On 10 August 2018, the WTO circulated the panel report in the case brought by the Russian Federation in “European Union and its Member States — Certain Measures Relating to the Energy Sector” (DS476). The dispute concerned certain measures that regulate the natural gas sector and facilitate the development of natural gas infrastructure within the European Union. The WTO panel rejected most of Russia's claims concerning the alleged incompatibility of EU's energy law with the WTO Agreements.
Origins of the dispute can be traced back in 2014, when Russia requested consultations with the European Union and its member states. Arguing that the Third Energy Package and the TEN-E Regulation discriminate de jure and de facto against Russian services and service suppliers and against gas of Russian origin, Russia requested the establishment of a WTO panel in May 2015. In particular, Russia contended that the Third Energy Package, Gas Market Directive and the TEN-E Regulation violated the rules of the General Agreement on Tariffs and Trade (GATT) and the General Agreement on Trade in Services (GATS). In addition, Russia challenged both the EU-level rules as well as the implementation of these rules by Croatia, Hungary and Lithuania. Challenged measures related to unbundling (the requirement to separate energy supply and generation from the operation of transmission networks), LNG, infrastructure exemption, upstream pipelines and third-country certifications.
The panel rejected most of Russia’s claims and ruled in favour of the EU concerning the rules on unbundling, LNG and upstream pipeline networks. Since different unbundling models do not modify the conditions of competition for natural gas, the rules on unbundling were found to be consistent with the GATT. Since LNG and natural gas are not “like” products, the LNG measure does not violate Article I:1 of the GATT.
However, the Panel found that some elements of the EU natural gas infrastructure policy (related to the third-country certification and the TEN-E Regulation) are inconsistent WTO rules. Thus, if the Panel Report is not appealed, the EU will have to bring the Third Energy Package in conformity with the GATT and GATS.
In relation to the TEN-E regulation, the Panel found that the measures included in the regulation are designed to decrease the availability of new projects developing pipeline infrastructure to transport gas of Russian origin. In other words, the TEN-E regulation provides more favourable conditions for natural gas of any origin than Russian and discriminates Russian gas in relation to gas from other third countries. Thus, the Panel found a violation of Articles I:1 and III:4 of the GATT.
By the same token, Russia claimed that the regime imposed on the OPAL pipeline - especially the capacity allocation, constitutes a quantitative restriction on the volume of imported Russian natural gas, and thus violates Article XI:1 of the GATT. The panel stated that the two challenged OPAL conditions - the 50% capacity cap and 3 bcm/year gas release programme – effectively limit competition and are inconsistent with Article XI:1 of the GATT.