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Arbitrators Recognize the Right of Ukraine to Restrict Exports of Timber Under Certain Circumstances in the First Dispute Under the EU-Ukraine Association Agreement

16/ 12/ 2020
  On 11 December 2020, the arbitration panel awarded a decision in the dispute between Ukraine and the EU in connection with the introduction by Ukraine of a moratorium onto the exports of unprocessed timber (rough logs). The arbitrators acknowledged that Ukraine has the right to restrict timber exports under certain circumstances. In the first dispute under the EU-Ukraine Association Agreement Ukraine was represented by the international trade practice team at Ilyashev & Partners Law Firm headed by the Firm’s Partner Olena Omelchenko, also with the participation of Roman Protsyshyn, an Attorney at Law. It has been the first time in Ukraine when a local law firm was engaged into the protection of interests in a transnational dispute. “The arbitration process demonstrated that Ukraine must protect its own interests under any circumstances. It is crucially important to prove the lawfulness of the ban imposed towards the exports of timber and sawn wood products of valuable and rare wood species, and we have managed to accomplish this, - pointed out Olena Omelchenko. - In addition, Ukraine still has the opportunity to choose the tools for implementation of the recommendation given by the arbitration panel. The consultations between the parties to find a mutually acceptable solution are ahead.” It should be mentioned that the dispute with the EU erupted due to the introduction by Ukraine of a moratorium onto the exports of unprocessed wood. Since 2005, Ukraine has had a permanent ban onto the exports of timber and sawn wood products of valuable and rare wood species: acacia, birch, cherry, pear, walnut, chestnut, common yew, sweet cherry, common maple and juniper. In 2015, Ukraine introduced a temporary 10-year ban onto the exports of unprocessed timber of any species of trees except for pine, towards which the moratorium started to apply from 01 January 2017. In January 2019, the EU filed a request to carry out consultations with Ukraine as to the temporary ban onto the exports of unprocessed timber. No mutually agreed solution was reached further to the consultations, and in June 2019 the EU initiated a dispute resolution procedure through arbitration and filed a request for summoning an arbitration panel. The first dispute within the framework of the EU-Ukraine Association Agreement, and the second settlement in the history of the EU through ad hoc arbitration, which is stipulated by a bilateral interstate trade agreement, touched upon the legal issues of interpretation of the provisions of the EU-Ukraine Association Agreement, in particular, the rights of each party to establish and regulate the levels of national environmental protection, sustainable management of forest resources, as well as the national policies of Ukraine in the sphere of forestry and environmental protection. The arbitration panel recognized the lawfulness of the permanent ban onto the exports of timber and sawn wood products of valuable and rare wood species. Supporting the position of Ukraine that forests are an exhaustive resource, the arbitrators acknowledged that the ban on exports of rough logs of 2015 does not comply with the provisions of the Association Agreement, and recommended that Ukraine adopt all necessary measures to implement this decision, considering for all the relevant provisions of the Association Agreement, including the provisions of Chapter 13 on trade and sustainable development, especially Article 294 on trade in forest products by which an obligation was imposed on Ukraine, as well as the EU, to improve forest law enforcement and governance and promote trade in legal and sustainable forest products.

On 11 December 2020, the arbitration panel awarded a decision in the dispute between Ukraine and the EU in connection with the introduction by Ukraine of a moratorium onto the exports of unprocessed timber (rough logs). The arbitrators acknowledged that Ukraine has the right to restrict timber exports under certain circumstances.

In the first dispute under the EU-Ukraine Association Agreement Ukraine was represented by the international trade practice team at Ilyashev & Partners Law Firm headed by the Firm’s Partner Olena Omelchenko, also with the participation of Roman Protsyshyn, an Attorney at Law. It has been the first time in Ukraine when a local law firm was engaged into the protection of interests in a transnational dispute.

“The arbitration process demonstrated that Ukraine must protect its own interests under any circumstances. It is crucially important to prove the lawfulness of the ban imposed towards the exports of timber and sawn wood products of valuable and rare wood species, and we have managed to accomplish this, – pointed out Olena Omelchenko. – In addition, Ukraine still has the opportunity to choose the tools for implementation of the recommendation given by the arbitration panel. The consultations between the parties to find a mutually acceptable solution are ahead.”

It should be mentioned that the dispute with the EU erupted due to the introduction by Ukraine of a moratorium onto the exports of unprocessed wood. Since 2005, Ukraine has had a permanent ban onto the exports of timber and sawn wood products of valuable and rare wood species: acacia, birch, cherry, pear, walnut, chestnut, common yew, sweet cherry, common maple and juniper. In 2015, Ukraine introduced a temporary 10year ban onto the exports of unprocessed timber of any species of trees except for pine, towards which the moratorium started to apply from 01 January 2017.

In January 2019, the EU filed a request to carry out consultations with Ukraine as to the temporary ban onto the exports of unprocessed timber. No mutually agreed solution was reached further to the consultations, and in June 2019 the EU initiated a dispute resolution procedure through arbitration and filed a request for summoning an arbitration panel.

The first dispute within the framework of the EU-Ukraine Association Agreement, and the second settlement in the history of the EU through ad hoc arbitration, which is stipulated by a bilateral interstate trade agreement, touched upon the legal issues of interpretation of the provisions of the EU-Ukraine Association Agreement, in particular, the rights of each party to establish and regulate the levels of national environmental protection, sustainable management of forest resources, as well as the national policies of Ukraine in the sphere of forestry and environmental protection.

The arbitration panel recognized the lawfulness of the permanent ban onto the exports of timber and sawn wood products of valuable and rare wood species. Supporting the position of Ukraine that forests are an exhaustive resource, the arbitrators acknowledged that the ban on exports of rough logs of 2015 does not comply with the provisions of the Association Agreement, and recommended that Ukraine adopt all necessary measures to implement this decision, considering for all the relevant provisions of the Association Agreement, including the provisions of Chapter 13 on trade and sustainable development, especially Article 294 on trade in forest products by which an obligation was imposed on Ukraine, as well as the EU, to improve forest law enforcement and governance and promote trade in legal and sustainable forest products.

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