Non-Recognized States from the Perspective of WTO Law The Legal Position of Non-Recognized States in the Post-Soviet Space Bordesholm/Kiel, 12-14 July 2018 Prof. Dr. Karsten Nowrot, LL.M. (Indiana) University of Hamburg, Germany

Background Reasons for integrating non-recognized entities into the global economy External perspective Other countries and private economic actors Non-recognized territorial entities as valuable business opportunities E.g. additional consumers for foreign goods and services, foreign investments Business expectations preferably stabilized by international legal rules (trade and investment law)

Background Reasons for integrating non-recognized entities into the global economy Internal perspective Public authorities and population of non-recognized territorial entities importance of a functioning economy for the population and the stability of a political community Strong interest in establishing also transboundary trade and investment relations preferably on the more secure basis of international trade and investment regulations

Non-Recognized States and WTO Law: Four Issues Addressing four issues to illustrate the approaches adopted by the WTO Is there an “automatism” with regard to WTO membership? In cases of secession from, or dissolution of, a (former) WTO member Underlying issue of state succession with regard to membership in international organizations

State Succession with regard to WTO Membership Underlying issue of state succession with regard to membership in international organizations E.g. Article 4 lit. a of the 1978 Vienna Convention on Succession of States in respect of Treaties “The present Convention applies to the effects of a succession of States in respect of: (a) any treaty which is the constituent instrument of an international organization without prejudice to the rules concerning acquisition of membership and without prejudice to any other relevant rules of the organization; […].” Dominant practice of international organizations Membership of IOs cannot be obtained by state succession Confirmed by WTO rules and practice

State Succession with regard to WTO Membership Partially different approach under former GATT 1947 Article XXVI:5 lit. c GATT: “If any of the customs territories, in respect of which a contracting party has accepted this Agreement, possesses or acquires full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement, such territory shall, upon sponsorship through a declaration by the responsible contracting party […] be deemed to be a contracting party.” Primarily context of decolonization Notable practical relevance: out of 128 GATT Contracting Parties by end of 1994, 63 have succeeded to this status on the basis of this provision Article XXVI GATT is no longer applicable since the entry into force of the WTO Agreement

WTO Membership for Non-Recognized States? WTO membership for non-recognized territorial entities? No “automatism” based on state succession, but at least possibility of WTO membership Article XII:1 WTO: “Any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. […].”

WTO Membership for Non-Recognized States? Currently three separate customs territories as WTO members Hong Kong, China (April 1986) Macao, China (January 1991) Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) (January 2002) Taiwan as the only “customs territory” ever admitted to the GATT/WTO since 1948 without direct “sponsorship” of the “mother country” under Article XXVI:5 lit. c GATT

WTO Membership for Non-Recognized States? Requirements for a “separate customs territory” under Article XII:1 WTO Customs territory See, e.g., Article XXIV:2 GATT: “For the purposes of this Agreement a customs territory shall be understood to mean any territory with respect to which separate tariffs or other regulations of commerce are maintained for a substantial part of the trade of such territory with other territories.” Full autonomy in the conduct of its external commercial relations De facto autonomy sufficient, no international legal recognition by related countries required See example of Taiwan

WTO Membership for Non-Recognized States? No legal entitlement to accession to the WTO for other countries/territory No judicial review in the WTO as to the determination of whether an entity qualifies as a “separate customs territory” under Article XII:1 WTO Consequence: political decision by the existing WTO members Who has to agree to the accession? Indicates importance of decision-making procedures

WTO Membership for Non-Recognized States? Accession to the WTO WTO accession process Article XII:2 WTO: “Decisions on accession shall be taken by the Ministerial Conference. The Ministerial Conference shall approve the agreement on the terms of accession by a two-third majority of the Members of the WTO.” But see: Decision-Making Procedures under Articles IX and XII of the WTO Agreement, Statement by the Chairman as agreed by the General Council on 15 November 1995, WTO Doc. WT/L/93 of 24 November 1995: “the General Council will seek a decision in accordance with Article IX:1”

WTO Membership for Non-Recognized States? Article IX:1 WTO: “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947. […].” Fn. 1 to Article IX:1 WTO: “The body concerned shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting when the decision is taken, formally objects to the proposed decision.” In practice, every WTO member enjoys a right to “veto” a decision

WTO Membership for Non-Recognized States? Challenges resulting from WTO membership of non-recognized territorial units Connections between the WTO and international standardization bodies E.g., Article 3.4 SPS Agreement “Members shall play a full part, within the limits of their resources, in the relevant international organizations and their subsidiary bodies, in particular the Codex Alimentarius Commission, the International Office of Epizootics, and the international and regional organizations operating within the framework of the International Plant Protection Convention, to promote within these organizations the development and periodic review of standards, guidelines and recommendations with respect to all aspects of sanitary and phytosanitary measures.”

WTO Membership for Non-Recognized States? Challenges resulting from WTO membership of non-recognized territorial units E.g., GATS Annex on Telecommunications, para. 7 lit. a: “Members recognize the importance of international standards for global compatibility and inter-operability of telecommunication networks and services and undertake to promote such standards through the work of relevant international bodies, including the International Telecommunication Union and the International Organization for Standardization.” Challenge: participation by, in particular, Taiwan in these organizations and other bodies?

Possible Reactions by WTO Members: Article XIII WTO What options do individual WTO members have in reacting to the membership of a non-recognized state? In particular: invocation under Article XIII WTO Agreement concerning the non-applicability of the multilateral trade agreements Article XIII:1 WTO: “This Agreement and the Multilateral Trade Agreements in Annexes 1 and 2 shall not apply as between any Member and any other Member if either of the Members, at the time either becomes a Member, does not consent to such application.”

Possible Reactions by WTO Members: Article XIII WTO Background to Article XIII WTO Same as concerning its predecessor Article XXXV GATT 1947 Accession to the WTO requires technically only a two-third majority (Article XII:2 WTO) Consequence: two-third of the WTO members could oblige a member to enter into a trade agreement with another country without its consent Article XXXV GATT / Article XIII WTO introduced to respect national sovereignty with regard to trade relations Facilitating the reaching of consensus concerning WTO accession

Possible Reactions by WTO Members: Article XIII WTO Relevance of Article XIII in WTO practice Practice under Article XXXV GATT 1947 Invoked on ca. 70 occasions As of January 2018, Article XIII WTO has been invoked on 12 instances, ten of them were subsequently withdrawn Two currently still in force Turkey concerning Armenia (2002) United States concerning Tajikistan (2012) Relevance in the context of non-recognized states as WTO members

WTO Legality of Measures adopted in connection with Non-recognized States WTO legality of measures adopted in connection with non-recognized states that are not WTO members In particular: trade relations between a secessionist non-recognized territorial entity and the WTO member from which it tries to withdraw Background: frequently quite strained political relations Two perspectives Measures adopted by the WTO member Measures adopted by public authorities of secessionist territorial entities

WTO Legality of Measures adopted in connection with Non-recognized States WTO legality of measures adopted by the WTO member facing secession E.g. domestic legislation prohibiting or restricting third-party economic activity by foreign nationals in the secessionist territory Trade in goods: Interplay of Article I (most-favoured-nation treatment), Article III (national treatment) and Article XI GATT (quantitative restrictions) does in principle allow for such measures to be adopted if applied to all other countries and to domestic operators and does not completely close the border for imports (no need to invoke, e.g., Article XXI GATT) Other WTO members can initiate dispute settlement proceedings against the WTO member in question

WTO Legality of Measures adopted in connection with Non-recognized States WTO legality of measures adopted by public authorities of secessionist territorial entities E.g. regulations contravening Article I and/or Article III GATT (preferential treatment of domestic products or imports from some countries only) WTO dispute settlement proceedings can only be initiated against WTO members Not against secessionist territorial entities that are not WTO members

WTO Legality of Measures adopted in connection with Non-recognized States WTO legality of measures adopted by public authorities of secessionist territorial entities Complaint against the WTO member facing secession? Question of state responsibility, in particular attribution (e.g., ILC Articles on the Responsibility of States for Internationally Wrongful Acts (2001)) General rule: conduct of an insurrectional or other movement is not attributable to the State at issue Consequence: no successful complaint against the WTO member facing secession

WTO Legality of Measures adopted in connection with Non-recognized States WTO legality of measures adopted by public authorities of secessionist territorial entities Complaint against another WTO member? Apparently no cases under WTO law yet However: possibly related practice in human rights law and investment law Arguably yes, if the other WTO member is exercising effective control over the secessionist territory through own armed forces, or through a subordinate local administration

Conclusion Conclusion Many (economy-related) arguments speak in favor of integrating non-recognized territorial entities into the international economic system and its legal order (including the WTO) However, transboundary economic relations are “not to be read in clinical isolation” from the respective political relationships between the actors involved Approaches adopted by the WTO indicate the desire of states to retain a certain “policy space”, also when dealing with non-recognized territorial entities

Non-Recognized States from the Perspective of WTO Law The Legal Position of Non-Recognized States in the Post-Soviet Space Bordesholm/Kiel, 12-14 July 2018 Prof. Dr. Karsten Nowrot, LL.M. (Indiana) University of Hamburg, Germany