on the position to be taken on behalf of the European Union within the Association Committee in Trade configuration established by the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part

EXPLANATORY MEMORANDUM

1.Subject matter of the proposal

This proposal concerns the decision establishing the position to be taken on the Union's behalf within the Association Committee meeting in trade configuration in connection with the envisaged adoption of a decision establishing the list of individuals to serve as arbitrators in dispute settlement proceedings.

2.Context of the proposal

2.1.The Association Agreement

The Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part (‘the Agreement’) aims to establish conditions for enhanced economic and trade relations leading towards Ukraine's gradual integration in the EU Internal Market, including by setting up a Deep and Comprehensive Free Trade Area as stipulated in Title IV (Trade and Trade-related Matters) of the Agreement, and to support Ukrainian efforts to complete the transition into a functioning market economy by means of, inter alia, the progressive approximation of its legislation to that of the Union. The Agreement entered into force on 1 September 2017.

2.2.The Association Committee in trade configuration

The Association Committee meeting in trade configuration as a specific configuration for addressing all issues related to Title IV (Trade and Trade-related Matters) of the Agreement is specified in Article 465(4) of the Agreement. Pursuant to Article 465(3) of the Agreement, the Association Committee has the power to adopt decisions in the cases provided for in the Agreement and in areas in which the Association Council has delegated powers to it. These decisions shall be binding upon the Parties, which shall take appropriate measures to implement them. The Association Committee shall adopt its decisions by agreement between the Parties.

2.3.The envisaged act of the Association Committee in trade configuration

The Association Committee in trade configuration shall adopt a decision establishing a list of individuals willing and able to serve as arbitrators in dispute settlement proceedings. The purpose of the envisaged act is to provide for a mechanism to resolve trade-related disputes between the Parties to the Agreement, concerning the application or interpretation of the trade part of that Agreement. The arbitration procedure set out in Chapter 14 of the Agreement provides that the complaining Party may request establishment of an arbitration panel to resolve a bilateral dispute.

Article 323 of the Agreement requires the Parties to prepare a list of possible arbitrators who are eligible and available for the composition of a panel. That list shall contain 15 qualified individuals who may serve as arbitrators. Accordingly, a draft list of arbitrators who are willing and able to serve on an arbitration panel has been discussed with the Government of Ukraine, providing for five candidate arbitrators from the Union, five candidate arbitrators from Ukraine and five third-country nationals who may serve as chairpersons of an arbitration panel.

The candidates proposed by the Union and by Ukraine and the selected chairpersons have specialised knowledge or experience of law and international trade as required by Article 323(2) of the Agreement. It can also be expected that the 14 listed individuals meet the requirement of independence in accordance with Article 323(3) of the Agreement and would be able to comply with the Code of Conduct set out in Annex XXV of the Agreement if appointed as arbitrators by the Parties.

Ukraine could propose only 4 arbitrators for the list as the nominated fifth candidate died after the closure of the selection procedure. For the proposal of the fifth arbitrator Ukraine will have to launch a new selection procedure which may not be concluded within a short timeframe. To avoid further delays in the establishment of this list of possible arbitrators, which is essential for the functioning of the dispute settlement system of the Agreement, the best option is the earliest possible adoption of a list containing 14 individuals and to obtain the commitment by Ukraine to propose as soon as possible a fifth individual.

3.Position to be taken on the Union's behalf

The position to be adopted on behalf of the Union aims at establishing a list of individuals who are willing and able to serve as arbitrators in dispute settlement proceedings, as provided for in the Agreement.

The decision constitutes the legal instrument establishing the Union's position to be adopted on its behalf in the Association Committee meeting in trade configuration.

This decision implements the Union’s common commercial policy towards an Eastern Partner country, based on the provisions of the above-mentioned Association Agreement. The establishment of a list of arbitrators is a legal requirement for setting up the institutional structures which enable the Union and Ukraine to effectively address bilateral disputes concerning the application and interpretation of the trade title of the Agreement. It is consistent with the Union's approach to dispute settlement disciplines negotiated or implemented within free trade agreements with other trade partners.

4.Legal basis

4.1.Procedural legal basis