Trade in electricity under WTO and EAEU Law: compatibility of two legal regimes^†

Abstract

Accession of Russia and Kazakhstan to the World Trade Organization (WTO) constitutes a landmark event in the history of this organization, especially in relation to trade in energy, in general, and trade in electricity, in particular. As a result, the role of the WTO in regulating trade in electricity has increasingly grown. However, the Treaty on the Eurasian Economic Union, a treaty that binds both Russia and Kazakhstan, necessitates additional regulation for trade in electricity, concurrent with law of the WTO. Recently, this treaty was amended by the Protocol on Common Electricity Market on 1 July 2019. As a result, compatibility issues between the rules of the WTO and the Eurasian Economic Union arise. This article concludes that the law of the WTO can be relevant to trade in electricity between Member States of the Eurasian Economic Union and third countries because of the specific place of the rules of the WTO under the Eurasian Economic Union legal order.

1. INTRODUCTION

Energy is the largest globally traded commodity upon which the modern world is greatly dependent, and it appears that it is the World Trade Organization (WTO) Members most dependent on energy imports that are most interested in the rules on energy in the WTO.¹ However, there were no specific negotiations in the Uruguay Round on energy materials and products.² This created legal uncertainty, as countries are now free to impose much higher tariff rates and export taxes on energy without violating WTO rules.³

Although electricity is a secondary energy source that is generated through the conversion of primary sources of energy, it constitutes a crucial energy source.⁴ Trade in electricity relates to network-dependent trade in energy. Contrary to the exchange of other traded goods, electricity is, in this sense, traded via the usage of linked energy grids and does not necessarily cross fixed borders. This means, then, that electricity is not subjected to the customary security clearances that other products are otherwise subjected to. However, the export of electricity depends on a fixed infrastructure of grids. The intrinsic reliance on fixed infrastructure greatly stresses the independence and complexity of energy trade, especially in the international market.⁵ This limitation of network usage entails spending huge capital and substantial investment, in addition to drafting the appropriate investment rules in order to secure the transportation and flow of energy products.⁶ Therefore, electricity is a highly complex and technological industry in which it is necessary to unify its generating facilities. Thus, it is critical that the operations and management of said facilities are executed in a fundamental manner so as to ensure its formation and smooth dispersion to cross-border electricity markets. The electric power system of a state consists of a set of electric power facilities, where the means of operation and management are connected by a single process of production, transmission and distribution of electricity.⁷ Therefore, from a technological perspective in the case of cross-border trade, it is necessary to unite the electric power systems of different countries to ensure such transboundary exchange. Moreover, the structure of the generating capacity of a region, and particular state, should be taken into account. For example, in a region rich in water resources, a hydroelectric power plant would be an effective solution while in others, it would be more economically feasible to build a network infrastructure to purchase electricity rather than locating a source of generation.⁸

At the international level of electrical trade, the joint operation of electric power systems is guaranteed by either parallel or direct current inserts.⁹ Ensuring the joint operation of power systems is a prerequisite for cross-border transmission of electricity.

This shows that technological features of electricity require special regulations of trade in electricity, which will be further addressed in this article.

As scholars have observed, Russia’s 2012 accession to the WTO created a landmark event in the global organization’s history, especially in relation to the trade of energy.¹⁰ This is also true with respect to accession of Kazakhstan to the WTO in 2015 as one of the major energy exporters.

Therefore, as a result of the memberships of major oil, gas, and electricity-exporting counties, the role of the WTO in regulating global trade in energy goods and services has increasingly come into question.¹¹

However, WTO regulations are not the only international legal regimes applicable when it comes to trading electricity. A growing number of preferential trade agreements (PTAs) influence the regulation of trade, generally, and trade in electricity, in particular. The proliferation of PTAs is considered one of the driving challenges to the multilateral trading systems, as it is considered a major barrier to bridging international trade regulations.¹² The Treaty on the Eurasian Economic Union (EAEU) is one of such PTAs. Currently, there are five Member States in the EAEU, namely the Republic of Armenia, Republic of Belarus, Republic of Kazakhstan, Republic of Kyrgyzstan and the Russian Federation. Electricity is traded within the EAEU and between EAEU members and third countries. These countries include Finland, Lithuania, Norway, China, Mongolia, Tajikistan, Azerbaijan and Georgia.

The EAEU Treaty created additional regulations for trade in electricity recently, the it was amended by the Protocol on the EAEU Common Electricity Market on 1 July 2019. This Protocol defines the legal basis for the electric energy market of EAEU Member States.

Further, economic integration within the EAEU requires a strengthening of the regulation of trade in energy and electricity in order to follow the objective of sustainable development within the EAEU. Such regulations should not contradict the obligations of EAEU and WTO members under WTO law.

Therefore, this article addresses the issue of the compatibility between WTO law and EAEU law regarding the trade of electricity. This article argues that WTO law can be relevant to the trade of energy between EAEU Member States and third parties because of the special place of WTO law within the EAEU legal order, even though the production, trade, and transmission of electricity are governed by national legislations. To begin, this article addresses the nature of electricity, in particular, on the debate as to whether it should be considered a good or a service. Next, the analysis is focused on the specific role of WTO law in the EAEU legal order regarding trade in electricity. Finally, the article assesses the compatibility of WTO law and EAEU law with respect to the trade of electricity.

2. IS ELECTRICITY A GOOD OR A SERVICE?

Traditionally, energy goods and energy-related services have not been distinguished inside the energy industry. This is because energy services were perceived as a value added to energy goods which could not be dealt with separately.¹³ Electricity is considered as a good. But there is a debate among scholars regarding the fact, that, ‘by its nature and its dependence upon grids, it is much more like a service, or perhaps a mixture of both’.¹⁴ Affirmatively, the Appellate Body of the WTO stated that there is

‘a category of measures that could be found to fall within the scope of both the General Agreement on Tariffs and Trade (GATT) 1994 and the General Agreement on Trade in Services (GATS). These are measures that involve a service relating to a particular good or a service supplied in conjunction with a particular good. In all such cases in this third category, the measure in question could be scrutinized under both the GATT 1994 and the GATS. However, while the same measure could be scrutinized under both agreements, the specific aspects of that measure examined under each agreement could be different. Under the GATT 1994, the focus is on how the measure affects the goods involved. Under the GATS, the focus is on how the measure affects the supply of the service or the service suppliers involved. Whether a certain measure affecting the supply of a service related to a particular good is scrutinized under the GATT 1994 or the GATS, or both, is a matter that can only be determined on a case-by-case basis’.¹⁵

Some scholars note that electricity should be defined as a service because it is not a physical substance nor it is a fuel. It cannot be stored and must be consumed right after it has been produced. Accordingly, the use of electricity should not be subjected to tariff protection but should rather be subjected to service-related fee structures responding to the need to maintain continuous power production and distribution.¹⁶

Opponents of the idea that electricity is a service claim that the technical characteristics of electricity show that it is a good, and should be governed by property law.¹⁷ For instance, according to Hill, the essential characteristic of a good is that it is ‘an entity over which ownership rights may be established and from which its owners derive some economic benefit, while services are necessarily used-up by their single occurrence’.¹⁸

Electricity is defined as a good in the Harmonized System Nomenclature classification¹⁹ under the heading code 2716 Electrical energy. The founding treaties of the European Union until the Treaty of Lisbon did not contain specific provisions on the role of EU in the energy sector. The amended Article 194 of the Treaty on the Functioning of the EU identifies energy as a shared competence between EU and Member States. Regarding the nature of energy in the Municipality of Almelo and others v NV Energiebedrijf Ijsselmij case,²⁰ the European Court of Justice (ECJ) has qualified electricity as a good, stating that, in Community law and in the national laws of the Member States, it is known that electricity constitutes a good within the meaning of Article 30²¹ of the EEC Treaty. Thus, electricity is regarded as a good under the Community’s tariff nomenclature.²²

Choosing the correct classification has a huge impact on international conduct—WTO Member States are able to significantly impose more protectionist restrictions on services than on goods.²³ Meanwhile, there is no collective agreement as to whether electricity should be categorized as being either a good or a service under WTO norms.²⁴ When the GATT was initially drafted, it was not regarded to as a commodity. Later on, some countries began considering it as such, and therefore undertook tariff bindings on it.²⁵ Scholars have observed that the production of primary and secondary energy does not constitute a service, and, therefore, is not subjected to the GATS, but rather results in goods covered by GATT rules.²⁶ However, the nature of electricity raises a more complex definitional challenge. In fact, electricity, which is the flow of electric change that constitutes an electric current moving inside a wire, has a unique physical consistency that makes it intangible and very difficult to store. This distinctive characteristic has led to a certain degree of inconsistency in relation to the application of the GATT rules.²⁷ Regional trade agreements have made the situation even more complicated, as they provide their own views on the legal treatment of electricity. The Treaty on EAEU is among such regional trade agreements. The EAEU treaty expressly defines electricity as a good.²⁸ However, WTO law, being part of the EAEU legal order, may significantly influence the trade of electricity within the EAEU, and between the EAEU and third parties. Therefore, the issue of impact of WTO law on the EAEU legal order is discussed in the remainder of this article.

3. WTO LAW IN EAEU LEGAL ORDER: FOCUS ON TRADE IN ELECTRICITY

Article 6 of the EAEU Treaty defines the EAEU law through listing the following legal sources: the EAEU Treaty, treaties concluded within the EAEU, treaties between the EAEU and third parties, and various decisions and regulations of the EAEU bodies.

To analyse possible ways of interpreting the trading provisions of EAEU law, the specific place of the WTO law in the EAEU legal order should be assessed.

To begin, the specific role of the WTO law in the EAEU legal order could be inferred from the Preamble to the EAEU Treaty. It acknowledges that the parties ‘take into consideration norms, rules, and principles of the World Trade Organization’.

Moreover, Annex 31 to the EAEU Treaty (Annex 31) highlights the necessity to interpret trade regimes of the EAEU members in the context of the WTO Agreement. Article 1 of Annex 31 enshrines that, from the date of accession of any Party to the WTO, the provisions of the WTO Agreement became an integral part of the legal framework of the EAEU. According to Article 2 of Annex 31, obligations undertaken by the parties on their accession to the WTO shall prevail over the treaties, concluded within the EAEU and decisions of its bodies (emphasis added).

The EAEU Court was established in 2015 as one of the bodies of the EAEU.²⁹ Therefore, the EAEU Court can interpret the EAEU Treaty, and other treaties within the EAEU, in the context of WTO agreements based on the approaches of the WTO Dispute Settlement Body (DSB). However, the EAEU Court is not bound by the DSB interpretation of WTO agreements.³⁰ The EAEU Court interpreting EAEU law, in the context of WTO agreements, should rely on the object and purpose of the EAEU Treaty, subsequent practices of the EAEU Member States, and relevant travaux préparatoires following customary rules of interpretation codified in Article 31 of the Vienna Convention on the Law of the Treaties (VCLT).

Such an approach was taken by the EAEU Court in its judgment in ArсelorMittal Kryvyi Rih,³¹ as of 27 April 2017, where the court interpreting the antidumping provisions of EAEU law took into consideration the GATT and the Agreement on the Implementation of Article VI of the GATT 1994 (Antidumping Agreement).³² The Court emphasized that Article VI of the GATT was implemented into EAEU law by Article 49(2) of the EAEU Treaty.³³ Moreover, the Court relied on the WTO jurisprudence with respect to the determination of the investigative period and injury investigations.³⁴

Furthermore, the Court reaffirmed this position in its Advisory Opinion on 30 October 2017 referring to Article XX of the GATT in stating that ‘for the purposes of comprehensive and correct understanding of mentioned above principles of functioning of internal market of goods, freedom of movement of goods recourse to the WTO law is of practical importance’.³⁵ Thus, by virtue of these decisions, the EAEU Court established its practice to interpret EAEU law in the context of the WTO law and WTO Dispute Settlement Body case law.

Therefore, provisions of EAEU law on trade in electricity could be interpreted in the context of relevant WTO law provisions and jurisprudence.

Among such provisions is Chapter XX of the EAEU Treaty governing trade in energy. Articles 81 and 82 of Chapter XX focus on trade in electricity. To further develop EAEU law pertaining to the trade of electricity, these articles were amended by the recently adopted Protocol on the EAEU Common Electricity Market on 1 July 2019 (The CEM Protocol). The CEM Protocol defines the legal basis for the electric energy market,³⁶ its dynamics and its development within the EAEU.

It is worth noting that the objective of the CEM Protocol is to regulate trade in electricity only within the EAEU. Therefore, it does not cover electric trade with third-party countries, including the transit of electricity through the territory of the EAEU from third-party states. It is expressly highlighted that the trade of electricity with third-party countries is governed by national legislation of EAEU Member States.³⁷ That means that the regulation of the trade of electricity with third-party countries is exempted from the jurisdiction of the EAEU bodies, and is under national jurisdiction of each particular EAEU Member State.

As for the trade of electricity within the EAEU, it is governed by regulations issued by the EAEU bodies, namely the Intergovernmental Council and the Eurasian Economic Commission, For example, access to services of natural monopolies in the electricity sector, procedures for interstate transmission of electricity, rules of mutual trade, and rules governing the determination and the distribution capacity of interstate power transmission lines will be governed at the EAEU level.³⁸

As for the treaties within the EAEU related to the trade of electricity, the Customs code of the EAEU governs purchase, sale, transfer and operational dispatch management of electricity between EAEU Member States.

In addition, the Russian Federation, the Republic of Belarus, and the Republic of Kazakhstan, being the most active EAEU Member States trading electricity, agreed on ensuring parallel operations of the Unified energy systems of other EAEU Member States by signing the bilateral agreements on parallel work.³⁹ These bilateral agreements on parallel work are of a framework nature. They provide coordinated technological mechanisms of the cross-border transfer of electric power in the absence of multilateral agreements within the EAEU. Meanwhile, they do not create a legal basis for common electricity markets within the EAEU since they only define both authorized entities and areas of cooperation. However, the functioning of such entities is subjected to domestic legislation of the EAEU Member States. The objective of the aforementioned agreements is to determine the entities authorized and responsible for ensuring the technical characteristics of reliability, and the safe operation of energy systems of states in order to organize the cross-border transmission of electricity.

These agreements define authorized bodies and organizations that provide parallel operations of power systems of the EAEU Member States in accordance with the legal status granted to these bodies and organizations by national legislation of the respective EAEU Member State. Therefore, there is no reason to create a special body authorized to manage the United energy system within the EAEU. Thus, performance of operational management of the integrated power systems is assigned to private companies under national legislation of each EAEU member. The right to participate in foreign trade in electricity relations is granted only to individually defined entities, and trade in electricity must be carried out in accordance with domestic foreign trade rules of respective EAEU Member States.

Moreover, Article 79 of the EAEU Treaty mandates that (EAEU) Member States develop long-term, mutually beneficial cooperatives in the energy sector that allow for the coordination of energy policies to carry out the gradual formation of common energy resource markets. Therefore, trade in electricity under EAEU law relates to the sphere of ‘coordinated policy’, which contrasts the ‘agreed’⁴⁰ and ‘unified’⁴¹ policies of the EAEU and does not require the transfer of Member States’ powers to the EAEU. Additionally, it does not imply the harmonization or unification of legal governance on the basis of decisions of the EAEU bodies. This should not be considered an obstacle for the interstate governance of trade in electricity. Such regulation allows EAEU Member States to use a wide range of relevant regulatory mechanisms of EAEU Common Electricity Markets separately from the regulation of national electricity markets of EAEU Member States.

As already mentioned, trade in electricity within the EAEU, as well as between EAEU and third parties, is conducted by private entities on the basis of national legislation of the EAEU Member States. For instance, the parallel operation of the electric ring formed by the networks of the Russian Federation, the Republic of Belarus, Estonia, Latvia and Lithuania is based on an Agreement on the parallel operation of power systems. This agreement was signed between private entities, namely Belenergo (Republic of Belarus), FGC UES PJSC (Russian Federation), SO UES JSC, JSC Augstsprieguma Tikls (Latvia), Elering OU (Estonia) and LITGRID, AB (Lithuania) (BRELL Agreement).⁴² All these companies are specially authorized, by their domestic legislation, to carry out operational and supervisory control of their state’s power system to ensure parallel operations with power systems of the other states. As a result, the parallel work of power systems on electric networks of 330, 500 and 750 kV of Belarus, Estonia, Latvia, Lithuania and Russia is ensured by the formation of an electric network. The parties to the BRELL agreement are guided by uniform criterion, principles ensuring the stability of parallel power systems, and documents that were drafted and approved by special Committees and Authorized representatives of the members involved.⁴³ The efficient operation of BRELL is the key factor to the balancing operation of the power systems of the Republic of Belarus, the Russian Federation, Estonia, Latvia and Lithuania.⁴⁴ It is important to note the upcoming significant changes in the regulation and operation of BRELL. Among such changes include the plan of Baltic States to separate their own power systems from the United Electricity System of the Russian Federation, and from the power system of the Republic of Belarus, as well.⁴⁵ The parties of BRELL, however, did agree to prepare a list of emergency situations in the event that the test is terminated and the original BRELL scheme is restored.⁴⁶ A package of key policy documents on this issue was signed by the President of the European Commission and the presidents of Lithuania, Latvia, Estonia and Poland on 28 June 2018.⁴⁷

Therefore, trade, production, and the transmission (transportation) of electricity and operational dispatch management are governed by domestic legislation of the EAEU Member States and not by the EAEU law. Moreover, the EAEU Treaty does not set forth the requirements for the unification and harmonization of the regulation of the trade of electricity. Thus, the extent to which WTO law and jurisprudence may influence trade in electricity within the EAEU and between EAEU and third parties is questionable.

At the same time, WTO law can still be relevant to the trade of energy between the EAEU and third parties. In particular, EAEU Member States, being simultaneous WTO members, are under Most Favored Nation (MFN) and national treatment enshrined in the GATT. These obligations concern: the imposition of export tariffs for non-EAEU members, transit of electricity from the territory of non-EAEU member through the territory of the EAEU and, obligations concerning state monopolies. Here, it becomes more obvious that EAEU and WTO law are, indeed, incompatible with one another. The following discussion analyses the issues brought forth as a result.

4. COMPATIBILITY BETWEEN EAEU AND WTO LAW ON TRADE IN ELECTRICITY

Four out of five EAEU members are also members of the WTO⁴⁸ and therefore, these members are subjected to MFN and national treatment.

The MFN clause could be seen as a self-enforcing rule, because terms of electricity contracts are easily understandable.⁴⁹ For energy exporting countries, like Russia, export duties constitute a sizeable source of state revenue. Although nothing prohibits energy exporting countries to impose as high an export tax on energy exports as they wish (unless they have bound their export duties under the terms of their WTO accession), they cannot discriminate between the export markets.⁵⁰ However, it is questionable whether WTO members are bound to negotiate export tariffs under Article II of the GATT. In John Jackson’s view, Article II refers to only importation, and it would be not possible to include the result of negotiations on export tariffs in the goods schedules. Export commitments could not become part of the GATT and would be treated as any other independent bilateral agreement between two members of the GATT. Therefore, in order to benefit all GATT members MFN clause would be applied.⁵¹ It is worth noting that simultaneous EAEU and WTO members did not make any commitments regarding ‘export electricity tariffs’ during the negotiation process of accession to the WTO.

Electricity as a good is also subjected to the national treatment obligation. However, there are at least two issues regarding the national treatment obligation, namely the likeness of conventional and renewable electricity and its freedom of transit.

To begin with the issue of likeness, it is worth noting that both hydroelectricity and nuclear electricity is recognized as being renewable. This case especially becomes more complex regarding the determination of likeness, because hydroelectricity, nuclear electricity, and conventional electricity possess similar physical characteristics and have the same end-use.

For the most part, electricity within the EAEU is conventional. However, the share of renewable electricity produced by both EAEU hydropower and nuclear power is significant. For instance, hydroelectricity constitutes more than 20 per cent, in Russia, and more than 33 per cent in Armenia respectively. Electricity from nuclear power constitutes more than 10 per cent in Russia, and more than 34 per cent in Armenia. Nearly 80 per cent of all electricity produced by in Kirgizstan is hydroelectricity.⁵² Therefore, the question regarding whether or not such non-physical, unincorporated characteristics as process and production methods (PPMs) of EAEU electricity should be taken into account as one of the criteria of likeness.

In the Canada-Renewable Energy⁵³ case, the Appellate Body ruled that ‘the government definition of the energy supply-mix may reflect the fact that consumers are ready to purchase electricity that results from the combination of different generation technologies, even if this is more expensive than electricity that is produced exclusively from conventional generation sources’.⁵⁴

For the fact that consumers’ tastes and habits are considered amongst the criteria of likeness in WTO jurisprudence,⁵⁵ it would be possible to include non-incorporated PPMs, including renewable PPMs of electricity such as hydropower and nuclear power, to determine likeness in the EAEU.

Christiane R. Conrad notes that advertising and marketing reveals that non-physical aspects often play an important role in consumer decisions. Therefore, some scholars argue that physical aspects, but also non-physical aspects, are relevant and may even be decisive for the determination of likeness.⁵⁶ Consumers often do consider unincorporated PPMs highly relevant for their purchasing decisions. It seems that the percentage of these consumers is rising.⁵⁷

Therefore, imported electricity from the EAEU to third-party counties may face the problem of likeness determination, as soon as such electricity becomes produced by both conventional and renewable resources. As a result, EAEU conventional electricity could be discriminated against on the basis of non-incorporated PPMs, taking into account that there is no mechanism that would verify renewable electricity in the grid.

As scholars note, since green electricity fed into the grid is blended with conventional electricity, there is a need for a mechanism that would verify the existence, type, and the amount of ‘green’ power in the grid to check whether, and to what extent, national renewable energy targets are met.⁵⁸

As for the national treatment obligation to provide freedom of transit enshrined in Article V of the GATT, it should be highlighted that electricity needs to be manufactured, and can be transmitted, from the production site to the receiving consumer only via an extensive network of aerial and/or underground power lines⁵⁹ [eg fixed infrastructure (electrical grid) that has a more limited transportation capacity than vessels, airplanes, ships or trains carrying other ‘conventional’ goods].⁶⁰

The United energy system includes the electric power systems of Russia, Azerbaijan, Belarus, Georgia, Kazakhstan, Moldova, Mongolia, Latvia, Lithuania, Ukraine and Estonia. The power systems of Central Asia, Kyrgyzstan, Tajikistan and Uzbekistan operate through the power system of Kazakhstan parallel with the United energy system of Russia.⁶¹ The exception is the Armenian energy system, which operates cooperatively with the Iranian energy system and is not part of the United energy system.⁶² Regarding Armenia's energy system, the technological basis for the formation of trade within the EAEU has not been formed yet.⁶³ Formation of such a basis deepens not only the technological issues and development of integration in the EAEU in the electricity sector, but also on the transit of electricity though the territory of Georgia, a non EAEU Member State.

Although Article V of the GATT ensures the obligation of the freedom of transit, it is questionable as to whether the ‘freedom of transit’ includes the right of the exporting country to build transit infrastructures for electricity in the territory of the transit country, which itself does not possess transmitting capacity.⁶⁴ This concern comes as a result of the failure of Article V of the GATT to clarify transit provisions for such energy goods as electricity.⁶⁵ This Article lacks the power to convince countries to invest in and construct new infrastructures needed for energy transportation. Therefore, although the WTO embraces basic disciplines addressing the transit of goods, they are incomplete and lack substantial obligations with relevance to the specific challenges of energy trade,⁶⁶ especially of trade in electricity.

Moving, now, to the legal status of state monopolies trading in electricity under WTO and EAEU law, it is worth noting that the energy sector has traditionally been dominated by state-owned companies, or has been under the direct control of the national government.⁶⁷ Economic activities in the energy sector have traditionally been left to state-owned companies or monopolized private enterprises.⁶⁸ However, competition law is not yet part of the legal framework under the GATT/WTO, and was not addressed under the 2004 Doha Round negotiation.⁶⁹ Article XVII (a) of the GATT ensures the obligation of WTO members to guarantee that State Trading Enterprises (STEs) act in a manner consistent with the general principles of non-discrimination (prescribed in GATT) for governmental measures affecting imports or exports by private traders.⁷⁰ A private corporation, or enterprise, could be considered to be an STE if it receives some special right or privilege from the state that, as a result of this right or privilege, is in a position to influence the level or direction of trade.⁷¹ The CEM Protocol ensures the right of legal entities of the EAEU members to trade in electricity on common electric energy markets on voluntary and competitive bases.⁷² Only the transmission of electricity, and its distribution to customers and dispatch, stays monopolized within the EAEU.⁷³

5. CONCLUSION

Technological features of electricity, such as reliance on fixed infrastructure and the limitation of network usage, requires special regulation of trade in electricity in both EAEU and international markets. Like in EU law, electricity is defined as a good under EAEU law. Along with that, WTO law, actually being part of the EAEU legal order, may potentially influence trade in electricity under EAEU law. The EAEU Court interprets EAEU law in the context of WTO law and jurisprudence. However, the EAEU Court is not bound by the DSB interpretation of WTO agreements, and should interpret relevant provisions relying on the object and purpose of the EAEU Treaty. Meanwhile, regardless of the existence of rules of EAEU law specifically focused on trade in electricity, (and recent adoption of Protocol on the EAEU Common Electricity Market on 1 July 2019) trade in electricity under EAEU law relates to the sphere of ‘coordinated policy’, which, in contrast to the ‘agreed’ and ‘unified’ policies of the EAEU, does not require the transfer of Member States’ powers to the EAEU level. In addition, it does not imply the harmonization or unification of legal governance based on decisions of the EAEU bodies. Trade in electricity within the EAEU, as well as between EAEU and third parties, is conducted by private entities on the basis of national legislation of the EAEU Member States. Therefore, trade, production, the transmission of electricity and operational dispatch management are governed by domestic legislation of the EAEU Member States and not by the EAEU law. Thus, the extent to which WTO law and jurisprudence may influence trade in electricity within the EAEU and between the EAEU and third parties is questionable. At the same time, WTO law can be relevant to trade in energy between EAEU Member States and third-party countries. However, EAEU Member States who are simultaneous WTO members did not make any commitments with respect to export electricity tariffs during the negotiation process of admittance into the WTO and, therefore, are not subject to obligations under Article II of the GATT. As for the MFN and national treatment obligations, importation of electricity from the EAEU to third-party counties may face the problem of likeness determination, as soon as such electricity becomes produced from both conventional and renewable sources.

Along with that, the national treatment obligation in Article V the GATT is very limited and lacks substantial obligations with relevance to the specific challenges of trade in electricity.

The CEM Protocol enshrines the right of legal entities of the EAEU members to trade in electricity on common electric energy markets on voluntary and competitive bases. Only the transmission of electricity, its distribution to customers and dispatch, stays monopolized within the EAEU, which is unlikely to qualify as a special right or privilege under Article XVII of the GATT.

Therefore, we finally conclude that, on the one hand, EAEU law on trade in electricity is developing progressively, qualifying electricity as a good. WTO law plays a significant role in interpreting EAEU law. On the other hand, reliance on WTO law, and jurisprudence for interpretation of the EAEU rules governing trade in electricity, is limited. Such limitation is inferred from specific technical characteristics of electricity and from specific regulations of trade in electricity. This is distinct when comparing trade in other energy goods. However, the creation and operation of a common EAEU electricity market will definitely determine the development of integration in the electric power sector simultaneously with the growth of national electricity markets of the EAEU Member States. Therefore, this may lead to the enlargement of regulatory authority of the EAEU bodies regarding the governance of the trade in electricity. As a result, it may increase influence of WTO law on EAEU law on the trade of electricity. There are several questions that were not addressed in this article, which may also influence the trade of energy under EAEU law. These questions may be addressed in the future. Among such questions, for instance, is the facilitation of energy trade between EAEU and China on the basis of the 2018 Agreement on Trade and Economic Cooperation between the EAEU and China. Although this agreement does not recognize preferential duties, it identifies energy as an area of sectoral cooperation. Such cooperation may be provided via free trade zones established between the EAEU and China. Another issue that may influence the regulation of the trade of electricity between the EAEU and third-party countries is the possibility of EAEU members to renegotiate their tariffs following accession to the EAEU. Also, the result of accession of Belarus might influence trade of electricity with the participation of the EAEU.

Footnotes