Court of Eurasian Economic Community Renders Its First Judgment

The task to create in the former USSR an international body comparable to the Court of the European Union is challenging. But this has already started to take shape: such a body not only exists, but it has already heard and resolved its first case, which was initiated by a Russian company.

The Eurasian Economic Community (“EurAsEC”) currently includes five countries as members:  Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan. These countries established the Court of the Eurasian Economic Community (the “Court”) in 2001. The Court is situated in Minsk, the capital of Belarus. The court started operating in January 2012.

Competence of the Court and Status of Its Judgments

The Court tries cases concerning the implementation and interpretation of provisions of international treaties and resolutions falling within the framework of EurAsEC. In addition, it hears cases related to the Customs Union. Currently its members are Belarus, Kazakhstan and Russia.

Importantly, not only member states, but also legal persons or individuals may file a claim falling within the competence of the Court.

Judgments of the Court are binding on the parties to the dispute and their performance is compulsory. In the event of failure to timely perform the judgment, any party to the dispute may apply to the EurAsEC Intergovernmental Council (which operates on the level of heads of states) to take a decision on such an issue.

Summary of the First Case

The Court heard and resolved its first case in June-September 2012.  Russian OJSC “Ugolnaya Kompaniya Yuzhny Kuzbass” (Coal Company Southern Kuzbass) appeared as the claimant. The claimant challenged certain provisions of the Resolution of the Customs Union Commission dated 17 August 2010 No. 335 “On Problematic Issues in Connection with Functioning of the Single Customs Space, and the Practice of Implementation of the Customs Union Mechanisms.”

In particular, the claimant challenged the validity of paragraph 1 of the Resolution of the Customs Union Commission which provides that companies exporting coal from Russia to other member states of the Customs Union have to file customs declarations. All customs duties had been abolished, but the declaration procedure remained intact in order to keep statistical records of mutual trade in energy resources (under the Commodity Nomenclature for the Foreign Economic Activity of the Customs Union).

Such goods are exported from the Russian Federation to other member states of the Customs Union. The claimant referred to resolutions of the EurAsEC Intergovernmental Council on the abolition of state control on internal borders of member states of the Customs Union. Yuzhny Kuzbass stopped filing declarations regarding the export of coal to Kazakhstan on 1 July 2011, with the statistical reports being the only documents submitted.

On 1 July 2011 the Russian Government passed Decree No. 529 putting into effect restrictions on the export of energy resources making it still necessary to declare such goods to the full extent in light of resolution No. 335 of the Customs Union Commission.

The customs authorities of the town of Kemerovo found the company’s actions to be in conflict with the law and instigated three administrative cases. The customs authorities imposed on OJSC “Ugolnaya Kompaniya Yuzhny Kuzbass” a penalty amounting to around 17 mln. roubles.

Meetings, hearings and judgment of the Court

The Court met on 26 June 2012 and proposed to the parties an opportunity to find a way to encourage an amicable settlement. However, the parties failed to settle the dispute.

The Court heard the case on 5 September 2012 and satisfied the claim. The Court found that the challenged paragraph 1 of the said Customs Union Commission Resolution is at odds with the international treaties applied for the operation of the Customs Union and the Unified Economic Space.

The resolutions of the Customs Union Commission form part of the customs law. They are obligatory for Customs Union member states and directly applicable by the customs authorities together with the Customs Code of the Customs Union.

The Court found that imposing on Russian business entities an additional duty to declare energy resources and subjecting them to administrative responsibility for failure to do so is a discriminatory measure in mutual trade. Such measures may be used only in accordance with a specific procedure agreed by the members of the Customs Union, which was not complied with in the present case.

Significance of the Court judgment

The Court’s main ruling was that companies are not obliged to submit customs declarations when exporting energy resources from one member state of the Customs Union to another. They may not be held liable for failure to submit customs declarations in Russia to export to other member states of the Customs Union.

This first judgment of Court of the Eurasian Economic Community should contribute to the simplification of customs procedures and stimulate free trade within the Customs Union.

Dmitry Davydenko, Andrey Kalimanov

Muranov Chernyakov & Partners Law firm