ukraine AA: Art. 308 (3)).

Trade-related energy issues get further “special treatment” at this stage.

In respect of a dispute concerning the relevant chapter of the association agreements which a party considers to be urgent, either party may request the chairperson of the arbitration panel to act as a conciliator. In this capacity, he/she will seek an agreed resolution of the dispute or seek to agree a procedure to achieve such resolution. If within 15 days no such agreement can be reached, the conciliator himself/herself shall recommend a solution or a procedure to achieve a solution, which the parties have to respect for three months following the conciliator’s decision or until resolution of the dispute, whichever is earlier (EU-Georgia AA: Art. 252; EU-Moldova AA:

Art. 388; EU-Ukraine AA: Art. 309).

As for the fi nal ruling, the arbitration panel has 120 days from the date of establishment to notify of it the parties and the Association Committee in Trade confi guration. In case the arbitration panel is in delay, this term can be prolonged up to 150 days. In cases of urgency, these terms shall be reduced to 60 days and 75 days repectively, and in respect of a dispute concerning trade-related energy issues which a party considers to be urgent, the arbitration panel has even less time, namely 40 days, to notify of its fi nal ruling (EU-Georgia AA: Art. 253; EU-Moldova AA: Art. 389;

EU-Ukraine AA: Art. 310). The primary mode of decision-making process in the arbitration panel is consensus. However, if it cannot be reached, the decision will be made by a majority vote (EU-Georgia AA: Art. 266 (1);

EU-Moldova AA: Art. 402 (1); EU-Ukraine AA: Art. 321 (1)).

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In its search for an interpretation of any matter submitted, the arbitration panel shall use interpretation methods of international customary law and also take into account relevant interpretations established in panels and the Appelate Body adopted by the WTO Dispute Settlement Body. The arbitration panel is allowed neither to extend nor limit the scope of the rights and obligations of the parties provided for in the association agreement (EU-Georgia AA: Art. 265; EU-Moldova AA: Art. 401; EU-Ukraine AA:

Art. 320).

The ruling of the arbitration panel is binding on the parties and it goes without saying that the party complained against shall comply with the arbitration panel ruling, to wit promptly and in good faith (EU-Georgia AA:

Art. 254 and 266 (2); EU-Moldova AA: Art. 390 and 402 (2); EU-Ukraine AA: Art. 311 and 321 (2)). If immediate compliance is not possible, the party shall notify the other one and the Association Committee in Trade confi guration of the time that it thinks will be required for compliance. This should be a reasonable period of time which, if the parties cannot agree on it, may be determined by the arbitration panel. The reasonable period of time may be extended by mutual agreement of the parties (EU-Georgia AA: Art. 255; EU-Moldova AA: Art. 391; EU-Ukraine AA: Art. 312). To complete the procedure of dispute settlement, association agreements also provide for options of temporary remedies in case of non-compliance (EU-Georgia AA: Art. 257–259; EU-Moldova AA: Art. 393–395;

EU-Ukraine AA: Art. 314–316).

Special attention should be paid to the provisions of association agreements according to which the arbitration panel shall request the Court of Justice of the European Union to give a ruling on the question if the dispute concerns the interpretation and application of a provision of the Assocation Agreement which imposes upon a party an obligation defi ned by reference to a provision of EU law (Petrov 2016: 106). This provision is unique in international agreements concluded by the EU so far, as in no other agreements excepts of these three association agreementsmay arbitration ask for a preliminary ruling of the Court of Justice (Van der Loo et al. 2014: 20). In contrast to the EU-Georgia and EU-Moldova Association Agreements, the EU-Ukraine Association Agreement specifi es that this procedure shall apply to disputes concerning the interpretation and application of a provision of this Agreement related to regulatory approximation contained in Chapter 3 (Technical Barriersto Trade), Chapter  4 (Sanitary and Phytosanitary Measures), Chapter 5 (Customs and Trade Facilitation), Chapter 6 (Establishment, Trade in Services and

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Electronic Commerce), Chapter 8 (Public Procurement) or Chapter 10 (Competition), or which otherwise imposes upon a Party an obligation defi ned by reference to a provision of the EU law. Nevertheless, relevance of the specifi cation provided for in the EU-Ukraine Association Agreement referring to specifi c chapters is practically nullifi ed given the more general character of the second part of the provision.

The ruling of the Court of Justice of the European Union shall be binding on the arbitration panel (EU-Georgia AA: Art. 267; EU-Moldova AA: Art. 403; EU-Ukraine AA: Art. 322). This procedure essentially aims at a heterogeneous interpretation of the EU law, thus guaranteeing the autonomy of the EU legal order (ECJ: Opinion 1/91; Van der Loo 2016:

296–301). Taking into account the specifi c focus of this procedure, it does not include the authority to decide on the direct applicability of a norm in the national legal order. The latter is reserved for domestic courts.

Conclusions

Though the three association agreements concluded by the EU with Georgia, Moldova and Ukraine are not identical, many of their provisions are similar. On monitoring and dispute settlement, all three agreements contain almost the same wording.

The association agreements stipulate a system of permanent monitoring. Several tools are used in oder to scrutinise the enforcement and implementation of the association agreement. The Dispute Settlement mechanism is based on the model of the WTO Dispute Settlement Understanding, but with faster procedures. This combination of a well-established dispute settlement system and shorter timeframes seems to be an effective and effi cient mechanism for avoiding and settling any dispute between the parties concerning the interpretation and application of the provisions of the association agreements.

Exclusive Jurisdiction of the Court of Justice of the European Union to interpret the EU legal norms will be preserved by involving the Court of Justice in the dispute settlement mechanism in relevant cases. Establishment of a direct link between the arbitration panel created under an international agreement and the Court of Justice constitutes an absolute novelty in the EU external relations and will contribute to achieving the goal of uniform interpretation of the EU acqui.