The World Trade Organization will examine Russia’s challenge to the European Union’s Carbon Border Adjustment Mechanism (CBAM) after the WTO Dispute Settlement Body agreed to establish a panel on September 25.
The proceedings add legal uncertainty for exporters, including aluminium suppliers, but the panel’s establishment does not constitute a finding that the EU carbon-border rules are inconsistent with WTO obligations.
Russia requested the panel for a second time after its initial request did not result in establishment. India was among 18 WTO members that reserved their rights to participate as third parties, according to reporting by The Economic Times on September 29.
Russia challenges CBAM and EU ETS measures
Russia’s dispute covers the EU’s CBAM as well as related elements of the EU Emissions Trading System (EU ETS). Its submissions include allegations of discriminatory treatment of imports and claims concerning measures supporting exports.
Those positions remain allegations submitted within the WTO dispute process. They are not findings by the panel, and the panel’s creation does not determine the legality of the measures under WTO rules.
The European Union said it remains confident that its carbon-border and emissions-trading measures comply with WTO rules and will defend them during the proceedings.
China, the United States, the United Kingdom and Japan were also among the WTO members reserving third-party participation rights.
Third-party rights do not establish support for Russia
Governments participating as third parties can present views on the legal and policy questions raised by a dispute. Their participation does not mean that they support the complainant’s arguments or have submitted an identical challenge against the EU measures.
For aluminium exporters and their European customers, the dispute does not currently alter the applicable CBAM framework. The establishment of the panel provides no basis for removing carbon-cost provisions from existing contracts solely because the EU rules are being challenged at the WTO.
The proceedings could affect the longer-term legal framework governing carbon-related trade measures, including the relationship between EU climate policy and international trade rules. For shipments currently subject to the mechanism, however, the existence of a WTO dispute remains separate from any future ruling that could affect the measures.
