In the evolution from protectionism to liberalisation, while member states ("States") of World Trade Organisation ("WTO") have generally agreed to liberalise their respective trade barriers, States do possess some leeway when it comes to the 'essential security' exceptions.
While subjectivity in interpretation of the terminology under the exception has been the general stance taken by various States, the legal position has now been clarified to a large extent with the WTO Panel Report in Russia – Measures concerning Traffic in Transit1 ("Russia-Ukraine Ruling"). This piece discusses the development of the law with reference to the essential security exceptions and examines its applicability towards the recent retaliatory measures taken by India vis-à-vis China.
II. The Essential Security Exceptions: Article XXI2 of General Agreement on Tariffs and Trade ("GATT")
The debate surrounding Article XXI of GATT stems from the ambiguity of the terminology 'essential security interests'. Article XXI (a) entitles a party to not disclose information which such party considers contrary to its 'essential security interests'. Article XXI (b) allows contracting parties to implement measures:
- which such contracting party considers necessary;
- towards protection of its 'essential security interests'; and
- in fulfilment of the specific circumstances laid down under Article XXI (b)(i)-(iii).3
There are inherent ambiguities underlying the specific terminologies used in Article XXI. The terms 'necessary', 'essential security interests' and 'emergency in international relations' carry no guidance with respect to their interpretation and meaning.
One of the very first instances where a defence under the security exception was invoked was in 1949, when Czechoslovakia brought an action against the United States against export licensing requirements administered by the United States government against certain countries.4 The licensing requirements were applicable to certain categories of goods that could be utilised for military purposes and discriminated against specific destination countries for security reasons. However, the United States justified the measure under Article XXI of the GATT. Despite Czechoslovakia's stern caution that such wide interpretation would result in autarky in international trade which the international trade regime sought to eliminate, the measures introduced by United States were voted to be justified.
A similar situation arose in the 1960s when Ghana, in justification of the measures introduced by it against Portugal on account of latter's actions in Angola, stated that "each contracting party was the sole judge of what was necessary in its essential security interests."5
The instances set out above clearly evidence the general understanding of the contracting parties that the States have the power to determine the nature as well as the necessity of imposition of measures while interpreting the essential security exception under Article XXI.
III. Russia-Ukraine Ruling6
Agitated by Russia's imposition of restrictions on traffic in transit from Ukraine, through Russia, to Kazakhstan and other countries, Ukraine, in 2016, requested consultation with Russia. Thereafter, in 2017, Ukraine requested the establishment of a WTO panel.
Ukraine sought to challenge the measures introduced by Russia to be in violation of Article V (Freedom of Transit) of GATT. Russia defended its actions by placing reliance on the essential security exception enshrined under Article XXI of GATT and adopted the stance that measures taken under Article XXI are not questionable since Article XXI is essentially a "self-judging" provision and cannot be reviewed by a WTO panel.
The WTO panel in its report dated April 05, 2019 found the Russian measures justified in light of the prevailing circumstances which pertained to 'emergency in international relations', resultantly satisfying the third limb of Article XXI(b). However, the WTO panel upon a careful analysis of the term 'which it considers' in Article XXI(b) distinguished the chapeau of Article XXI(b) and the specific situations delineated in sub-paragraphs (i)-(iii). The Panel agreed with Ukraine that while the States under the chapeau of Article XXI(b) were free to decide for themselves whether they considered the adoption of measures necessary, determination of the existence of specific situations [ i.e. XXI(b)(i)-(iii)] must be made objectively by the WTO panel rather than by the invoking State itself.7
As regards the term 'essential security interests', the WTO panel observed that compared to 'security interests' the ambit of 'essential security interests' is narrower as it only involves interests relating to the quintessential functions of the State namely, the protection of its territory and its population from external threats, and the maintenance of law and internal public order.8
The WTO panel also held that the good faith obligation [enshrined under Article 31(1)9 of the Vienna Convention on the Law of Treaties ("VCLT")] is applicable to not just the designation of 'essential security interests' by the concerned State, but also to the measures imposed. Additionally, the measures implemented should meet a minimum requirement of plausibility in relation to the proffered essential security interests i.e. that they are not implausible as measures protective of these interests.10
IV. Defence of essential security exception – Indian context
In the preceding few years, India has been a witness to recurrent border disputes with China. Since May, 2020, there have been heightened tensions in the relationship between the countries, with Chinese troops making frequent incursions into Indian territory. The situation escalated to a point where both sides currently have deployed their respective military forces at the border.
Resultantly, India has implemented and continues to implement several counter-measures including: banning several Chinese apps,11 mandatory disclosure of country of origin on imported goods,12 prohibition on imports of certain goods from China.13 Certain other measures include introduction of separate approval for any foreign investment from neighbouring countries including China and its nationals.14
While the political situation between the countries remains quite tense at the moment, China is yet to officially request consultations with India and/or request the formulation of a Panel with the WTO. In light of the Russia-Ukraine Ruling, the question that arises is whether India can successfully defend its measures under the garb of essential security exception.
Given the varied nature of measures effected by India, it may be required to justify its measures under the essential security exceptions set out under GATT (i.e. Article XXI) and General Agreement on Trade in Services ("GATS") (i.e. Article XIV bis15).
While decisions rendered by WTO panel bodies are not binding upon subsequent panels, the decisions do hold a high persuasive value. In keeping with the Russia-Ukraine Ruling, the WTO panel has the authority to analyse the measures imposed by India in line with the requirement under Article XXI(b)(iii) (or the equivalent provisions in other instruments) and whether the prevailing situation classifies as an 'emergency in international relations'.
In defending the measures, as per the plausibility test laid down in the Russia-Ukraine Ruling, India will be required to prove that the measures implemented by it were: (a) reasonable in keeping with the objective of protecting its essential security interests; and (b) in line with the 'good faith' obligation under Article 31(1) of the VCLT. Given the current political situation between the two States, India may need to establish existence of 'emergency in international relations' similar to the Russia-Ukraine Ruling.
It will be interesting to see how the Russia-Ukraine Ruling is referred to and relied upon in future disputes including the pending dispute in the case of United States-Certain Measures on Steel and Aluminium Products, where both India and China are third parties.16 The United States had in 2018 adopted a stance that measures taken by it were in pursuance of its national security interests and these would not be susceptible to review. Given that the dispute is yet to be decided, it would be interesting to see how the United States argues its stance before the Panel.
V. Analysis & Conclusion
The Russia-Ukraine Ruling is of much relevance being the primary and sole decision that has extensively considered the scope and interpretation of Article XXI. It is likely that the interpretation given to Article XXI of GATT may be extended to similar provisions in the future.
For future disputes where the exception under Article XXI is raised, the invocation shall be subject to review by the Panel Body under sub-paragraphs (i)-(iii) of Article XXI. A system of checks and balances, as has been developed by the Russia-Ukraine Ruling is important so as to prevent states from taking recourse to the essential security exceptions as per their whims and fancies. Recently, China has resorted to banning several apps including TripAdvisor (a US app).17 This comes at a time when the Trump led US government has taken steps to ban Tik Tok (a Chinese app) citing security reasons. As more and more States start taking recourse to the security exceptions, not only does it lead to a failure of the objectives of GATT (and by extension WTO), it also lends an easy escape route back to protectionist culture.
1. Russia – Measures concerning Traffic in Transit, WT/DS512/R.
2. Nothing in this Agreement shall be construed
(a) to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or
(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests (i) relating to fissionable materials or the materials from which they are derived; (ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; (iii) taken in time of war or other emergency in international relations; or
(c) to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.
4. Summary Record of the Twenty-Second Meeting, June 08, 1949, CP.3/SR22-II/28, https://www.wto.org/english/tratop_e/dispu_e/gatt_e/49expres.pdf.
5. WTO, 'Article XXI: Security Exception', https://www.wto.org/english/res_e/booksp_e/gatt_ai_e/art21_e.pdf.
6. Summary Record of the Twenty-Second Meeting, supra note 3.
7. Para 7.100.
8. Para 7.130.
9. 'A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose'.
10. Para 7.138.
11. Press Information Bureau, 'Government Bans 59 Mobile Apps which are prejudicial to sovereignty and integrity of India, defence of India, security of state and public order', https://pib.gov.in/PressReleseDetailm.aspx?PRID=1635206.
12. Consumer Protection (E-Commerce) Rules, 2020, Rule 6(5).
13. Business Today, 'Setback for China: India bans import of air conditioners with refrigerants' , (October 16, 2020, 10:31 AM), https://www.businesstoday.in/current/economy-politics/setback-for-china-india-bans-import-of-air-conditioners-with-refrigerants/story/419102.html.
14. Press Note No. 3 (2020 Series), Available at: https://dipp.gov.in/sites/default/files/pn3_2020.pdf.
15. '1. Nothing in this Agreement shall be construed:
(a) to require any Member to furnish any information, the disclosure of which it considers contrary to its essential security interests; or
(b) to prevent any Member from taking any action which it considers necessary for the protection of its essential security interests: (i) relating to the supply of services as carried out directly or indirectly for the purpose of provisioning a military establishment; (ii) relating to fissionable and fusionable materials or the materials from which they are derived; (iii) taken in time of war or other emergency in international relations; or
(c) to prevent any Member from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.
2. The Council for Trade in Services shall be informed to the fullest extent possible of measures taken under paragraphs 1(b) and (c) and of their termination.'
16. United States-Certain Measures on Steel and Aluminium Products WT/DS552/12. (The WTO panel had been constituted on 25 January 2019, however, the final report has yet to be issued).
17. BBC News, 'China Bans 105 Apps including TripAdvisor', https://www.bbc.com/news/technology-55230654.
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