EUROPEAN UNION AND ITS MEMBER STATES – CERTAIN MEASURES RELATING TO THE ENERGY SECTOR REPORT OF THE PANEL BCI DELETED, AS INDICATED [***]
Document: REPORT OF THE PANEL
Date: 10 August 2018
Document codes: WT/DS476/R
Complainant: Russia
Respondent: EU
Third parties: Brazil, China, India, Japan, Ukraine, U.S., Colombia, South Korea, Saudi Arabia
Dispute stage: Panel
Agreements cited: Art. XVI:1, XVII  Services (GATS)Art. III:4  GATT 1994Art. II:1, VI:1, VI:5(a)  Services (GATS)Art. I:1, XI:1, X:3(a)  GATT 1994Art. XVI  Services (GATS)

EUROPEAN UNION AND ITS MEMBER STATES – CERTAIN MEASURES
RELATING TO THE ENERGY SECTOR
REPORT OF THE PANEL
BCI DELETED, AS INDICATED [***]

LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex A-1 Working Procedures of the Panel A-2
Annex A-2 Additional Working Procedures on BCI A-7
ANNEX B
ARGUMENTS OF THE PARTIES
RUSSIA
Contents Page
Annex B-1 First part of the executive summary of the arguments of Russia B-2
Annex B-2 Second part of the executive summary of the arguments of Russia B-17
EUROPEAN UNION
Contents Page
Annex B-3 First part of the executive summary of the arguments of the European Union B-26
Annex B-4 Second part of the executive summary of the arguments of the European Union B-41
ANNEX C
ARGUMENTS OF THE THIRD PARTIES
Contents Page
Annex C-1 Executive summary of the arguments of Colombia C-2
Annex C-2 Executive summary of the arguments of India C-3
Annex C-3 Executive summary of the arguments of Japan C-6
Annex C-4 Executive summary of the arguments of Ukraine C-10
ANNEX D
PRELIMINARY RULINGS BY THE PANEL
Contents Page
Annex D-1 First Preliminary Ruling by the Panel (conclusions), 9 May 2016 D-2
Annex D-2 Second Preliminary Ruling by the Panel (conclusions), 10 November 2016 D-3

EXHIBITS FREQUENTLY CITED IN THIS REPORT
Panel
Exhibit
Short title (where
applicable)
Full title
EU-1 Regulation (EC) No. 715/2009 of the European Parliament and of the
Council of 13 July 2009 on conditions for access to the natural gas
transmission networks and repealing Regulation (EC) No. 1775/2005
(Text with EEA relevance), OJ L 211/36 of 14.8.2009
EU-3 Regulation (EU)
No. 1391/2013
Commission Delegated Regulation (EU) No. 1391/2013 of 14 October
2013, amending Regulation (EU) No. 347/2013 of the European
Parliament and of the Council on guidelines for trans-European energy
infrastructure as regards the Union list of projects of common interest,
OJ L 349/28 of 21.12.2013
EU-4 TEN-E Regulation Regulation (EU) No. 347/2013 of the European Parliament and of the
Council of 17 April 2013 on guidelines for trans-European energy
infrastructure and repealing Decision No. 1364/2006/EC and amending
Regulations (EC) No. 713/2009, (EC) No. 714/2009 and (EC) No.
715/2009 (Text with EEA relevance), OJ L 115/39 of 25.4.2013
EU-5 Directive 2009/73/EC Directive 2009/73/EC of the European Parliament and of the Council of 13
July 2009 concerning common rules for the internal market in natural gas
and repealing Directive 2003/55/EC (Text with EEA relevance),
OJ L 211/94 of 14.8.2009
EU-6 Regulation (EC)
No. 713/2009
Regulation (EC) No. 713/2009 of the European Parliament and of the
Council of 13 July 2009 establishing an Agency for the Cooperation of
Energy regulators (Text with EEA relevance), OJ L 211/1 of 14.8.2009
EU-10/
RUS-4
 Directive 2003/55/EC of the European Parliament and of the Council of 26
June 2003 concerning common rules for the internal market in natural gas
and repealing Directive 98/30/EC, OJ L 176/57 of 15.7.2003
EU-15/
RUS-38
W/120 Services Sectoral Classification List, Note by the Secretariat,
MTN.GNS/W/120 (10 July 1991)
EU-16/
RUS-37
 Schedule of Specific Commitments of Croatia, GATS/SC/130
(22 December 2000)
EU-17/
RUS-36
 Schedule of Specific Commitments of Hungary, GATS/SC/40 (15
April 1994)
EU-19/
RUS-35
 Schedule of Specific Commitments of Lithuania, GATS/SC/133
(21 December 2001)
EU-24 Oxford English Dictionary Online, definition of "service, n.1"
http://www.oed.com/view/Entry/176678?rskey=JSiVqR&result=1&isAdva
nced=false#eid (accessed 1 July 2016)
EU-26 US Department of Transportation, Pipeline & Hazardous Materials Safety
Administration, "Stakeholder Communications: Natural Gas Pipeline
Systems"
https://primis.phmsa.dot.gov/comm/NaturalGasPipelineSystems.htm
(accessed 1 July 2016)
EU-27 MIT Study on the Future of Natural Gas, Chapter 6, "Infrastructure", pp.
131-146, available at:
http://energy.mit.edu/research/future-natural-gas/ (accessed 3 August
2017)
EU-28 NaturalGas.org, "Natural Gas – From Wellhead to Burner Tip"
http://naturalgas.org/naturalgas/ (accessed 3 August 2017)
EU-29 US Energy Information Administration, Natural Gas Transmission Path
http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/ngpipe
line/transpath_fig.html (accessed 1 July 2016)
EU-32 HS Chapter 27 Harmonized Commodity Description and Coding System, Chapter 27,
available at: www.wcoomd.org (accessed 3 August 2017)
EU-34 CPC 2.1 code 65131 CPC Ver.2.1 code 65131, Detailed structure and explanatory notes, United
Nations Statistics Division, Classifications Registry
http://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=31&Lg=1&Co=65131
(accessed 1 July 2016)

Panel
Exhibit
Short title (where
applicable)
Full title
EU-37 CPC 2.1 code 67990 CPC Ver.2.1 code 67990, Detailed structure and explanatory notes, United
Nations Statistics Division, Classifications Registry
http://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=31&Lg=1&Co=67990
(accessed 1 July 2016)
EU-40 Working Party on Domestic Regulation, Informal Note by the Secretariat,
"Examples of measures to be addressed by Disciplines under GATS Article
VI:4", JOB(02)/20/Rev.10 (31 January 2005)
EU-41 Hungary's Gas Act Hungary's Act XL of 2008 on Natural Gas Supply – In Force on 31 March
2012 (extracts of an unofficial consolidated version incorporating
Government Decree No. 19/2009 (I.30.) on the implementation of the Act
on Natural Gas Supply)
EU-42/
RUS-19
Commission
Interpretative Note
on the Unbundling
Regime
Commission Staff Working Paper, Interpretative Note on Directive
2009/72/EC Concerning Common Rules for the Internal Market in
Electricity and Directive 2009/73/EC Concerning Common Rules for the
Internal Market in Natural Gas – The Unbundling Regime
(22 January 2010)
EU-51 Commission opinion
on the certification of
Energinet.dk
Commission Opinion of 9 January 2012 pursuant to Article 3(1) of
Regulation (EC) No. 715/2009 and Article 10(6) of Directive 2009/73/EC
– Denmark – Certification of Energinet.dk (gas), C(2012) 88 final
EU-52 Commission opinion
on the certification of
GTS
Commission Opinion of 1 July 2013 pursuant to Article 3(1) of Regulation
(EC) No. 715/2009 and Article 10(6) of Directive 2009/73/EC – the
Netherlands - Certification of Gas Transport Services B.V., C(2013) 4205
final
EU-53/
RUS-53
Commission opinion
on the certification of
MGT
Commission Opinion of 17 February 2015 pursuant to Article 3(1) of
Regulation (EC) No. 715/2009 and Article 10(6) of Directive 2009/73/EC
– Hungary – Certification of Magyar Gáz Tranzit Zrt., C(2015) 1046 final
EU-54/
RUS-50
Commission opinion
on the certification of
Amber Grid
Commission Opinion of 23 March 2015 pursuant to Article 3(1) of
Regulation (EC) No. 715/2009 and Article 10(6) of Directive 2009/73/EC
– Lithuania – Amber Grid, C(2015) 2135
EU-67 Decision of the
French NRA on the
certification of TIGF
Decision of the French Commission for the Regulation of Energy (CRE) of
4 June 2014 on the certification of Transport et Infrastructures Gaz
France (TIGF)
EU-68 Decision of the Greek
NRA on the
certification of DESFA
Decision of the Greek Regulatory Authority for Energy (RAE) of 25
September 2014 on the certification of the Hellenic Transmission System
Operator (DESFA)
EU-69 Decision of the Polish
NRA on the
certification
of Gaz-System
Decision of 19 May 2015 of the Polish Energy Regulatory Office (ERO) on
the certification of Gazociągów Przesyłowych Gaz-System Spółka Akcyjna
(Gaz-System) in connection with its function as the transmission system
operator on the Polish section of the Yamal-Western Europe pipeline
EU-70 International Energy Agency, Energy supply security: Emergency
Response of IEA Countries 2014 (OECD/IEA 2014)
EU-71 United Nations Economic Commission for Europe, Emerging Global Energy
Security Risks, No. 36 (2007), pp. 8-9
EU-73 Regulation (EU)
No. 994/2010
Regulation (EU) No. 994/2010 of the European Parliament and of the
Council of 20 October 2010 concerning measures to safeguard security of
gas supply and repealing Council Directive 2004/67/EC (Text with EEA
relevance), OJ L 295/1 of 12.11.2010
EU-93 R. Adlung, P. Morrison, M. Roy and W. Zhang, "FOG in GATS
Commitments – Boon or Bane?", Staff Working Paper ERSD-2011-04,
World Trade Organization, Economic Research and Statistics Division
(31 March 2011)
EU-101 Commission Merger
Jurisdictional Notice
Commission Consolidated Jurisdictional Notice under Council Regulation
(EC) No. 139/2004 on the control of concentrations between
undertakings, 2008/C 95/01
EU-104 Commission Decision of 31 March 2011 on China National Bluestar/Elkem
notification pursuant to Article 4 of Council Regulation No. 139/2004,
Case COMP/M.6082
EU-106 Commission Decision of 19 May 2011 on DSM/Sinochem/JV notification
pursuant to Article 4 of Council Regulation (EC) No. 139/2004, Case
COMP/M.6113

Panel
Exhibit
Short title (where
applicable)
Full title
EU-110 Shareholdings in TSOs in the European Union (BCI)
EU-131 Resolution of the Government of the Russian Federation No. 1017 of 5
October 2012 on measures implementing Decree of the President of the
Russian Federation No. 1285 of 11 September 2012
EU-143 Commission's
comments to the
Gate Terminal
exemption decision
Commission's comments of 26 March 2007 to the Decision of the Dutch
Ministry of Economic Affairs of 23 November 2006 No. G/2006/01 on the
exemption of the Gate Terminal project from certain parts of the Gas
Directive 2003/55
EU-146 Eurostat statistics on production, imports, exports and consumption of
gas in the European Union between 2011 and 2015
EU-155 Hungary's Gas Act Hungary's Gas Act XL of 2008, including the amendments made after
31 May 2012
EU-166 US Department of Transportation, Pipeline & Hazardous Materials Safety
Administration, "Stakeholder Communications: Natural Gas Processing
Plants"
https://primis.phmsa.dot.gov/comm/FactSheets/FSNaturalGasProcessingP
lants.htm (accessed 23 March 2017)
EU-190 Eurostat statistics on
natural gas supplies
and consumption
Eurostat statistics on natural gas supplies to the European Union and
member States by partner, volume and share between 2006 and 2015,
and gross inland consumption of natural gas in the EU member States
between 2006 and 2015
RUS-2 Regulation (EU)
No. 2016/89
Commission Delegated Regulation (EU) No. 2016/89 of 18 November
2015 amending Regulation (EU) No. 347/2013 of the European Parliament
and of the Council as regards the Union list of projects of common
interest, OJ L 19/1 of 27.1.2016
RUS-5 Communication from the Commission to the European Parliament and the
Council, European Energy Security Strategy, COM(2014) 330 final,
(28 May 2014)
RUS-6 Regulation (EC) No. 1775/2005 of the European Parliament and of the
Council of 28 September 2005 on conditions for access to the natural gas
transmission networks (Text with EEA relevance), OJ L 289/1
of 3.11.2005
RUS-7 Decision No. 1364/2006/EC of the European Parliament and of the Council
of 6 September 2006 laying down guidelines for trans-European energy
networks and repealing Decision 96/391/EC and Decision
No. 1229/2003/EC, OJ L 262/1 of 22.9.2006
RUS-8 Commission Staff Working Document Accompanying Commission
Delegated Regulation (EU) No. 2016/89 of 18 November 2015 amending
Regulation (EU) No. 347/2013 of the European Parliament and of the
Council as regards the Union list of projects of common interest,
SWD(2015) 247 of 18.11.2015
RUS-10 Commission decision
on the exemption of
the TAP pipeline
Commission Decision of 16 May 2013 on the exemption of the Trans
Adriatic Pipeline from the requirements on third party access, tariff
regulation and ownership unbundling laid down in Articles 9, 32, 41(6),
41(8) and 41(10) of Directive 2009/73/EC, C(2013) 2949
RUS-22 Lithuania's Law on
Implementation
Law of the Republic of Lithuania of 30 June 2011 No. XI-1565 on the
Implementation of the Law Amending the Law on Natural Gas
RUS-27 Commission
Explanatory Note on
New Infrastructure
Exemptions
Commission Staff Working Document on Article 22 of Directive
2003/55/EC Concerning Common Rules for the Internal Market in Natural
Gas and Article 7 of Regulation (EC) No. 1228/2003 on Conditions for
Access to the Network for Cross-border Exchanges in Electricity – New
Infrastructure Exemptions, SEC(2009) 642 final (6 May 2009)
RUS-28 Sprague Natural Gas Glossary,
http://www.spragueenergy.com/natgas/additional-resources/glossary
(accessed 10 May 2016)
RUS-29 H. R. Williams and C. J. Myers (eds.), Manual of Oil and Gas Terms, 15th
edn (LexisNexis, 2012) (selected pages)
RUS-30 A. Goldthau, "The Geopolitics of Natural Gas: The Politics of Natural Gas
Development in the European Union", Harvard University's Belfer Center

Panel
Exhibit
Short title (where
applicable)
Full title
& Rice University's Baker Institute Center for Energy Studies,
(October 2013)
RUS-32 United Nations Economic Commission for Europe, Study on Current Status
and Perspectives for LNG in the UNECE Region (UN 2013)
RUS-41 UNECE glossary for
transport statistics
Illustrated Glossary for Transport Statistics, Chapter D, "Pipeline
Transport", 4th edn (UNECE 2009), pp. 97-103
RUS-42 Commission Decision of 20 November 2013 on the state aid to Klaipedos
NAFTA – LNG Terminal (SA.36740 (2013/NN)), C(2013) 7884 final
RUS-45 Croatia's Gas Market
Act
Croatia's Gas Market Act (Official Gazette 28-472/2013, 14-299/2014)
RUS-46 Croatia's Act on the
Regulation of Energy
Activities
Croatia's Act on the Regulation of Energy Activities of 25 October 2012
RUS-47 Hungary's Gas Act Chapter III of Hungary's Act XXIX of 2011 on the Amendment of
Regulations Relating to Energy Supply amending Hungary's Act XL of
2008 on Natural Gas Supply
RUS-57 Commission opinion
on the certification of
TAP AG
Commission Opinion of 28 January 2016 pursuant to Article 3(1) of
Regulation (EC) No. 715/2009 and Article 10(6) of Directive 2009/73/EC
– Italy - Greece - Certification of TAP AG, C(2016) 538 final
RUS-59 Commission opinion
on the certification of
Gaz-System I
Commission Opinion of 9 September 2014 pursuant to Article 3(1) of
Regulation (EC) No 715/2009 and Article 10(6) and 11(6) of Directive
2009/73/EC – Poland - Certification of Gaz-System as the operator of the
Polish section of the Yamal-Europe Pipeline, C(2014) 6463
RUS-61 BNetzA decision on
the exemption of the
OPAL and NEL
pipelines
Ruling of the German Federal Network Agency for Electricity, Gas,
Telecommunications, Post and Railways (BNetzA) of 25 February 2009 on
the Application for Exemption from the Regulation by OPAL NEL Transport
GmbH (Case ref. BK7-08-009)
RUS-66 Final views of the UK
NRA on the
exemption of the
Dragon LNG facility
Final Views of the UK Office of Gas and Electricity Markets (Ofgem) on the
draft application by Dragon LNG Ltd for an exemption from the Regulated
Third Party Access provisions of the Gas Directive for the Milford Haven
LNG import terminal (June 2004)
RUS-68 Final views of the UK
NRA on the
exemption of the
South Hook LNG
facility
Final Views of the UK Office of Gas and Electricity Markets (Ofgem) on the
application by South Hook LNG Terminal Company Ltd (SHTCL) (owned by
Qatar Petroleum and ExxonMobil) under section 19C of the Gas Act 1986
for an exemption from section 19D of the Gas Act 1986 for the entire
proposed capacity of its LNG import facility at Milford Haven
(November 2004)
RUS-73 Commission opinion
on the certification of
Gaz-System II
Commission Opinion of 19 March 2015 pursuant to Article 3(1) of
Regulation (EC) No. 715/2009 and Article 10(6) and 11(6) of Directive
2009/73/EC – Poland – Certification of Gaz-System as the operator of the
Polish section of Yamal-Europe Pipeline
RUS-81 Commission decision
on the exemption of
the Gazelle pipeline I
Commission Decision of 20 May 2011 on the exemption of the Gazelle
pipeline from the requirements on third party access and tariff regulation
laid down in Articles 32, 33, 34, 41(6), 41(8) and 41(10) of Directive
2009/73/EC, C(2011) 3424
RUS-82 Commission decision
on the exemption of
the OPAL pipeline
Commission Decision of 12 June 2009 on the exemption of the OPAL
pipeline from the requirements on third party access and tariff regulation
laid down in Articles 18, 25(2), 25(3) and 25(4) of Directive 2003/55/EC,
K(2009) 4694, SG-Greffe (2009)D/3322
RUS-83 Commission decision
on the exemption of
the Austrian section
of the Nabucco
pipeline
Commission Decision of 8 February 2008 on the exemption of the
Austrian section of the Nabucco pipeline from the requirements on third
party access and tariff regulation laid down in Articles 18, 25(2), 25(3)
and 25(4) of Directive 2003/55/EC, CAB D(2008)142
RUS-84 Commission decision
on the exemption of
the Bulgarian section
of the Nabucco
pipeline
Commission Decision of 20 April 2009 on the exemption of the Bulgarian
section of the Nabucco pipeline from the requirements on third party
access and tariff regulation laid down in Articles 18, 25(2), 25(3) and
25(4) of Directive 2003/55/EC, CAB D(2009)

Panel
Exhibit
Short title (where
applicable)
Full title
RUS-85 Commission decision
on the exemption of
the Romanian section
of the Nabucco
pipeline
Commission Decision of 23 June 2009 on the exemption of the Romanian
section of the Nabucco pipeline from the requirements on third party
access and tariff regulation laid down in Articles 18, 25(2), 25(3) and
25(4) of Directive 2003/55/EC, C(2009)
RUS-86 Commission decision
on the exemption of
the Poseidon pipeline
Commission Decision of 22 May 2007 on the exemption of the Poseidon
pipeline from the requirements on third party access laid down in Articles
18, 20, 25(2), 25(3) and 25(4) of Directive 2003/55/EC, SG-Greffe(2007)
D/203046
RUS-87 Commission decision
on the exemption of
the Gazelle pipeline II
Commission Decision of 1 December 2011 on the exemption of the
Gazelle pipeline from the requirement of ownership unbundling laid down
in Article 9 of Directive 2009/73/EC, C(2011) 8777
RUS-91 [***] (BCI)
RUS-92 [***] (BCI)
RUS-94 [***] (BCI)
RUS-97 Final Joint Opinion of the Energy Regulators on TAP AG's Exemption
Application
RUS-101 Letter from the UK
NRA regarding the
Commission decision
on the exemption of
the Dragon LNG
facility
Letter of 11 April 2005 from the UK Office of Gas and Electricity Markets
(Ofgem) to All Interested Parties regarding the European Commission
decision on Ofgem's decision to grant Dragon LNG Ltd (Dragon) an
exemption under section 19C(5) of the Gas Act 1986 from the application
of section 19D of the Gas Act
RUS-102 Letter from the UK
NRA regarding the
Commission decision
on the exemption of
the South Hook LNG
facility
Letter of 11 February 2005 from the UK Office of Gas and Electricity
Markets (Ofgem) to All Interested Parties regarding the European
Commission decision on Ofgem's decision to grant South Hook LNG
Terminal Company Ltd (SHTCL) and Grain LNG Ltd (GLNG) an exemption
under section 19C(5) of the Gas Act 1986 from the application of section
19D of the Gas Act
RUS-109 Energy Infrastructure
Blueprint
Communication from the Commission to the European Parliament, the
Council, the European Economic and Social Committee and the Committee
of the Regions, "Energy infrastructure priorities for 2020 and beyond – A
Blueprint for an integrated European energy network" COM(2010) 677
(17 November 2010)
RUS-
115bis
 Letter of 8 May 2014 from the Permanent Mission of the European Union
to the WTO regarding Russia's request for consultations
RUS-116 UK House or Lords
Report
UK House of Lords, Select Committee on European Communities, Seventh
Report on the Amended Proposal for a European Parliament and Council
Directive concerning common rules for the internal market in natural gas
(18 November 1997)
https://publications.parliament.uk/pa/ld199798/ldselect/ldeucom/035vii/e
c0701.htm (accessed 15 September 2017)
RUS-119 Commission Proposal
for the Directive
European Commission, Proposal for a Directive of the European
Parliament and of the Council amending Directive 2003/55/EC concerning
common rules for the internal market in natural gas, COM(2007) 529
final, 2007/0196 (COD) (19 September 2007)
RUS-122 European Commission Fact Sheet, Intergovernmental agreements in
energy (16 February 2016)
RUS-129 "Prime Minister: Construction of Terminal Increases",
https://lrv.lt/en/news/prime-minister-construction-ofterminal-increases-
br-energy-independence-and-reduces-gas-prices
RUS-130 Draft Decision of the Government of the Republic of Lithuania "On
Approval of the Concept of the Amendment of the Law on Natural Gas of
the Republic of Lithuania", (23 March 2010), (unofficial translation)
RUS-132 Baltic Business News, "Kubilius: Gazprom's influence on Lithuania must
decrease", (online, 13 September 2010)
RUS-133 Seimas of the Republic of Lithuania, 6th (Spring) Session, Evening's
Plenary Session No. 346, Verbatim Report, 28 June 2011 (unofficial
translation)
RUS-134 Seimas of the Republic of Lithuania, 6th (Spring) Session, Evening's

Panel
Exhibit
Short title (where
applicable)
Full title
Plenary Session No. 347, Verbatim Report, 30 June 2011 (unofficial
translation)
RUS-135 ICIS, "Incumbent opposes Lithuanian grid unbundling decision", (online,
20 May 2010)
RUS-
136rev
Lithuania's Law on
Natural Gas
Law of the Republic of Lithuania of 10 October 2000 No. VIII-1973 on
Natural Gas
RUS-138 V. Žinios, "Interview: Interview with Andrius Kubilius, Lithuania's Prime
Minister by Rytas Staselis", Business News, (Vilnius, 6 September 2010)
(unofficial translation)
RUS-139 Baltic News Service, "Energy Minister: Gazprom, Lithuania's Govt Pursue
Different Interests With Building of Gas Pipeline to Klaipedia", (Vilnius, 22
September 2009)
RUS-140 Baltic News Service, "Govt Asks Lithuanian Gas' Top Execs to Resign",
(Vilnius, 8 February 2011)
RUS-141 Elta, "Prime Minister Armed For Negotiations With Gazprom", (online, 8
September 2011) (unofficial translation)
RUS-142 Ministry of Energy of the Republic of Lithuania: "Ministry of Energy
appeals to court to launch legal investigation of the operations of AB
Lietuvos Dujos", 17 March 2011
RUS-147 European Commission, PowerPoint Presentation on North-South
Interconnections in Central-Eastern Europe – The South-Eastern European
subgroup in electricity and gas (15 February 2012)
RUS-151 Decision of the Government of the Republic of Croatia of 3 October 2016
on Appointing the Supplier on the Wholesale Gas Market
RUS-152 Croatia's Gas Market Act (2007), Article 10
RUS-154 OECD Economic Outlook No. 73, Chapter 7, "Foreign direct investment
restrictions in OECD countries" (OECD 2003)
RUS-155 World Bank, Investing Across Borders 2010, pp. 7 - 20
RUS-157 Commission decision
on BP/ Chevron/ Eni/
Sonangol/ Total/ JV
concentration
Commission Decision of 16 May 2012 on BP/ Chevron/ Eni/ Sonangol/
Total/ JV notification pursuant to Article 4 of Council Regulation No.
139/2004, Case No COMP/M.6477
RUS-166 Energy Council, Memo/08/127, (27 February 2009)
RUS-167 V. Pakalkaite, "Lithuania's Strategic Use of EU Energy Policy Tools: A
Transformation of Gas Dynamics" (2016), paper NG111, Oxford Institute
for Energy Studies
RUS-170 EurActiv, "EU unveils plan to dismantle big energy firms", (online, 20
September 2007)
RUS-171 Shepherd and Wadderburn LLP, "Full ownership unbundling: no way or
the third way", Lexology, (online, 7 August 2008)
RUS-172 Wikileaks, Public Library of US Diplomacy, Cable of 7 November 2007
"Grand Coalition Opposes European Union Commission's Unbundling
Directives"
RUS-173 EurActiv, "Eight EU states oppose unbundling, table 'third way'", (online,
1 February 2008)
RUS-174 E. Chow, "France, Germany Propose End-Run Around Unbundling",
Law360, (online, 29 January 2008)
RUS-175 EurActiv, "Commission rebuffs Franco-German energy proposals", (online,
15 February 2008)
RUS-176 I. Wissenbach, "EU Commission sets strict terms on unbundling", Reuters,
(Brussels, 25 April 2008)
RUS-177 V. Horváth, "Compromise in sight on energy liberalization", EurActiv,
(online, 16 May 2008)
RUS-178 Wikileaks, Public Library of US Diplomacy, Cable of 31 October 2008
"Outlook for the EU's Third Energy Package"
RUS-179 R. Goldirova, "Parliament rejects full gas company unbundling",
Euobserver, (online, 10 July 2008)

Panel
Exhibit
Short title (where
applicable)
Full title
RUS-180 S. Stefanini, "EU Backs a Compromise on Gas Unbundling", Law360,
(online, 9 July 2008)
RUS-181 P. Newton, "EU institutions agree unbundling terms for energy networks",
Utility Week, (online 8 April 2009)
RUS-184 The UK Department for Trade and Industry, Consultation Document,
Implementation of those provisions of Directive 98/30/EC of the European
Parliament and of the Council of 22 June 1998 concerning the common
rules for the internal market in natural gas which relate to access to
upstream pipeline networks (March 2000)
RUS-188 K. Gluger, M. Liebensteiner, and S. Schmitt, Vienna University of
Economics and Business, "Assessing the Economies of Scope from Vertical
Integration: Evidence from European Electricity Utilities", PowerPoint
Presentation at IAEE Conference held in New York on 18 June 2014
RUS-189 Shareholding of TSOs before and after the Third Package
RUS-194 Inland Sales of Natural Gas in the European Union in 2014
http://www.eurogas.org/uploads/2016/flipbook/statistical-report-
2015/index.html#p=6 (accessed 3 August 2017)
RUS-195 European Commission Memo "Clean Power for Transport – Frequently
Asked Questions", Memo/13/24 (24 January 2013)
RUS-196 Norway Pipelines Map
RUS-197 Gassco AS, the Norwegian Ministry of Petroleum and Energy, List of gas
pipelines on the Norwegian continental shelf
RUS-204 Gassco, Europipe II
https://www.gassco.no/en/our-activities/pipelines-and-
platforms/europipe-II/ (accessed 25 February 2017)
RUS-206 [***] (BCI)
RUS-214 European Commission, EU Energy in Figures: Statistical Pocketbook 2016,
pp. 26 and 65
RUS-217 [***] (BCI)
RUS-218 [***] (BCI)
RUS-220 [***] (BCI)
RUS-221 [***] (BCI)
RUS-246 European Commission Press Release, "Gas markets: Commission
reinforces market conditions in revised exemption decision on OPAL
pipeline" (28 October 2016)
RUS-251 Wikipedia, "Vertical Integration"
https://en.wikipedia.org/wiki/Vertical_integration#Problems_and_benefits
(accessed 11 May 2017)
RUS-252 Neil Kokemuller, "The Advantages of a Vertical Integration Strategy"
http://smallbusiness.chron.com/advantages-vertical-integration-strategy-
20987.html (accessed 3 August 2017)
RUS-260 NaturalGas.org, "Processing Natural Gas"
http://naturalgas.org/naturalgas/processingng/ (accessed 11 May 2017)
RUS-266 Gassco, Kollsnes Gas Processing Plant
RUS-268 Gas Strategies
industry glossary
Gas Strategies, Industry Glossary (excerpts)
http://www.gasstrategies.com/industry-glossary (accessed 3 August
2017)
RUS-270 University of Texas at Austin, Petroleum Extension Service, A Dictionary
for the Oil and Gas Industry, 2nd edn (Austin, Texas 2011), p. 165
RUS-271 UNECE LNG Study United Nations Economic Commission for Europe, Study on Current Status
and Perspectives for LNG in the UNECE Region (UN 2013), Chapter 2,
Figure 1: Illustrations of LNG and Pipeline Value Chains, p. 2

CASES CITED IN THIS REPORT
Short title Full case title and citation
Argentina – Financial Services Appellate Body Report, Argentina – Measures Relating to Trade in Goods and
Services, WT/DS453/AB/R and Add.1, adopted 9 May 2016
Argentina – Financial Services Panel Report, Argentina – Measures Relating to Trade in Goods and Services,
WT/DS453/R and Add.1, adopted 9 May 2016, as modified by Appellate Body
Report WT/DS453/AB/R
Argentina – Hides and Leather Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and
the Import of Finished Leather, WT/DS155/R and Corr.1, adopted 16
February 2001, DSR 2001:V, p. 1779
Argentina – Import Measures Appellate Body Reports, Argentina – Measures Affecting the Importation of
Goods, WT/DS438/AB/R / WT/DS444/AB/R / WT/DS445/AB/R, adopted 26
January 2015
Argentina – Import Measures Panel Reports, Argentina – Measures Affecting the Importation of Goods,
WT/DS438/R and Add.1 / WT/DS444/R and Add.1 / WT/DS445/R and Add.1,
adopted 26 January 2015, as modified (WT/DS438/R) and upheld
(WT/DS444/R / WT/DS445/R) by Appellate Body Reports WT/DS438/AB/R /
WT/DS444/AB/R / WT/DS445/AB/R
Australia – Apples Appellate Body Report, Australia – Measures Affecting the Importation of
Apples from New Zealand, WT/DS367/AB/R, adopted 17 December 2010,
DSR 2010:V, p. 2175
Australia – Salmon Appellate Body Report, Australia – Measures Affecting Importation of
Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, p.
3327
Brazil – Aircraft Appellate Body Report, Brazil – Export Financing Programme for Aircraft,
WT/DS46/AB/R, adopted 20 August 1999, DSR 1999:III, p. 1161
Brazil – Desiccated Coconut Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut,
WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, p. 167
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded
Tyres, WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, p. 1527
Brazil – Retreaded Tyres Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres,
WT/DS332/R, adopted 17 December 2007, as modified by Appellate Body
Report WT/DS332/AB/R, DSR 2007:V, p. 1649
Canada – Autos Appellate Body Report, Canada – Certain Measures Affecting the Automotive
Industry, WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, DSR
2000:VI, p. 2985
Canada – Autos Panel Report, Canada – Certain Measures Affecting the Automotive Industry,
WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as modified by Appellate
Body Report WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, p. 3043
Canada – Dairy (Article 21.5 –
New Zealand and US II)
Appellate Body Report, Canada – Measures Affecting the Importation of Milk
and the Exportation of Dairy Products – Second Recourse to Article 21.5 of
the DSU by New Zealand and the United States, WT/DS103/AB/RW2,
WT/DS113/AB/RW2, adopted 17 January 2003, DSR 2003:I, p. 213
Canada – FIRA GATT Panel Report, Canada – Administration of the Foreign Investment
Review Act, L/5504, adopted 7 February 1984, BISD 30S/140
Canada – Periodicals Appellate Body Report, Canada – Certain Measures Concerning Periodicals,
WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, p. 449
Canada – Periodicals Panel Report, Canada – Certain Measures Concerning Periodicals,
WT/DS31/R and Corr.1, adopted 30 July 1997, as modified by Appellate
Body Report WT/DS31/AB/R, DSR 1997:I, p. 481
Canada – Provincial Liquor
Boards (EEC)
GATT Panel Report, Canada – Import, Distribution and Sale of Alcoholic
Drinks by Canadian Provincial Marketing Agencies, L/6304, adopted
22 March 1988, BISD 35S/37
Canada – Provincial Liquor
Boards (US)
GATT Panel Report, Canada – Import, Distribution and Sale of Certain
Alcoholic Drinks by Provincial Marketing Agencies, DS17/R, adopted
18 February 1992, BISD 39S/27

Short title Full case title and citation
Canada – Wheat Exports and
Grain Imports
Appellate Body Report, Canada – Measures Relating to Exports of Wheat and
Treatment of Imported Grain, WT/DS276/AB/R, adopted 27 September
2004, DSR 2004:VI, p. 2739
Chile – Alcoholic Beverages Appellate Body Report, Chile – Taxes on Alcoholic Beverages,
WT/DS87/AB/R, WT/DS110/AB/R, adopted 12 January 2000, DSR 2000:I, p.
281
Chile – Alcoholic Beverages Panel Report, Chile – Taxes on Alcoholic Beverages, WT/DS87/R,
WT/DS110/R, adopted 12 January 2000, as modified by Appellate Body
Report WT/DS87/AB/R, WT/DS110/AB/R, DSR 2000:I, p. 303
China – Electronic Payment
Services
Panel Report, China – Certain Measures Affecting Electronic Payment
Services, WT/DS413/R and Add.1, adopted 31 August 2012, DSR 2012:X, p.
5305
China – HP-SSST (Japan) /
China – HP-SSST (EU)
Appellate Body Reports, China – Measures Imposing Anti-Dumping Duties on
High-Performance Stainless Steel Seamless Tubes ("HP-SSST") from Japan /
China – Measures Imposing Anti-Dumping Duties on High-Performance
Stainless Steel Seamless Tubes ("HP-SSST") from the European Union,
WT/DS454/AB/R and Add.1 / WT/DS460/AB/R and Add.1, adopted 28
October 2015
China – Raw Materials Appellate Body Reports, China – Measures Related to the Exportation of
Various Raw Materials, WT/DS394/AB/R / WT/DS395/AB/R /
WT/DS398/AB/R, adopted 22 February 2012, DSR 2012:VII, p. 3295
Colombia – Ports of Entry Panel Report, Colombia – Indicative Prices and Restrictions on Ports of Entry,
WT/DS366/R and Corr.1, adopted 20 May 2009, DSR 2009:VI, p. 2535
Colombia – Textiles Appellate Body Report, Colombia – Measures Relating to the Importation of
Textiles, Apparel and Footwear, WT/DS461/AB/R and Add.1, adopted 22
June 2016
Colombia – Textiles Panel Report, Colombia – Measures Relating to the Importation of Textiles,
Apparel and Footwear, WT/DS461/R and Add.1, adopted 22 June 2016, as
modified by Appellate Body Report WT/DS461/AB/R
Dominican Republic – Import
and Sale of Cigarettes
Appellate Body Report, Dominican Republic – Measures Affecting the
Importation and Internal Sale of Cigarettes, WT/DS302/AB/R, adopted 19
May 2005, DSR 2005:XV, p. 7367
Dominican Republic – Import
and Sale of Cigarettes
Panel Report, Dominican Republic – Measures Affecting the Importation and
Internal Sale of Cigarettes, WT/DS302/R, adopted 19 May 2005, as modified
by Appellate Body Report WT/DS302/AB/R, DSR 2005:XV, p. 7425
EC – Asbestos Appellate Body Report, European Communities – Measures Affecting
Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5
April 2001, DSR 2001:VII, p. 3243
EC – Bananas III Appellate Body Report, European Communities – Regime for the
Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25
September 1997, DSR 1997:II, p. 591
EC – Bananas III Panel Reports, European Communities – Regime for the Importation, Sale and
Distribution of Bananas, WT/DS27/R/ECU (Ecuador) / WT/DS27/R/GTM,
WT/DS27/R/HND (Guatemala and Honduras) / WT/DS27/R/MEX (Mexico) /
WT/DS27/R/USA (US), adopted 25 September 1997, as modified by Appellate
Body Report WT/DS27/AB/R, DSR 1997:II, p. 695 to DSR 1997:III, p. 1085
EC – Fasteners (China) Appellate Body Report, European Communities – Definitive Anti-Dumping
Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R,
adopted 28 July 2011, DSR 2011:VII, p. 3995
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products
(Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998,
DSR 1998:I, p. 135
EC – Hormones Panel Reports, EC Measures Concerning Meat and Meat Products (Hormones),
WT/DS48/R/CAN (Canada) / WT/DS26/R/USA (US), adopted 13 February
1998, as modified by Appellate Body Report WT/DS26/AB/R, WT/DS48/AB/R,
DSR 1998:II, p. 235 / DSR 1998:II, p. 699
EC – Poultry Appellate Body Report, European Communities – Measures Affecting the
Importation of Certain Poultry Products, WT/DS69/AB/R, adopted 23 July
1998, DSR 1998:V, p. 2031

Short title Full case title and citation
EC – Poultry Panel Report, European Communities – Measures Affecting the Importation
of Certain Poultry Products, WT/DS69/R, adopted 23 July 1998, as modified
by Appellate Body Report WT/DS69/AB/R, DSR 1998:V, p. 2089
EC – Seal Products Appellate Body Reports, European Communities – Measures Prohibiting the
Importation and Marketing of Seal Products, WT/DS400/AB/R /
WT/DS401/AB/R, adopted 18 June 2014, DSR 2014:I, p. 7
EC – Seal Products Panel Reports, European Communities – Measures Prohibiting the
Importation and Marketing of Seal Products, WT/DS400/R and Add.1 /
WT/DS401/R and Add.1, adopted 18 June 2014, as modified by Appellate
Body Reports WT/DS400/AB/R / WT/DS401/AB/R, DSR 2014:II, p. 365
EC – Selected Customs Matters Appellate Body Report, European Communities – Selected Customs Matters,
WT/DS315/AB/R, adopted 11 December 2006, DSR 2006:IX, p. 3791
EC – Selected Customs Matters Panel Report, European Communities – Selected Customs Matters,
WT/DS315/R, adopted 11 December 2006, as modified by Appellate Body
Report WT/DS315/AB/R, DSR 2006:IX, p. 3915
EC – Trademarks and
Geographical Indications (US)
Panel Report, European Communities – Protection of Trademarks and
Geographical Indications for Agricultural Products and Foodstuffs, Complaint
by the United States, WT/DS174/R, adopted 20 April 2005, DSR 2005:VIII,
p. 3499
EC and certain member States
– Large Civil Aircraft
Appellate Body Report, European Communities and Certain Member States –
Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted 1
June 2011, DSR 2011:I, p. 7
EC and certain member States
– Large Civil Aircraft
Panel Report, European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft, WT/DS316/R, adopted 1 June 2011, as
modified by Appellate Body Report, WT/DS316/AB/R, DSR 2011:II, p. 685
EEC – Animal Feed Proteins GATT Panel Report, EEC – Measures on Animal Feed Proteins , L/4599,
adopted 14 March 1978, BISD 25S/49
EEC – Minimum Import Prices GATT Panel Report, EEC – Programme of Minimum Import Prices, Licences
and Surety Deposits for Certain Processed Fruits and Vegetables , L/4687,
adopted 18 October 1978, BISD 25S/68
EU – Biodiesel (Argentina) Appellate Body Report, European Union – Anti-Dumping Measures on
Biodiesel from Argentina, WT/DS473/AB/R and Add.1, adopted 26 October
2016
Guatemala – Cement I Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding
Portland Cement from Mexico, WT/DS60/AB/R, adopted 25 November 1998,
DSR 1998:IX, p. 3767
India – Additional Import
Duties
Appellate Body Report, India – Additional and Extra-Additional Duties on
Imports from the United States, WT/DS360/AB/R, adopted 17 November
2008, DSR 2008:XX, p. 8223
India – Agricultural Products Panel Report, India – Measures Concerning the Importation of Certain
Agricultural Products, WT/DS430/R and Add.1, adopted 19 June 2015, as
modified by Appellate Body Report WT/DS430/AB/R
India – Autos Panel Report, India – Measures Affecting the Automotive Sector,
WT/DS146/R, WT/DS175/R, and Corr.1, adopted 5 April 2002, DSR 2002:V,
p. 1827
India – Patents (US) Appellate Body Report, India – Patent Protection for Pharmaceutical and
Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998,
DSR 1998:I, p. 9
India – Solar Cells Appellate Body Report, India – Certain Measures Relating to Solar Cells and
Solar Modules, WT/DS456/AB/R and Add.1, adopted 14 October 2016
Japan – Alcoholic Beverages II Appellate Body Report, Japan – Taxes on Alcoholic Beverages,
WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996,
DSR 1996:I, p. 97
Japan – Alcoholic Beverages II Panel Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/R,
WT/DS10/R, WT/DS11/R, adopted 1 November 1996, as modified by
Appellate Body Report WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, DSR
1996:I, p. 125

Short title Full case title and citation
Japan – Apples Appellate Body Report, Japan – Measures Affecting the Importation of
Apples, WT/DS245/AB/R, adopted 10 December 2003, DSR 2003:IX, p.
4391
Japan – DRAMs (Korea) Panel Report, Japan – Countervailing Duties on Dynamic Random Access
Memories from Korea, WT/DS336/R, adopted 17 December 2007, as
modified by Appellate Body Report WT/DS336/AB/R, DSR 2007:VII, p. 2805
Japan – Semi-Conductors GATT Panel Report, Japan – Trade in Semi -Conductors, L/6309, adopted
4 May 1988, BISD 35S/116
Korea – Alcoholic Beverages Appellate Body Report, Korea – Taxes on Alcoholic Beverages,
WT/DS75/AB/R, WT/DS84/AB/R, adopted 17 February 1999, DSR 1999:I, p.
3
Korea – Alcoholic Beverages Panel Report, Korea – Taxes on Alcoholic Beverages, WT/DS75/R,
WT/DS84/R, adopted 17 February 1999, as modified by Appellate Body
Report WT/DS75/AB/R, WT/DS84/AB/R, DSR 1999:I, p. 44
Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of
Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR
2000:I, p. 3
Korea – Various Measures on
Beef
Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled
and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January
2001, DSR 2001:I, p. 5
Mexico – Anti-Dumping
Measures on Rice
Appellate Body Report, Mexico – Definitive Anti-Dumping Measures on Beef
and Rice, Complaint with Respect to Rice, WT/DS295/AB/R, adopted 20
December 2005, DSR 2005:XXII, p. 10853
Mexico – Corn Syrup (Article
21.5 – US)
Appellate Body Report, Mexico – Anti-Dumping Investigation of High
Fructose Corn Syrup (HFCS) from the United States – Recourse to Article
21.5 of the DSU by the United States, WT/DS132/AB/RW, adopted 21
November 2001, DSR 2001:XIII, p. 6675
Philippines – Distilled Spirits Appellate Body Reports, Philippines – Taxes on Distilled Spirits,
WT/DS396/AB/R / WT/DS403/AB/R, adopted 20 January 2012, DSR
2012:VIII, p. 4163
Russia – Tariff Treatment Panel Report, Russia – Tariff Treatment of Certain Agricultural and
Manufacturing Products, WT/DS485/R, Corr.1, Corr.2, and Add.1, adopted
26 September 2016
Thailand – Cigarettes
(Philippines)
Appellate Body Report, Thailand – Customs and Fiscal Measures on
Cigarettes from the Philippines, WT/DS371/AB/R, adopted 15 July 2011, DSR
2011:IV, p. 2203
Thailand – Cigarettes
(Philippines)
Panel Report, Thailand – Customs and Fiscal Measures on Cigarettes from
the Philippines, WT/DS371/R, adopted 15 July 2011, as modified by
Appellate Body Report WT/DS371/AB/R, DSR 2011:IV, p. 2299
US – Carbon Steel Appellate Body Report, United States – Countervailing Duties on Certain
Corrosion-Resistant Carbon Steel Flat Products from Germany,
WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, p.
3779
US – Carbon Steel Panel Report, United States – Countervailing Duties on Certain Corrosion-
Resistant Carbon Steel Flat Products from Germany, WT/DS213/R and
Corr.1, adopted 19 December 2002, as modified by Appellate Body Report
WT/DS213/AB/R, DSR 2002:IX, p. 3833
US – Carbon Steel (India) Appellate Body Report, United States – Countervailing Measures on Certain
Hot-Rolled Carbon Steel Flat Products from India, WT/DS436/AB/R, adopted
19 December 2014, DSR 2014:V, p. 1727
US – Carbon Steel (India) Panel Report, United States – Countervailing Measures on Certain Hot-Rolled
Carbon Steel Flat Products from India, WT/DS436/R and Add.1, adopted 19
December 2014, as modified by Appellate Body Report WT/DS436/AB/R,
DSR 2014:VI, p. 2189
US – Clove Cigarettes Appellate Body Report, United States – Measures Affecting the Production
and Sale of Clove Cigarettes, WT/DS406/AB/R, adopted 24 April 2012, DSR
2012: XI, p. 5751

Short title Full case title and citation
US – Clove Cigarettes Panel Report, United States – Measures Affecting the Production and Sale of
Clove Cigarettes, WT/DS406/R, adopted 24 April 2012, as modified by
Appellate Body Report WT/DS406/AB/R, DSR 2012: XI, p. 5865
US – Continued Zeroing Appellate Body Report, United States – Continued Existence and Application
of Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009, DSR
2009:III, p. 1291
US – COOL Appellate Body Reports, United States – Certain Country of Origin Labelling
(COOL) Requirements, WT/DS384/AB/R / WT/DS386/AB/R, adopted 23 July
2012, DSR 2012:V, p. 2449
US – COOL Panel Reports, United States – Certain Country of Origin Labelling (COOL)
Requirements, WT/DS384/R / WT/DS386/R, adopted 23 July 2012, as
modified by Appellate Body Reports WT/DS384/AB/R / WT/DS386/AB/R,
DSR 2012:VI, p. 2745
US – COOL (Article 21.5 –
Canada and Mexico)
Panel Reports, United States – Certain Country of Origin Labelling (COOL)
Requirements – Recourse to Article 21.5 of the DSU by Canada and Mexico,
WT/DS384/RW and Add.1 / WT/DS386/RW and Add.1, adopted 29 May
2015, as modified by Appellate Body Reports WT/DS384/AB/RW /

US – Corrosion-Resistant Steel
Sunset Review
Appellate Body Report, United States – Sunset Review of Anti-Dumping
Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan,
WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, p. 3
US – Corrosion-Resistant Steel
Sunset Review
Panel Report, United States – Sunset Review of Anti-Dumping Duties on
Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244/R,
adopted 9 January 2004, as modified by Appellate Body Report
WT/DS244/AB/R, DSR 2004:I, p. 85
US – Countervailing and Anti-
Dumping Measures (China)
Appellate Body Report, United States – Countervailing and Anti-Dumping
Measures on Certain Products from China, WT/DS449/AB/R and Corr.1,
adopted 22 July 2014, DSR 2014:VIII, p. 3027
US – Countervailing Measures
(China)
Appellate Body Report, United States – Countervailing Duty Measures on
Certain Products from China, WT/DS437/AB/R, adopted 16 January 2015
US – FSC (Article 21.5 – EC) Appellate Body Report, United States – Tax Treatment for "Foreign Sales
Corporations" – Recourse to Article 21.5 of the DSU by the European
Communities, WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, p.
55
US – FSC (Article 21.5 – EC) Panel Report, United States – Tax Treatment for "Foreign Sales
Corporations" – Recourse to Article 21.5 of the DSU by the European
Communities, WT/DS108/RW, adopted 29 January 2002, as modified by
Appellate Body Report WT/DS108/AB/RW, DSR 2002:I, p. 119
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border
Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April
2005, DSR 2005:XII, p. 5663 (and Corr.1, DSR 2006:XII, p. 5475)
US – Gambling Panel Report, United States – Measures Affecting the Cross-Border Supply of
Gambling and Betting Services, WT/DS285/R, adopted 20 April 2005, as
modified by Appellate Body Report WT/DS285/AB/R, DSR 2005:XII, p. 5797
US – Gasoline Appellate Body Report, United States – Standards for Reformulated and
Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, p.
3
US – Gasoline Panel Report, United States – Standards for Reformulated and Conventional
Gasoline, WT/DS2/R, adopted 20 May 1996, as modified by Appellate Body
Report WT/DS2/AB/R, DSR 1996:I, p. 29
US – Hot-Rolled Steel Appellate Body Report, United States – Anti-Dumping Measures on Certain
Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August
2001, DSR 2001:X, p. 4697
US – Hot-Rolled Steel Panel Report, United States – Anti-Dumping Measures on Certain Hot-Rolled
Steel Products from Japan, WT/DS184/R, adopted 23 August 2001 modified
by Appellate Body Report WT/DS184/AB/R, DSR 2001:X, p. 4769

Short title Full case title and citation
US – Lamb Appellate Body Report, United States – Safeguard Measures on Imports of
Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia,
WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, p.
4051
US – Malt Beverages GATT Panel Report, United States – Measures Affecting Alcoholic and Malt
Beverages, DS23/R, adopted 19 June 1992, BISD 39S/206
US – Offset Act (Byrd
Amendment)
Appellate Body Report, United States – Continued Dumping and Subsidy
Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January
2003, DSR 2003:I, p. 375
US – Offset Act (Byrd
Amendment)
Panel Report, United States – Continued Dumping and Subsidy Offset Act of
2000, WT/DS217/R, WT/DS234/R, adopted 27 January 2003, as modified by
Appellate Body Report WT/DS217/AB/R, WT/DS234/AB/R, DSR 2003:II, p.
489
US – Oil Country Tubular
Goods Sunset Reviews
Appellate Body Report, United States – Sunset Reviews of Anti-Dumping
Measures on Oil Country Tubular Goods from Argentina, WT/DS268/AB/R,
adopted 17 December 2004, DSR 2004:VII, p. 3257
US – Poultry (China) Panel Report, United States – Certain Measures Affecting Imports of Poultry
from China, WT/DS392/R, adopted 25 October 2010, DSR 2010:V, p. 1909
US – Section 337 Tariff Act GATT Panel Report, United States Section 337 of the Tariff Act of 1930 ,
L/6439, adopted 7 November 1989, BISD 36S/345
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp
and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR
1998:VII, p. 2755
US – Shrimp (Article 21.5 –
Malaysia)
Appellate Body Report, United States – Import Prohibition of Certain Shrimp
and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia,
WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, p. 6481
US – Shrimp (Thailand) / US –
Customs Bond Directive
Appellate Body Report, United States – Measures Relating to Shrimp from
Thailand / United States – Customs Bond Directive for Merchandise Subject
to Anti-Dumping/Countervailing Duties, WT/DS343/AB/R / WT/DS345/AB/R,
adopted 1 August 2008, DSR 2008:VII, p. 2385 / DSR 2008:VIII, p. 2773
US – Shrimp II (Viet Nam) Appellate Body Report, United States – Anti-Dumping Measures on Certain
Shrimp from Viet Nam, WT/DS429/AB/R, and Corr.1, adopted 22 April 2015
US – Stainless Steel (Korea) Panel Report, United States – Anti-Dumping Measures on Stainless Steel
Plate in Coils and Stainless Steel Sheet and Strip from Korea, WT/DS179/R,
adopted 1 February 2001, DSR 2001:IV, p. 1295
US – Stainless Steel (Mexico) Appellate Body Report, United States – Final Anti-Dumping Measures on
Stainless Steel from Mexico, WT/DS344/AB/R, adopted 20 May 2008, DSR
2008:II, p. 513
US – Tuna II (Mexico) Appellate Body Report, United States – Measures Concerning the
Importation, Marketing and Sale of Tuna and Tuna Products,
WT/DS381/AB/R, adopted 13 June 2012, DSR 2012:IV, p. 1837
US – Tuna II (Mexico) Panel Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products, WT/DS381/R, adopted 13
June 2012, as modified by Appellate Body Report WT/DS381/AB/R, DSR
2012:IV, p. 2013
US – Tuna II (Mexico) (Article
21.5 – Mexico)
Appellate Body Report, United States – Measures Concerning the
Importation, Marketing and Sale of Tuna and Tuna Products – Recourse to
Article 21.5 of the DSU by Mexico, WT/DS381/AB/RW and Add.1, adopted 3
December 2015
US – Tuna II (Mexico) (Article
21.5 – Mexico)
Panel Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of
the DSU by Mexico, WT/DS381/RW, Add.1 and Corr.1, adopted 3 December
2015, as modified by Appellate Body Report WT/DS381/AB/RW
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton,
WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, p. 3

Short title Full case title and citation
US – Wool Shirts and Blouses Appellate Body Report, United States – Measure Affecting Imports of Woven
Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted 23 May 1997,
and Corr.1, DSR 1997:I, p. 323
US – Zeroing (Japan) Appellate Body Report, United States – Measures Relating to Zeroing and
Sunset Reviews, WT/DS322/AB/R, adopted 23 January 2007, DSR 2007:I, p.
3
US – Zeroing (Japan) (Article
21.5 – Japan)
Appellate Body Report, United States – Measures Relating to Zeroing and
Sunset Reviews – Recourse to Article 21.5 of the DSU by Japan,
WT/DS322/AB/RW, adopted 31 August 2009, DSR 2009:VIII, p. 3441

ABBREVIATIONS FREQUENTLY USED IN THIS REPORT
Abbreviation Description
Amber Grid AB Amber Grid
Bcm Billion cubic meters
BEMIP Baltic Energy Market Interconnection Plan
BNetzA Bundesnetzagentur
CEE Central East European
CNG Compressed natural gas
Commission European Commission
CPC 1991 United Nations Provisional Central Product Classification
CPC 2.1 2015 United Nations Central Product Classification
DESFA Hellenic Gas Transmission System Operator S.A.
Directive Directive 2009/73/EC
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement
of Disputes
Engie Engie S.A.
EC European Communities
EU European Union
GATS General Agreement on Trade in Services
GATT 1994 General Agreement on Tariffs and Trade 1994
GRTgaz GRTgaz S.A.
GTS Gat Transport Services B.V.
HEP Hrvatska elektroprivreda d.d
HS Harmonized Commodity Description and Coding System of the
World Customs Organization
ISO Independent system operator
ITO Independent transmission operator
Lietuvos dujos AB Lietuvos dujos
Litgas Litgas UAB
LNG Liquefied natural gas
LSO LNG system operator
m3/a Cubic meters per annum
MGT Magyar Gáz Tranzit Zrt.
MVM Magyar Villamos Művek Zrt.
NEL pipeline Nordeuropäische Erdgasleitung
NEL GT NEL Gastransport GmbH
NETRA pipeline Norddeutsche Erdgas Transversale Pipeline System
NIC NABUCCO Gas Pipeline International GmbH
NRA National regulatory authority
NSI North-South Gas Interconnections
Ofgem UK Office of Gas and Electricity Markets
OPAL pipeline Ostsee-Pipeline-Anbindungsleitung
OPAL GT OPAL Gastransport GmbH & Co. KG
OU Ownership unbundling
SCM Agreement Agreement on Subsidies and Countervailing Measures
SEP Second Energy Package
SGC Southern Gas Corridor
SOCAR State Oil Company of the Azerbaijan Republic
SoS Security of energy supply
TAP pipeline Trans-Adriatic Pipeline
TAP AG Trans-Adriatic Pipeline AG
TBT Agreement Agreement on Technical Barriers to Trade
TEP Third Energy Package
TEN-E Trans-European Networks for Energy
TIGF Transport et Infrastructures Gaz France S.A.
TPA Third-party access
TRIMs Agreement Agreement on Trade-Related Investment Measures
TSO Transmission system operator

Abbreviation Description
UNECE United Nations Economic Commission for Europe
UPN Upstream pipeline network
Vienna Convention Vienna Convention on the Law of Treaties, Done at Vienna, 23 May
1969, 1155 UNTS 331; 8 International Legal Materials 679
VIU Vertically integrated undertaking
WTO World Trade Organization

1 INTRODUCTION
1.1 Complaint by Russia
1.1. On 30 April 2014, the Russian Federation (Russia) requested consultations with the European
Union and its member States pursuant to Articles 1 and 4 of the Understanding on Rules and
Procedures Governing the Settlement of Disputes (DSU) , the General Agreement on Trade in
Services (GATS) and the General Agreement on Tariffs and Trade 1994 (GATT 1994) with respect
to the measures and claims set out below.1
1.2. Consultations were held on 23 through 24 June 2014 and on 10 July 2014.
1.2 Panel establishment and composition
1.3. On 11 May 2015, Russia requested the establishment of a panel pursuant to Article 6 of the
DSU, Article XXIII of th e GATS , and Article XXIII of the GATT 1994 with standard terms of
reference.2 At its meeting on 20 July 2015, the Dispute Settlement Body (DSB) established a panel
pursuant to the request of Russia in document WT/DS 476/2, in accordance with Article 6 of th e
DSU.3
1.4. The Panel's terms of reference are the following:
To examine, in the light of the relevant provisions of the covered agreements cited by
the parties to the dispute, the matter referred to the DSB by the Russian Federation in
document WT/DS476/2 and to make such findings as will assist the DSB in making
the recommendations or in giving the rulings provided for in those agreements.4
1.5. On 22 February 2016, Russia requested the Director-General to determine the composition of
the panel, pursuant to Article 8.7 of the DSU. On 7 March 20165, the Director-General accordingly
composed the Panel as follows:
Chairperson: Mr Felipe Lopeandía

Members: Mr Jose-Victor Chan-Gonzaga
 Mr Marco Tulio Molina Tejeda

1.6. Brazil, the People's Republic of China (China) , Colombia, India, Japan, the Republic of Korea
(Korea), the Kingdom of Saudi Arabia (Saudi Arabia), Ukraine and the United States notified their
interest in participating in the Panel proceedings as third parties.
1.3 Panel proceedings
1.3.1 General
1.7. After consultation with the parties, the Panel adopted its Working Procedures 6 and timetable
on 31 March 2016 . The Panel modified its Working Procedures on 19 May 2016 and its timetable
on 30 September 2016 and 23 March 2017 after consultation with the parties.
1.8. The Panel received a written submission from Russia on 17 May 2016 and from the European
Union on 11 July 2016, and sent advance questions before holding its first substantive meeting

1 See Russia's request for consultations, WT/DS476/1. Russia's request for consultations (consultations
request) was also made pursuant to Articles 4.1, 7.1 and 30 of the Agreement on Subsidies and Countervailing
Measures (SCM Agreement) and Article 8 of the Agreement on Trade-Related Investment Measures (TRIMs
Agreement) with respect to potential inconsistencies with those agreements.
2 Russia's request for the establishment of a panel (panel request), WT/DS476/2. Russia's panel request
did not make reference to any provisions of the SCM Agreement or the TRIMs Agreement.
3 WT/DSB/M/365.
4 WT/DS476/3.
5 The Director-General's deadline for appointing the panelists was extended due to unforeseen
circumstances and after having notified the parties.
6 See the Panel's Working Procedures in Annex A-1.

with the parties on 5 through 7 September 2016. A session with the third parties to ok place on
6 September 2016.
1.9. After the first substantive meeting, the Panel sent the parties questions to be answered in
writing. Russia also sent written questions to the European Union following the first substantive
meeting. The parties' responses to a ll such questions were received on 12 October 2016. The
parties submitted their second written submissions on 21 November 2016. The Panel sent advance
questions before holding its second substantive meeting with the parties on 28 February and 1
March 2017. The Panel sent additional questions in writing after the second substantive meeting,
as did both parties. The parties' responses to all such questions were received on 30 March 2017
and the parties commented on each other's responses on 3 May 2017.7, 8
1.10. On 16 May 2017, the Panel issued the descriptive part of its Report to the parties. The Panel
issued its Interim Report to the parties on 8 August 2017. The Panel issued its Final Report to the
parties on 24 October 2017.
1.11. In these panel proceedings, certain filings were made outside of the deadlines prescribed by
the Working Procedures adopted by the Panel. 9 The Panel stresses the importance of all parties
and third parties adhering to the time -limits for filing documents, in the interests of fairness and
the orderly conduct of panel proceedings.
1.3.2 Additional Working Procedures on Business Confidential Information (BCI)
1.12. At Russia's request and after consultations with both parties , the Panel adopted, on
5 April 2016, additional working procedures for the protection of BCI.10
1.3.3 Preliminary rulings
1.13. In a communication of 18 March 2016, the European Union requested the Panel to make a
preliminary ruling before the date for the filing of the parties' first written submissions, clarifying
whether certain matters in Russia's panel request were identified in Russia's c onsultations request
within the meaning of Article 4.4 of the DSU . At the invitation of the Panel, Russia provided a
response in writing on 18 April 2016. All third parties were also invited to comment on the
European Union 's request by 25 April 2016 . Colombia and Ukraine availed themselves of this
possibility. The Panel communicated its conclusions in writing to the parties and the third parties
on 9 May 2016, indicating that the more detailed reasons in support of its conclusions would be
provided no later than the date of the issuance of the Interim Report. The Panel's full decision
regarding the European Union's first request for a preliminary ruling is set out in section 7 of this
Report.

7 During the course of the proceedings, both parties requested extensions for several deadlines provided
for in the timetable. The dates set out in paragraphs 1.8 and 1.9 reflect extensions granted by the Panel
following such requests.
8 In addition to the steps set out in paragraphs 1.8 and 1.9, the Panel posed several supplementary
questions, on 14 October 2016, 21 October 2016, 9 December 2016 and 10 May 2017, pursuant to
paragraph 11 of its Working Procedures.
9 The hard copies of the European Union's first written submission were not received by the 17:00
deadline specified in paragraph 24 of the Panel's Working Procedures and certain hard copies of Exhibit EU-70
to the European Union's first written submission were not received by the deadline specified in the Panel's
timetable. The European Union explained that this delay was caused by printing problems due to the size of
these documents. Furthermore, the hard copies and electronic copies of the European Union's closing
statement at the second meeting of the Panel were not received by the deadline specified in paragraph 14(a)
of the Panel's Working Procedures. In response to a complaint by Russia and at the Panel's invitation, the
European Union submitted that it had provided "brief remarks" at the end of the second meeting of the Panel
and that the Working Procedures "do not provide for the possibility to file ad hoc comments on the closing
statements". The European Union nonetheless provided a written version of its remarks, which it could not
"guarantee … provides a complete and exact transcription". (European Union's communication of
10 March 2017). Following a complaint by Russia concerning the accuracy of the written version of the
European Union's closing remarks, the Panel invited both parties to review the relevant parts of the recordings
of the second meeting of the Panel, after which the European Union provided, on 3 May 2017, a "transcript" of
its closing remarks. (European Union's communication of 3 May 2017).
10 See Additional Working Procedures on BCI in Annex A-2.

1.14. In its first written submission of 11 July 2016 and in its comments on Russia's response s to
questions by the Panel following the first substantive meeting of 21 October 2016 , the European
Union requested the Panel to clarify whether certain m atters in Russia's first written submi ssion
and response s to questions by the Panel were identified in Russia's panel reques t within the
meaning of Article 6.2 of the DSU. At the invitation of the Panel, Russia provided a response in
writing on 27 October 2016. In a communication of 28 October 2016, the European Union
requested that the Panel make a preliminary ruling on this matter before the date for the filing of
the parties' second written submissions. On 10 November 2016, t he Panel communicated its
conclusions on a number of the terms of reference objections raised by the European Union to the
parties, indicating that the more detailed reasons in support of its conclusions would be provided
no later than the date of the issuance of the Interim Report. The Panel declined to rule , at that
stage of the proceedings, on certain of the terms of reference objections raised by the European
Union. The Panel's full decision regarding all terms of reference objections raised by the European
Union in its second request for a preliminary ruling is set out in section 7 of this Report.
2 FACTUAL ASPECTS
2.1 Introduction
2.1. This dispute concerns certain measures that regulate the natural gas sector and facilitate the
development of natural gas infrastructure within the European Union . This section of the Report
begins by briefly describing the background of the relevant legal and regulatory instruments of the
European Union and its member S tates that give rise to the challenged measures. The relevant
aspects of each of the measures are then described in detail.
2.2. The Third Energy Package is a set of legal acts and regulatory ins truments that the European
Union enacted in 2009 to reform its internal market in natural gas. 11 As regards the natural gas
market, the main component of the T hird Energy Package is contained in Directive 2009/73/EC of
the European Parliament and of the Cou ncil of 13 July 2009 concerning common rules for the
internal market in natural gas and repealing Directive 2003/55/EC (the Directive).12
2.3. The Directive establishes common rules for the European Union's internal market in "natural
gas, including LNG [liquefied natural gas ]".13 It repeals Directive 2003/55/EC of the European
Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in
natural gas and repealing Directive 98/30/EC , which formed part of the Second Energy Packag e
(SEP).14 The rules relate to the organization and functioning of the natural gas sector, access to
the market, the criteria and procedures applicable to the granting of authorizations for
transmission, distribution, supply and storage of natural gas and t he operation of systems. 15 The
Directive requires EU member States to "bring into force the laws, regulations and administrative
provisions necessary to comply with [it] by 3 March 2011".16 It also requires EU member States to

11 Russia's first written submission, para. 25; and European Union's first written submission, paras. 19-
21. The Third Energy Package also reforms the European Union's internal market in electricity, but that aspect
is not challenged in this dispute. This dispute is limited to the components of the Third Energy Package which
regulate the natural gas market.
12 Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning
common rules for the internal market in natural gas and repealing Directive 2003/55/EC (Text with EEA
relevance), OJ L 211/94 of 14.8.2009, (Directive 2009/73/EC), (Exhibit EU-5). Other components of the Third
Energy Package are Regulation (EC) No. 715/2009 of the European Parliament and of the Council of 13 July
2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No.
1775/2005 (Text with EEA relevance), OJ L 211/36 of 14.8.2009, (Exhibit EU-1); Regulation (EC) No.
713/2009 of the European Parliament and of the Council of 13 July 2009 establishing an Agency for the
Cooperation of Energy regulators (Text with EEA relevance), OJ L 211/1 of 14.8.2009, (Regulation (EC) No.
713/2009), (Exhibit EU-6); and Regulation (EU) No. 994/2010 of the European Parliament and of the Council of
20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive
2004/67/EC (Text with EEA relevance), OJ L 295/1 of 12.11.2010, (Regulation (EU) No. 994/2010), (Exhibit
EU-73). (Russia's panel request, p. 5; and Russia's first written submission, para. 26).
13 Directive 2009/73/EC, (Exhibit EU-5), Article 1(2).
14 Directive 2009/73/EC, (Exhibit EU-5), Article 53.
15 Directive 2009/73/EC, (Exhibit EU-5), Article 1(1).
16 Directive 2009/73/EC, (Exhibit EU-5), Article 54. The date from which EU member States are required
to apply Article 11 is, however, 3 March 2013. (Ibid.)

ensure that national regulatory authorities ( NRAs) are appropriately empowered to ensure
compliance with the requirements under the Directive.17
2.4. A related element of the European Union's energy policy is the Trans -European Networks for
Energy measure (TEN-E measure), which complements t he requirements of the Third Energy
Package by facilitating investments in infrastructure with cross -border impacts. 18 The main
component of the TEN-E measure is Regulation (EU) No. 347/2013 of the European Parliament and
of the Council of 17 April 2013 on guidelines for Trans -European energy infrastructure and
repealing Decision No . 1364/2006/EC and amending Regulations (EC) No . 713/2009, (EC)
No. 714/2009 and (EC) No . 715/2009 (TEN-E Regulation) . Recital 8 of this Regulation explains
that:
Despite the fact that … Directive 2009/73/EC … provides for an internal market in
energy, the market remains fragmented due to insufficient interconnections between
national energy networks and to the suboptimal utilisation of existing energy
infrastructure.
To address this fragmentation, the TEN-E Regulation "lays down rules for the timely development
and interoperability of trans-European energy networks".19
2.5. The TEN -E Regulation repeals and replaces the pre -existing TEN -E framework in Decision
No. 1364/2006/EC of the Euro pean Parliament and of the Council of 6 September 2006 laying
down guidelines for trans -European energy networks and repealing Decision 96/391/EC and
Decision No. 1229/2003/EC. It has been amended twice : in October 2013, through Commission
Delegated Regula tion (EU) No . 1391/2013 of 14 October 2013, amending Regulation (EU)
No. 347/2013 of the European Parliament and of the Council of 17 April 2013 on guidelines for
trans-European energy infrastructure as regards the Union list of projects of common interest , and
then in November 2015, through Commission Delegated Regulation (EU) 2016/89 of
18 November 2015 amending Regulation (EU) No . 347/2013 of the European Parliament and of
the Council as regards the Union list of projects of common interest . We refer to these legal
instruments, collectively, as the "TEN -E measure" and expand on the details of this measure
below.
2.2 The measures at issue
2.2.1 Introduction
2.6. Russia's challenge against the Directive is directed at several separate, distinct measures
stemming from this instrument. Russia furthermore challenges some of these measures as
contained in the national implementing laws of Croatia, Hungary and Lithuania . Russia also
challenges the TEN -E measure contained in the EU legal ins truments described herein. For
purposes of this Report, the measures at issue can be categorized as follows:

17 Directive 2009/73/EC, (Exhibit EU-5), Article 41(4). This includes, at minimum, the power to:
(a) issue binding decisions on natural gas undertakings; (b) carry out investigations into the functioning of the
gas markets and impose any necessary and proportionate measures to promote effective competition and
ensure the proper functioning of the market; (c) require any information from natural gas undertakings
relevant for the fulfilment of its tasks; (d) impose effective, proportionate and dissuasive penalties on natural
gas undertakings not complying with their obligations; and (e) appropriate rights of investigations and relevant
powers of instructions for dispute settlement concerning certain obligations under the Directive.
18 Commission Staff Working Document Accompanying Commission Delegated Regulation (EU) No.
2016/89 of 18 November 2015 amending Regulation (EU) No. 347/2013 of the European Parliament and of the
Council as regards the Union list of projects of common interest, SWD(2015) 247 of 18.11.2015, (Exhibit RUS-
8), p. 12.
19 Regulation (EU) No. 347/2013 of the European Parliament and of the Council of 17 April 2013 on
guidelines for trans-European energy infrastructure and repealing Decision No. 1364/2006/EC and amending
Regulations (EC) No. 713/2009, (EC) No. 714/2009 and (EC) No. 715/2009 (Text with EEA relevance), OJ L
115/39 of 25.4.2013, (Exhibit EU-4).

No. Short Title

1 Unbundling measure

2 Public body measure20

3 LNG measure

4 Infrastructure exemption measure

5 Upstream pipeline networks measure

6 Third-country certification measure

7 TEN-E measure

2.2.2 The unbundling measure
2.7. The unbundling measure provides rules on the separation, i.e. "unbundl ing", of
"undertaking[s] performing any of the functions of production or supply" , on the one hand, and
"transmission system operator[s] or [] transmission system[s]" , on the other hand. 21 These rules
are applicable to vertically integrated undertakings (VIUs), defined in the Directive as:
[A] natural gas undertaking or a group of natural gas undertakings where the same
person or the same persons are entitled, directly or indirectly, to exercise control, and
where the undertaking or group of undertakings perform at l east one of the functions
of transmission, distribution, LNG or storage, and at least one of the functions of
production or supply of natural gas[.]22
2.8. Such VIUs are generally required to unbundle "undertaking[s] performing any of the
functions of production or supply" from "transmission system operator[s] or [] transmission
system[s]". The specific r ules for such unbundling depend on the applicable unbundling model,
described below.
2.9. Russia challenges the unbundling measure in the Directive as well as in the national
implementing laws of Croatia, Hungary and Lithuania.
2.2.2.1 The unbundling measure in the Directive
2.10. To achieve unbundling, the Directive requires EU member States to implement the
ownership unbundling model (OU model). In addition, it allows EU member States to implement ,
under certain conditions, the independent system operator model (ISO model) or the independent
transmission operator model (ITO model), or both.23
2.11. Under the OU model, the same natural or legal person or persons cannot exercise control or
any right, directly or indirectly, over a natural gas production or supply undertaking as well as a
natural gas transmission system or transmission system operator (TSO). 24 These rights include
"the power to exercise voting rights"25; "the power to appoint members of the supervisory board,
the administrative board or bodies legally representing the undertaking" 26; or "the holding of a
majority share".27 Furthermore, the same person c annot serve as a member of the supervisory

20 Russia refers to it as the "government exemption measure", whereas the European Union refers to it
as the "public body specification". (See, e.g. Russia's first written submission, paras. 233, 248, 269, 272, 275,
277 and 280; and European Union's first written submission, paras. 225, 226 and 228). For purposes of this
Report, this measure is referred to as the "public body measure".
21 Directive 2009/73/EC, (Exhibit EU-5), Article 9(1)(b).
22 Directive 2009/73/EC, (Exhibit EU-5), Article 2(20).
23 Directive 2009/73/EC, (Exhibit EU-5), Article 9(8).
24 Directive 2009/73/EC, (Exhibit EU-5), Article 9(1)(b).
25 Directive 2009/73/EC, (Exhibit EU-5), Article 9(2)(a).
26 Directive 2009/73/EC, (Exhibit EU-5), Articles 9(1)(c) and 9(2)(b).
27 Directive 2009/73/EC, (Exhibit EU-5), Article 9(2)(c).

board, the administrative board or of bodies legally representing a natural gas production or
supply undertaking as well as a transmission system or a TSO. 28 Under the OU model, the TSO is
also the transmission system owner.29
2.12. The optional additional models – the ISO and ITO models – are available only if, as of
3 September 2009, the transmission system already belonged to a VIU.30
2.13. Under the ISO model, a VIU own s a transmission system network, but the operator of the
transmission system must be an independent entity, also referred to as the independent system
operator (ISO).31
2.14. The operator of the transmission system, i.e. the TSO or the ISO, is responsible for granting
and managing third-party access to the transmission system, including the collection of ac cess
charges and other payments; for operating, maintaining and dev eloping the transmission system;
and for the investment planning for this system.32
2.15. This operator must (i) comply with the rules on ownership unbundlin g in Article s 9(1)(b),
(c), and (d) of the Directive 33; (ii) demonstrate that it has at its disposal the required financial,
technical, physical, and human resources to carry out the tasks of transmission 34; (iii) undertake
to comply with a ten -year network development plan monitored by the relevant NRA 35; and (iv)
demonstrate its ability to comply with Regulation (EC) No. 715/2009, including the cooperation of
TSOs at European and regional level.36
2.16. Article 15 of the Directive, entitled "Unbundling of transmiss ion system owners and storage
system operators", requires that:
A transmission system owner, where an independent system operator has been
appointed, and a storage system operator which are part of vertically integrated
undertakings shall be independent at least in terms of their legal form, organisation
and decision making from other activities not relating to transmission, distribution and
storage.37
2.17. For transmission system owners, this requires, at a minimum, that:
(a) persons responsible for the management of the transmission system owner … shall
not participate in company structures of the integrated natural gas undertaking

28 Directive 2009/73/EC, (Exhibit EU-5), Article 9(1)(d).
29 Directive 2009/73/EC, (Exhibit EU-5), Article 9(1)(a), stating that "each undertaking which owns a
transmission system acts as a transmission system operator".
30 Directive 2009/73/EC, (Exhibit EU-5), Article 9(8). We note that Russia at times refers to the TAP
infrastructure exemption decision, which allowed Trans-Adriatic Pipeline AG (TAP AG) to operate as an "'ad hoc'
ITO" despite not belonging to a VIU on 3 September 2009. (Russia's first written submission, paras. 332-334;
and second written submission, para. 227). The possibility of providing exemptions to the rules on unbundling,
third-party access, and tariff regulation requirements under the infrastructure exemption measure is described
below in section 2.2.5 and is not addressed further in the context of the unbundling measure. Furthermore, we
note that Article 9(9) of the Directive also allows another unbundling model for TSOs belonging to a VIU on
3 September 2009. Under this model, EU member States may derogate from the rules in the OU model, the
ISO model and the ITO model provided that "there are arrangements in place which guarantee more effective
independence of the transmission system operator than the provisions of Chapter IV [concerning the ITO
model]" on 3 September 2009. (Directive 2009/73/EC, (Exhibit EU-5), Article 9(9)). See also European Union's
first written submission, p. 8, fn 11). However, Russia does not rely on or refer to this model in challenging the
unbundling measure in the Directive and the European Union has clarified that Article 9(9) has not been
applied or relied on by any entity seeking certification. (European Union's response to Panel question No. 37,
para. 69). This model is hence not relevant for the Panel's assessment of the unbundling measure's WTO
consistency and is therefore not addressed further.
31 Directive 2009/73/EC, (Exhibit EU-5), Articles 9(8)(a) and 14.
32 Directive 2009/73/EC, (Exhibit EU-5), Article 14(4).
33 Directive 2009/73/EC, (Exhibit EU-5), Article 14(2)(a). See also para. 2.11 above.
34 Directive 2009/73/EC, (Exhibit EU-5), Article 14(2)(b).
35 Directive 2009/73/EC, (Exhibit EU-5), Article 14(2)(c).
36 Directive 2009/73/EC, (Exhibit EU-5), Article 14(2)(e).
37 Directive 2009/73/EC, (Exhibit EU-5), Article 15(1).

responsible, directly or indirectly, for the day -to-day operation of the production and
supply of natural gas;
(b) appropriate measures shall be taken to ensure that the professional interests of
persons responsible for the management of the transmission system owner … are
taken into account in a manner that ensures that they are capable of acti ng
independently;
…
(d) the transmission system owner … shall establish a compliance programme, which
sets out measures taken to ensure that discriminatory conduct is excluded, and
ensure that observance of it is adequately monitored.38
2.18. Furthermore, the transmission system owner must: (i) provide the relevant cooperation and
support to the ISO 39; (ii) finance the investments decided on by the ISO and approved by the
relevant NRA, or agree to financing by any other interested party, including the ISO itself 40; (iii)
provide for the coverage of liability relating to the transmission system network assets, excluding
liability relating to the tasks of the ISO 41; and (iv) provide guarantees to facilitate financing of any
transmission system network expansions, except where it has agreed to financing by any other
interested party.42
2.19. When the ISO model is applied, certain aspects of the owner's and the ISO's activities and
relationship are subject to monitoring or approval by the NRA of the relevant EU member State.
The NRA shall (a) monitor the owner's and the ISO's compliance w ith the requirements of
Article 14 of the Directive 43 and their "relations and communications" 44; (b) "approve contracts
and act as a dispute settlement authority" between the two in respect of comp laints in relation to
the ISO's obligations under the Directive 45; (c) approve the investment planning and the multi -
annual network development plan of the ISO 46; (d) ensure that network access tariffs collected by
the ISO include remuneration for the owner 47; and (e) have the powers to carry out unannounced
inspections at the premises of the owner and the ISO.48
2.20. Under the ITO model, a VIU is required to establish an independent transmission operator
(ITO), which owns and operates the transmission system. 49 Under this model, t he VIU owns the
ITO.50 Chapter IV of the Directive contains rules specific to the ITO model, including those
described below.
2.21. Pursuant to Article 17(1) of the Directive, ITOs "shall be equipped with all human, technical,
physical and financi al resources necessary for fulfilling their obligations under [the] Directive and
carrying out the activity of gas transmission ".51 As further provided by Article 17(1) of the
Directive, assets that are necessary for the activity of gas transmission, includ ing the transmission
system, shall be owned by the ITO; and personnel necessary for the activity of gas transmission,
including the performance of all corporate tasks, shall be employed by the ITO.52 Under

38 Directive 2009/73/EC, (Exhibit EU-5), Article 15(2).
39 Directive 2009/73/EC, (Exhibit EU-5), Article 14(5)(a).
40 Directive 2009/73/EC, (Exhibit EU-5), Article 14(5)(b). Article 14(5)(b) goes on to state that:
The relevant financing arrangements shall be subject to approval by the regulatory authority. Prior to
such approval, the regulatory authority shall consult the transmission system owner together with other
interested parties.
41 Directive 2009/73/EC, (Exhibit EU-5), Article 14(5)(c).
42 Directive 2009/73/EC, (Exhibit EU-5), Article 14(5)(d).
43 Directive 2009/73/EC, (Exhibit EU-5), Article 41(3)(a).
44 Directive 2009/73/EC, (Exhibit EU-5), Article 41(3)(b).
45 Directive 2009/73/EC, (Exhibit EU-5), Articles 41(3)(b) and 41(11).
46 Directive 2009/73/EC, (Exhibit EU-5), Article 41(3)(c).
47 Directive 2009/73/EC, (Exhibit EU-5), Article 41(3)(d).
48 Directive 2009/73/EC, (Exhibit EU-5), Article 41(3)(e).
49 Directive 2009/73/EC, (Exhibit EU-5), Articles 9(8)(b) and 17(1)(a) and Chapter IV. Under the ITO
model, the operator of the transmission system is referred to as the independent transmission operator (ITO)
or the TSO.
50 Directive 2009/73/EC, (Exhibit EU-5), Article 9(8)(b).
51 Directive 2009/73/EC, (Exhibit EU-5), Article 17(1).
52 Directive 2009/73/EC, (Exhibit EU-5), Articles 17(1)(a) and 17(1)(b).

Article 17(1)(c) of the Directive, leasing of perso nnel and rendering of services, to and from any
other parts of the VIU, is prohibited. The ITO may, however, render services to the VIU as long as
(i) the provision of those services does not discriminate between system users, is available to all
system users on the same terms and conditions and does not restrict, distort or prevent
competition in production or supply; and (ii) the terms and conditions of the provision of those
services are approved by the relevant NRA. Article 17(1)(d) also provides that, "without prejudice
to the decisions of the Supervisory Body under Article 20", appropr iate financial resources for
future investment projects and/or for the replacement of existing assets shall be made available to
the TSO in due time by the VIU following an appropriate request from the TSO.53
2.22. Article 13 of the Directive sets out the general tasks of a TSO as, among others:
"operat[ing], maintain[ing] and develop[ing] under economic conditions secure, reliable and
efficient transmission … facilities "54, "refrain[ing] from discriminating between system users or
classes of system users, particul arly in favour of its related undertakings" 55, and "provid[ing] …
sufficient information" to "any other transmission system operator, any other storage system
operator, any other LNG system operator and/or any distribution system operator" 56 as well as
"system users". 57 Article 17(2) of the Directive provides that the activity of gas transmission
performed by the ITO "shall include at least the following tasks in addi tion to those listed in
Article 13":
(a) the representation of the transmission system operator a nd contacts to third
parties and the regulatory authorities;
(b) the representation of the transmission system operator within the European
Network of Transmission System Operators for Gas (ENTSO for Gas);
(c) granting and managing third -party access on a non -discriminatory basis
between system users or classes of system users;
(d) the collection of all the transmission system related charges including access
charges, balancing charges for ancillary services such as gas treatment,
purchasing of services (balancing costs, energy for losses);
(e) the operation, maintenance and development of a secure, efficient and
economic transmission system;
(f) investment planning ensuring the long -term ability of the system to meet
reasonable demand and guaranteeing security of supply;
(g) the s etting up of appropriate joint ventures, including with one or more
transmission system operators, gas exchanges, and the other relevant actors
pursuing the objective to develop the creation of regional markets or to
facilitate the liberalisation process; and
(h) all corporate services, including legal services, accountancy and IT services.58
2.23. Article 18 of the Directive requires that, "without prejudice to the decisions of the
Supervisory Body under Article 20", the ITO must have "effective decision -making right s,
independent from the vertically integrated undertaking, with respect to assets necessary to
operate, maintain or develop the transmission system" 59 and "the power to raise money on the
capital market".60 The remainder of Article 18 of the Directive provides for the following rules:

53 Directive 2009/73/EC, (Exhibit EU-5), Article 17(1)(d).
54 Directive 2009/73/EC, (Exhibit EU-5), Article 13(1)(a).
55 Directive 2009/73/EC, (Exhibit EU-5), Article 13(1)(b).
56 Directive 2009/73/EC, (Exhibit EU-5), Article 13(1)(c).
57 Directive 2009/73/EC, (Exhibit EU-5), Article 13(1)(d).
58 Directive 2009/73/EC, (Exhibit EU-5), Article 17(2).
59 Directive 2009/73/EC, (Exhibit EU-5), Article 18(1)(a).
60 Directive 2009/73/EC, (Exhibit EU-5), Article 18(1)(b).

2. The transmission system operator shall at all times act so as to ensure it has the
resources it needs in order to carry out the activity of transmission properly and
efficiently and develop and maintai n an efficient, secure and economic transmission
system.
3. Subsidiaries of the vertically integrated undertaking performing functions of
production or supply shall not have any direct or indirect shareholding in the
transmission system operator. The trans mission system operator shall neither have
any direct or indirect shareholding in any subsidiary of the vertically integrated
undertaking performing functions of production or supply, nor receive dividends or
any other financial benefit from that subsidiary.
4. The overall management structure and the corporate statutes of the transmission
system operator shall ensure effective independence of the transmission system
operator in compliance with this Chapter. The vertically integrated undertaking shall
not d etermine, directly or indirectly, the competitive behaviour of the transmission
system operator in relation to the day to day activities of the transmission system
operator and management of the network, or in relation to activities necessary for the
preparation of the ten -year network development plan developed pursuant to
Article 22.
5. In fulfilling their tasks in Article 13 and Article 17(2) of this Directive, and in
complying with Article 13(1), Article 14(1)(a), Article 16(2), (3) and (5), Article 18( 6)
and Article 21(1) of Regulation (EC) No 715/2009, transmission system operators
shall not discriminate against different persons or entities and shall not restrict, distort
or prevent competition in production or supply.
6. Any commercial and financial relations between the vertically integrated
undertaking and the transmission system operator, including loans from the
transmission system operator to the vertically integrated undertaking, shall comply
with market conditions. The transmission system opera tor shall keep detailed records
of such commercial and financial relations and make them available to the regulatory
authority upon request.
7. The transmission system operator shall submit for approval by the regulatory
authority all commercial and financ ial agreements with the vertically integrated
undertaking.
8. The transmission system operator shall inform the regulatory authority of the
financial resources, referred to in Article 17(1)(d), available for future investment
projects and/or for the replacement of existing assets.
9. The vertically integrated undertaking shall refrain from any action impeding or
prejudicing the transmission system operator from complying with its obligations in
this Chapter and shall not require the transmission system oper ator to seek
permission from the vertically integrated undertaking in fulfilling those obligations.
10. An undertaking which has been certified by the regulatory authority as being in
compliance with the requirements of this Chapter shall be approved and designated as
a transmission system operator by the Member State concerned. The certification
procedure in either Article 10 of this Directive and Article 3 of Regulation (EC)
No 715/2009 or in Article 11 of this Directive shall apply.61
2.24. For the ITO model, the Directive also requires the establishment of a Supervisory Body of
the ITO.62 Article 20 of the Di rective sets out, in relevant part, the following provisions concerning
a Supervisory Body of the ITO:

61 Directive 2009/73/EC, (Exhibit EU-5), Article 18.
62 Directive 2009/73/EC, (Exhibit EU-5), Article 20.

1. The transmission system operator shall have a Supervisory Body which shall be in
charge of taking decisions which may have a significant impact on the value of the
assets of the shareholders within the transmission system operator, in particular
decisions regarding the approval of the annual and longer -term financial plans, the
level of indebtedness of the transmission system operator and the amount of
dividends distributed to shareholders. The decisions falling under the remit of the
Supervisory Body shall exclude those that are related to the day to day activities of
the transmission system operator and management of the network, and in relation to
activities necessary for the preparation of the ten -year network development plan
developed pursuant to Article 22.
2. The Supervisory Body shall be composed of members representing the vertically
integrated undertaking, members representing third party share holders and, where
the relevant legislation of a Member State so provides, members representing other
interested parties such as employees of the transmission system operator.63
2.25. Furthermore, pursuant to Article 19 of the Directive, the Supervisory Body is i n charge of
"[d]ecisions regarding the appointment and renewal, working conditions including remuneration,
and termination of the term of office, of the persons responsible for the management and/or
members of the administrative bodies of the transmission system operator".64 The identity of, and
the conditions governing the term, the duration and the termination of office of , the persons
nominated by the Supervisory Body for appointment or renewal as persons responsible for the
executive management and/or as members of the administrative bodies of the TSO, and the
reasons for any proposed decision must be notified to the relevant NRA. Such nominations become
binding if the relevant NRA does not raise objections, within three weeks, in cases where "doubts
arise as to the professional independence of a nominated person" or "in the case of premature
termination of a term of office, doubts exist regarding the justification of such premature
termination".65 These rules also apply to at least half of the members of the Supervisory Body
minus one and the rules concerning premature termination apply to all such members.66
2.26. For persons responsible for the management of the ITO and members of the administrative
bodies a number of rules apply to secure their independence : (a) these persons cannot exercise
any professional position or responsibility, interest or business relationship, either directly or
indirectly, with any part of the VIU (other than the ITO) or its controlling shareholders during a
period of three years before their appointment67, during their appointment68, or during a period of
four years after termination of their appointment 69; (b) these persons and other employees of the
ITO cannot hold an interest in or receive any financial benefit, directly or indire ctly, from any part
of the VIU other than the ITO or receive remuneration depending on activities or results of the
VIU70; and (c) these persons shall be guaranteed "[e]ffective rights of appeal to the regulatory
authority … against premature terminations o f their term of office". 71 The same rules apply to at
least half of the members of the Supervisory Body minus one.72
2.27. When the ITO model is applied, certain aspects of the ITO's and the VIU's activities and
relationship are subject to monitoring and/or approv al by the NRA of the relevant EU member
State. The NRA shall (i) issue penalties for discriminatory behaviour in favour of the VIU 73; (ii)
monitor communications74 as well as commercial and financial relations75 between the ITO and the

63 Directive 2009/73/EC, (Exhibit EU-5), Articles 20(1) and 20(2).
64 Directive 2009/73/EC, (Exhibit EU-5), Article 19(1).
65 Directive 2009/73/EC, (Exhibit EU-5), Article 19(2).
66 Directive 2009/73/EC, (Exhibit EU-5), Article 20(3).
67 Directive 2009/73/EC, (Exhibit EU-5), Article 19(3). This rule only applies to the majority of the
persons responsible for the management and/or members of the administrative bodies of the ITO. The
remaining persons shall not have exercised "management or other relevant activity in the vertically integrated
undertaking for a period of at least six months before their appointment". (Directive 2009/73/EC, (Exhibit EU-
5), Article 19(8)).
68 Directive 2009/73/EC, (Exhibit EU-5), Article 19(4).
69 Directive 2009/73/EC, (Exhibit EU-5), Article 19(7).
70 Directive 2009/73/EC, (Exhibit EU-5), Article 19(5).
71 Directive 2009/73/EC, (Exhibit EU-5), Article 19(6).
72 Directive 2009/73/EC, (Exhibit EU-5), Article 20(3).
73 Directive 2009/73/EC, (Exhibit EU-5), Article 41(5)(a).
74 Directive 2009/73/EC, (Exhibit EU-5), Article 41(5)(b).
75 Directive 2009/73/EC, (Exhibit EU-5), Article 41(5)(d).

VIU; (iii) act as dispute settlement authority between the VIU and the ITO in respect of the latter's
obligations under the Directive 76; (iv) approve all commercial and financial agreements between
the VIU and the ITO, on the condition that they comply with market conditions 77; (v ) request
justification from the VIU in relation to notifications by the compliance officer concerning
investment decisions78; (vi) carry out inspections on the premises of the VIU and the ITO 79; and
(vii) assign all or specific tasks of the ITO to an appoin ted independent system operator under the
ISO model in case of a persistent breach by the ITO of its obligations under the Directive.80
2.28. Under the Directive, derogations from the rules on unbundling are permitted for certain EU
member States. More particular ly, Article 49 allows EU member States "not directly connected to
the interconnected system of any other Member State and having only one main external supplier"
to derogate from, among others, the rules on unbundling and specifies that these rules "shall not
apply to Estonia, Latvia and/or Finland until any of those Member States is directly connected to
the interconnected system of any Member State other than Estonia, Latvia, Lithuania and
Finland".81 Similarly, EU member States "qualifying as an emergent market, which, because of the
implementation of this Directive, would experience substantial problems" are permitted to
derogate from, among others, the rules on unbundling.82 The Directive also specifies that the rules
on unbundling do not apply to Cyprus, Luxembourg and Malta.83
2.2.2.2 The unbundling measure in the national implementing laws of Croatia, Hungary,
and Lithuania
2.29. Croatia has implemented the rules on unbundling in the Directive through its Gas Market
Act, which allows all three unbundling models. 84 The OU model is implemented through Article 14
of the Gas Market Act and the ISO and ITO models are implemented through Articles 15 through
17 and Articles 18 through 22 of the Gas Market Act, respectively.
2.30. Hungary has implemented the rules on unbundling in th e Directive through its Gas Act,
which also allows all three unbundling models. 85 The OU model is implemented through
Section 121/H, the ISO model is implemented through Section 121/I, and the ITO model is
implemented through Sections 121/B through 121/G of this Act. In addition, Russia refers to
Section 120/A(3)(b)86 and Section 123(4) of Hungary's Gas Act .87, 88 Both parties have submitted

76 Directive 2009/73/EC, (Exhibit EU-5), Article 41(5)(c).
77 Directive 2009/73/EC, (Exhibit EU-5), Article 41(5)(e).
78 Directive 2009/73/EC, (Exhibit EU-5), Articles 21(4) and 41(5)(f). The compliance officer is appointed
by the Supervisory Body, subject to the approval of the relevant NRA, and is generally in charge of monitoring
the implementation of the compliance programme; annually reporting on measures taken in accordance with
this programme to the relevant NRA; reporting to the Supervisory Body and issuing recommendations on the
compliance programme and its implementation; notifying the NRA of any substantial breaches of the
programme; and reporting to the NRA on any commercial or financial relations between the VIU and the ITO.
(Directive 2009/73/EC, (Exhibit EU-5), Articles 21(2) and 21(3)).
79 Directive 2009/73/EC, (Exhibit EU-5), Article 41(5)(g).
80 Directive 2009/73/EC, (Exhibit EU-5), Article 41(5)(h).
81 Directive 2009/73/EC, (Exhibit EU-5), Article 49(1).
82 Directive 2009/73/EC, (Exhibit EU-5), Article 49(2).
83 Directive 2009/73/EC, (Exhibit EU-5), Article 49(6).
84 Croatia's Gas Market Act (Official Gazette 28-472/2013, 14-299/2014), (Croatia's Gas Market Act),
(Exhibit RUS-45).
85 Hungary's Act XL of 2008 on Natural Gas Supply – In Force on 31 March 2012 (extracts of an
unofficial consolidated version incorporating Government Decree No. 19/2009 (I.30.) on the implementation of
the Act on Natural Gas Supply), (Hungary's Gas Act) (Exhibit EU-41); Hungary's Gas Act XL of 2008, including
the amendments made after 31 May 2012, (Hungary's Gas Act), (Exhibit EU-155); and Chapter III of
Hungary's Act XXIX of 2011 on the Amendment of Regulations Relating to Energy Supply amending Hungary's
Act XL of 2008 on Natural Gas Supply, (Hungary's Gas Act), (Exhibit RUS-47). The multiple exhibits are a
result of the existence of a separate Hungarian legislation amending the original Act and disagreements
between the parties regarding the accuracy of the translation.
86 Russia's first written submission, paras. 227-228. Section 120/A is entitled "Common Unbundling
Rules Relating to Vertically Integrated Natural Gas Companies" and provides, in relevant parts, that "the
system operator – other than the authorized operator of the regulated natural gas market and transmission
system operators – may not acquire any share in any other authorized operator engaged in activities other
than his own activities, which are subject to authorization under this Act". See Hungary's Gas Act (Exhibits EU-
155/RUS-47).
87 Russia's first written submission, paras. 227-228. Section 123(4) provides as follows:

their own translations of Hungary's national implementing law as exhibits, and disagree on the
translation of certain provisions and the completeness of the submitted exhibits.89 The implications
of these disagreements will be addressed in the Panel's findings, as appropriate.
2.31. Lithuania has implemented the rules on unbundling in the Directive through Articles 40 and
41 of its Law on Natural Gas 90, which al low only the OU model . Moreover, Russia refers to
Lithuania's Law Implementing the Law Amending the Law on Natural Gas ( Lithuania's Law on
Implementation)91, which lays down "the procedure and principles of implementation of the Law on
Natural Gas", including the unbundling requirement contained in Chapter Eight of the Law on
Natural Gas .92 Article 2.2 of the Law on Implementation requires "non -compliant natural gas
undertakings" to choose between two different procedures in orde r to ensure compliance with the
unbundling requirement, namely the "control reform procedures", and the "reorganisation
procedures", defined respect ively in Articles 3 and 4 of Lithuania's Law o n Implementation.
Pursuant to Article 3.1, non -compliant natur al gas undertakings may seek compliance with the
unbundling requirement "by reforming the control of an undertaking on their own initiative", which
"shall be effected through transactions (transfer of assets or shares, assignment of rights, transfer
of shareholders' rights, shareholders' agreement, increasing or decreasing of the authorised capital
or any other) made in accordance with the proce dure established in paragraph 2 [of Article 3 ]".
Article 3.2 stipulates, inter alia, that non-compliant gas undertakings "must obtain the approval of
the Commission" before entering into a transaction "which causes or may cause change
(emergence, ceasing, decrease or increase) of control defined in Article 41 of the Law on Natural
Gas".
2.2.3 The public body measure i n the national implementing laws of Croatia, Hungary,
and Lithuania
2.32. Russia challenges the public body measure in the national implementing laws of Croatia,
Hungary, and Lithuania, which transpose Article 9(6) of the Directive . This Article states as
follows:
For the implementation of this Article, where the person referred to in points (b), (c)
and (d) of paragraph 1 [of Article 9] is the Member State or another public body, two
separate public bodies exercising control over a transmission system operator o r over
a transmission system on the one hand, and over an undertaking performing any of

Any company that is involved in the extraction of natural gas, the production of electricity, or in
the supply of natural gas or electricity, and any shareholders exercising control in such
companies may not acquire any share – directly or indirectly – in a transmission system operator
where such share constitutes entitlement to exercise control. The acquisition of shares in a
transmission system operator, or in a controlling shareholder thereof, where such share
constitutes entitlement to exercise control is subject to the Office's prior approval as well. This
provision shall have no bearing on the provision contained in Subsection (1) of Section 121/B.
See Hungary's Gas Act (Exhibits EU-155/RUS-47). The text of Section 123(4) in those two exhibits is
identical. This provision is referred to as "Section 194" in paragraph 227 of Russia's first written submission
and Exhibit RUS-47.
88 Russia also identifies Section 117(1) of Hungary's Gas Act. (Russia's response to Panel question No.
165, para. 69 (citing Hungary's Gas Act, (Exhibit RUS-47), pp. 37-38)).
89 With respect to the accuracy of the translations, the European Union submitted corrections to the
translations of Sections 120/A and 121/H in Exhibit RUS-47 and offers its own Exhibit EU-41 as an accurate
translation. (European Union's first written submission, para. 229; and response to Panel question No. 2,
para. 17). Russia accepted the translations of these Sections in Exhibit EU-41. (Russia's response to Panel
question No. 145, para. 1). With respect to the completeness of the submitted exhibits, the European Union
argued that the text of Section 123 in Exhibit RUS-47, while not fundamentally different in meaning from the
text in Exhibits EU-41 and EU-155, is incomplete because it omits Section 123(2). (European Union's first
written submission, paras. 548 and 552; and response to Panel question Nos. 2 and 163, paras. 16 and 35,
respectively). Russia submitted that its own translation of Section 123 in Exhibit RUS-47 is more accurate than
those provided by the European Union. (Russia's response to Panel question Nos. 145 and 163, paras. 2 and
60-65).
90 Law of the Republic of Lithuania of 10 October 2000 No. VIII-1973 on Natural Gas, (Lithuania's Law
on Natural Gas), (Exhibit RUS-136rev).
91 Law of the Republic of Lithuania of 30 June 2011 No. XI-1565 on the Implementation of the Law
Amending the Law on Natural Gas, (Lithuania's Law on Implementation), (Exhibit RUS-22).
92 Lithuania's Law on Implementation, (Exhibit RUS-22), Article 1(1).

the functions of production or supply on the other, shall be deemed not to be the
same person or persons.93
2.33. Croatia has implemented this provision through Article 14(6) of its Gas Market Act, Hungary
has implemented it through Section 121/H (4) of its Gas Act, and Lithuania has implemented it
through Article 41(5) of its Law on Natural Gas. The table below reproduces these provisions:

Croatia94

Hungary95

Lithuania96

Two separate public authorities
that control the transmission
system operator or the
transmission system and that
control the energy undertaking
performing any of the activities of
production, trade or supply and
the activity of the production of
natural gas shall not be
considered the same person or
persons within the meaning of
[the relevant ownership
unbundling provisions of the Gas
Market Act].

The obligation set out in [the
relevant ownership unbundling
provisions of the Gas Act] shall be
deemed to be fulfilled in a
situation where economic
operators defined by law acting in
the name of Hungary or other
public bodies exercising control
over a transmission system
operator or over a transmission
line on the one hand, and over a
company performing any of the
functions of production or supply
of natural gas on the other.

Where the person referred to in
[the relevant ownership
unbundling provisions of the Law
on Natural Gas] is a member
State or another public body, two
separate public bodies exercising
control over a transmission
system operator or over a
transmission system on the one
hand, and over an undertaking
performing any of the functions of
production or supply on the
other, shall be deemed not to be
the same person or persons.

2.2.4 The LNG measure
2.34. Russia challenges the LNG measure in the Directive. Article 2(11) of the Directive defines an
"LNG facility" as "a terminal which is used for the liquefaction of natural gas or the importation,
offloading, and re-gasification of LNG". An "LNG system operator" is "a natural or legal person who
carries out the function of liquefaction of natural gas, or the importation, offloading, and re -
gasification of LNG and is responsible for operating a LNG facility".97
2.35. According to Article 2(3) of the Directive, "trans mission" involves the transport of natural
gas through a high-pressure pipeline network. According to Article 2(4) of the Directive, a TSO is a
natural or legal person who carries out the function of transmission and is responsible for
operating the transm ission system. As LNG facilities and L NG system operator s do not fall within
the scope of "transmission system" and the definition of a TSO , respectively, they are not subject
to the unbundling requirements of the Directive applicable to transmission syste ms and TSOs. LNG
system operator s are subject to the rules on third -party access prescribed by Article 32 of the
Directive.98
2.2.5 The infrastructure exemption measure
2.36. Article 36 of the Directive provides that two categories of infrastructure "may, upon request,
be exempted, for a defined period of time" from generally applicable rules such as: rules regarding
unbundling; rules regarding third-party access to transmission and distribution systems, LNG
facilities, storage facilities and upstream pipeline networks; and rules regulating terms, conditions,
tariffs and methodologies for access to these.99 The first category i s " [m]ajor new gas

93 Directive 2009/73/EC, (Exhibit EU-5), Article 9(6).
94 Croatia's Gas Market Act, (Exhibit RUS-45), Article 14(6).
95 Hungary's Gas Act, (Exhibits EU-155/RUS-47), Section 121/H(4). Despite initial disagreement, the
parties have subsequently both agreed to the translation of Section 121/H(4). (Russia's response to Panel
question No. 2, para. 10; and European Union's first written submission, para. 229).
96 Lithuania's Law on Natural Gas, (Exhibit RUS-136rev), Article 41(5).
97 Directive 2009/73/EC, (Exhibit EU-5), Article 2(12).
98 Directive 2009/73/EC, (Exhibit EU-5), Article 32(1). This Article explicitly mentions LNG facilities.
99 Directive 2009/73/EC, (Exhibit EU-5), Article 36(1) (referring to Articles 9, 32-34, 41(6), 41(8), and
41(10)). This Article corresponds to Article 22 of Directive 2003/55/EC, which was part of the Second Energy
Package. Although the versions of the measure enacted in the different Directives differ slightly, the language

infrastructure, i.e. interconnectors, LNG and storage facilities "100; the second category is
"significant increases of capacity in existing infrastructure and … modifications of such
infrastructure which enable the development of new sources of gas supply".101
2.37. Infrastructure falling within one of these two categories may only be exempted "under the
following conditions" as provided in Article 36(1) of the Directive:
(a) the investment must enhance competition in gas supply and enhance security of
supply;
(b) the level of risk attached to the investment must be such that the investment
would not take place unless an exemption was granted;
(c) the infrastructure must be owned by a natural or legal person which is separate at
least in terms of its legal form from the system operators in whose systems that
infrastructure will be built;
(d) charges must be levied on users of that infrastructure; and
(e) the exemption must not be detrimental to competition or the effective functioning
of the internal market in natural gas, or the efficient functioning of the regulated
system to which the infrastructure is connected.
2.38. While the decision initially lies with the relevant NRA, it must be notified to the Commission,
which can require the NRA to withdraw or amend its original decision. 102 Article 36( 10) of the
Directive states that the Commission may adopt guidelines for the application of these condi tions.
The Commission has not thus far adopted such guidelines.
2.39. Article 36 also directs the NRA to consider imposing, on a case -by-case basis, conditions
regarding the scope103 and duration of the exemption and non -discriminatory access to the
infrastructure, taking into account the additional capacity to be built or the modification of existing
capacity, the time horizon of the project, and national circumstances.104
2.40. Pursuant to this provision, the Commission and the NRAs have issued a number of decisions
regarding infrastructure exemption requests . The parties refer to those relating to: the Ostsee-
Pipeline-Anbindungsleitung ( OPAL pipeline )105, the Nordeuropäische Erdgasleitung (NEL
pipeline)106, the Gazelle pipeline 107, the Trans-Adriatic Pipeline ( TAP pipeline )108, the Nabucco

concerning the criteria for granting an exemption is identical. The Panel's references to Article 36 of the
Directive generally subsume its predecessor, Article 22 of Directive 2003/55/EC.
100 Directive 2009/73/EC, (Exhibit EU-5), Article 36(1). Article 2(17) of the Directive defines an
"interconnector" as "a transmission line which crosses or spans a border between Member States for the sole
purpose of connecting the national transmission systems of those Member States."
101 Directive 2009/73/EC, (Exhibit EU-5), Article 36(2).
102 Directive 2009/73/EC, (Exhibit EU-5), Article 36(9).
103 See Directive 2009/73/EC, (Exhibit EU-5), Article 36(6), which states that "[a]n exemption may
cover all or part of the capacity of the new infrastructure, or of the existing infrastructure with significantly
increased capacity".
104 Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning
common rules for the internal market in natural gas and repealing Directive 98/30/EC, OJ L 176/57 of
15.7.2003, (Exhibits EU-10/RUS-4), Article 22(3)(b).
105 Ruling of the German Federal Network Agency for Electricity, Gas, Telecommunications, Post and
Railways (BNetzA) of 25 February 2009 on the Application for Exemption from the Regulation by OPAL NEL
Transport GmbH (Case ref. BK7-08-009), (BNetzA decision on the exemption of the OPAL and NEL pipelines),
(Exhibit RUS-61); and Commission Decision of 12 June 2009 on the exemption of the OPAL pipeline from the
requirements on third party access and tariff regulation laid down in Articles 18, 25(2), 25(3) and 25(4) of
Directive 2003/55/EC, K(2009) 4694, SG-Greffe (2009)D/3322, (Commission decision on the exemption of the
OPAL pipeline), (Exhibit RUS-82). The Commission infrastructure exemption decisions in OPAL and NEL are
contained in the same document, but are referred to as separate decisions in our Report for purposes of clarity.
106 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82).
107 Commission Decision of 20 May 2011 on the exemption of the Gazelle pipeline from the requirements
on third party access and tariff regulation laid down in Articles 32, 33, 34, 41(6), 41(8) and 41(10) of Directive
2009/73/EC, C(2011) 3424, (Commission decision on the exemption of the Gazelle pipeline I), (Exhibit RUS-
81); and Commission Decision of 1 December 2011 on the exemption of the Gazelle pipeline from the

pipeline109, the Poseidon pipeline110, the Dragon LNG facility111, the South Hook LNG facility112, and
the Gate Terminal LNG facility.113
2.41. While the parties refer to Article 36 of the Directive and the listed decisions , the precise
nature and relevant aspects of the measure differ for each of Russia's claims. We address this in
our findings below.
2.2.6 The upstream pipeline networks measure
2.42. Russia challenges the upstream pipeline networks measure in the Directive. An "upstream
pipeline network" is defined in Article 2(2) of the Directive as:
[A]ny pipeline or network of pipelines operated and/or constructed as part of an oil or
gas production project, or used to convey natural gas from one or more such projects
to a processing plant or terminal or final coastal landing terminal[.]114
2.43. According to Article 2(3) of the Directive, "transmission" means "the transport of natural
gas through a network, which mainly contains high -pressure pipelines, other than an upstream
pipeline network and other than the part of high-pressure pipelines primarily used in the context of
local distribution of natural gas, with a view to its delivery to customers, but not including
supply".115 As the transport of natural gas through an upstream pipeline network does not fall

requirement of ownership unbundling laid down in Article 9 of Directive 2009/73/EC, C(2011) 8777,
(Commission decision on the exemption of the Gazelle pipeline II), (Exhibit RUS-87).
108 Commission Decision of 16 May 2013 on the exemption of the Trans Adriatic Pipeline from the
requirements on third party access, tariff regulation and ownership unbundling laid down in Articles 9, 32,
41(6), 41(8) and 41(10) of Directive 2009/73/EC, C(2013) 2949, (Commission decision on the exemption of
the TAP pipeline), (Exhibit RUS-10).
109 Commission Decision of 8 February 2008 on the exemption of the Austrian section of the Nabucco
pipeline from the requirements on third party access and tariff regulation laid down in Articles 18, 25(2), 25(3)
and 25(4) of Directive 2003/55/EC, CAB D(2008)142, (Commission decision on the exemption of the Austrian
section of the Nabucco pipeline), (Exhibit RUS-83); Commission Decision of 20 April 2009 on the exemption of
the Bulgarian section of the Nabucco pipeline from the requirements on third party access and tariff regulation
laid down in Articles 18, 25(2), 25(3) and 25(4) of Directive 2003/55/EC, CAB D(2009), (Commission decision
on the exemption of the Bulgarian section of the Nabucco pipeline), (Exhibit RUS-84); and Commission
Decision of 23 June 2009 on the exemption of the Romanian section of the Nabucco pipeline from the
requirements on third party access and tariff regulation laid down in Articles 18, 25(2), 25(3) and 25(4) of
Directive 2003/55/EC, C(2009), (Commission decision on the exemption of the Romanian section of the
Nabucco pipeline), (Exhibit RUS-85). No English translation was made available for the Commission's Decision
on the exemption of the Hungarian part of the Nabucco pipeline. (Russia's first written submission, para. 631,
fn 826).
110 Commission Decision of 22 May 2007 on the exemption of the Poseidon pipeline from the
requirements on third party access laid down in Articles 18, 20, 25(2), 25(3) and 25(4) of Directive
2003/55/EC, SG-Greffe(2007) D/203046, (Commission decision on the exemption of the Poseidon pipeline),
(Exhibit RUS-86).
111 Final Views of the UK Office of Gas and Electricity Markets (Ofgem) on the draft application by
Dragon LNG Ltd for an exemption from the Regulated Third Party Access provisions of the Gas Directive for the
Milford Haven LNG import terminal (June 2004), (Final views of the UK NRA on the exemption of the Dragon
LNG facility), (Exhibit RUS-66); and Letter of 11 April 2005 from the UK Office of Gas and Electricity Markets
(Ofgem) to All Interested Parties regarding the European Commission decision on Ofgem's decision to grant
Dragon LNG Ltd (Dragon) an exemption under section 19C(5) of the Gas Act 1986 from the application of
section 19D of the Gas Act, (Letter from the UK NRA regarding the Commission decision on the exemption of
the Dragon LNG facility), (Exhibit RUS-101).
112 Final Views of the UK Office of Gas and Electricity Markets (Ofgem) on the application by South Hook
LNG Terminal Company Ltd (SHTCL) (owned by Qatar Petroleum and ExxonMobil) under section 19C of the Gas
Act 1986 for an exemption from section 19D of the Gas Act 1986 for the entire proposed capacity of its LNG
import facility at Milford Haven (November 2004), (Final views of the UK NRA on the exemption of the South
Hook LNG facility), (Exhibit RUS-68); and Letter of 11 February 2005 from the UK Office of Gas and Electricity
Markets (Ofgem) to All Interested Parties regarding the European Commission decision on Ofgem's decision to
grant South Hook LNG Terminal Company Ltd (SHTCL) and Grain LNG Ltd (GLNG) an exemption under section
19C(5) of the Gas Act 1986 from the application of section 19D of the Gas Act, (Letter from the UK NRA
regarding the Commission decision on the exemption of the South Hook LNG facility), (Exhibit RUS-102).
113 Commission's comments of 26 March 2007 to the Decision of the Dutch Ministry of Economic Affairs
of 23 November 2006 No. G/2006/01 on the exemption of the Gate Terminal project from certain parts of the
Gas Directive 2003/55, (Commission's comments to the Gate Terminal exemption decision), (Exhibit EU-143).
114 Directive 2009/73/EC, (Exhibit EU-5), Article 2(2).
115 Directive 2009/73/EC, (Exhibit EU-5), Article 2(3). (emphasis added)

within the definition of "transmission", upstream pipeline networks and upstream pipeline network
operators do not fall within the scope of a "transmission system" and the definition of a "TSO",
respectively. Consequently, upstream pipeline networks and upstream pipelin e network operators
are not subject to the rules of the Directive applicable to TSOs, including those on unbundling and
tariff regulation. The operators of upstream pipeline networks are also not subject to the rules on
third-party access under Article 32 of the Directive.
2.44. For upstream pipeline networks, Article 34, entitled "Access to upstream pipeline networks",
provides that member States shall take the necessary measures to ensure that natural gas
undertakings and eligible customers are able to obtain access to upstream pipeline networks,
except for the parts of those networks and facilities that are used for local production at the site of
a field where the gas is produced. According to Article 34(2), such access is provided in a manner
determined by t he relevant EU member State, applying "the objectives of fair and open access,
achieving a competitive market in natural gas and avoiding any abuse of a dominant position,
taking into account security and regularity of supplies, capacity which is or can re asonably be
made available, and environmental protection".116
2.2.7 The third-country certification measure
2.45. Russia challenges the third-country certification measure in the Directive and in the national
implementing laws of Croatia, Hungary and Lithuania.
2.2.7.1 The third-country certification measure in the Directive
2.46. Article 11 of the Directive is entitled "Certification in relation to third countries" and
provides, in relevant parts, as follows:
1. Where certification is requested by a transmission system owner or a transmission
system operator which is controlled by a person or persons from a third country or
third countries, the regulatory authority shall notify the Commission.
The regulatory authority shall also notify to the Commission without delay any
circumstances that would result in a person or persons from a third country or third
countries acquiring control of a transmission system or a transmission system
operator.
2. The transmission system operator shall notify to the regulatory authority any
circumstances that would result in a person or persons from a third country or third
countries acquiring control of the transmission system or the transmission system
operator.
3. The regulatory authority shall adopt a draft decision on the certification of a
transmission system operator within four months from the date of notification by the
transmission system operator. It shall refuse the certification if it has not been
demonstrated:
(a) that the entity concerned complies with the requirements of Article 9; and

116 Directive 2009/73/EC, (Exhibit EU-5), Article 34(2). This provision further states:
The following matters may be taken into account:
(a) the need to refuse access where there is an incompatibility of technical specifications which
cannot reasonably be overcome;
(b) the need to avoid difficulties which cannot reasonably be overcome and could prejudice the
efficient, current and planned future production of hydrocarbons, including that from fields of
marginal economic viability;
(c) the need to res pect the duly substantiated reasonable needs of the owner or operator of the
upstream pipeline network for the transport and processing of gas and the interests of all other
users of the upstream pipeline network or relevant processing or handling faciliti es who may be
affected; and
(d) the need to apply their laws and administrative procedures, in conformity with Community
law, for the grant of authorisation for production or upstream development.

(b) to the regulatory authority or to another competent authority designated by the
Member State that granting certification will not put at risk the security of
energy supply of the Member State and the Community. In considering that
question the regulatory author ity or other competent authority so designated
shall take into account:
(i) the rights and obligations of the Community with respect to that third country
arising under international law, including any agreement concluded with one
or more third countries to which the Community is a party and which
addresses the issues of security of energy supply;
(ii) the rights and obligations of the Member State with respect to that third
country arising under agreements concluded with it, insofar as they are in
compliance with Community law; and
(iii) other specific facts and circumstances of the case and the third country
concerned.
4. The regulatory authority shall notify the decision to the Commission without delay,
together with all the relevant information with respect to that decision.
5. Member States shall provide for the regulatory authority or the designated
competent authority referred to in paragraph 3(b), before the regulatory authority
adopts a decision on the certification, to request an opinion from the Commission on
whether:
(a) the entity concerned complies with the requirements of Article 9; and
(b) granting certification will not put at risk the security of energy supply to the
Community.
…
7. When assessing whether the control by a person or persons from a third country or
third countries will put at risk the security of energy supply to the Community, the
Commission shall take into account:
(a) the specific facts of the case and the third country or third countries concerned;
and
(b) the rights and obligations of the Community with respect to that third country
or third countries arising under international law, including an agreement
concluded with one or more third countries to which the Community is a party
and which addresses the issues of security of supply.
…
9. Nothing in this Article shall affect the right of Member States to exercise, in
compliance with Community law, national legal controls to protect legitimate public
security interests.
10. The Commission may adopt Guidelines setting out the details of the procedure to
be followed for the application of this Article.117
2.2.7.2 The third -country certification measure in the national implementing law s of
Croatia, Hungary and Lithuania
2.47. Croatia has implemented the rules on third-country certification through Article 24 of its Gas
Market Act, Hungary ha s implemented them through Secti on 128/A of its Gas Act, and Lithua nia

117 Directive 2009/73/EC, (Exhibit EU-5), Article 11.

has implemented them through Article 29 of its Law on Natural Gas . The table below reproduces
the relevant text of these provisions:
Croatia118

Hungary119

Lithuania120

(1) The certification procedure
initiated based on the request for
certification submitted by the
owner of the transmission system
or transmission system operator
controlled by a person or persons
from a third country or third
countries shall be subject to the
provision of Article 23 of this Act,
with the following differences
stated in this article.

(2) The Agency shall without delay
inform the Ministry and the
European Commission and submit
a proposal of its decision on:

1. the request for certification
submitted by the owner of the
transmission system or
transmission system operator
controlled by a person or persons
from a third country or third
countries and

2. all circumstances that may
result in a person or persons from
a third country or third countries
taking control of the transmission
system or the transmission system
operator.
…

(4) The Ministry shall determine if
the Agency's issuing of the
certificate would endanger the
security of energy supply of the
Republic of Croatia and the
European Union and shall deliver
its opinion to the Agency within 60
days of Agency's notification.

(1) By way of derogation from the
certification procedure referred to
in Section 128, the Office shall
open certification procedures
relating to the third countries
specified in this Section in the
following cases:

a) upon receipt of notice from the
transmission system operator
under Subsection (2);

b) upon receipt of the request
specified in Paragraph a) of
Subsection (3); or

c) upon receipt of information
specified in Paragraph b) of
Subsection (3).

…

(4) The Office shall refuse to
certify compliance with unbundling
requirements in certification
procedures involving third
countries, if the party acquiring
control fails to verify:

…

b) that the certificate, if granted,
will not jeopardize the security of
the supply of natural gas –
including the security of the
supply of natural gas in the
European Union …

1. Where the issue of a licence is
requested by a transmission
system operator which is
controlled by a person or persons
from a third country or third
countries, the Commission shall
notify the European Commission.
The Commission shall also notify to
the European Commission any
other circumstances that would
result in a person or persons from
a third country or third countries
acquiring control of a transmission
system or a transmission system
operator.

…

4. Having regard to the opinion of
the European Commission, if any,
the Commission shall adopt a final
decision on the designation of a
transmission system operator
within a period of two months after
the day when the opinion of the
European Commission was
received or should have been
received, but was not delivered.
The Commission shall designate an
operator provided that it
demonstrates that:

…

2) such designation will not put
at risk energy supply and the
security of such supply of the
Republic of Lithuania, another
Member State or the European
Union.

2.48. Russia also challenges certain "additional" provisions of the national laws of Hungary , and
Lithuania, namely Sections 123(5) and 123(6) of Hungary's Gas Act, as well as Articles 20(5) and
29(4)(3) of Lithuania's Law on Natural Gas.121

118 Croatia's Gas Market Act, (Exhibit RUS-45), Article 24.
119 Hungary's Gas Act, (Exhibits EU-155/RUS-47 and EU-41), Article 128/A. Despite initial disagreement,
Russia agrees with the translation of Article 128/A provided in Exhibit EU-41, but notes that the provisions of
Hungary's Gas Act should be referred to as "Sections" rather than "Articles". (Russia's response to Panel
question No. 145, para. 3). For reasons of convenience, we refer to the provisions of Hungary's Gas Act as
"Sections" in our Report.
120 Lithuania's Law on Natural Gas, (Exhibit RUS-136rev), Article 29. Despite initial disagreement, the
European Union agrees with the English translation of Article 29 contained in Exhibit RUS-136rev. (European
Union's response to Panel question No. 145, para. 1).
121 Russia describes Section 123 of Hungary's Gas Act as imposing "additional" conditions that apply on
top of the conditions stipulated in Article 128/A of Hungary's Gas Act. (Russia's first written submission, para.
431). Russia refers to Article 20(5) of Lithuania's Law on Natural Gas as "yet another discriminatory provision",
having previously described the provisions of Article 29 of Lithuania's Gas Act. (Russia's first written
submission, para. 440). Article 29(4)(3) is described by Russia as setting forth "an entirely different
requirement" not closely corresponding to Article 11 of the Directive. (Russia's response to Panel question No.

2.49. Sections 123(5) and 123(6) of Hungary's Gas Act provide as follows:
(5) The Office 's resolution granting consent is required for the execution of any
transaction that would allow a person or persons from a third country or third
countries to acquire control over a transmission system operator or the controlling
shareholder of a transmission system operator.
(6) The Office may refuse to grant approval or render its approval conditional for the
transactions referred to in Subsections (2) and (5) above and in Subsection (1) of
Section 122, if they are deemed to pose any potential threat to the security of natural
gas supply, to public safety, to the enforcement of compliance with energy policy
objectives, to the discharge of activities subject to authorization under this Act, or the
regulations for determining the price of transmission, stor age and distribution
services, and universal services, and the regulations for determining the quality of
such services, furthermore, if the execution of such transactions would infringe upon
the pre-emption right notified to the Office according to Subsection (8).122
2.50. Article 20 of Lithuania's Law on Natural Gas is entitled "Licences and Certificates in the
Natural Gas Sector", with the relevant part of Article 20(5) stating that:
Licences for transmission, distribution, storage and liquefaction shall be iss ued to a
legal entity established in the Republic of Lithuania or a unit of a legal entity or other
organisation of another Member State established in the Republic of Lithuania.123
2.51. The relevant part of Article 29(4)(3) of Lithuania's Law on Natural Gas reads as follows:
The Commission shall designate an operator provided that it demonstrates that:
…
3) legitimate public security interests are protected.124
2.2.8 The TEN-E measure
2.52. The TEN -E measure stems from the provisions of the TEN -E R egulation that set out the
criteria for the designation of certain infrastructure projects as "projects of common interest"
(PCIs), lay out the regulatory framework to facilitate their timely implementation and provide them
with certain incentives.125
2.53. Article 2(4) of the TEN-E Regulation defines a PCI as a project necessary to implement the
energy infrastructure priority corridors and areas set out in Annex I of the Regulation, and which is
part of the Union list of PCIs (Union list) . The Union list is established by the Commission in t he
form of an Annex to the TEN -E Regulation, every two years, on the basis of the regional lists of
proposed PCIs adopted by twelve Regional Groups. 126 The first Union list was adopted in 2013127
and the second Union list was adopted in 2015.128

3, para. 15(b)). Following Russia's descriptions, we refer to Sections 123(5) and 123(6) of Hungary's Gas Act
and Articles 20(5) and 29(4)(3) of Lithuania's Law on Natural Gas collectively as "additional" conditions. The
European Union argues that Russia's challenges to these "additional" conditions are outside the scope of this
Panel's terms of reference because they do not implement the rules on third-country certification in the
Directive. This issue is addressed in section 7.2.2.3.2 of our findings below.
122 Hungary's Gas Act, (Exhibit EU-155), Section 123; and Hungary's Gas Act, (RUS-47), Section 194.
Despite initial disagreement, both parties have subsequently submitted exhibits with identical translations of
Section 123 of Hungary's Gas Act (Exhibits EU-155/RUS-47).
123 Lithuania's Law on Natural Gas, (Exhibit RUS-136rev), Article 20(5).
124 Lithuania's Law on Natural Gas, (Exhibit RUS-136rev), Article 29(4). The European Union originally
provided its own translation of the Article but agrees with the translation in Exhibit RUS-136rev. (European
Union's first written submission, para. 559; and European Union's response to Panel question No. 145).
125 TEN-E Regulation, (Exhibit EU-4), Article 1(2).
126 TEN-E Regulation, (Exhibit EU-4), Article 3.
127 Commission Delegated Regulation (EU) No. 1391/2013 of 14 October 2013, amending Regulation
(EU) No. 347/2013 of the European Parliament and of the Council on guidelines for trans-European energy

2.54. To be designated as a PCI (and be included in the Union list), an infrastructure project must
meet two sets of criteria: a set of criteria common for all infrastructure projects falling within the
scope of the TEN -E Regulation (general criteria), and a set of cr iteria specific to projects
developing a particular group of energy infrastructure categories (specific criteria). The general
criteria are set out in Article 4(1) of the Regulation as follows:
(a) the project is necessary for at least one of the energy infrastructure priority
corridors and areas;
(b) the potential overall benefits of the project, assessed according to the
respective specific criteria in paragraph 2, outweigh its costs, including in the
longer term; and
(c) the project meets any of the following criteria:
(i) involves at least two Member States by directly crossing the border of two or
more Member States;
(ii) is located on the territory of one Member State and has a significant cross -
border impact as set out in Annex IV.1;
(iii) crosses the border of at least one Member State and a European Economic
Area country.129
2.55. To fall within the scope of the TEN -E Regulation, a project must develop infrastructure
falling under the energy infrastructure categories in electricity, gas, oil, and carbon dioxide set out
in Annex II of the TEN -E Regulation 130, as well as fall within the "energy infrastructure priority
corridors and areas" defined in Annex I of the TEN -E Regulation. 131 The "energy infrastructure
priority corridors and areas" are the geographical areas around which the Union lists "cluster" the
PCIs.132 The priority corridors and areas for projects developing energy infrastructure categories
concerning gas133 are defined in Annex I.2 of the TEN-E Regulation as follows:
2. PRIORITY GAS CORRIDORS
(5) North-South gas interconnections in Western Europe ( 'NSI West Gas '): gas
infrastructure for North -South gas flows in Western Europe to further diversify
routes of supply and for increasing short-term gas deliverability.
Member States concerned: Belgium, Denmark, France, Germany, Ireland, Italy,
Luxembourg, Malta, the Netherlands, Portugal, Spain, the United Kingdom;

infrastructure as regards the Union list of projects of common interest, OJ L 349/28 of 21.12.2013, (Regulation
(EU) No. 1391/2013), (Exhibit EU-3).
128 Commission Delegated Regulation (EU) No. 2016/89 of 18 November 2015 amending Regulation
(EU) No. 347/2013 of the European Parliament and of the Council as regards the Union list of projects of
common interest, OJ L 19/1 of 27.1.2016, (Regulation (EU) No. 2016/89), (Exhibit RUS-2).
129 TEN-E Regulation, (Exhibit EU-4), Article 4(1).
130 This dispute is limited to the components of the TEN-E measure that pertain to projects developing
infrastructure concerning natural gas.
131 TEN-E Regulation, (Exhibit EU-4), Articles 4(1) and 4(2)(b).
132 See, e.g. Regulation (EU) No. 2016/89, (Exhibit RUS-2), pp. 13-19.
133 Annex II.2 of the TEN-E Regulation provides that the energy infrastructure categories concerning gas
include the following:
(a) transmission pipelines for the transport of natural gas and bio gas that form part of a
network which mainly contains high -pressure pipelines, excluding high -pressure pipelines used
for upstream or local distribution of natural gas;
(b) underground storage facilities connected to the above -mentioned high -pressure gas
pipelines;
(c) reception, storage and regasification or decomp ression facilities for liquefied natural gas
(LNG) or compressed natural gas (CNG);
(d) any equipment or installation essential for the system to operate safely, securely and
efficiently or to enable bi -directional capacity, including compressor stations[ .] (TEN -E
Regulation, (Exhibit EU-4), Annex II.2)

(6) North-South gas interconnections in Central Eastern and South Eastern Europe
('NSI East Gas'): gas infrastructure for regional connections between and in the
Baltic Sea region, the Adriatic and Aegean Seas, the Eastern Mediterranean Sea
and the Black Sea, and for enhancing diversification and security of gas supply.
Member States concerned : Austria, Bulgaria, Croatia , Cyprus, Czech Republic,
Germany, Greece, Hungary, Italy, Poland, Romania, Slovakia, Slovenia;
(7) Southern Gas Corridor ( 'SGC'): infrastructure for the transmission of gas from
the Caspian Basin, Central Asia, the Middle East and the Ea stern Mediterranean
Basin to the Union to enhance diversification of gas supply.
Member States concerned : Austria, Bulgaria, Croatia , Czech Republic, Cyprus,
France, Germany, Hungary, Greece, Italy, Poland, Romania, Slovakia, Slovenia;
(8) Baltic Energy Marke t Interconnection Plan in gas ( 'BEMIP Gas '): gas
infrastructure to end the isolation of the three Baltic States and Finland and
their dependency on a single supplier, to reinforce internal grid infrastructures
accordingly, and to increase diversification a nd security of supplies in the Baltic
Sea region.
Member States concerned: Denmark, Estonia, Finland, Germany , Latvia,
Lithuania, Poland, Sweden.134
2.56. In addition to meeting the general criteria, projects developing energy infrastructure
categories concerning gas must "contribute significantly to at least one of the following specific
criteria", as laid out in Article 4(2)(b), namely:
(i) market integration, inter alia through lifting the isolation of at least one Member
State and reducing energy infrastructure bo ttlenecks; interoperability and
system flexibility;
(ii) security of supply, inter alia through appropriate connections and diversification
of supply sources, supplying counterparts and routes;
(iii) competition, inter alia through diversification of supply sources, supplying
counterparts and routes;
(iv) sustainability, inter alia through reducing emissions, supporting intermittent
renewable generation and enhancing deployment of renewable gas.135
2.57. When the Regional Group s, referred to in paragraph 2.53 above, assess whether projects
fulfil the general and specific criteria, they shall give "due consideration" to (a) the urgency of each
proposed project to meet energy policy targets of market integration, inter alia , through lifting
isolation, competition, sustainability and security of supply; (b) the number of member States
affected by each project, whilst ensuring e qual opportunities for projects involving peripheral
member States; (c) the contribution to territorial cohesion ; and (d) complementarity with other
proposed projects.136 In addition, the assessment shall be in accordance with the indicators set out
in Annex IV.2 through 5 of the Regulation.137
2.58. The TEN -E Regulation provides three types of incentives to projects designated as PCIs.
First, Chapter III of the TEN -E Regulation provides for more streamlined administrative processing
of the applications relating to such projects. In particular, Article s 7(2) and 7(3) of the TEN -E
Regulation require all authorities to "ensure that the most rapid treatment legally possible is given
to the [] files [related to PCIs]" and that PCIs shall be "allocated the status of the h ighest national

134 TEN-E Regulation, (Exhibit EU-4), Annex I.2. (footnote omitted)
135 TEN-E Regulation, (Exhibit EU-4), Article 4(2)(b).
136 TEN-E Regulation, (Exhibit EU-4), Article 4(4).
137 TEN-E Regulation, (Exhibit EU-4), Article 4(3).

significance possible and be treated as such in permit granting processes", if such a status exists
in national law.
2.59. Second, Chapter IV of the TEN -E Regulation contains provisions on the cost allocation of
cross-border investments between member States and the granting of certain other regulatory
treatment incentives. In particular, Article 12 provides that efficiently incurred project investment
costs are to be borne by the relevant operators of the transmission infrastructure or project
promoters of the member States to which the project provides a net positive impact, as well as the
principal of including such costs in tariffs. 138 In turn, Article 13 envisages that member States and
NRAs shall ensure that "appropriate incentives", including those relating to tariffs, are granted to a
gas-related PCI where a project promoter incurs higher risks for the development, construction,
operation or maintenance of such project compared to the risks normally incurred by a comparable
infrastructure project.139
2.60. The third type of incentive is the availability of financing, in accordance with Chapter V of
the TEN-E Regulation. Gas-related PCIs are eligible for financial assistance in the form of grants for
studies and financial instruments.140 Pursuant to Article 14(2) of the TEN-E Regulation, gas-related
PCIs that meet additional criteria – commercially unviable projects that significantly improve
security of supply, solidarity or innovation, and that received a cross -border cost allocation
decision pursuant to Article 12 – are also eligible for financial assistance in the form of grants for
works.
3 PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
3.1. In its first written submission, Russia requests the Panel to find that the European Union and
its member States have violated their obligations under the following provisions:
 Article XVI:2(e) of the GATS, because the unbundling measures of Croatia,
Hungary and Lithuania restrict or require specific types of legal entity or joint
venture through which a service supplier may supply a service;
 Article XVI:2(a) of the GATS, because Croatia and Lithuania, in implementing
their unbundling measures, have each, in effect, adopted a prohibited
quantitative limitation in the form of a monopoly or exclusive service supplier;
 Article XVI:2(f) of the GATS, because Croatia, Hungary and Lithuania each
impose prohibited limitations on the participation of foreign capital in terms of
maximum percentage limit on foreign shareholding;
 Article XVII:1 of the GATS, because Croatia, Hunga ry and Lithuania's
government exemption measures, adopted pursuant to Article 9(6) of the
Directive, arbitrarily exempt government -controlled pipeline transport services
and service suppliers from the unbundling requirements, thus modifying the
conditions of competition to the detriment of like Russian services and service
suppliers, resulting in less favorable treatment on both a de jure and de facto
basis;
 Article II:1 of the GATS, because the unbundling measure under the Directive,
by enabling Member Sta tes to select from among the unbundling models, de
facto, modifies the conditions of competition in the EU market to the detriment
of Russian services and service suppliers, compared to like services and service
suppliers of other Members, thus resulting in less favorable treatment;
 Article III:4 of the GATT 1994, because the unbundling measure under the
Directive, by enabling Member States to select from among the unbundling
models, de facto, modifies the conditions of competition in the EU market to the
detriment of imported Russian natural gas, compared to like domestic gas,

138 TEN-E Regulation, (Exhibit EU-4), Articles 12(1) and 12(4).
139 TEN-E Regulation, (Exhibit EU-4), Article 13(1); and Directive 2009/73/EC, (Exhibit EU-5),
Article 41(8).
140 TEN-E Regulation, (Exhibit EU-4), Article 14(1).

resulting in less favorable treatment;
 Article I:1 of the GATT 1994, because the unbundling measure under the
Directive, by enabling Member States to select from among the unbundling
models, de facto , grants an advantage to imported natural gas of other
Members not accorded immediately and unconditionally to like Russian gas,
resulting in less favorable treatment;
 Article I:1 of the GATT 1994, because the Directive accords natural gas of other
Members imported through LNG facilities and upstream pipeline networks an
advantage not extended immediately and unconditionally to like Russian gas;
 Article III:4 of the GATT 1994, because the Directive accords imported Russian
natural gas less favorable treatment than domestic natural gas transported
through upstream pipeline networks;
 Article XVII:1 of the GATS, because Croatia, Hungary and Lithuania's third -
country certification measures accord other Members' pipeline transport
services and s ervice suppliers de jure less favorable treatment than like
domestic services and service suppliers;
 Article II:1 of the GATS, because the third -country certification measure under
the Directive accords Russian pipeline transport services and service suppl iers
less favorable treatment than like services and service suppliers of other
Members, on both a de jure and de facto basis;
 Article III:4 of the GATT 1994, because the third -country certification measure
under the Directive accords other Members' natura l gas less favorable
treatment than like domestic gas;
 Article VI:1 of the GATS, because Croatia, Hungary and Lithuania do not
administer their third -country certification measures in a reasonable, objective
and impartial manner;
 Article VI:5 of the GATS, because Croatia, Hungary and Lithuania's third -
country certification measures nullify or impair their specific commitments in a
manner inconsistent with the criteria of Article VI:4 of the GATS;
 Article X:3(a) of the GATT 1994, because the European Union's administration
of the infrastructure exemption measure is not uniform, impartial or reasonable,
as applied by the Commission in its OPAL infrastructure exemption decision,
and in comparison to i ts Gazelle, TAP, Nabucco and Poseidon infrastructure
exemption decisions;
 Article I:1 of the GATT 1994, because the infrastructure exemption measure, as
implemented to deny the NEL exemption, grants an advantage to other
Members' imported natural gas, inc luding like Azeri gas to be transported and
sold on the EU market via TAP, not extended immediately and unconditionally
to Russian gas transported via NEL;
 Article I:1 of the GATT 1994, because the infrastructure exemption measure, as
implemented to deny t he [sic] impose more restrictive conditions on the OPAL
exemption, grants an advantage to other Members' imported natural gas not
extended immediately and unconditionally to Russian gas transported via OPAL;
 Article I:1 of the GATT 1994, because the infrastructure exemption measure, as
implemented to deny the NEL exemption and to impose more restrictive
conditions on the OPAL exemption, grants an advantage to other Members'
natural gas imported, transported and sold on the EU market through LNG
facilities;

 Article II:1 of the GATS, because the infrastructure exemption measure, as
implemented by the Commission, modified the conditions of competition in the
EU market, resulting in less favorable treatment being accorded to the Russian
pipeline transport service supplier and its services supplied through NEL GT and
OPAL GT than the treatment accorded to like services and service suppliers of
other Members;
 Article I:1 of the GATT 1994, because the Directive grants natural gas of other
Members imported thro ugh upstream pipeline networks an advantage not
extended immediately and unconditionally to like Russian gas transported and
sold on the EU market via NEL and OPAL;
 Article II:1 of the GATS, because the Directive accords pipeline transport
services and service suppliers of other Members whose services are supplied via
upstream pipeline networks more favorable treatment than accorded to like
Russian services and service suppliers via NEL and OPAL;
 Article XI:1 of the GATT 1994, because the OPAL exemption dec ision, pursuant
to the infrastructure exemption measure, institutes two quantitative restrictions
on the importation of natural gas from Russia;
 Article II:1 of the GATS, because the TEN -E measure accords Russian pipeline
transport services and service sup pliers less favorable treatment than like
services and services suppliers of other Members;
 Article III:4 of the GATT 1994, because the TEN -E measure accords imported
Russian natural gas less favorable treatment than like domestic gas transported
and sold on the EU market; and
 Article I:1 of the GATT 1994, because the TEN -E measure grants other
Members' natural gas an advantage not extended immediately and
unconditionally to like Russian natural gas.141
3.2. In its second written submission, Russia requests the P anel to find that the European Union
and its member States have violated their obligations under the following provisions:
 Claim 1 – Article XVI:2(e) of the GATS, because the unbundling measures of
Croatia, Hungary and Lithuania restrict or require specifi c types of legal entity
or joint venture through which a service supplier may supply a service;
 Claim 2 – Article XVI:2(a) of the GATS, because Croatia and Lithuania, in
implementing their unbundling measures, have each, in effect, adopted a
prohibited quantitative limitation in the form of a monopoly or exclusive service
supplier;
 Claim 3 – Article XVI:2(f) of the GATS, because Croatia, Hungary and Lithuania
each impose prohibited limitations on the participation of foreign capital in
terms of maximum percentage limit on foreign shareholding;
 Claim 4 – Article XVII:1 of the GATS, because Article 9(6) of the Directive, "as
such", arbitrarily exempts government -controlled pipeline transport services
and service suppliers from the unbundling requirements, thus modifying the
conditions of competition to the detriment of like Russian services and service
suppliers, resulting in less favourable treatment as evidenced by the Croatian,
Hungarian and Lithuanian government exemption measures;
 Claim 5 – Article XVII:1 of the GATS, because Article 9(6) of the Directive, "as
applied" in Croatia's, Hungary's and Lithuania's government exemption
measures, arbitrarily exempt government -controlled pipeline transport services

141 Russia's first written submission, para. 810. (emphasis omitted)

and service suppliers from the unbundling requireme nts, thus modifying the
conditions of competition to the detriment of like Russian services and service
suppliers, resulting in less favourable treatment;
 Claim 6 – Article II:1 of the GATS, because the unbundling measure under the
Directive, by enabling M ember States to select from among the unbundling
models, de facto, modifies the conditions of competition in the EU market to the
detriment of Russian services and service suppliers, compared to like services
and service suppliers of other Members, thus re sulting in less favorable
treatment;
 Claim 8 – Article III:4 of the GATT 1994, because the unbundling measure
provided for in the Directive, by enabling Member States to select from among
the unbundling models, "as such", modifies the conditions of competi tion in the
EU market to the detriment of imported Russian natural gas, compared to like
domestic gas, resulting in less favourable treatment;
 Claim 10 – Article I:1 of the GATT 1994, because the unbundling measure
under the Directive, by enabling Member S tates to select from among the
unbundling models, de facto, "as such", grants an advantage to imported
natural gas of other Members not accorded immediately and unconditionally to
like Russian gas, resulting in less favourable treatment;
 Claim 12 and 13 – Article I:1 of the GATT 1994, because the Directive accords
natural gas of other Members imported through LNG facilities and upstream
pipeline networks an advantage not extended immediately and unconditionally
to like Russian gas;
 Claim 14 – Article III:4 of the GATT 1994, because the Directive accords
imported Russian natural gas less favorable treatment than domestic natural
gas transported through upstream pipeline networks;
 Claim 15 – Article XVII:1 of the GATS, because Croatia, Hungary and
Lithuania's third-country certification measures accord other Members' pipeline
transport services and service suppliers de jure less favorable treatment than
like domestic services and service suppliers;
 Claim 16 – Article II:1 of the GATS, because the third -country certification
measure under Article 11 of the Directive, "as such", accords Russian pipeline
transport services and service suppliers less favorable treatment than like
services and service suppliers of other Members;
 Claim 17 – Article II:1 of the GATS, because the third -country certification
measure under Article 11 of the Directive, "as such" by several Member States,
accords Russian pipeline transport services and service suppliers less favorable
treatment than like services and service suppliers of other Members;
 Claim 19 – Article VI:1 of the GATS, because Croatia, Hungary and Lithuania do
not administer their third -country certification measures in a reasonable,
objective and impartial manner;
 Claim 20 – Article VI:5(a) of the GATS, because Croatia, Hungary and
Lithuania's third -country certification measures nullify or impair their specific
commitments in a manner inconsistent with the criteria of Article VI:4 of the
GATS;
 Claim 21 – Article X:3(a) of the GATT 1994, because the European Union's
administration of the infrastructure exemption measure is not uniform, impartial
or reasonable, as applied by the Commission in its OPAL infrastructure
exemption decision, and in comparison to its Gazelle, TAP, Nabucco and
Poseidon infrastructure exemption decisions;

 Claim 22 – Article I:1 of the GATT 1994, because the infrastructure exemption
measure, as implemented to deny the NEL exemption, grants an advantage to
other Members' imported natural gas, including like Azeri gas to be transported
and sold on the EU market via TAP, not extended immediately and
unconditionally to Russian gas transported via NEL;
 Claim 23 – Article I:1 of the GATT 1994, because the infrastructure exemption
measure, as implemented to deny the [sic] impose more restrictive conditions
on the OPAL exemption, grants an advantage to other Members' imported
natural gas not extended immediately and unconditionally to Russian gas
transported via OPAL;
 Claim 24 – Article I:1 of the GATT 1994, because the infrastructure exemption
measure, as im plemented to deny the NEL exemption and to impose more
restrictive conditions on the OPAL exemption, grants an advantage to other
Members' natural gas imported, transported and sold on the EU market through
LNG facilities;
 Claim 25 – Article II:1 of the GA TS, because the infrastructure exemption
measure, as implemented by the Commission, modified the conditions of
competition in the EU market, resulting in less favorable treatment being
accorded to the Russian pipeline transport service supplier and its ser vices
supplied through NEL GT and OPAL GT than the treatment accorded to like
services and service suppliers of other Members;
 Claim 26 – Article I:1 of the GATT 1994, because the Directive grants natural
gas of other Members imported through upstream pipe line networks an
advantage not extended immediately and unconditionally to like Russian gas
transported and sold on the EU market via NEL and OPAL;
 Claim 28 – Article XI:1 of the GATT 1994, because the OPAL exemption
decision, pursuant to the infrastructur e exemption measure, institutes two
quantitative restrictions on the importation of natural gas from Russia;
 Claim 29 – Article II:1 of the GATS, because the TEN -E measure accords
Russian pipeline transport services and service suppliers less favorable
treatment than like services and services suppliers of other Members;
 Claim 30 – Article III:4 of the GATT 1994, because the TEN -E measure accords
imported Russian natural gas less favorable treatment than like domestic gas
transported and sold on the EU market; and
 Claim 31 – Article I:1 of the GATT 1994, because the TEN -E measure grants
other Members' natural gas an advantage not extended immediately and
unconditionally to like Russian natural gas.142
3.3. In its first written submission, the European Union reques ts that the Panel reject Russia's
claims in this dispute in their entirety and to find that the challenged measures are consistent with
the obligations of the European Union and its member States under the provisions of the WTO
agreements. More particularly:
With regard to unbundling, the European Union requests the Panel to find that:
 the implementation of the unbundling requirement in the domestic laws of
Croatia, Hungary and Lithuania does not violate the commitments under Article
XVI of the GATS in res pect of these countries because the challenged measure

142 Russia's second written submission, para. 487. The numbering used by Russia in its second written
submission originates from its reply to Panel question No. 5, in response to which the European Union raised a
number of terms of reference objections. With the exception of the Panel's preliminary ruling concerning these
terms of reference objections, the numbering assigned by Russia will not be used further in this Report.

does not qualify as a prohibited market access restriction under sub -paragraphs
(e), (a) or (f) of Article XVI of the GATS, and would in any event be justified
under Article XIV (a) and (c) of the GATS;
 the implementation of the public body specification in Article 9(6) of Directive
2009/73 in Croatia, Hungary and Lithuania violates neither de jure nor de facto
the national treatment obligation in Article XVII of the GATS, and would in any
event be justified under Article XIV (c) of the GATS;
 the unbundling measure does not violate the most favoured nation treatment
obligation in Article II:1 of the GATS since it does not discriminate between
pipeline transport service suppliers from different third countries;
 the unbundling measure does not violate the national treatment obligation in
Article III:4 of the GATT 1994 since it does not accord Russian natural gas less
favourable treatment than like domestic gas;
 the unbundling measure does not violate the mo st favoured nation treatment
obligation in Article I:1 of the GATT 1994 since it does not accord third -
countries' natural gas an advantage not extended immediately and
unconditionally to like Russian gas and, furthermore, Russia's new claim
regarding the alleged priority buying by Litgas from Statoil through the Klaipeda
LNG Terminal is outside the Panel's terms of reference;
 Directive 2009/73/EC does not violate Article I:1 of the GATT 1994 because it
does not accord natural gas of other third countries im ported through LNG
facilities and upstream pipeline networks an advantage not extended to Russian
gas;
 Directive 2009/73/EC does not violate Article III:4 of the GATT 1994 because it
does not accord Russian gas treatment less favourable than like domestic gas
transported via upstream pipeline networks.
With regard to third country certification , the European Union requests the Panel to
find that:
 the SoS certification requirement, as transposed in the domestic laws of
Croatia, Hungary and Lithuania, is justified under Article XIV (a) of the GATS.
 the alleged additional certification requirements provided for in the domestic
laws of Croatia, Hungary and Lithuania are outside the Panel's terms of
reference and/or are not inconsistent with Article XVII of t he GATS because
they do not accord less favourable treatment to Russian services or service
suppliers than to like services or service suppliers of those EU Member States.
 the SoS certification requirement is not inconsistent, either de iure or de facto,
with Article II:1 of the GATS because it does not accord less favourable
treatment to Russian services or service suppliers than to like services or
service suppliers of other countries. In any event, the alleged difference in
treatment would be justified under Article XIV (a) of the GATS. In addition,
Russia's de facto claims are partly outside the Panel's terms of reference.
 Russia's claim that this measure violates Article III:4 of the GATT is outside the
Panel's terms of reference. In any event the meas ure is not inconsistent with
Article III:4 of the GATT because it does not afford less favourable treatment to
Russian gas than to EU gas.
 the administration of the SoS certification requirement by Croatia, Hungary and
Lithuania is not inconsistent with Article VI:I of the GATS.
 the SoS certification requirement, as transposed in the domestic laws of

Croatia, Hungary and Lithuania, is not inconsistent with Article VI:5 of the
GATS.
With regard to the infrastructure exemption measure , the European Union req uests
the Panel to find that:
 the European Union's administration of the infrastructure exemption measure is
not inconsistent with Article X:3(a) of the GATT 1994;
 the infrastructure exemption measure, as implemented to deny the NEL
exemption, is not inconsistent with Article I:1 of the GATT 1994 because it does
not grant to other Members' imported natural gas, including like Azeri gas to be
transported and sold on the EU market via TAP, an advantage not extended
immediately and unconditionally to Russian gas transported via NEL;
 the infrastructure exemption measure is not inconsistent with Article I:1 of the
GATT 1994 because it does not impose more restrictive conditions on the OPAL
exemption or grants an advantage to other Members' imported natural gas no t
extended immediately and unconditionally to Russian gas transported via OPAL;
 the infrastructure exemption measure is not inconsistent with Article I:1 of the
GATT 1994 because it does not grant an advantage to other Members' natural
gas imported, transported and sold on the EU market through LNG facilities;
 the infrastructure exemption measure, as implemented by the Commission, is
not inconsistent with Article II:1 of the GATS, because it does not result in less
favorable treatment being accorded to the Russian pipeline transport service
supplier and its services supplied through NEL GT and OPAL GT than the
treatment accorded to like services and service suppliers of other Members;
 the Directive is not inconsistent with Article I:1 of the GATT 1994, becau se it
does not grant natural gas of other Members imported through upstream
pipeline networks an advantage not extended immediately and unconditionally
to like Russian gas transported and sold on the EU market via NEL and OPAL;
 the Directive is not inconsi stent with Article II:1 of the GATS, because it does
not accord pipeline transport services and service suppliers of other Members
whose services are supplied via upstream pipeline networks more favorable
treatment than accorded to like Russian services an d service suppliers via NEL
and OPAL;
 the infrastructure exemption measure is not inconsistent with Article XI:1 of the
GATT 1994, because the OPAL exemption decision does not institute two
quantitative restrictions on the importation of natural gas from Russia.
With regard to projects of common interest, the European Union requests the Panel to
find that:
 the TEN – E measure is not inconsistent, either de iure or de facto , with
Article II:1 of the GATS or with Articles III:4 and I:1 of the GATT because the
selection of PCIs does not afford less favourable treatment to Russian TSOs or
to Russian Gas than to like service providers or gas of the European Union or of
other countries, respectively.143
3.4. In its second written submission, the European Union requests t hat the Panel reject Russia's
claims in this dispute in their entirety.144

143 European Union's first written submission, paras. 841-844. (emphasis original)
144 European Union's second written submission, para. 437.

4 ARGUMENTS OF THE PARTIES
4.1. The arguments of the parties are reflected in their executive summaries, provided to the
Panel in accordance with paragraph 19 of the Working Procedures adopted by the Pan el (see
Annexes B-1, B-2, B-3 and B-4).
5 ARGUMENTS OF THE THIRD PARTIES
5.1. The arguments of Colombia, India 145, Japan and Ukraine are reflected in their executive
summaries, provided in accordance with paragraph 20 of the Working Procedures adopted by the
Panel (see Annexes C -1, C -2, C -3 and C-4). Brazil, China, Korea, Saudi Arabia and t he United
States did not submit written or oral arguments to the Panel.
6 INTERIM REVIEW
6.1. On 8 August 2017, the Panel issued its Interim Report to the parties. On 11 September 2017,
both parties submitted written requests for the Panel to review aspects of the Interim Report. On
25 September 2017, the European Union submitted comments on Russia's requests for review.
Russia did not submit any comments on the European Union's requests for review by the deadline
provided for in the Panel's timeline and subsequently confirmed that it did not have any such
comments.146 Neither party requested an interim review meeting.
6.2. In accordance with Articl e 15.3 of the DSU, this section of the Report addresses the parties'
requests for review of the Report made at the interim review stage. We discuss the parties'
requests for substantive modifications below, in sequence according to the sections and
paragraphs to which the requests pertain. In addition to the substantive requests discussed below,
various editorial and drafting improvements were made to the Report, including those requested
by the parties.
6.3. In addressing the parties' requests for substantive modifications below, we are mindful of the
specific scope, nature and purpose of interim review. With respect to the scope of our review, we
observe that Article 15.2 of the DSU, and paragraph 21 of the Panel's Working Procedures, provide
parties with an o pportunity to request the Panel "to review precise aspects of the interim report".
Previous panels have declined to expand the scope of interim review beyond that provided for in
Article 15.2 of the DSU and have accordingly circumscribed their revi ew to ad dress only those
requests related to "precise aspects" of the interim report. 147 With respect to the nature and
purpose of our review, it is well -established that interim review is not an appropriate stage for the
parties to raise new arguments or submit new evidence not previously presented before a panel;
nor is it an appropriate stage for the parties to re -argue their case on the basis of the arguments
already put before a panel.148
6.4. In light of the considerations stated above, we will review our Interim Repo rt only in light of
the parties' requests that relate to its "precise aspects". We will not accept requests amounting to
a party's attempt to re-argue its case.149
6.5. As an additional observation of a general nature particularly relevant for the present case, we
would like to note that, in the "Findings" section of the Report, we summarize the parties'

145 Following the WTO Secretariat's enquiry, India confirmed that its third-party statement will serve as
the executive summary of its arguments.
146 See Russia's communication of 26 September 2017.
147 Panel Reports, Brazil – Taxation, paras. 6.7-6.8; Japan – Alcoholic Beverages II, para. 5.2; Australia
4.2; Canada – Continued Suspension, paras. 6.16-6.17; US – Continued Suspension, paras. 6.17-6.18; and
India - Agricultural Products, para. 6.5.
148 Appellate Body Reports, EC – Sardines, para. 301; and EC – Selected Customs Matters, para. 259.
See also Panel Reports, Japan – DRAMs (Korea), para. 6.2; US – Poultry (China), para. 6.32; India –
Agricultural Products, para. 6.5; India – Solar Cells, para. 6.24; Russia – Pigs, paras. 6.6-6.7; US – Zeroing
149 In following this approach, we also address the general concern expressed in the European Union's
comments on Russia's request for review of the Interim Report, that "in several instances, Russia engages in
extensive re-argumentation of its claims". (European Union's comments on Russia's request for review of the
Interim Report, para. 1).

arguments in the manner and to the extent necessary and appropriate to capture our
understanding for the purposes of our own assessment and reasoning. We underli ne that we have
done this on the basis of a comprehensive and holistic reading of the parties' submissions. The
parties' arguments are summarized in their own words in the executive summaries annexed to the
Final Report. In any event, we emphasize that the disputing parties are responsible for presenting
their arguments in a clear manner. A panel is not expected to "divine" a claim or a defence if a
party merely submits allegations without relating them to legal arguments.150
6.6. Finally, we are mindful of the Ap pellate Body's request that, when redacting information
designated as BCI by a party, "a panel must make efforts to ensure that the public version of its
report circulated to all Members of the WTO is understandable". 151 In this dispute, the parties
designated a certain amount of information provided to the Panel as BCI. Moreover, during the
interim review, Russia requested that certain additional information, which had not been initially
submitted as containing BCI, be identified as such in the final report.152 While we have made every
effort to ensure that the public version of our Report will be understandable, we also considered it
appropriate to protect all the information designated by the parties as BCI.
6.7. The numbering of some of the paragraphs an d footnotes in the Final Report has changed
from the numbering in the Interim Report. The discussion below refers to the numbering in the
Interim Report and, where it differs, includes the corresponding numbering in the Final Report.
6.8. Pursuant to the DSU, a ll panel proceedings remain confidential until the Panel Report is
circulated to WTO Members. Paragraph 23 of the Panel's Working Procedures states that "[t]he
interim report, as well as the final report prior to its official circulation, shall be kept str ictly
confidential and shall not be disclosed." The confidential nature of the Interim Report was explicitly
reiterated when it was transmitted to the parties on 8 August 2017. On 18 October 2017, Russia
made the Panel aware of a publicly available webcast from a meeting in the European Parliament
where certain elements of the confidential Interim Report were referred to. 153 In its response of
19 October 2017, the European Union expressed its regret and indicated that it had taken steps to
have the relevant p arts of the webcast removed from public viewing. 154 The Panel wishes to
emphasize its disappointment and concern that the confidentiality of the Interim Report was not
respected, and notes the subsequent steps taken by the European Union to address the disclosure.
6.1 Factual aspects
6.9. Russia requests that a section be added to paragraph 2.7, essentially seeking to clarify that
the term VIU "was adopted by the EU for use in the Directive and related legal instruments" and
that this is "not a commonly used term in the natural gas sector". 155 The European Union opposes
Russia's request, arguing that the term VIU is commonly used and that it would be "incorrect to
suggest that it is somehow designed for the purpose of this dispute or the [] Directive."156
6.10. We note that paragraph 2.7 quotes the Directive's definition of a VIU and clearly states that
it is derived therefrom. We do not believe that it is necessary for us to venture into a discussion of
whether, and if so how, the term VIU is "commonly used" and we therefore decline to add the
section proposed by Russia. We have, however, mod ified the language of paragraph 2.7 in a
manner that reflects some of the language used by Russia in its request.
6.11. Russia requests the addition of a sentence to paragraph 2.38 as follows: "The Commission
has thus far failed to adopt any such guidelines".157 The European Union disagrees and submits the
sentence Russia proposes is irrelevant for the description of the measure. 158 While we have not
used the exact language request ed by Russia, we consider it useful to reflect the fact that the

150 Appellate Body Report, US – Gambling, para. 140.
151 Appellate Body Report, Japan – DRAMs, para. 279.
152 Russia's request for review of the Interim Report, para. 247.
153 Russia's communication of 18 October 2017.
154 European Union's comments on Russia's communication of 18 October 2017.
155 Russia's request for review of the Interim Report, para. 4.
156 European Union's comments on Russia's request for review of the Interim Report, para. 2.
157 Russia's request for review of the Interim Report, para. 8.
158 European Union's comments on Russia's request for review of the Interim Report, para. 3.

Commission has not thus far adopted such guidelines , and we have modified paragraph 2.38
accordingly.
6.12. Russia submits that footnote 116 to paragraph 2.44 , which describes Article 34 of the
Directive, should quote directly from the Directive. 159 Russia further submits that the Panel should
note here that Article 34 of the Directive has never been applied. 160 The European Union disagrees
that this latter addition should be made, because it considers that it is factually incorrect.161
6.13. With respect to Russia's request to quote the text of Article 34 of the Directive, we
rephrased footnote 116 in light of Russia's comment. With respect to its comment regarding the
application of Article 34, this request i s, in our view, tantamount to an attempt to re -litigate
arguments already put before us, which we do not consider appropriate at the interim review
stage.
6.2 Introduction
6.14. Russia submits that the Panel's comment in footnote 154 (footnote 283 in this Report)
concerning Russia's use of the labels " de facto ", "de jure" , "as such" and "as applied" is
superfluous and does not add to the explanation provided by the Panel in t he sentence preceding
that footnote. Russia hence requests that the footnote be removed. 162 The European Union
disagrees, submitting that the concern expressed in that footnote is a relevant one which the
European Union also expressed on multiple occasions d uring the proceedings. 163 The European
Union suggests that the Panel could add to this footnote that it shared the same concern.
6.15. As explained below in paragraph 7.13 and footnote 283, Russia's use of the labels " de
facto", "de jure", "as such" and "as applied" in relation to its claims contributed to our impression
that the precise nature and content of some of the challe nged measures, and claims against them,
were not always clear or consistent. We must therefore decline Russia's request to remove
footnote 154. We also decline to introduce the European Union's suggested addition.
6.3 General issues related to Russia's claims under the GATS
6.16. With respect to footnote 434 to paragraph 7.250 (footnote 563 of this Report) , the
European Union requests the Panel to indicate that Russia's claim regarding the unbundling
measure in the national implementing laws of Hungary did not involve a claim of inconsistency
with Article XVI:2(a) of the GATS. 164 The European Union further requests that the same
modification be made with respect to paragraph 7.288.165 We have decided to accommodate the
European Union's request and have modified footnote 434 and paragraph 7.288 accordingly. In
addition, we have made a similar clarification in paragraph 7.585.
6.17. Russia submits that the "Introduction" to Section 7. 4.1 mischaracterizes in several key
respects Russia's position regarding the services at issues. Russia argues that, "[i]n addition, …
these and related mischaracterizations in the [Interim Report] lead the Panel to" an incorrect
conclusion with respect to the services at issue in paragraph 7.285. Russia agrees that pipeline
transport services encompass the transportation of natural gas, but disagrees with the definition of
the covered services adopted by the Panel. Russia is of the view that "this misappre hension of the
scope of the covered services impacts various other aspects of the Panel's [Interim Report],
leading to incorrect findings in those respects as well". Russia encourages the Panel to more
closely adhere to the definition of the services propo sed by Russia, as the complainant, in the
Panel's Final Report.166 The European Union disagrees with Russia's general comments on the
Panel's analysis relating to the definition of the services at issue in Section 7.4 of the Interim
Report. For the European Union, the Panel did not misrepresent Russia's position regarding that
definition and correctly examined the meaning of the words of the relevant Schedules in

159 Russia's request for review of the Interim Report, para. 10.
160 Russia's request for review of the Interim Report, para. 10.
161 European Union's comments on Russia's request for review of the Interim Report, para. 4.
162 Russia's request for review of the Interim Report, para. 11.
163 European Union's comments on Russia's request for review of the Interim Report, para. 5.
164 European Union's request for review of the Interim Report of the Panel, para. 1.
165 European Union's request for review of the Interim Report of the Panel, para. 4.
166 Russia's request for review of the Interim Report of the Panel, paras. 12-13.

accordance with the rules of interpretation of the Vienna Convention. The European Union requests
that Russia's comments be dismissed.167
6.18. We recall that the limited function of the interim review stage is to consider specific and
particular aspects of the Interim Report, and not to reopen arguments and evidence already put
before the Panel. 168 It appears to us that Russia's general comments on Section 7.4.1 do not
require a specific response by the Panel, but would call on us to engage in a new analysis of
arguments and evidence on the record. We must therefore decline Russia's request.
6.19. Russia submits that the last sentence of paragraph 7.252 mischaracterizes in several
respects Russia's position in paragraphs 96 and 97 of Russia's first written submission. Russia
argues that the main premise of Russia's explanation regarding this topic, in part icular in the
opening sentence of paragraph 96 of its first written submission, was that "broadly defining the
covered services … is consistent with the 'Subject matter and scope' of the Directive". Russia
submits that it never stated "that its proposed de finition of the services at issue is consistent with
the 'Subject matter and scope' of the Directive". Russia requests that the Panel revise the last
sentence of paragraph 7.252 by adding the phrase "as set forth in Article 1 of the Directive", as
follows: "Russia submits that its proposed definition of the services at issue is consistent with the
'Subject matter and scope' of the Directive, as set forth in Article 1 of the Directive, although
Russia takes issue with certain definitions contained in the Dir ective".169 The European Union
disagrees with Russia disputing the Panel's description of Russia's position. The European Union
argues that Russia repeatedly stressed that "pipeline transport services" should be "broadly"
defined. According to the European U nion, the quote from Russia's first written submission
indicates undeniably that the "broad definition" argued for by Russia would, in its view, be
"consistent with the 'subject matter and scope' of the Directive".170
6.20. We recall that our findings do not aim to fully reproduce the parties' arguments as
presented in their submissions, but summarize such arguments to the extent necessary to
facilitate our own analysis and assessment. Nonetheless, we have rephrased the last sentence of
paragraph 7.252 in order to accommodate Russia's request.
6.21. Russia submits that paragraph 100 of Russia's first written submission does not support the
proposition contained in the first sentence of paragraph 7.253. Russia argues that, in paragraph
100 of its first written submission, Russia used "transmission" as an adjective to describe the
relevant industry segment, while, in the first sentence of paragraph 7.253, the Panel used that
word as a noun. According to Russia, this difference is not immaterial. 171 The European Union
submits that the reasoning behind Russia's request is entirely missing. For the European Union,
the Panel has correctly described Russia's position and the use of "transmission" as a noun or as
an adjective does not alter the meaning of what Russia has stated, nor the Panel's
paraphrasing.172
6.22. We recall that our findings do not aim to fully reproduce the parties' arguments as
presented in their submissions, but summarize such arguments to the extent necessary to
facilitate our own analysis and assessment. We note tha t Russia does not explain why, in its view,
using the word "transmission" as a noun rather than as an adjective makes a material difference in
the first sentence of paragraph 7.253, and does not make any specific proposal to modify that
sentence. Like the European Union, we are of the view that using the word "transmission" as a
noun rather than as an adjective does not modify the gist of Russia's arguments as summarized in

167 European Union's request for review of the Interim Report of the Panel, para. 6.
168 See, for instance, Panel Reports, Japan – Alcoholic Beverages II, para. 5.2; Australia – Salmon,
– Continued Suspension, paras. 6.16-6.17; US – Continued Suspension, paras. 6.17-6.18; India - Agricultural
169 Russia's request for review of the Interim Report of the Panel, para. 14 (quoting Russia's first written
submission, para. 96).
170 European Union's comments on Russia's request for review of the Interim Report, para. 15 (quoting
Russia's second written submission, para. 75).
171 Russia's request for review of the Interim Report, paras. 15-16 (quoting Russia's first written
submission, para. 100). We note that the last sentence of paragraph 16 of Russia's request for review appears
to be unfinished.
172 European Union's comments on Russia's request for review of the Interim Report, para. 8.

paragraph 7.253 of the Interim Report. For these reasons, we do not find it necessary to modify
the first sentence in paragraph 7.253.
6.23. Russia submits that, in the last sentence of paragraph 7.253 , the Panel blurred together
concepts contained in paragraphs 101 and 102 of Russia's first written submission. According to
Russia, it is accura te that, in paragraph 101 of its first written submission, Russia quoted several
aspects of the ordinary dictionary definition of "supply", "within which Russia stated that all
services related to the supply of natural gas, including its transmission, are included". Russia
further argues that, in paragraph 102 of its first written submission, it stated that "[i]f anything,
the entire gas market can be thought of as a 'supply system'". According to Russia, by blurring
these concepts together in the last sent ence of paragraph 7.253, the Panel mischaracterized
Russia's position regarding the meaning of "supply" in the context of the covered services, "natural
gas pipeline transport services", and in the natural gas industry generally. 173 The European Union
submits that the Panel's description of Russia's position is correct and that Russia has consistently
argued for the gas market as a "supply system". The European Union recalls that Russia objected
to the unbundling measure, which requires separation of transmis sion interests, on the one hand,
and production and/or supply interests, on the other. The European Union also notes that Russia
explicitly argued that, in its view, pipeline transport services must be viewed to be "part of a
continuum".174
6.24. We recall that o ur findings do not aim to fully reproduce the parties' arguments as
presented in their submissions, but summarize such arguments to the extent necessary to
facilitate our own analysis and assessment. We note that, while taking issue with the Panel's
summary of Russia's arguments in the last sentence of paragraph 7.253, Russia does not make
any specific proposal to modify that sentence. In any event, taking into account Russia's comment,
we have modified the last sentence of paragraph 7.253, as follows : "Ref erring to dictionary
definitions of the term 'supply', Russia argues that all services related to the supply of natural gas,
including its transmission, fall within these broad definitions . and Russia further argues that the
entire gas market can be thought of as a 'supply system'."
6.25. Russia submits that it "has identified several concerns" with the Panel's conclusions
concerning the services at issue, in paragraphs 7.285 and 7.263 . According to Russia, such
conclusions "are not consistent with the evidence i n the record".175 We note that Russia's general
comment appears to challenge the manner in which the Panel assessed the evidence on record.
We recall the limited function of the interim review and that it is not acceptable for parties to re -
argue their case during the interim review stage.
6.26. Russia submits that it has never stated that it intended the services at issue to include the
"production" of natural gas. 176 The European Union submits that, as demonstrated by Russia's
response to Panel question No. 155, Ru ssia did consider that pipeline transport services include
"production" of natural gas and, therefore, Russia's objection should be dismissed. 177 We note
that, while taking issue with the Panel's assessment of Russia's position, Russia does not identify a
specific paragraph (or paragraphs) of the Interim Report which, in its view, should be modified. We
further note that, in explaining its understanding of the notions of "supply" and "supply services"
in the course of this dispute, Russia made various statements which can reasonably be understood
as indicating that, for Russia, such notions include the production of natural gas .178 Hence, we
must decline Russia's objection.

173 Russia's request for review of the Interim Report, para. 17 (quoting paragraphs 101 and 102 of
Russia's first written submission).
174 European Union's comments on Russia's request for review of the Interim Report, para. 9 (quoting
Russia's response to Panel question No. 155, para. 10).
175 Russia's request for review of the Interim Report, para. 19.
176 Russia's request for review of the Interim Report, para. 20.
177 European Union's comments on Russia's request for review of the Interim Report, para. 9 (quoting
Russia's response to Panel question No. 155, para. 10, where Russia stated, inter alia: "[b]ut for its
discriminatory unbundling measure, the EU would not question the existence of supply services. VIUs in the
EU, as in other countries, would still own and control all of the necessary assets for the production, supply and
transmission of natural gas, including the transmission system.")
178 See, for instance, Russia's response to Panel question No. 62, para. 288 ("The main components of
the 'supply' of natural gas as a 'service' include services that overlap with natural gas production, as well as
services related to the sale of natural gas"); response to Panel question No. 155, para. 1 ("A producer is, by

6.27. Russia questions the accuracy of the Panel finding, in paragraph 7.309, that "Russia does
not present specific arguments to the effect that the ordinary meaning of 'pipeline transport
services' would include the notions of 'supply' and 'supply services'". 179 We note that Russia does
not cite the submission(s) where Russia would have made specific arguments to the effect that the
ordinary meaning of "pipeline transport services" includes the notions of "supply" and "supply
services". In our view, paragraph 7.309 accurately reflects Russia's arguments. Therefore, we
decline Russia's objection.
6.4 The unbundling measure
6.28. The European Union requests that the Panel add another section to the description of its
arguments on the issue of whether to assess the Directive's unbundling measure within each EU
member State or throughout the EU territory in paragraph 7.378. The requested section
essentially denotes the European Union's position that "the Directive is not a 'genuine cause' for
any alleged de facto discrimination" since it does not "require[] the Member States to exercise the
discretion to choose between implementing OU only or also the other models in one or the other
manner".180
6.29. Since our findings touch upon the notion that the assessment of a challenged measure 's
WTO consistency must be based on effects that are attributable to, i.e. have a genuine relationship
with, that measure, we consider it useful to include the European Union's position on this matter.
We have, however, not considered it necessary to inclu de the full section requested by the
European Union. Instead, we have added a single sentence to paragraph 7.378, which aims at
capturing the essence of the European Union's position.
6.30. Russia requests the Panel to "revise its findings" in paragraphs 7.381 through 7.383 that
the unbundling measure challenged by Russia under Article II:1 of the GATS and Articles I:1 and
III:4 of the GATT 1994 is that contained in the Directive, and to conclude instead that th e
challenged measure is a "single measure" consisting of the unbundling measure in the Directive as
well as the implementing legislation of each of the EU member States. 181 The European Union
submits that the Panel should reject Russia's request, arguing tha t Russia has not provided
evidence that a "single measure" exists, nor that such a measure is "attributable to the EU".182
6.31. We note that our decision to first determine exactly what measure Russia is challenging was
prompted by the lack of clarity and consist ency concerning this matter in Russia's vari ous
submissions. In its request for review of the Interim Report, Russia acknowledges that it initially
focused on the unbundling measure in the Directive and subsequently altered its focus "[u]pon
reviewing the EU's arguments".183 Russia then goes on to "briefly trace the history of how Russia
characterized the unbundling measure in this proceeding" in order to support its view that the
challenged measure is a "single measure" consisting of the unbundling measure i n the Directive as
well as the implementing legislation of each of the EU member States. 184 Russia thus appears to
be seeking to clarify the nature of the challenged measure at the interim review stage, and on this
basis requests us to revise our findings. I n our view, this request is tantamount to an attempt to
re-litigate arguments already put before us, which we do not consider appropriate at the interim
review stage.
6.32. In any event and as further described in paragraphs 7.381 through 7.383, our conclusion
that the challenged measure consists of the unbundling measure in the D irective is based on "an
overall reading of Russia's panel request and the submissions provided by Russia throughout these
proceedings". This overall reading already takes into account the various characterizations referred
to by Russia in its request for review. We see nothing in Russia's request that would cause us to

definition, a supplier of natural gas. When it sells that gas, of course a good is sold and supplied, as the EU
says. In so doing, however, a gas supplier, which may well also be a producer, also supplies the market with
pipeline transport services."); and response to Panel question No. 155, para. 10 (quoted by the European
Union in its comments on Russia's request for review of the Interim Report, para. 9, see previous footnote).
179 Russia's request for review of the Interim Report, para. 21.
180 European Union's request for review of the Interim Report, para. 7 (quoting European Union's
response to Panel question No. 171(c), para. 72).
181 Russia's request for review of the Interim Report, paras. 22-30.
182 European Union's comments on Russia's request for review of the Interim Report, para. 10.
183 Russia's request for review of the Interim Report, paras. 24-25.
184 Russia's request for review of the Interim Report, paras. 26-29.

question or revise our overall reading nor the ensuing conclusion. We therefore reject Russia's
request.
6.33. The European Union requests that another sentence be added to paragraph 7.392,
repeating parts of the arguments that the European Union requested to have included in
paragraph 7.378.185
6.34. We recall that we have granted the European Union 's request concerning paragraph 7.378
by introducing a sentence aimed at capturing the European Union's argument that "the Directive is
not a 'genuine cause' for any alleged de facto discrimination" since it does not "require[] the
Member States to exercise the discretion to choose between implementing OU only or also the
other models in one or the other manner". 186 We do not believe that a repetition of this argument
later on in the same section of our Report serves to clarify the European Union's position further or
to otherwise improve our Report, and we therefore reject the European Union's request.
6.35. Russia requests the Panel to "reconsider its determination" in footnote 681 to
paragraph 7.426 (footnote 813 of this Report) that the example of the "'ad hoc' ITO" TAP AG is not
relevant for the assessment of the unbundling measure's consistency with Article II:1 of the GATS
as it pertains to the infrastructure exemption measure rather than the unbundling measure. 187
Russia alternatively requests that we should "better explain" our decision not to accord weight to
the example of TAP AG. 188 The European Union criticizes Russia for seeking to conflate "clearly
distinct measures when making arguments" and submits that Russia's request should therefore be
rejected.189
6.36. In our view, Russia does not appear to be questioning the factual accuracy of our finding
that TAP AG is not an ITO pursuant to the unbundling measure but an "' ad hoc' ITO" pursuant to
the infrastructure exemption measure. Rather, Russia appears to be arguing that we should
nonetheless reconsider our decision not to accord weight to this example in the context of
assessing the WTO consistency of the unbundling measure. In our view, this amounts to an
attempt by Russia to re -litigate arguments already put before us, and we therefore reject Russia's
request. In order to accommodate Russia's alternative request, we have how ever provided further
explanation of our reasoning in footnote 681 to paragraph 7.426.
6.37. Russia requests that the Panel modify the characterization of Russia's posit ion concerning
the issue of whether the assessment under Article II:1 of the GATS should focus on VIUs or TSOs
in paragraph 7.429190, whereas the European Union cons iders that Russia's position has been
correctly described in paragraph 7.429 and that the characterization therein should not be
modified.191
6.38. We note that Russia does not specify what precise aspects of paragraph 7.429 it requests to
have modified or how it prefers to have its position characterized. In i ts request, Russia states
that:
Russia argued that the activity of supplying a service "by a service supplier of one
Member, through commercial presence in the territory of any other Member," in the
words of Article I:2(c) of the GATS, necessitates the inv olvement of both entities, the
"service supplier" in the exporting country and the "commercial presence" (which also
is a service supplier), in the supply of that service.192
6.39. Russia does not provide a reference for this argument but goes on to quote a statem ent
from its second written submission that "in Member States that permit only the OU model, such as
Lithuania, a VIU is required to divest its assets and is restricted from maintaining anything more

185 European Union's request for review of the Interim Report, para. 10. See also para. 6.28 above.
186 See paras. 6.28-6.29 above.
187 Russia's request for review of the Interim Report, paras. 31-36.
188 Russia's request for review of the Interim Report, para. 36.
189 European Union's comments on Russia's request for review of the Interim Report, para. 11.
190 Russia's request for review of the Interim Report, paras. 37-40.
191 European Union's comments on Russia's request for review of the Interim Report, para. 13.
192 Russia's request for review of the Interim Report, para. 38.

than a limited, minority ownership interest in the TSO."193 In its request, Russia therefore appears
to be suggesting that its position is similar to the conclusion we ultimately reach on this matter:
namely that the assessment of GATS claims concerning mode 3 may involve looking at both the
commercial presence i n the importing Member (in the present dispute, TSOs) and the natural or
juridical persons in the exporting Member, supplying services through that commercial presen ce
(in the present case, VIUs). 194 We, however, have difficulties locating this position in a ny part of
Russia's prior submissions. In light of this, we do not believe it would be appropriate to suggest, in
our findings, that Russia's position throughout the proceedings was that which is now being
presented in its request for review of the Interim Report.
6.40. At the same time, we agree with Russia that paragraph 7.429 presents Russia's position as
a "contrast" to that of the European Union. 195 This approach was prompted by the European
Union's criticism of Russia's position and we find it useful to rephrase paragraph 7.429 to reflect
this aspect. As a consequence of this change, we have made minor adjustments to the
characterization of the European Union's position in paragraph 7.430.
6.41. Russia disagrees with the Panel's finding in paragraph 7.443 that "[b]ased on the evidence,
we understand that the TSOs pointed to by Russia as constituting a commercial presence take the
form of juridical persons rather than, inter alia , branches or r epresentative offices." Russia
requests the Panel to delete this finding and consequently "reanalyze the entire commercial
presence issue as set forth in paragraphs 7.443 through 7.451 of the [Interim Report]".
Alternatively, Russia requests that the Panel provide "some explanation, including citation to actual
evidence in the record, supporting this finding".196 The European Union disagrees, pointing out that
"[n]one of the TSO's that Russia referred to in the proceedings is a branch or representative office"
and that Russia "does not seek to demonstrate otherwise, and cannot do so".197
6.42. In our view, Russia's request that we delete our finding and "reanalyze the entire
commercial presence issue" amounts to an attempt to re-litigate the case, which is not appropriate
at the interim review stage. In any event, and as pointed out by th e European Union, Russia has
provided no argumentation or evidence in these proceedings relating to the supply of services
through the commercial presence of TSOs , which take the form of branches or representative
offices. In light of this, as well as the fact that it is for Russia as the complaining party to make a
prima facie case, we have difficulties understanding how we would "reanalyze the entire
commercial presence issue" in respect of branches or representative offices. We therefore reject
Russia's request.
6.43. With respect to Russia's alternative request that we provide "some explanation, includi ng
citation to actual evidence i n the record", we note that Russia's position on this matter was not
clear throughout the proceedings. For this reason, we had to rely on inferences in making our
finding. In order to provide further clarity for the basis of our finding, and to accommodate
Russia's alternative request, we have inserted footnote 826 to paragraph 7.443, explaining these
inferences.
6.44. Russia requests that the Panel modify paragraph 7.478 and footnote 74 0 hereto
(footnote 873 in this Report) by "tak[ing] account of th[e] evidence" and "provid[ing] its reasoning
in response to th[e] argument" provided by Russia in response to Panel question No. 179
concerning the competitive opportunities for pipeline transport service suppliers that are not VIUs
under the different unbundling models. 198 More particularly, Russia points to the arguments or
"evidence" con cerning the p ublic body measure 199 and those concerning the notion that "for
purposes of the ITO model, natural or legal persons that are not a VIU are legally prohibited from
supplying pipeline transport services in the EU." 200 The European Union criticizes Russia for
pointing to a measure that is distinct from the unbundling measure, the public body measure, and

193 Russia's request for review of the Interim Report, para. 39 (quoting Russia's second written
submission, para. 209).
194 See para. 7.440 below.
195 Russia's request for review of the Interim Report, para. 39.
196 Russia's request for review of the Interim Report, paras. 41-42.
197 European Union's comments on Russia's request for review of the Interim Report, para. 14.
198 Russia's request for review of the Interim Report, paras. 43-47.
199 Russia's request for review of the Interim Report, para. 45.
200 Russia's request for review of the Interim Report, paras. 46-47 (quoting Russia's response to Panel
question No. 179, para. 157).

submits that Russia has been "unable to demonstrate with evidence that 'natural or legal persons
that are not a VIU are legally prohibited from supplying pipeline transport services in the EU'." The
European Union therefore submits that Russia's request be rejected.201
6.45. With respect to Russia's request that we "take account of this evidence", we note that we
have already taken into account the two lines of argumentation or "evidence" referred to by Russia
but did not consider these relevant to Russia's claim under Article II:1 of the GATS against the
unbundling measure. Insofar as Russia is requesting that we reconsider the we ight given to these
two lines of argumentation or "evidence", this request amounts to an attempt to re -litigate
arguments already put before us, which is not appropriate at the interim review stage. With
respect to Russia's request that we "provide [our] reasoning in response to this arg ument", we
note that footnote 740 to paragraph 7.478 already contains reasoning in support of our decision
not to accord weight to the arguments provided by Russia in response to Panel question No. 179.
While it is not clear what precise aspects of this reasoning Russia takes issue with, we have
attempted to accommodate Russia's request by clarifying parts of the reasoning herein.
6.46. Russia requests that the Panel modif y paragraphs 7.479 and 7.480, which address certain
additional arguments submitted by Russia in response to Panel question No. 172(a) concerning the
alleged less favourable treatment of pipeline transport service suppliers under the OU model in
comparison with the ITO model. 202 Russia's request appears to concern two of the three "points"
raised by Russia in its response, namely "the inherent commercial and logistical competitive
advantages associated with vertical integration" 203 and the arguments provided in response to
Panel qu estion No. 183(a) "with regard to the different treatment and competitive advantage
accorded to domestic or imported gas by VIUs subject to the ITO model". 204 Russia requests that
the Panel "take this evidenc e into account" and "provide its reasoning in resp onse to these
argument[s]".205 In respect of the former point, Russia also requests that we delete the "repeated
reference to a 'sim ple internet search'", which is , in Russia's view, superfluous. 206 The European
Union submits that "what Russia labels as 'evide nce', constitute mere unsubstantiated and general
allegations."207
6.47. We note that all three additional points raised by Russia in response to Panel question
No. 172(a) are addressed in paragraphs 7.479 and 7.480 and footnote 745 hereto (footnote 880 in
this Report), including those mentioned by Russia in its request for review. These were, however,
found not to have been substantiated by Russia or not to be relevant for our assessment of
Russia's claim under Artic le II:1 of the GATS. Inso far as Russia is requesting that we reconsider
the relevance or persuasiveness of these points, this request amounts to an attempt to re -litigate
arguments already put before us, which is not appropriate at the interim review stage. In order to
address Rus sia's concerns regarding the adequacy of our reasoning, we have provided further
details and references to Russia's response in paragraphs 7.479 and 7.480 and footnote 745
hereto. With respect to Russia's more specific request that we delete the references to a "simple
internet search", we note that this is a d irect quote from Russia's response to Panel question No.
172(a), which we see no reason to delete.
6.48. Footnote 748 to paragraph 7.482 (footnote 883 in this Report) concerns Russia's contention
that the objective of the unbundling measure is to reduce reliance on imported Russian natural gas
or Russian pipeline transport servi ces or service suppliers . Russia submits that this footnote
includes "only a very small fraction of the evidence put forward by Russia on this issue" and
requests that we take into account additional arguments and evidence, listed by Russia in its
request for review.208 The European Union has not provided comments on this request.
6.49. We note that the arguments and evidence concerning the European Union's alleged
objectives are provided at a variety of places in Russia's submissions, and not always in connection
with Russia's claim against the unbundling measure under Article II:1 of the GATS, rendering it
difficult to determine which arguments and evidence to address in the context of this claim.

201 European Union's comments on Russia's request for review of the Interim Report, para. 15.
202 Russia's request for review of the Interim Report, paras. 48-57.
203 Russia's request for review of the Interim Report, paras. 49-52.
204 Russia's request for review of the Interim Report, paras. 53-56.
205 Russia's request for review of the Interim Report, para. 57.
206 Russia's request for review of the Interim Report, fn 31.
207 European Union's comments on Russia's request for review of the Interim Report, para. 16.
208 Russia's request for review of the Interim Report, paras. 58-63.

Indeed, some of the arguments and evidence listed by Russi a in its request for review do not
appear to concern the unbundling measure at all. 209 Nonetheless, and in order to ensure the
completeness of our findings, we have provided further details and references to R ussia's various
submissions in footnote 748.
6.50. Russia requests that the Panel specify which examples are encompassed by the reference to
"the above -mentioned examples" in paragraph 7.487.210 The European Union ha s not provided
comments on this request. We consider that the specification requested by Russia provides
additional clarity and have made the necessary modification to paragraph 7.487.
6.51. Paragraphs 7.496 through 7.508 concern four exampl es of TSOs, which Russia relies on in
arguing that "only TSOs controlled by the Russian VIU were required to undergo ownership
unbundling", and the issue of whether the Russian VIU Gazprom can be considered to have
supplied pipeline transport services thro ugh the commercial presence of these TSOs, within the
meaning of the GATS. Russia appears to make two separate requests in this regard:
6.52. First, Russia requests that the Panel "set[] forth its own legal interpretation of the key term
'legally direct' in GATS Article XXVIII(n)(ii)" and "respond[ ] to Russia's interpretation of this
term".211 The European Union criticizes Russia for seeking to "re-argue its claims" and submits that
nothing in Russia's request "alters the correctness of the Panel's findings."212
6.53. When addressing Russia's request, we begin by noting that it is well -established practice
that panels need not address all arguments submitted by the parties to a dispute. In the current
dispute, we did not consider it necessary to determine, in the abstract, the meaning of the term
"legally direct", which forms part of the definition of "control" under Article XXVIII(n)(ii) of the
GATS. Indeed, we specifically found that the concept of "control" is a matter to be as sessed on a
case-by-case basis.213 In accordance with this approach, we instead address this issue in respect
of the evidence relied on by Russia. We do not believe that a further discussion of the concepts of
"control" or "legally direct", in the abstract, would provide further clarity or serve to resolve issues
raised by Russia's claim under Article II:1 of the GATS. We therefore reject Russia's request.
6.54. Second, Russia criticizes the Panel for not "according sufficient weight" to the evidence
submitted by Russia concerning the [*** ] for four TSOs and requests that the Panel should do so
or "[a]t the very least … properly respond to Russia's arguments concerning this evidence". 214 The
European Union criticizes Russia for seeking to "re -argue its claims" and submits that nothing in
Russia's request "alters the correctness of the Panel's findings."215
6.55. We note that, while we have not found it necessary to address Russia's more general
assertions concerning Gazprom's level of control over the four TSOs, we have considered all
arguments provided by Russia in relation to the evidence submitted by it, namely the [***] for the
four TSOs. In sofar as Russia is requesting that we reconsider the weight of this evidence or the
persuasiveness of its arguments, this request amounts to an attempt to re -litigate evidence and
arguments already put before us, which is not appropriate at the interim r eview stage. In order to
accommodate Russia's concerns regarding the adequacy of our reasoning, we have provided
further details when presenting Russia's arguments in paragraph 7.500 and when addressing these
in paragraph 7.501 . We have, however, not included or addressed certain new arguments raised
by Russia in its request for review216, as interim review is not the appropriate forum for presenting
new arguments.
6.56. Footnote 784 to paragraph 7.498 (footnote 919 in this Report) explains that the European
Union was provided an opportunity to com ment on new pieces of evidence submitted by Russia in
its comments on the European Union's responses to the Panel's questions following the second

209 See, e.g. Russia's request for review of the Interim Report, para. 60 (citing Russia's first written
submission, paras. 6-7 concerning the TEN-E measure and the possibilities for certain pipelines of being
considered projects of common interest)
210 Russia's request for review of the Interim Report, para. 64.
211 Russia's request for review of the Interim Report, paras. 66-67.
212 European Union's comments on Russia's request for review of the Interim Report, para. 17.
213 See para. 7.470 below.
214 Russia's request for review of the Interim Report, para. 67.
215 European Union's comments on Russia's request for review of the Interim Report, para. 17.
216 Russia's request for review of the Interim Report, para. 72.

meeting, but did not avail itself of this opportunity in respect of certain pieces of new evidence.
The Europ ean Union requests that the relevant part of its communication be quoted in this
regard.217 We consider the requested addition useful as it clarifies that the European Union actively
declined to comment on certain pieces of the new evidence, and we have ther efore included the
quote in footnote 784.
6.57. The European Union requests that the Panel add another section to the description of its
position on the issue of whether the unbundling measure in the Directive falls within the scope of
Article III:4 of the GATT 1994 in paragraph 7.526. More particularly, the European Union requests
the inclusion of certain arguments concerning the lack of a relationship between "the origi n of the
pipeline service supplier with the origin of the gas flowing through the pipeline", submitted by the
European Union in the context of arguing that imported Russian natural gas is not accorded less
favourable treatment under the unbundling measure.218
6.58. In paragraph 7.526, we explain that the European Union has pointed to there being "no link
between the origin of the gas that flows through a pipeline and the ori gin of the service supplier"
in the context of arguing that the unbundling measure does not fall within the scope of Article III:4
of the GATT 1994. We also explain that we consider this argument misplaced and better addressed
in the context of considering whether there is less favourable treatment of imported Russian
natural gas in comparison with that of domestic EU natural gas. We do not believe that the
inclusion of arguments submitted by the European Union in the context of arguing that imported
Russian natural gas is not accorded less favourable treatment under the unbundling measure
would provide further clarification. We therefore reject the European Union's request.
6.59. Russia suggests several revisions of the Panel's likeness analysis in the context of Russia's
claims under Articles I:1 and III:4 of the GATT 1994 in sections 7.5.1.4.2.2 and 7.5.1.4.3.2 .219
Russia specifically requests that the Panel "should clarify its view" on whether natural gas includes
LNG, and "preferably near the outset of the final report".220 Russia also considers that the Panel
should examine the like products issue regarding LNG at this point in its analysis, because this is
the first claim reached by the Panel concerning natural gas. 221 The European Union did not provide
any comments regarding Russia's requests.
6.60. We note that, in the course of our likeness analysis regarding LNG and natural gas in
section 7.7.2.2.2, we rejected Russia's contention that LNG and natural gas are one and the same
product. However, in order to make it cle ar that we do not consider natural gas and LNG as one
and the same product in the context of our analysis of Russia's claims against the unbundling
measure, we supplement paragraphs 7.532 and 7.574 with additional reasoning. We further
consider that paragraphs 7.531, 7.532 and 7.574 set out in sufficient detail the reasons for our not
addressing the likeness issue regarding LNG and natural gas in the context of the unbundling
measure. Therefore, we decline Russia's request that the Panel examine the like product issue
regarding LNG at this point in our analysis.
6.61. Russia further requests that the Panel delete certain sentences from paragraph 7.529,
which, in Russia's view, mischaracterize Russia's position and the evidence on the record. 222 We
disagree with Russia that anything in paragraph 7.529 mischaracterizes Russia's position or the
evidence on the record. We also recall that we only summarize the parties' arguments the extent
necessary and appropriate to capture our understanding for the purposes of our own assessment
and reasoning .223 Russia's arguments are summarized in its own words in the executive
summaries annexed to the Final Report. For these reasons, we decline Russia's request.
6.62. Paragraphs 7.537 and 7.538 set out the arguments o f the parties and the approach of the
Panel in assessing whether the unbundling measure accords less favourable treatment to imported
Russian natural gas in violation of Article III:4 of the GATT 1994. More particularly,
paragraph 7.538 sets out the two issues raised by the parties' argumentation:

217 European Union's request for review of the Interim Report, para. 12.
218 European Union's request for review of the Interim Report, para. 13.
219 Russia's request for review of the Interim Report, paras. 76-84 and 104-107.
220 Russia's request for review of the Interim Report, paras. 82 and 104.
221 Russia's request for review of the Interim Report, para. 83.
222 Russia's request for review of the Interim Report, para. 84.
223 See para. 6.5 above.

(a) whether Russia has demonstrated that natural gas is accorded less favourable
treatment under the OU model in compari son with that accorded to natural has under
the ISO model and/or the ITO models; and (b) if so, whether Russia has
demonstrated that the unbundling measure in the Directive accords less favourable
treatment to imported Russian natural gas than that accorde d to domestic EU natural
gas by "enabling" EU member States to choose between implementing only the OU
model or implement the ISO and/or the ITO models in addition to the OU model in
respect of transmission systems that belonged to a VIU on 3 September 2009.
6.63. In the immediately following paragraph, it is explained that the first of these issues involves
an assessment of "whether the OU model 'modifies the conditions of competition in the relevant
market to the detriment' of natural gas in comparison with the ISO and/or the ITO models." Russia
appears to make two separate requests concerning these paragraphs.
6.64. First, Russia requests that the Panel modify " its description of the issue s and order of
analysis in p aragraph 7.538", arguing that it should instead consider (a) whether the unbundling
measure "provides differential treatment to (or 'draws regulatory distinctions between') imported
Russian gas transported via pipelines of the R ussian VIU, Gazprom, which was required to adopt
the OU model in certain Member States … when compared with the treatment provided by the
unbundling measure to like domestic gas transported via pipelines of VIUs that were allowed in
other Member States to adopt the less restrictive ITO model"; and (b) "whether this differential
treatment (or these 'regulatory distinctions') modifies the conditions of competition, i.e., results in
a detrimental impact on the 'equality of competitive opportunities,' for Russi an gas in the EU
market compared to like domestic gas". 224 The European Union submits that the Panel's approach
for determining less favourable treatment under Article III:4 of the GATT 1994 comports with WTO
jurisprudence and that Russia "seems to have difficulties in understanding the legal standard that
applies in WTO discrimination cases".225
6.65. The Appellate Body has clarified that Article III:4 of the GATT is concerned with treatment
that modifies the competitive conditions for goods, not formal differences in the treatment of
goods226 and that it does not "preclud e any regulatory distinctions between products that are
found to be like, as long as treatment accorded to the group of imported products is no less
favourable than that accorded to the group of like domestic products." 227 In our view, the
"description of the issues" in paragraphs 7.538 and 7.539 reflects this prior WTO jurispr udence as
well as the particularities of the parties' argumentation in the case before us. These elements are
likewise reflected in the "order of analysis" in paragraph 7.538. More particularly, this order
reflects the fact that it is not necessary to consider whether the unbundling measure de facto
discriminates or draws regulatory distinctions between imported Russian natural gas and domestic
EU natural gas in resp ect of the applicable unbundling model(s) insofar as the competitive
opportunities of natural gas are not modified under the different unbundling models. We therefore
see no reason to modify our "description of the issues and order of analysis", and hence reject
Russia's request.
6.66. Second, Russia appears to repeat its request that the unbundling measure be characterized
as a "single measure" consisting of the unbundling measure in the Directive as well as the
implementing legislation of each of the EU member States.228 In this regard, the European Union
recalls its position that Russia has not demonstrated the existence of a so -called "single measure",
nor that "such (non -existent) 'single measure'" could be attributed to the European Union. 229 We
have already rejected the same request, in pa ragraphs 6.30 through 6.32 above, and continue to
do so for purposes of our findings under Article III:4 of the GATT 1994.
6.67. Russia requests that the Panel delete, from paragraph 7.540, the sentence: "We note that
Russia's argumentation concerning the specific alleged competitive advantages under the ISO and
the ITO models has not been entirely clear throughout these procee dings." In Russia's view, this

224 Russia's request for review of the Interim Report, paras. 87-88. (emphasis original)
225 European Union's comments on Russia's request for review of the Interim Report, para. 18.
226 Appellate Body Report, Korea – Various Measures on Beef, para. 137. See also Appellate Body
Reports, EC – Seal Products, para. 5.101 (referring to Appellate Body Reports, US – Clove Cigarettes,
227 Appellate Body Report, US – Clove Cigarettes, para. 193. (emphasis original)
228 Russia's request for review of the Interim Report, para. 89.
229 European Union's comments on Russia's request for review of the Interim Report, para. 19.

sentence "does not clarify or contribute to the Panel's analysis". 230 The European Union argues
that this sentence is correct and should be maintained, pointing out that it "shared [the Panel's]
concern throughout the proceedings".231
6.68. In our view, the initial characterization of Russia's arguments in paragraph 7.540 as
"unclear" is useful as it serves to explain our approach in the subsequent paragraphs. We
therefore reject Russia's request.
6.69. Paragraphs 7.541 through 7.568 contain the Panel's findings concerning the alleged
competitive advantages under the ISO and the ITO models , relied on by Russia in its claim under
Article III:4 of the GATT 1994. Russia requests that we "rev isit" the finding in paragraph 7.542
that "Article III:4 of the GATT 1994 prohibits less favourable treatment of goods only and does not
refer to less favourable treatment of producers" and the finding that Russia therefore must
demonstrate that the treatment of VIUs under the ISO and ITO models "translates into a
competitive advantage for the natural gas produced or supplied by the VIU". As support, Russia
cites certain prior cases in which the treatment of prod ucers or suppliers of goods was taken into
account in finding that a challenged measure falls within the scope of Article III:4 of the
GATT 1994 or that it accords less favourable treatment to imported goods in violation of this
provision. Russia also requests that we revisit our "additional findings and overall conclusion
regarding Russia's claim against the unbundling measure under GATT Article III:4" and that "[t]he
same holds for Russia's claim against this measure under Article I:1." 232 The European Union has
not provided comments on this request.
6.70. We cannot agree with Russia's reading of our finding in paragraph 7.542 as suggesting that
we will not take account of the treatment accorded to producers or suppl iers of natural gas, such
as VIUs, under the ISO or the ITO models. Rather, we specify that this will be taken into account
insofar as Russia has demonstrated that this "translates into a competitive advantage for the
natural gas produced or supplied by th e VIU". We see no divergence between this approach and
that taken by the Appellate Body and prior panels in the jurisprudence cited by Russia. We
therefore decline to "revisit" our findings in paragraphs 7.541 through 7.568.
6.71. In addition to the request addressed immediately above, Russia also submits certain
comments regarding paragraphs 7.541 through 7.568 concerning interpretation of municipal law
and the need for a holistic analysis in this regard.233 We have, however, not been able to discern
any request for review in respect of such comments, let alone requests for review of precise
aspects of the Interim Report. We further note that the issue of interpretation of municipal law was
not raised by any party or addressed in our findings in paragraphs 7.541 through 7.568. We
therefore do not address these comments further.
6.72. With respect to the Panel's findings in paragraphs 7.581 and 7.582, Russia requests that the
Panel take into account certain evidence, including the evidence concerning Lithuania's grant of
priority to natural gas supplied by Litgas through the Klaipeda LNG Terminal and the five-year deal
between Statoil and Litgas.234 The European Union did not comment on Russia's request.
6.73. We note that we have already assessed the relevance and weight of the evidence presented
by Russia, which i s reflected in paragraphs 7.581 and 7.582. We thus understand Russia to
request that the Panel engages in a reassessment of this evidence. As noted above, interim review
is not an appropriate stage for a party to re -argue its case.235 Therefore, we do not find Russia's
request acceptable.
6.74. The European Union requests the Panel to add, at the end of paragraphs 7.607 and 7.618 ,
the phrase: "and that no other service suppliers can access the market". 236 We note that the

230 Russia's request for review of the Interim Report, para. 90.
231 European Union's comments on Russia's request for review of the Interim Report, para. 20.
232 Russia's request for review of the Interim Report, paras. 96-103 (referring to Appellate Body
Reports, EC – Seal Products, para. 1.4; and Panel Reports, Mexico – Taxes on Soft Drinks, paras. 8.112-8.113;
233 Russia's request for review of the Interim Report, paras. 91-96.
234 Russia's request for review of the Interim Report, paras. 109-113.
235 See para. 6.3 above.
236 European Union's request for review of the Interim Report, paras. 16 and 18.

European Union does n ot explain the reason for inserting this additional phrase. We do not
consider that the phrase requested by the European Union contributes to clarifying our reasoning
and we therefore decline the European Union's request.
6.75. Russia submits that, when setting out its analysis of Russia's claim under Article XVI:2(a) of
the GATS concerning Lithuania's law implementing the unbundling measure, the Panel found, in
paragraph 7.618, that "this evidence consists of a narrative of the Commission Opinion with no
established path showing that it is rooted in a legal text". According to Russia, the Panel's analysis
is insufficient and results in the conclusion that only de jure monopoly service suppliers established
by law (and not de facto) would qualify as a monopoly supplier of a service under Article XXVIII(h)
of the GATS. Russia requests the Panel to revisit and reconsider this analysis. 237 The European
Union does not provide comments on this request.
6.76. In our view, Russia's request for the Panel to "revisit and reconside r" its allegedly
"insufficient" analysis challenges the manner in which the Panel assessed the evidence on record
and amounts to an attempt by Russia to re-argue its case, which, as explained, is not acceptable
at the interim review stage. We also disagree with Russia's argument that the Panel's assessment
of a specific piece of evidence submitted by Russia in support of its claim "results in" the general
conclusion proposed by Russia. Our findings on Russia's claim against Lithuania's national
implementing law under Article XVI:2(a) of the GATS are based on an overall analysis or Russia's
argumentation and evidence presented in th e course of these proceedings. We therefore decline
Russia's request.
6.77. With respect to paragraph 7.640, the European Union suggests the Panel add a footnote
referring to paragraph 105 of the European Union's first written submission at the end of the third
sentence.238 We do not find it appropriate to add, at the end of that sentence, a footnote referring
to arguments made by the European Union in paragraph 105 of its first written submission.
Nevertheless, taking into account the European Union's request, we included footnote 1119 at the
end of the first sentence of paragraph 7.640 since this sentence quotes arguments by the
European Union. This new footnote refers to paragraph 99 of the European Union's first written
submission, where these particular arguments are found.
6.5 The public body measure
6.78. In respect of paragraph 7.764, the European Union requests that the Panel add, after the
words "as the national laws in question impl ement Article 9(6) of the Directive," the phrase: "and
because the member States' national regulatory authorities rely on the Commission's opinion to
make their own assessment". 239 The European Union also requests that the Panel supplement
paragraph 7.820 with an additional summary of the European Union's arguments.240 The European
Union, however, does not explain what value these changes would have for the Fina l Report. We
further note that the European Union does not provide any reference to its arguments that the
member States' national regulatory authorities "rely on the Commission's opinion to make their
own assessment". We also observe that there is already a reference to the European Union's
confirmation that there have been no instances where a TSO controlled by a public body from a
third country sought the application of Article 9(6) of Directive or the corresponding national
implementing provisions in footnote 1229 to paragraph 7.820 (footnote 1367 in this Report). In
light of these considerations, we do not find the requested additions useful and therefore declin e
the European Union's requests.
6.6 The LNG measure
6.79. Russia requests that the Panel reconsider its finding in section 7.7.2.2.2 that Russia has not
demonstrated that natural gas imported from Russia and LNG imported from other countries are
like products with in the meaning of Article I:1 of the GATT 1994. 241 In the event the Panel does
not reverse its like product finding in its Final Report, Russia urges the Panel to assume that
natural gas imported in the form of LNG and via pipelines are like products and, on that basis,

237 Russia's request for review of the Interim Report, para. 114.
238 European Union's request for review of the Interim Report, para. 20.
239 European Union's request for review of the Interim Report, para. 24.
240 European Union's request for review of the Interim Report, para. 25.
241 Russia's request for review of the Interim Report, para. 118.

complete its analysis under Article I:1 of the GATT 1994, including whether (a) the LNG measure
confers an "advantage, favour, privilege, or immunity" on a product originating in the territory of
any country and (b) that the advantage so accor ded is not extended "immediately" and
"unconditionally" to imported Russian natural gas.242
6.80. The European Union considers that Russia's comments seek to "reargue issues" relating to
the LNG measure.243 According to the European Union, once the Panel has found t hat the products
are not like products, the Panel is not required to continue and "examine further the consistency of
the LNG measure with Article I:1". 244 The European Union therefore submits that Russia's request
in respect of the Panel's analysis of the LNG measure must be rejected.245
6.81. We decline Russia's request that we reconsider our finding that Russia has not
demonstrated that natural gas imported from Russia and LNG imported from other countries are
like products within the meaning of Article I:1 of th e GATT 1994. Likewise, we do not accept
Russia's request that we continue our analysis as to whether the LNG measure confers an
advantage, favour, privilege, or immunity on a product originating in the territory of any country
that is not extended immediat ely and unconditionally to imported Russian natural gas. We note
that we have the discretion to address only the issues we deem necessary to resolve a particular
claim.246 We are not convinced that continuing our analysis in the abstract, on the basis of the
hypothetical assumption that LNG and natural gas are like products, will contribute to this end.
6.82. With respect to the Panel's likeness analysis, Russia also submits that, while the European
Union asserted that the use of non -regasified LNG as transport fuel in the European Union is
possible, the record contains no evidence demonstrating that LNG has actually been used for this
or any other purpose. 247 On this basis, Russia requests that the Panel should conclude that the
end-uses of natural gas imported in to the European Union in the form of LNG and other natural
gas are the same, thus requiring an affirmative competitive relationship finding.248
6.83. The European Union requests that, in paragraph 7.826, the Panel adds the following text:
"The European Union submits that LNG and natural gas are not like products within the meaning of
Article I:1 of the GATT 1994." 249 Regarding Russia's request, the European Union responds th at,
contrary to Russia's claim, there is evidence on the record demonstrating that LNG has actually
been used "for transport purposes", and points to Exhibits EU-162 and RUS-195.250
6.84. While we decline Russia's request, we decided to modify the text of footnotes 1268 and
1269 (footnotes 1407 and 1408 in this Report) to reflect more fully the basis for our finding in
paragraphs 7.842 and 7.843 that a certain amount of LNG imported into the European Union is not
regasified for the purposes of its transportation and supply via pipelines in the European Union,
and is instead used in i ts liquid form as a transport fuel. We also decided to accommodate the
European Union's request and supplement paragraph 7.826 with a reference to the European
Union's argument.
6.85. The European Union requests that the Panel refer to its argument that consumers of LNG
purchase LNG to use it as fuel for ships in paragraph 7.849.251 We observe that paragraph 7.849
concerns the consumers' tastes and habits criterion of likeness. We understand the European
Union to have argued that LNG can be us ed as a transport fuel, including as a fuel for ships, in
support of its contention that the end -uses of LNG and natural gas are different, rather than that
the consumer's tastes and habits regarding LNG and natural gas are different. For this reason, the
explicit reference to the European Union's argument that LNG can be used as a transport fuel is
found in paragraph 7.848, which deals with the end -uses criterion of likeness. On this basis, we
decline the European Union's request.

242 Russia's request for review of the Interim Report, para. 119.
243 European Union's comments on Russia's request for review of the Interim Report, para. 21.
244 European Union's comments on Russia's request for review of the Interim Report, para. 22.
245 European Union's comments on Russia's request for review of the Interim Report, para. 22.
246 See for instance Panel Report, EU – Poultry Meat (China), para. 6.19 (referring to Appellate Body
Report, EC – Poultry, para. 135; and Panel Report, India – Solar Cells, para. 7.76).
247 Russia's request for review of the Interim Report, para. 129.
248 Russia's request for review of the Interim Report, para. 129
249 European Union request for review of the Interim Report, para. 26.
250 European Union's comments on Russia's request for review of the Interim Report, para. 22.
251 European Union's request for review of the Interim Report, para. 27.

6.86. Russia requests the Panel to address Russia's argument made in response to Panel question
No. 109(a), in which Russia referred to the Commission's decision in competition proceedings
allegedly recognizing that from the perspective of gas buyers there is no distinction between gas
transported by pipeline and gas transported as LNG and regasified. 252 The European Union did not
provide any comments on Russia's request.
6.87. Recalling that the purpose of the interim review is not to provide an opportunity for the
parties to re-argue their case, we decided to accommodate Russia's request and explicitly address
its argument made in response to Panel question No. 109(a) and with reference to Exhibit RUS -
157 in two new paragraphs inserted after paragraph 7.850 (paragraphs 7.851 and 7.852 in this
Report). We also introduced several minor changes of a consequential nature.
6.7 The upstream pipeline networks measure
6.88. We note that Russia submits certain new arguments regarding the alleged advantage
granted to Norwegian natural gas not p reviously developed in its submissions to the Panel. 253 We
recall that interim review is not an appropriate stage for the submission of new arguments. 254
Therefore, as Russia did not assert these arguments before, we refuse to consider them at this
stage in the proceedings.
6.89. Russia further requests that the Panel revise its reasoning in paragraphs 7.1028 through
7.1039 (paragraphs 7.1030 through 7.1043 in this Report) on whether the upstream pipeline
networks measure creates more favo urable conditions for the transportation of natural gas via
upstream pipelines than via transmission pipelines. 255 In particular, Russia requests that the Panel
review Exhibit RUS -116 in its analysis in paragraphs 7.1030 through 7.1031 (paragraphs 7.1032
through 7.1033 in this Report).256 In Russia's view, the Panel's summary of Russia's arguments in
paragraph 7.1029 (paragraph 7.1031 in this Report) does not accurately reproduce Russia's
arguments developed in paragraphs 291 and 294 of Rus sia's second written submission.257 Russia
also submits that the European Union offered no defence regarding the lack of advantage to
Norwegian natural gas transported by upstream pipeline networks that are not subject to
regulated transportation tariffs, and on this basis, requests that th e Panel rectify its finding in
paragraph 7.1030 and conclude that such an "exemption" creates an advantage.258
6.90. The European Union disagrees with all of Russia's comments with respect to the upstream
pipeline networks measure and considers that Russia seeks to re-argue its case.259 With respect to
Russia's alleged demonstration of what the "UPN exemption" consists of on the basis of Exhibit
RUS-116260, the European Union submits that Exhibit RUS -116 is a UK document describing
discussions in the UK House of Lords and does not constitute any "EU admission of any supposed
objective of the UPN measure". 261 The European Union further argues that merely citing some
words that are taken out of context does not amount to evidence demonstrating the alleged
competitive advantage for gas of a certain origin.262
6.91. We decided to partially accommodate Russia's request that the Panel review Exhibit RUS-
116 in its analysis. While this does nothing but reinforce our view as to the correct outcome of this
claim, we supplemented our reas oning with explicit references to Exhibit RUS -116 and Russia's
allegations based thereon in two new paragraphs after paragraph 7.1038 (paragraphs 7.1041 and
7.1042 in this Report).

252 Russia's request for review of the Interim Report, para. 130. We note that in its response to Panel
question No. 109(a), Russia referred to "Regulation (EC) 139/2004 'Merger Procedure' issued by the
Commission in a competition proceeding in 2012" rather than the Commission's decision in competition
proceedings. (Russia's response to Panel question No. 109(a), para.436)
253 Russia's request for review of the Interim Report, paras. 147-148.
254 See para. 6.3 above.
255 Russia's request for review of the Interim Report, paras. 136-170.
256 Russia's request for review of the Interim Report, para. 144.
257 Russia's request for review of the Interim Report, para. 146.
258 Russia's request for review of the Interim Report, para. 151.
259 European Union's comments on Russia's request for review of the Interim Report, para. 23.
260 Russia's request for review of the Interim Report, para. 145.
261 European Union's comments on Russia's request for review of the Interim Report, para. 24.
262 European Union's comments on Russia's request for review of the Interim Report, para. 24.

6.92. We understand that Russia's concern that the Panel's summary of Russia's arguments in
paragraph 7.1029 does not accurately reproduce Russia's arg uments relates to the lack of
references to Russia's allegations that the European Union included the upstream pipeline
networks measure to avoid the resulting increases in costs and loss of efficiency to Norwegian gas
producers on the basis of Exhibit RUS -116. As we are now explicitly referring to Russia's
allegations based on Exhibit RUS -116 in a different paragraph, we consider that the summary of
Russia's arguments provided in paragraph 7.1029, when read in light of Russia's other arguments,
accurately reflects the gist of Russia's submissions. Therefore, we decline Russia's request for a
revision of paragraph 7.1029.
6.93. We also decline Russia's request that the Panel rectify its finding in paragraph 7.1030 and
conclude that, because the European Union offe red no defence regarding the lack of advantage to
Norwegian natural gas transported by upstream pipeline networks that are not subject to
regulated transportation tariffs, such an "exemption" creates an advantage. We recall that it is
Russia, as the compla inant in these proceedings, and not the European Union, who bears the
burden of demonstrating that there is an advantage granted to natural gas of any origin within the
meaning of Article I:1 of the GATT 1994 that is not extended to like Russian natural ga s. Except
for repeatedly alleging that the operators of upstream pipeline networks are "exempted" from tariff
regulation requirements, Russia did not provide any explanation as to how the non -application of
tariff regulation requirements to the operators o f upstream pipeline networks provides an
advantage to natural gas of Norwegian or any other origin. As noted above in paragraph 6.5, a
panel is not expected to "di vine" a claim of WTO inconsistency from the mere alle gations of a
complainant.
6.94. With respect to the Panel's reasoning in paragraphs 7.1033 through 7.1038
(paragraphs 7.1035 through 7.1040 in this Report), Russia requests that the Panel clarify the basis
for its conclusio n that Russia has not demonstrated that the legal regime of the operators of
upstream pipeline networks creates more favourable conditions for the transportation of natural
gas via upstream pipelines than via transmission pipelines. 263 Russia also requests t hat the Panel
"rule expressly" that the European Union has not satisfied its burden of proof to "demonstrate
that, notwithstanding the full control exercised by Norwegian VIUs over their upstream pipeline
networks and the Norwegian -origin gas transported t hrough those upstream pipeline networks,
Article 34 nevertheless eliminates the possibility that the UPN exemption results in more
favourable conditions for the transportation of that Norwegian gas".264
6.95. The European Union submits that it was for Russia to d emonstrate that a competitive
advantage was conferred to a product of a certain origin (rather than to a producer) and to
demonstrate that Article 34 imposes "no obligation whatsoever".265
6.96. We consider that our reasoning in paragraphs 7.1028 through 7.1039 explains in sufficient
detail the basis for our finding that Russia has not demonstrated that the legal regime of the
operators of upstream pipeline networks creates more favourable conditions for the transportation
of natural gas via upstream pipelines than via transmission pipelines. Therefore, we decline
Russia's request for any further clarifications in this regard.
6.97. Furthermore, we do not find acceptable Russia's request that the Panel "rule expressly" that
the European Union has not satisfied its burden of proof to "demonstrate that, notwithstanding the
full control exercised by Norwegian VIUs over their upstream pipeline networks and the
Norwegian-origin gas transported through those upstream pipeline networks, Article 34
nevertheless eliminates the pos sibility that the UPN exemption results in more favourable
conditions for the transportation of that Norwegian gas". 266 We recall that Russia bears the burden
of demonstrating that the regulation of the operators of upstream pipeline networks under the
Directive, which includes Article 34 of the Directive, grants an advantage to natural gas of any
origin that is not extended to natural gas of Russian origin. Therefore, it is for Russia, and not for
the European Union, to demonstrate how the application of Art icle 34 of the Directive, instead of
Article 32 of the Directive, provides an advantage to natural gas of any origin.

263 Russia's request for review of the Interim Report, para. 156.
264 Russia's request for review of the Interim Report, para. 159. (emphasis original)
265 European Union's comments on Russia's request for review of the Interim Report, para. 26.
266 Russia's request for review of the Interim Report, para. 159.

6.98. With respect to paragraph 7.1037 (paragraph 7.1039 in this Report) , Russia submits that
contrary to the Panel' s description, Russia has not argued that the "obligation" of Article 34(1) is
vague and meaningless "because of the 'matters' listed in Article 34(2)" but rather that Article 34
imposes no "obligation" and that it is "vague" and "meaningless" on its face. 267 Russia further
submits that the Panel's statement that Article 34 provides "an obligation of third -party access to
upstream pipeline networks" does not constitute an objective assessment o f the matter before it
and requests that the Panel address the difference in treatment of upstream pipeline networks
under Article 34 of the Directive and transmission pipelines under Article 32 of the Directive in
order to assess whether it results in more favourable conditions of transportation for natural gas of
Norwegian origin transported through upstream pipelines, compared to Russian gas transported
through transmission pipelines.268 The European Union does not provide any comments on Russia's
request.
6.99. In light of Russia's comments, we decided to modify paragraph 7.1037 concerning the
Panel's description of Russia's arguments. However, we decline Russia's request that the Panel
provide any additional analysis regarding the difference in treatment of ups tream pipeline
networks under Article 34 of the Directive and transmission pipelines under Article 32 of the
Directive. We consider that we have provided sufficient reasons in support of our rejection of
Russia's arguments that Article 34 of the Directive provides no obligation of third -party access to
upstream pipelines.
6.100. Russia also submits, and requests that the Panel confirm, that "Russia has made a prima
facie case that Article 34 is vague, serves no meaningful purpose, and has never been utilized". 269
The European Union did not comment on Russia's request. In l ight of our analysis in
section 7.9.2.2.3.1, we decline Russia's request.
6.101. Russia further requests that the Panel complete its analysis regarding Article 34 under the
second prong of the "advantage" test the Panel articulated under Article I:1 of the GATT 1994 and
examine whether more favourable conditions for the transportation of natural gas via upstream
pipelines than via transmission pipelines result in more favourable competitive opportunities fo r
natural gas of any particular origin.270 The European Union did not comment on Russia's request.
6.102. We decline Russia's request. We fail to understand how we can meaningfully assess
whether more favourable conditions for the transportation of natural gas via upstream pipelines
than via transmission pipelines result in more favourable competitive opportunities for natural gas
of any particular origin without a prior affirmative finding that the upstream pipeline networks
measure does indeed create more favourable conditions for the transportation of natural gas via
upstream pipelines than via transmission pipelines.
6.8 The TEN-E measure
6.103. The European Union requests that the Panel supplement footnote 1916 to
paragraph 7.1265 (footnote 2065 in this Report ) with additional text reflecting certain of the
European Union's arguments regarding the criteria used to assess the candidate PCIs. 271 We
decide to accommodate the European Un ion's request and modified the text of footnote 1916
(footnote 2065 in this Report) accordingly.
6.104. With respect to the Panel's assessment of Russia's claim against the TEN-E measure under
Article II:1 of the GATS (section 7.11.4.1.3), Russia requests that the Panel revisit its finding in
paragraph 7.1427 (paragraph 7.1430 in this Report) that the Panel does not "consider it necessary
to make a separate finding on whether the TEN -E measure discriminates against Russian
infrastructure projects". 272 According to Russia, the Panel "neglects to articulate a clear legal
standard" as to what would constitute a sufficiently close connection between infrastructure
"projects" covered by the TEN -E Regulation and pipeline transport services and service suppli ers

267 Russia's request for review of the Interim Report, para. 164.
268 Russia's request for review of the Interim Report, para. 165.
269 Russia's request for review of the Interim Report, para. 168.
270 Russia's request for review of the Interim Report, para. 169.
271 European Union's request for review of the Interim Report, para. 30.
272 Russia's request for review of the Interim Report, para. 173.

within the meaning of the GATS.273 Russia submits that the Panel has introduced an additional step
for the complainant to fulfil that has no basis in the GATS: after establishing that a measure
affects trade in services a complainant would now be require d to establish a "sufficiently close
connection" between a measure and its impact on services or service suppliers. 274 The European
Union did not comment on Russia's request.
6.105. In view of Russia's comments, we revised paragraph 7.1419
(paragraph 7.1422 in this Report) in order to clarify our reference to "a sufficiently close
connection" between infrastructure projects covered by the TEN -E R egulation and pipeline
transport services and service suppliers covered by the GATS. We also introduced other
consequential changes in paragraphs 7.1426 and 7.1427 (paragraphs 7.1429 and 7.1430 in this
Report). We note that our reasoning in paragraphs 7.1419 through 7.1427 is developed in light of
the manner in which Russia chose to pursue its claim against the TEN-E measure under Article II:1
of the GATS and the specific circumstances of the present case. Based on the analysis conducted,
we do not consider that separate findings on whether the TEN -E measure discriminates agai nst
Russian infrastructure projects would contribute to the resolution of Russia's claim under
Article II:1 of the GATS. Therefore, we decline Russia's request that the Panel revisit its decision in
paragraph 7.1427 not to make a finding on whether the TEN -E measure discriminates against
Russian infrastructure projects.
7 FINDINGS
7.1 Introduction
7.1.1 Order of analysis
7.1. As we explain in the descriptive part of this Report, Russia makes claims under the GATS and
the GATT 1994 relating to various aspects of a number of measures by the European Union and its
member States. Russia considers that certain aspects of each of the challenged measures violate
one or more specific provisions of the GATS and/or the GATT 1994. The provisions invoked by
Russia under the GATS are Articles II:1, VI:1, VI:5, XVI:2(a), (e) and (f) and XVII. Under the
GATT 1994, Russia alleges that certain m easures are inconsistent with Articles I:1, III:4, X:3(a)
and XI:1. More specifically, Russia cha llenges the unbundling measure under Articles II:1
and XVI(a), (e) and (f) of the GATS and Articles I:1 and III:4 GATT 1994; the public body measure
under Arti cle XVII of the GATS; the LNG measure under Article I:1 of the GATT 1994 ; the
infrastructure exemption measure under Article II:1 of the GATS and Articles I:1, X:3(a) and XI:1
of the GATT 1994; the upst ream pipeline networks measure under Articles I:1 and III:4 of the
GATT 1994; the third-country certification measure under Articles II:1, VI:1, VI:5 and XVII of the
GATS and the TEN -E measure under Article II:1 of the GATS and Articles I:1 and III:4 of the
GATT 1994.
7.2. In its defence, the European Union asserts, inter alia, that certain of its measures, that is, the
unbundling measure; the public body measure; and the thir d-country certification measure, are
justified by the exceptions relating to services in Articles V, XIV(a) and/or (c) of the GATS, and
that the TEN -E measure is justified under Article XX(j) of the GATT 1994 with regard to claims
under that Agreement.
7.3. The Panel recalls that it has the autonomy to decide on the order of its analysis.275

273 Russia's request for review of the Interim Report, para. 171.
274 Russia's request for review of the Interim Report, para. 172.
275 As the panel in Argentina – Financial Services recalled, the Appellate Body recognized this autonomy
in Canada – Wheat Exports and Grain Imports when it stated that "[a]s a general principle, panels are free to
structure the order of their analysis as they see fit. In so doing, panels may find it useful to take account of the
manner in which a claim is presented to them by a complaining Member." See Appellate Body Report, Canada
– Wheat Exports and Grain Imports, para. 126; Panel Report, Argentina – Financial Services, para. 7.67. We
are mindful that the order we choose may also have an impact on the potential to apply judicial economy when
making our determinations in this case. Panel Report, India – Autos, para. 7.161; Panel Report, Argentina –
Financial Services, para. 7.63.

7.4. In our Report, fol lowing this introduction, we first determine the contours of our terms of
reference, including in respect of two preliminary ruling requests by the Europea n Union and on
our own motion.
7.5. Subsequently, we set out the legal standards pursuant to the legal pro visions that we will
then apply in our measure -by-measure analysis of Russia's claims and the Euro pean Union's
defences, beginning with the unbundling measure, and then turning to the public body measure,
the LNG measure, the infrastructure exemption measu re, the upstream pipeline networks
measure, the third-country certification measure and the TEN-E measure.
7.6. As a significant portion of Russia's claims and the parties' argumentation in this dispute dealt
with the GATS, we deemed it appropriate next to set out our understanding of key threshold issues
relating to the GATS, that is, the meaning and scope of the services at issue in this dispute and
whether Croatia, Hungary and Lithuania have undertaken specific commitments with respect to the
services at issue.
7.7. With respect to the various claims and defences under the GATS and/or GATT 1994 relating
to each measure, we have opted for the order of analysis that we deemed most suitable given the
precise nature o f Russia's challenge against a particular measure a nd in light of parties'
argumentation. Where appropriate, we offer further observations relating to particular
considerations affecting the order of our analysis in respect of certain specific claims and defences
below.
7.1.2 Burden of proof
7.8. The general rule in WTO dispute settlement is that the burden of proof rests upon the party,
whether complaining or defending, who asserts the affirmative of a particular claim or defence. 276
Following this principle, the Appellate Body has explained that the complaining party in any given
dispute should establish a prima facie case of inconsistency of a measure with a provision of the
WTO covered agreements, before the burden of showing consistency with that provision or
defending it under an exception must be assumed by the responding party.277 In other words, "a
party claiming a violation of a provision of the WTO Agreement by another Member must assert
and prove its claim."278
7.9. A prima facie case is "one which, in the absence of effective refutation by the defending
party, requires a panel, as a matter of law, to rule in favour of the complaining party presenting
the prima facie case."279 To establish a prima facie case, the party asserting a p articular claim
must adduce evidence sufficient to raise a presumption that what is claimed is true. If the
complaining party "adduces evidence sufficient to raise a presumption that what is claimed is true,
the burden then shifts to the other party, who w ill fail unless it adduces sufficient evidence to
rebut the presumption".280 In this regard, the Appellate Body has stated that:
[P]recisely how much and precisely what kind of evidence will be required to establish
such … [presumptions] will necessarily var y from measure to measure, provision to
provision, and case to case.281
7.10. The Appellate Body has also stated that "[a] complaining party may not simply submit
evidence and expect the panel to divine from it a claim of WTO -inconsistency. Nor may a
complaining party simply allege facts without relating them to its legal arguments".282
7.11. In this dispute, Russia bears the burden of establishing a prima facie case that the
challenged measures are inconsistent with the cited provisions of the GATS and/or the GATT 1994.

276 Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:I, 323 at p. 335.
277 Appellate Body Report, EC – Hormones, para. 104.
278 Appellate Body Report, US – Wool Shirts and Blouses, p. 16, DSR 1997:I, 323 at p. 337.
279 Appellate Body Report, EC – Hormones, para. 104.
280 Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:I, 323 at p. 335. (footnote
omitted)
281 Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:I, 323 at p. 335. (footnote
omitted)
282 Appellate Body Report, US – Gambling, para. 140.

Should the Panel find that Russia has established its prima facie case, it is for the European Union
to provide arguments and evidence that are needed to support its rebuttal, and/or its defence, as
appropriate, under the GATS and/or the GATT 1994.
7.1.3 General observations
7.12. At the outset, we wish to point out that, in endeavouring to pinpoint the precise nature,
scope and subject-matter of, and to properly understand the argumentation in support of, Russia's
claims against measures of the European Union, as well as Croatia, Hungary and Lithuania , we
have encountered several challenges.
7.13. First, we have, at times, had the impression that the precise nature and content of some of
the challenged measures, and claims against them, were not clear or consistent, or appeared to be
conflated, throughout the complain ing party's submissions. We have endeavoured to address the
measures, and claims against them, as presented by the complaining party.283
7.14. Second, we have encountered claims against various aspects of the challenged measures
under both the GATS and the GATT 1994 284, accompanied by some argumentation seemingly
blurring fundamental distinctions between the GATS and the GATT 1994. We note the important
differences between Russia's claims under the GATS and the GATT 1994, t he distinct scope and
subject matter of the GATS and the GATT 1994, respectively, and the different nature of the
specific obligations contained in each of these agreements. Where the parties appeared to conflate
or blur their argumentation under these two agreements, we have had to carefully identify and
consider relevant argumentation. We wish to underline that, in our assessment of Russia's claims,
we have remained mindful of our task and mandate under the DSU in light of the differences that
exist betwe en Russia's claims under the GATS and the GATT 1994. Notably, whereas our
assessment of Russia's claims under the GATS focuses on services and service suppliers, our
assessment of Russia's claims under the GATT 1994 focuses on goods.
7.15. Third, we are cognizan t that this dispute occurs in the context of certain highly complex
factual realities of the natural gas industry, including particularities of the markets for natural gas
and its transport. We are also aware that certain specificities of that industry, no tably in terms of
transport through fixed infrastructure, raise certain challenges in the application of WTO rules.
However, we underline that our duty has been to assess Russia's claims within the confines of
WTO law.
7.2 Terms of reference issues
7.2.1 First request for a preliminary ruling by the European Union
7.2.1.1 Introduction
7.16. On 18 March 2016, the European Union submitted a request for a preliminary ruling, asking
the Panel to clarify whether the capacity allocation measures and the proje cts of common interest
measures, included in Sections II and III of Russia's panel request, respectively, raise d new
matters not covered by Russia's consultations request and, therefore, fell outside the Panel's terms
of reference.285
7.17. As explained in paragraph 1.13 above, and in order to ensure the efficiency of the
proceedings, the Panel decided to issue a prompt preliminary ruling, on 9 May 2016, containing

283 In this respect, we were not always able to follow Russia's labelling of its various claims (e.g. "de
facto", "de jure", "as such", "as applied").
284 Each of these agreements has a distinct scope and subject-matter. It is well established that a
measure may be inconsistent with the GATS and the GATT 1994 at the same time: the Appellate Body
considers that obligations under the GATS and the GATT 1994 may coexist and that a measure may fall
simultaneously within the scope of both Agreements, even though the specific aspects of the measure that are
to be examined under each Agreement may differ. (Appellate Body Reports, Canada – Periodicals, p. 18, DSR
1997:I, 481, at p. 498 (referring to Panel Report, Canada – Periodicals, para. 5.17); and EC – Bananas III,
285 European Union's first request for a preliminary ruling, paras. 2, 4, and 42.

the conclusions on the E uropean Union's request, with more detailed reasoning to be provided no
later than the date of the issuance of the Interim Report. The issued conclusions are as follows:
The Panel finds that the matters contained in Sections II ( [capacity allocation]
measures) and III ([projects of common interest] measures) of Russia's panel request
are sufficiently identified in the consultations request and that the inclusion of these
matters in Russia's panel request did not expand the scope or change the essence of
the dispute. The Panel concludes, therefore, that those matters fall within its terms of
reference.286
7.18. Following the approach set out in the preliminary ruling of 9 May 2016, we will now address
the conclusions that the capacity allocation measures, included in Section II of Russia's panel
request, and the projects of common interest measures, included in Section III of Russia's panel
request, fall within the Panel's terms of reference, in turn, below.
7.19. Before turning to our reasoning in support of these conclusions, however, we note that,
following the European Union's first request for a preliminary ruling, both parties refer to the
challenged measures in Section III of Russia's panel request as the TEN-E measure rather than the
projects of common intere st measures.287 For purposes of consistency throughout this Report, we
will use the term "TEN-E measure" in our reasoning below as well.
7.2.1.2 The capacity allocation measures included in Section II of Russia's panel
request
7.20. Beginning with the capacity allocation measures, included in Section II of Russia's panel
request, we note that Russia has not addressed these further, following the issuance of the Panel's
conclusions. Furthermore, in response to a question by the Panel, Russia has clarified that it is no
longer challenging these measures. 288 In light of this, the European Union does not consider it
necessary for the Panel to provide more detailed reasons in support of its conclusion that the
capacity allocation measures fall within its terms of reference289, whereas Russia is of the view that
it would still be relevant for the Panel to provide such reasons.290
7.21. In considering whether to provide more detailed reasons in support of our conclusion that
the capacity allocation measures, included in Section II of Russia's panel request, fall within the
Panel's terms of reference, we are mindful of the fundamental nature of the terms of reference. As
clarified by the Appellate Body, they establish the jurisdiction of the panel and serve the due
process objective of providing the parties and third parties notice of the nature of the case. 291 At
the same time, we wish to recall that the aim of the dispute settlement mechanism is to "secure a
positive solution to a dispute" 292, and that the "prompt settlement" of disputes is essenti al to the
effective functioning of the WTO.293
7.22. In this regard , we note that a complaining Member has "the prerogative to narrow or
abandon its claims, and thereby reduce the scope of its disagreement and dispute , at any stage of
a proceeding". 294 In these proc eedings, Russia has exercised its prerogative in a manner that
reduces the scope of the dispute before this Panel so as not to cover the capacity allocation
measures, included in Section II of Russia's panel request. For this reason, it is no longer
necessary to address the capacity allocation measures in order to secure a positive resolution of
the dispute before us. In light of this, and bearing in mind the objective of prompt settlement of

286 Preliminary ruling (conclusions) of 9 May 2016, para. 2.1. These conclusions are annexed to and
form part of the Final Report.
287 See, e.g. Russia's first written submission, paras. 753-809; and second written submission,
paras. 441-486; and European Union's first written submission, paras. 806-839 and 844; and second written
submission, paras. 354-436.
288 Russia's response to Panel question No. 15(a), para. 102.
289 European Union's response to Panel question No. 15(b), para. 35.
290 Russia's response to Panel question No. 15(b), para. 103.
291 Appellate Body Report, US – Carbon Steel, para. 126 (referring to Appellate Body Report, Brazil –
Desiccated Coconut, p. 20, DSR 1997:1, 167, at p. 186).
292 Article 3.7 of the DSU.
293 Article 3.3 of the DSU.
294 Appellate Body Report, US – Countervailing Measures (China), para. 4.19 (referring to Appellate
Body Report, Japan – Apples, para. 136). (emphasis added)

disputes, we do not consider it relevant or appropriate to elabor ate further on the conclusion that
these measures fall within the Panel's terms of reference.295
7.23. Accordingly, we will not provide more detailed reasons in support of the conclusion in our
preliminary ruling of 9 May 2016 that the capacity allocation measures , included in Section II of
Russia's panel request, fall within the Panel's terms of reference.
7.2.1.3 The TEN-E measure included in Section III of Russia's panel request
7.24. Turning to the TEN -E measure, included in Section III of Russia's panel request, the
European Union's preliminary ruling request is based on the contention that this Section raises new
matters, which were not covered by Russia's consultations request and, according to the European
Union, "expands impermissibly the scope of the dispute, thereby c hanging its essence".296 For this
reason, the European Union requests the Panel to issue a preliminary ruling to the effect that "the
matters raised by the Russian Federation in Section[] … III of its Panel Request are not within the
Panel's terms of reference."297
7.25. The question we must consider is, therefore, whether the matters contained in Section III of
Russia's panel request are properly before us or whether, as the European Union requests, we
should exclude them from our terms of reference on the ground that they were not sufficiently
identified in the consultations request. This question involves an examination of the relationship
between Russia's consultations request and its panel request.
7.26. We start by recalling that, pursuant to Article 7.1 of the DSU, our terms of reference are the
following:
To examine, in the light of the relevant provisions of the covered agreements cited by
the parties to the dispute, the matter referred to the DSB by the Russian Federation in
document WT/DS476/2 and to make such findings as will assist the DSB in making
the recommendations or in giving the rulings provided for in those agreements.298
7.27. In this regard, we note that "Articles 4 and 6 of the DSU … set forth a process by which a
complaining party must request consultations, and consultations must be held, before a matter
may be referred to the DSB for the establishment of a panel."299
7.28. Article 4.4 of the DSU sets out the requirements for consultations requests as follows:
Any request for consultations shall be submitted in writing and shall give the reasons
for the request, including identification of the measures at issue and an indication of
the legal basis for the complaint.
7.29. Article 6.2 of the DSU sets out the requirements for panel requests as follows:
The request for the establishment of a panel shall be made in writing. It shall indicate
whether consultations were held, identify the specific measures at issue and provide a
brief summary of the legal basis of the comp laint sufficient to present the problem
clearly.
7.30. Both Articles 4.4 and 6.2 of the DSU thus refer to the identification of the measures and the
legal basis, or claims, at issue. The Appellate Body has clarified that the measures and claims

295 We note that this approach is consistent with that taken by other panels, which have declined to
make preliminary rulings concerning measures that were ultimately not challenged by the complaining
Member. (See Panel Reports, India – Agricultural Products, paras. 7.107-7.109; and India – Solar Cells,
para. 7.23).
296 European Union's first request for a preliminary ruling, para. 2.
297 European Union's first request for a preliminary ruling, para. 42. See also ibid. para. 4.
298 WT/DS476/3.
299 Appellate Body Report, Brazil – Aircraft, para. 131.

together constitute the "matter referred to the DSB"300, yet emphasized that measures and claims
are "distinct and 'should not be confused'".301
7.31. In this regard, we note that the European Union requests the Panel to find that "the matters
raised by the Russian Federation in Se ction[] … III of its Panel Request are not within the Panel's
terms of reference" 302, which could refer to the identification o f measures or claims, or both. We
note, however, that all arguments by the European Union concerning Section III of Russia's panel
request relate to whether the TEN -E measure, included in this Section, was identified in Russia's
consultations request. For this reason, our assessment below focuses on the identification of the
measure at issue, the TEN -E measure, in Russia's consultatio ns request. Should we find that the
TEN-E measure does not fall within our terms of reference, it would appear that the claims raised
by Russia in Section III of its panel request against this measure would also fall outside our terms
of reference, and hen ce the matters in Section III of Russia's panel request would not be within
our terms of reference.303
7.32. We begin our assessment by noting that Article 6.2 requires that a panel request "identify
the specific measures at issue". Pursuant to Article 4.4 of the DSU, a consultations request shall
include "identification of the measures at issue". Hence, while both Articles 6.2 and 4.4 of the DSU
refer to the identification of the measures at issue, they impose different requirements. The
Appellate Body has clarified that:
This difference in the language between Articles 4.4 and 6.2 makes it clear that, in
identifying the measure at issue, greater specificity is required in a panel request than
in a consultations request.304
7.33. The Appellate Body also cautioned panels ag ainst imposing "too rigid a standard" of identity
between the scope of the consultations request and the panel request as this would substitute the
consultations request for the panel request. 305 According to the Appellate Body, "the requirement
under Article 4.4 to identify the measure at issue cannot be too onerous at this initial step in the
proceedings … because 'the claims that are made and the facts that are established during
consultations do much to shape the substance and the scope of the subsequent panel
proceedings.'"306 However, the Appellate Body also recognized that "consultations – as well as the
request that triggers and precedes them – … play an important role in defining the scope of the
dispute"307:
The conduct of consultations, as well as the a bility of the parties to engage fully
therein, is directly affected by the content of the consultations request. It is this
document that informs the respondent, and the WTO membership, of the nature and
object of the challenge raised by the complainant, a nd enables the respondent to
prepare for the consultations themselves.308
7.34. Hence, the Appellate Body has also made it clear that the language used in the
consultations request should "sufficiently alert[]"309 the responding party to the "nature and object
of th e challenge raised by the complainant". 310 According to the Appellate Body, a measure

300 Appellate Body Reports, Guatemala – Cement I, para. 72; US – Carbon Steel, para. 125; Australia –
Apples, para. 416; EC and certain member States – Large Civil Aircraft, para. 639; and China – Raw Materials,
para. 219. (emphasis original)
301 Appellate Body Report, Australia – Apples, para. 417 (quoting Appellate Body Report, EC – Selected
Customs Matters, para. 132). See also Appellate Body Report, Guatemala – Cement I, para. 69.
302 European Union's first request for a preliminary ruling, para. 42. (emphasis added) See also ibid.
para. 4.
303 We note that a similar approach has been followed in previous disputes. (See, e.g. Panel Report, US
– Carbon Steel, paras. 8.6-8.12; and Appellate Body Report, US – Carbon Steel, para. 171).
304 Appellate Body Reports, Argentina – Import Measures, para. 5.9.
305 Appellate Body Report, US – Upland Cotton, para. 293.
306 Appellate Body Reports, Argentina – Import Measures, para. 5.12 (quoting Appellate Body Report,
India – Patents (US), para. 94).
307 Appellate Body Reports, Argentina – Import Measures, para. 5.12.
308 Appellate Body Reports, Argentina – Import Measures, para. 5.12. (footnote omitted)
309 Appellate Body Report, US – Zeroing (Japan), para. 95.
310 Appellate Body Reports, Argentina – Import Measures, para. 5.12.

identified in the panel request may be found to fall outside the panel's terms of reference if it is
"separate and legally distinct" from the measures identified in the consultations request.311
7.35. Similarly, it is well -settled that a complaining party may "not expand the scope of the
dispute"312 or change the "essence" of that dispute in its panel request. 313 According to the
Appellate Body, "when a party alleges that a panel reque st has impermissibly expanded the scope
of the dispute or changed its essence, ascertaining whether this is so involves scrutinizing the
extent to which the identified measure at issue and/or the legal claims have evolved or changed
from the consultations request to the panel request ".314 The determination of whether the
identification of specific measures in the panel request "expand[s] the scope" or modifies the
"essence" of the dispute must be made on a case-by-case basis.315
7.36. With these observations in mind, we now turn to the question put before the Panel by the
European Union, namely whether the TEN -E measure was sufficiently identified in Russia's
consultations request or whether the inclusion of this measure in Section III of Russia's panel
request "expand[s] the scope" or changes the "essence" of the dispute. We first examine the panel
request, and then turn to the consultations request.
7.37. Section III of Russia's panel request includes a narrative part, which describes the TEN -E
measure as follows:
The EU h as also enacted regulations establishing "trans -European energy
infrastructure priority corridors and areas," including four spec ific "priority gas
corridors." The principal regulation, Regulation (EU) No 347/2013, is referred to as the
"TEN-E regulation." It sets forth criteria for identifying "projects of common interest"
or "PCIs," which are accorded priority status, including within priority gas corridors.
The TEN -E regulation provides for the implementation of PCIs, including those
concerning natural gas, to be facilitated by "streamlined and efficient permit granting
procedures," "improved regulatory treatmen t" and EU financial assistance. In
October 2013, the Commission issued an amendment to the TEN -E regulation settin g
out the initial list of PCIs. These include a number of projects that promote and
facilitate the production and transportation of domestic natural gas, as well as the
importation and transportation of gas from various third -countries, including
numerous LNG projects. However, the list of PCIs excludes any project designed to
facilitate the importation or transportat ion of natural gas from Russia. The Russian
Federation is not aware of any such projects currently under consideration for
designation as a PCI.316
7.38. Hereafter, Russia's panel re quest lists, as legal instruments through which the TEN -E
measure is enacted and implemented:
Directive 2009/73/EC [the Directive];
Regulation (EC) No 715/2009;
Regulation (EU) No 347/2013 [the TEN-E Regulation];
Commission Delegated Regulation (EU) No 1391/2013; and
Regulation (EU) No 1316/2013 of the European Parliament and of the Council of 11
December 2013 establishing the Connecting Europe Facility, amending Regulation
(EU) No 913/2010 and repealing Regulations (EC) No 680/2007 and (EC) No 67/2010,
OJ L 348, 20.12.2013.

311 Appellate Body Reports, Argentina – Import Measures, para. 5.13.
312 Appellate Body Report, US – Upland Cotton, para. 293.
313 Appellate Body Report, Mexico – Anti-Dumping Measures on Rice, paras. 137-138.
314 Appellate Body Reports, Argentina – Import Measures, para. 5.13.
315 Appellate Body Report, US – Shrimp (Thailand) / US – Customs Bond Directive, para. 293.
316 Russia's panel request, p. 8. (footnote omitted)

as well as any amendments or extensions, any replacement measures, any renewal
measures, any implementing measures, and other related measures of the
foregoing.317
7.39. Russia's consultations request does not include separate sections but consists of a narrative
part, which provides a general description of the measures at issue, namely:
[C]ertain restrictions and requirements maintained by the EU and implemented within
its territory by the EU and its Member States, including Croatia, Hungary and
Lithuania, through the so -called "Third Energy Package" Directives and Regulations,
implementing legislation and decisions of the EU and its Member States and the
measures resulting from participation in the Tr eaty establishing the Energy
Community (hereinafter referred to as "Third Energy Package"), and pertaining to, in
particular, the unbundling of vertically -integrated undertakings involved in the
production, supply, and transmission of natural gas or electr icity, the discriminatory
certification requirements in relation to third countries, and the requirements in
respect of granting of access to natural gas and electricity network capacity by
transmission service operators.318
7.40. This is followed by more detailed descriptions of measures that "[i]n particular, though not
exclusively …, in the view of the Russian Federation, constitute an infringement" 319, and a list of
"instruments through which the EU and its Member States maintain the above measures
includ[ing], but … not limited to" 36 legal instruments . Three of these 36 legal instruments are
also listed in Section III of Russia's panel request, namely the Directive, Regulation (EC)
No. 715/2009, and the TEN-E Regulation.320 Russia's consultations request goes on to list:
[A]ny amendments, supplements, extensions, replacement measures, renewal
measures, related measures, or implementing measures; as well as all other
implementing measures of or decisions taken under "Third Energy Package" and
adopted by the EU Member States that have not been identified in the present request
and for the identification of which the Russian Federation requests the assistance of
the European Commission during the consultations, or any such measures referred to
by either party during the course of the consultations.321
7.41. The European Union argues that the consultations request makes no reference to the TEN -E
measure. In this regard, the European Union submits that the TEN -E measure does not fall within
any of the categories of measures menti oned in the consultations request's general description of
the measures at issue and that this measure is not part of the Third Energy Package. 322 In the
European Union's view, the "mere listing" of the TEN -E Regulation in Russia's consultations
request, without further specification, is not sufficient to identify the TEN-E measure.323
7.42. Russia argues that the express reference to the TEN -E Regulation in its consultations
request should be considered sufficient to have identified the TEN -E measure. 324 Russia also
argues the TEN -E measure is not "separate and legally distinct" from the Third Energy Package
and that the broad scope of the consultations request demonstrates that Russia intended to
identify a range of measures related to the energy sector. 325 Furthermore, Russia submits that the
parties discussed the relevant aspects of the TEN -E measure during their second round of
consultations, which, in Russia's view, supports its position that this measure is identified in its
consultations request.326
7.43. In our view, the arguments of the parties raise three issues: (a) whether our assessment of
the scope of Russia's consultations request should take into account what was actually discussed

317 Russia's panel request, pp. 8-9.
318 Russia's consultations request, p. 1.
319 Russia's consultations request, p. 1.
320 Russia's consultations request, pp. 2-4.
321 Russia's consultations request, p. 5.
322 European Union's first request for a preliminary ruling, paras. 34-35.
323 European Union's first request for a preliminary ruling, para. 38.
324 Russia's response to the European Union's first request for a preliminary ruling, paras. 11 and 17.
325 Russia's response to the European Union's first request for a preliminary ruling, para. 16.
326 Russia's response to the European Union's first request for a preliminary ruling, para. 9 and fn 21.

among the parties during their consultations; (b) whether the listi ng of the TEN-E Regulation in
Russia's consultations request is sufficient to identify the TEN -E measure in Section III of Russia's
panel request; and (c) whether the lack of a description of the TEN-E measure in the narrative part
of Russia's consultations request entails that this measure is not sufficiently identified.
7.44. We begin with the issue of whether the actual discussions among the parties during their
consultations should impact our assessment of the scope of Russia's consultations request. In this
regard, we have difficulties understanding Russia's position that the Appellate Body "has yet to
rule definit ively on this issue". 327 In our view, the Appellate Body was explicit in US – Upland
Cotton, when finding that panels should limit their analysis to the written consultations request
and should not consider what took place during the consultations. In particular, we note that,
according to the Appellate Body:
Examining what took place in the consultations would seem contrary to Article 4.6 of
the DSU, which provides that "[c]onsultations shall be confidential, and without
prejudice to the rights of any Member in any further proceedings." Moreover, it would
seem at odds with the requirements in Article 4.4 of the DSU that the request for
consultations be made in writing and that it be notified to the DSB. In addition, there
is no public record of what actually transpires during consultations and parties will
often disagree about what, precisely, was discussed.328
7.45. We fully concur with this reasoning by the A ppellate Body. In particular, we consider that
the confidential character of the consultations and the lack of official record would make it very
difficult, if not impossible, for a panel to establish objectively, what the parties said – or did not
say – during their consultations. Therefore, we shall not take into consideration what was
discussed by the parties during the consultations held pursuant to Article 4 of the DSU in
determining whether the TEN-E measure in Section III of Russia's panel request is properly within
the Panel's terms of reference.
7.46. With respect to the two other issues raised by the parties' arguments – whether the listing
of the TEN -E Regulation in Russia's consultations request is sufficient to identify the TEN -E
measure in section III of Russia's panel request and whether the lack of a description of the TEN -E
measure in the narrative part of Russia's consultations request entails that this measure is not
sufficiently identified – we note that these relate to different elements of Ru ssia's consultations
request, namely its list of legal instruments and its narrative or descriptive part. While we find it
useful to address the issues raised by the parties, as they relate to a particular element in Russia's
consultations request, we wish to emphasize that our ultimate decision concerning the issue of
whether the TEN -E measure was sufficiently identified in Russia's consultations request will be
based on a holistic reading of the relevant parts of all elements in Russia's consultations request.
7.47. Having set out our general approach, we turn now to the issue of whether the listing of the
TEN-E Regulation in Russia's consultations request is sufficient to identify the TEN -E measure in
Section III of the panel request.
7.48. In addressing this issue, we find it useful to examine the content of the TEN-E Regulation
and compare this with the description of the TEN -E measure in Section III of Russia's panel
request.
7.49. We note that, pursuant to its title, the TEN -E Regulation contains "guidelines for trans -
European energy infrastructure". Pursuant to its Article 1 ("Subject matter and scope"), this
Regulation "lays down guidelines for the timely development and interoperability of priority
corridors and areas of trans -European energy infrastructure" 329 and more particularly "addresses
the identification of projects of common interest" 330, "facilitates the timely implementation of
projects of common interest by streamlining, coordinating more closely, and accelerating permit
granting processes and by enhancing pu blic participation"331, "provides rules and guidance for the

327 Russia's response to the European Union's first request for a preliminary ruling, fn 21.
328 Appellate Body Report, US – Upland Cotton, para. 287.
329 TEN-E Regulation, (Exhibit EU-4), Article 1.1.
330 TEN-E Regulation, (Exhibit EU-4), Article 1.2(a).
331 TEN-E Regulation, (Exhibit EU-4), Article 1.2(b).

cross-border allocation of costs and risk-related incentives for projects of common interest"332, and
"determines the conditions for eligibility of projects of common interest for Union financial
assistance".333
7.50. In accordance with the subject matter and scope set out in Article 1, the remainder of the
TEN-E Regulation is focused on projects of common interest . Chapter II is entitled "Projects of
common interest" and sets out procedures to establish lists of projects of common interest, criteria
for such projects, and rules on implementation and monitoring of those projects . Chapter III deals
with the granting of permits and public participation for projects of common interest . Chapter IV
addresses the r egulatory treatment of projects of common interest . Chapter V concerns EU
financial assistance for projects of common interest.
7.51. The TEN -E Regulation thus appears to cover the very aspects described in Section III of
Russia's panel request regarding the TEN -E measure and the projects of common interest, in
particular, the establishment of "trans -European energy infrastructure priority corridors and
areas", "criteria for identifying 'projects of common interest'", and the facilitation of such by
"'streamlined and efficient permit granting procedures' , 'improved regulatory treatment' and EU
financial assistance".334
7.52. In addition to these aspects, we note that Russia's description of the TEN -E measure in
Section III of its panel request also covers the first list o f projects of common interest, contained
in Regulation (EU) No. 1391/2013.335 As pointed out by the European Union, this instrument is not
listed in Russia's consultations request.336
7.53. In this regard, however, we note that the first list of projects of common interest was
adopted pursuant to the TEN-E Regulation337 and constitutes an amendment to this Regulation,
which consists, in its entirety, of an annex with a list of projects of common interest to be added to
the TEN-E Regulation.338 The European Union does no t appear to dispute this. 339 Furthermore, we
note that Russia's consultations request, following its reference to the TEN -E Regulation, also
refers to "any amendments, supplements, extensions, replacement measures, renewal measures,
related measures, or impl ementing measures".340 We consider, therefore, that the content of the
TEN-E measure described in Section III of Russia's panel request, including the first list of projects
of common interest 341, is covered by the references in the consultations request to the TEN -E
Regulation and to "amendments" and "supplements" hereto.342

332 TEN-E Regulation, (Exhibit EU-4), Article 1.2(c).
333 TEN-E Regulation, (Exhibit EU-4), Article 1.2(d).
334 Russia's panel request, p. 8. See also para. 7.37 above.
335 Russia's panel request, p. 8.
336 European Union's first request for a preliminary ruling, para. 40.
337 Regulation (EU) No. 1391/2013, (Exhibit EU-3), preamble.
338 Regulation (EU) No. 1391/2013, (Exhibit EU-3), Article 1. See also Russia's response to the European
Union's first request for a preliminary ruling, para. 18.
339 European Union's first request for a preliminary ruling, para. 40. In this regard, the European Union
notes that "Regulation 1391/2013 supplements Regulation 347/2013 by adding an annex setting out the initial
list of PCIs." (Ibid.)
340 Russia's consultations request, p. 5. (emphasis added)
341 In response to a question by the Panel, Russia has clarified that the TEN-E measure consists of the
TEN-E Regulation and the first and second lists of projects of common interest, added to that Regulation
pursuant to Regulation (EU) No. 1391/2013 and Regulation (EU) No. 2016/89. (Russia's response to Panel
question No. 5, paras. 52-53). We note that the second list of projects of common interest, contained in
Regulation (EU) No. 2016/89, had not been adopted at the time of Russia's consultations or panel requests and
is therefore not listed in either of those. The European Union has not raised any terms of reference issue in this
regard. In any event, we recall that, similarly to Russia's consultations request, Russia's panel request refers to
"any amendments or extensions, any replacement measures, any renewal measures, any implementing
measures, and other related measures of the foregoing" following its listing of the TEN-E Regulation. (Russia's
panel request, p. 9). (emphasis added) As with the first list of projects of common interest, the second list of
projects of common interest was adopted pursuant to the TEN-E Regulation and constitutes an amendment to
this Regulation, which replaces parts of the annex containing the list of projects of common interest.
(Regulation (EU) No. 2016/89, (Exhibit RUS-2), Article 1). For this reason, we believe that the second list of
projects of common interest is also within our terms of reference. (See Appellate Body Report, US – Zeroing
(Japan) (Article 21.5 – Japan), paras. 112 and 116 for a similar approach).
342 As pointed out by the European Union, Section III of Russia's panel request also lists another legal
instrument, namely Regulation (EU) No. 1316/2013, which is not listed in Russia's consultations request.

7.54. Nonetheless, the European Union does not consider the listing of the TEN-E Regulation in
the consultations request sufficient because that Regulation is a "multipurpose legal vehicle"
which, in addition to laying down guidelines for projects of common inter est, amends three pre -
existing Regulations that are listed in the consultations request but, in the European Union's view,
are unrelated to projects of common interest.343 According to the European Union, it was therefore
reasonable to assume that the TEN-E Regulation had been included in the panel request "only to
the extent that it amends Regulations 713/2009, 714/2009 and 715/2009 and not in respect of its
provisions concerning the PCIs".344
7.55. We have difficulties accepting this argument. The amendments to Regulation (EC)
No. 713/2009, Regulation (EC) No. 714/2009 and Regulation (EC) No. 715/2009, enacted by the
TEN-E Regulation, appear to concern only projects of common interest. 345 In our vie w, the fact
that the TEN -E Regulation introduces certain amendments, which are exclusively related to
projects of common interest, to other R egulations contained in the consultations request could not
reasonably lead the European Union to believe that the TEN-E Regulation was listed for purposes
other than to identify the TEN -E measure and its provisions concerning the projects of common
interest.
7.56. Bearing in mind that the TEN-E Regulation, as amended, covers the aspects of the TEN -E
measure described in Sec tion III of Russia's panel request and does not cover or relate to any
other measures or instruments except to the extent of amending such in a manner exclusively
related to projects of common interest, the listing of the TEN-E Regulation in the consultati ons
request should have been sufficient to alert the European Union of Russia's intention to seek
consultations concerning the TEN-E measure.
7.57. We turn now to the question of whether, as argued by the European Union, the fact that the
narrative part of Russi a's consultations request does not describe the TEN -E measure entails that
this measure should not be considered as sufficiently identified in that request.
7.58. When examining Russia's consultations and panel requests, respectively, it is clear that the
latter contains a more detailed description of the TEN -E measure, not found in the consultations
request.

(European Union's first request for a preliminary ruling, para. 41). Russia has not relied on this legal
instrument further in its challenge against the TEN-E measure and has clarified that this instrument does not
form part of the challenged measure. (See, e.g. Russia's response to Panel question No. 5, paras. 52-53). As
explained in section 7.2.1.2 above concerning the capacity allocation measures, we do not consider it relevant
or appropriate to address in further detail instruments that Russia is no longer challenging in these
proceedings. Importantly, the question before us is not whether Russia's decision not to challenge Regulation
(EU) No. 1316/2013 served to "cure" any potential deficiencies in its consultations request. Rather, we are
concluding that it is not necessary for us to address this legal instrument in further detail following the
clarification, provided by Russia in its written submissions and responses to questions, that this instrument
does not form part of the challenged measure.
343 European Union's first request for a preliminary ruling, para. 38.
344 European Union's first request for a preliminary ruling, para. 39.
345 These amendments are the following: (a) With respect to Regulation (EC) No. 713/2009, Article 20
of the TEN-E Regulation amends Article 22(1) in order to enable the Agency for the Cooperation of Energy
Regulators, established under this latter regulation, to collect fees for decisions related to cross border cost
allocation for projects of common interest; (b) With respect to Regulation (EC) No. 714/2009, Article 21 of the
TEN-E Regulation amends: (i) Articles 8(3)(a) and 10(a) of Regulation (EC) No. 714/2009 by elaborating the
content of the common network operation tools to ensure coordination of network operations and adding that
Union aspects of network planning under the TEN-E Regulation shall be included, if appropriate, in national
investment plans and that it shall be subject to a cost benefit analysis for projects of common interest; (ii)
Article 11 of Regulation (EC) No. 714/2009 by adding that the costs in the cost-benefit analysis for projects of
common interest shall be borne by TSOs; (iii) Article 18 of Regulation (EC) No. 714/2009 by allowing the
Commission to adopt guidelines on the implementation of operational coordination between TSOs at the EU
level; and (iv) Article 23 of Regulation (EC) No. 714/2009 by requiring the rules and general principles
concerning mechanisms for control by EU member States of the Commission's exercise of implementing
powers to apply in certain circumstances; and (c) With respect to the Regulation (EC) No. 715/2009, Article 22
of the TEN-E Regulation amends: (i) Article 8(10)(a) of Regulation (EC) No. 715/2009 by adding that Union
aspects of network planning under the TEN-E Regulation shall be included, if appropriate, in national
investment plans and that it shall be subject to a cost benefit analysis for projects of common interest; and (ii)
Article 11 of Regulation (EC) No. 715/2009 by adding that the costs in the cost-benefit analysis for projects of
common interest shall be borne by TSOs.

7.59. As explained by the Appellate Body, however, a " precise and exact identity between the
specific measures that were the subject of consultations and the specific measures identified in the
request for the establishment of a panel" is not required 346 because the difference in the language
between Articles 4.4 and 6.2 of the DSU "makes it clear that, in identifying the measure at issue,
greater specificity is required in a panel request than in a consultations request".347
7.60. For this reason, we do not con sider the mere inclusion of additional and more specific
language in Russia's panel request sufficient to conclude that it impermissibly expands the scope
of the dispute. Instead, we recall that our assessment should focus on the extent to which the
TEN-E measure has "evolved" from measures identified in the consultations request.348
7.61. In this regard, we are not convinced by Russia's argument that the phrase "measures …
pertaining to … the requirements in respect of granting of access to natural gas and electri city
network capacity by transmission service operators" 349 in the narrative part of Russia's
consultations request "implicates" the TEN -E measure.350 The description of the TEN -E measure in
Section III of Russia's panel request clarifies that this measure rel ates to the facilitation of
infrastructure promoting and facilitating the production, importation or transportation of natural
gas.351 We do not consider that the TEN-E measure could properly be categorized as "requirements
in respect of granting of access to natural gas … network capacity".352
7.62. At the same time, we observe that the description provided in the narrative part of Russia's
consultations request contains various phrases indicating a broad coverage of measures. In
particular, the use of the expressions "measures … pertaining to, in particular" and "[i]n particular,
though not exclusively , the following measures" 353 plainly demonstrate that the various
descriptions of measures in the narrative part of Russia's consultations request were not
exhaustive and should, in our view, have alerted the European Union to this fact.
7.63. Furthermore, in arguing that the TEN -E measure was not described in the narrative part of
Russia's consultations request, the European Union also points to the fact that this measure is not
part of the Third Energy Package. 354 Russia responds that the TEN -E measure and the Third
Energy Package are not "separate and legally distinct", but "share the same underlying legal
authorities and policy objectives" and are "integrated, legally and operationally".355
7.64. In this regard, we note that the European Union does not explain why it does not consider
the TEN-E measure a part of the Third Energy Package, nor does the European Union propose a
definition of the Third Energy Package. At the same time, Russia states that "Directive 2009/73/EC
and Regulation 715/2009 constitute the TEP for gas" 356, which could suggest that Russia does not
dispute the factual accuracy of the European Union's position that the Third Energy Package may
not include the TEN-E measure.
7.65. In any event, we do not consider it necessary to determine the exact content or scope of
the Third Energy Package in order to resolve the issue before us. In our view, it was clear from the
language used in Russia's consultations request that Russia sought consultations with respect to a
broad range of measures. In particular, we observe the reference to:
"Third Energy Package" Directives and Regulations, implementing legislation and
decisions of the EU and its Member States and the measures resulting from
participation in the Treaty establishing the Energy Community (hereinafter referred to
as "Third Energy Package")[.]357

346 Appellate Body Report, Brazil – Aircraft, para. 132. (emphasis original)
347 Appellate Body Reports, Argentina – Import Measures, para. 5.9.
348 Appellate Body Reports, Argentina – Import Measures, paras. 5.13 and 5.26-5.30.
349 Russia's consultations request, p. 1.
350 Russia's response to the European Union's first request for a preliminary ruling, para. 44.
351 Russia's panel request, p. 8.
352 Russia's consultations request, p. 1. (emphasis added)
353 Russia's consultations request, p. 1. (emphasis added)
354 European Union's first request for a preliminary ruling, para. 35.
355 Russia's response to the European Union's first request for a preliminary ruling, paras. 35-36.
356 Russia's response to the European Union's first request for a preliminary ruling, para. 17.
357 Russia's consultations request, p. 1.

7.66. In this passage of its consultations request, Russia thus identifies three groups of measures,
to which it collectively refers as th e Third Energy Package, namely (a) Third Energy Package
Directives and Regulations; (b) implementing legislation and decisions; and (c) the measures
resulting from participation in the Treaty establishing the Energy Community.
7.67. Even if considering the Thir d Energy Package in a narrow sense, as covering only the
Directive and Regulation (EC) No. 715/2009, we note that the TEN -E measure, and in particular
the TEN-E Regulation, establishes several explicit links with these instruments. More particularly,
the TEN-E Regulation amends Regulation (EC) No. 715/2009 and its purpose is stated as:
Despite the fact that … Directive 2009/73/EC … provide[s] for an internal market in
energy, the market remains fragmented due to insufficient interconnections between
national energy networks and to the suboptimal utilisation of existing energy
infrastructure.358
7.68. We further note that the TEN -E Regulation explicitly shares and adds to the definitions
provided for in the Directive and in Regulation (EC) No. 715/2009. 359 Moreover, the criteria for
projects of common interest, established pursuant to Article 4 of the TEN-E Regulation, refer to the
objectives of market integration, security of supply, and competition, which are echoed in the
Directive.360 As noted by Russia, the Commission has itself stated that "[t]he TEN -E Regulation
complements the requirements of the Third Energy Package and facilitates investments with cross-
border impacts".361
7.69. Hence, it appears that the TEN -E measure shares the same po licy objectives as the
Directive and, as argued by Russia, is integrated "legally and operationally" 362 with other
instruments, including the Directive and Regulation (EC) No. 715/2009. For this reason, it cannot,
in our view, be considered "separate and leg ally distinct" from the two instruments comprising the
Third Energy Package in a narrow sense, namely the Directive and Regulation (EC) No. 715/2009.
7.70. In the above, we have considered both the list of legal instruments and the narrative part of
Russia's consultations request as well as the parties' arguments as they pertain to these elements.
When assessing the different elements of Russia's consultations request in a holistic manner, we
are of the view that the TEN -E measure is sufficiently identified and t hat the inclusion of this
measure in Section III of Russia's panel request does not impermissibly expand the scope of the
dispute or change its essence.
7.71. We wish to underline that further specification by Russia in its consultation s request would,
in our v iew, have been useful, and that the listing of a legal instrument, without further
specification, may not in all circumstances suffice, in particular, if this legal instrument has a broad
scope covering aspects other than the challenged measure. Having sai d this, we recall our finding
that the TEN -E Regulation and the amendments hereto cover the TEN -E measure described in
Section III of Russia's panel request and does not cover or relate to any other measures or
instruments except to the extent of amending such in a manner exclusively related to projects of
common interest.
7.72. In light of this, we consider that the explicit listing of the TEN -E Regulation and
amendments hereto should have alerted the European Union to the fact that Russia was seeking
consultations with respect to the TEN -E measure. We do not believe that the identification of the
TEN-E measure, provided by the listing of the TEN -E Regulation and amendments hereto, is
invalidated by the lack of an explicit description of this measure in the narr ative part of Russia's
consultations request, since the open -ended language of this part plainly informs the European
Union that the description is not meant to be exhaustive. Similarly, we recall that the language

358 TEN-E Regulation, (Exhibit EU-4), Recital (8).
359 TEN-E Regulation, (Exhibit EU-4), Article 2.
360 Directive 2009/73/EC, (Exhibit EU-5), Recitals (22), (54) and (56); and TEN-E Regulation (Exhibit
EU-4), Article 4(2)(b).
361 Russia's response to the European Union's first request for a preliminary ruling, para. 35 (quoting
Commission Staff Working Document Accompanying Commission Delegated Regulation (EU) No. 2016/89 of 18
November 2015 amending Regulation (EU) No. 347/2013 of the European Parliament and of the Council as
regards the Union list of projects of common interest, SWD(2015) 247 of 18.11.2015, (Exhibit RUS-8), p. 12).
362 Russia's response to the European Union's first request for a preliminary ruling, para. 35.

used in the narrative part of Russia's co nsultations request makes it clear that Russia is seeking
consultations with respect to a broad range of measures and that, in any event, the TEN -E
Regulation cannot be considered "separate and legally distinct" from the instruments forming part
of the Thi rd Energy Package in a narrow sense , namely the Di rective and Regulation (EC)
No. 715/2009.
7.73. In conclusion, we are of the view that the TEN-E measure is sufficiently identified in Russia's
consultations request, and that the inclusion of this measure in Se ction III of Russia's panel
request does not impermissibly expand the scope of the dispute or change its essence. We
therefore find that the matters contained in Section III of Russia's panel request are within our
terms of reference.
7.2.2 Second request for a preliminary ruling by the European Union
7.2.2.1 Introduction
7.74. The European Union submitted its second request for a p reliminary ruling on
28 October 2016. That request primarily concerned Russia's response to Panel question No. 5, but
also included the initial ter ms of reference objections raised by the European Union in its first
written submission.363
7.75. In its response to Panel question No. 5, Russia replied to a request by the Panel to clarify
the scope and nature of certain of its claims following the first substa ntive meeting with the
parties.364 Russia's response provided a brief description of each of its claims and references to the
relevant pages of its panel request identifying the challenged measures. 365 Russia included in its
response multiple claims, some of which were further subdivided into sub-claims, numbering them
Claim 1 through Claim 31.366
7.76. The European Union argued that certain matters included by Russia in its response to Panel
question No. 5 were not covered by its panel request and therefore fell outside the Panel's terms
of reference.367 Russia agreed with the European Union that its claim under Article III:4 of the
GATT 1994 against the third -country certification measure in the Directive , referred to in its
response to Panel question No. 5 as Clai m 18 , fell outside the Panel's terms of reference and
indicated that it would no longer pursue Claim 18 as part of these proceedings.368
7.77. In light of Russia's statement, on 28 October 2016, the Panel communicated to the parties
its decision not to consider t he European Union's terms of reference objection concerning Russia's
Claim 18. As explained above in paragraph 1.14, o n 10 November 2016, the Panel issued its
preliminary ruling containing conclusions on a number of the terms of reference objections covered

363 European Union’s first written submission, paras. 421-422, 546-551, 553-556, 567-570, 578-581,
and 617-618.
364 Panel question No. 5.
365 Russia's response to Panel question No. 5, paras. 23–53. In its response, Russia referred to certain
page numbers of its panel request that did not coincide with the page numbers in Russia's panel request
(WT/DS476/2). Russia subsequently explained that the discrepancy in page numbering stemmed from Russia's
reliance on its panel request "as originally submitted to the WTO Secretariat and circulated among the parties",
which, according to Russia, contained page numbers different from page numbers used in Russia's panel
request contained in document WT/DS476/2. (Russia's comments on the European Union's comments on
Russia's response to Panel question Nos. 5 and 17, fn 2). All references to Russia's panel request in this Report
should be understood to be references to document WT/DS476/2.
366 These claim numbers are referred to in paragraph 3.2 above. For ease of reference, we refer to
"Claims" with this numbering in this section.
367 European Union's comments on Russia's response to Panel question Nos. 5 and 17.
368 Russia's comments on the European Union's comments on Russia's response to Panel question Nos.
5 and 17, para. 7. In its response to Panel question No. 5, Russia summarized its Claim 18 as follows:
Claim 18 – GATT Article III:4 (National Treatment): Claim 18 is described in Section XVI of Russia’s
FWS. It challenges the third-country certification measure "as such," based on the underlying provisions of
Article 11 of the Directive. Moreover, Russia characterizes this as an instance of de jure discrimination because
Article 11 distinguishes between third-country and domestic applicants for certification based exclusively on
origin. (Russia's response to Panel question No. 5, para. 44).

by the European Union's second request for a preliminary ruling, while declining to rule at that
stage in the proceedings on several of those objections.369
7.78. Our analysis below is structured as follows. First, we provide the reasoning in support of the
conclusions issued to the parties on 10 November 2016 . We then provide our decision, as well as
the reasoning in support of it, on the terms of reference objections on which we declined to rule at
that stage in the proceedings.
7.2.2.2 Reasoning in support of the conclusions issued in the second preliminary ruling
7.79. In the preliminary ruling issued to the parties on 10 November 2016, the Panel concluded
that the following claims by Russia fell outside the Panel's terms of reference: Claims 7, 9, and 11;
alternative "as applied" Claims 29 through 31; Claim 16, as developed in paragraphs 449 through
454 of Russia's first written submission; and Claim 27. 370 However, the Panel found t hat Russia's
Claim 21 and its Claims 12 through 14 were within its terms of reference. The Panel did not
consider it necessary to address the European Union's concerns in relation to Russia's Claims 1
through 3.
7.80. In paragraph 1.5 of the preliminary ruling of 10 November 2016, we indicated that the more
detailed reasons in support of these conclusions would be provided no later than the date of the
issuance of the Interim Report. Thus, in accordance with this indication, we provide reasoning in
support of the conclusions contained in this preliminary ruling.
7.2.2.2.1 Relevant legal provisions and general considerations of the Panel
7.81. We recall that a panel's terms of reference are governed by the panel request, unless the
parties agree otherwise. 371 This Panel was establi shed with standard terms of reference. 372
Therefore, the scope of our review is limited to the examination of the "matter" referred to the
DSB by Russia in its panel request.
7.82. In order to constitute the "matter referred to the DSB" and thus form the basis of a panel's
terms of reference, a panel request must identify the specific measures at issue and provide the
legal basis of the complaint, in accordance with Article 6.2 of the DSU. 373 Furthermore, by
requiring a panel request to adhere to certain threshold s tandards of specificity and clarity,
Article 6.2 serves the due process objective of notifying the parties and third parties of the nature
of a complainant’s case in order to enable them to respond accordingly. 374 In US – Carbon Steel,
the Appellate Body explained that when faced with an issue relating to the scope of its terms of

369 Our decision on the terms of reference objections on which we declined to rule in the preliminary
ruling of 10 November 2016, as well as the reasons supporting it, are provided in section 7.2.2.3 below.
370 More detailed descriptions of these claims are provided below in the relevant parts of this section.
371 Article 7.1 of the DSU. See also Appellate Body Reports, US – Carbon Steel, para. 124; and
Argentina – Import Measures, para. 5.11.
372 Document WT/DS476/3 in the relevant part states as follows:

1. At its meeting on 20 July 2015, the Dispute Settlement Bo dy (DSB) established a panel
pursuant to the request of the Russian Federation in document WT/DS476/2, in accordance with
Article 6 of the DSU (WT/DSB/M/365).

2. The Panel's terms of reference are the following:

"To examine, in the light of the relevant provisions of the covered agreements cited by
the parties to the dispute, the matter referred to the DSB by the Russian Federation in
document WT/DS476/2 and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements."
373 Appellate Body Reports, Argentina – Import Measures, para. 5.11. Article 6.2 of the DSU provides as
follows:
The request for the establishment of a panel shall be made in writing. It shall indicate whether
consultations were held, identify the specific measures at issue and provide a brief summary of
the legal basis of the complaint sufficient to present the problem clearly. In case the applicant
requests the establishment of a panel with other than standard terms of r eference, the written
request shall include the proposed text of special terms of reference.
374 Appellate Body Reports, Argentina – Import Measures, paras. 5.11 and 5.39.

reference, a panel must scrutinize carefully the panel request to ensure its compliance with both
the letter and the spirit of Article 6.2 of the DSU.375
7.83. In Korea – Dairy, the Appellate Body identified four distinct requirements that a panel
request must meet to comply with Article 6.2. Accordingly, the panel request must: (i) be in
writing; (ii) indicate whether consultations were held; (iii) identify the spec ific measures at issue;
and (iv) provide a brief summary of the legal basis of the complaint sufficient to present the
"problem" clearly.376
7.84. As the Appellate Body clarified, a panel request's compliance with the requirements of
Article 6.2 of the DSU must be demonstrated on its face as it existed at the time of its filing. 377
Thus, any defects in the panel request cannot be "cured" by the subsequent submissions of the
parties.378 However, the Appellate Body also observed that subsequent submissions, such as the
complaining party's first written submission, may be consulted to the extent that they may confirm
or clarify the meaning of the words used in the panel request.379
7.85. We consider that, in the present dispute, Russia's panel request meets the first two
requirements of Article 6.2. The parties do not disagree that these two requirements are satisfied.
Therefore, the rest of our analysis is focused on the compliance of Russia's panel request with the
third and fourth requirements of Article 6.2. We note that these two requirements are cumulative,
which means that a panel request must satisfy both of them. Moreover, as the Appellate Body
clarified, they are also distinct requirements that should not be conflated.380
7.86. In the subsections below, we provide reasons in sup port of our conclusions contained in the
preliminary ruling of 10 November 2016, as set out above. For ease of reference, the arguments of
the parties are summari zed in the subsections that address a particular objection or set of
objections. For analytical purposes, we have grouped and examined together the European Union's
objections that raise similar issues in respect of one or several claims by Russia.
7.2.2.2.2 Russia's claims 1 through 3 against the unbundling measure in the national
implementing laws of Croatia, Hungary and Lithuania
7.87. Russia's Claims 1 through 3 challenge the unbundling measures of Croatia, Hungary and
Lithuania under Article XVI(2)(e), (a) and (f), respectively. 381 The European Union expresses its
concern that, in its response to Panel question No. 5, Russia referred to the Directive as one of the
relevant legal instruments without having identified and connected it with Article XVI of the GATS
in the panel request. 382 Russia has clarified that, in the context of its Claims 1 through 3, the
unbundling measures of Croatia, Hungary and Lithuania are the main focus of Russia's market
access claims.383
7.88. We recall that, on the basis of Russia's clarification, we found it unnecessary to rule on the
European Union's concern in the preliminary ruling of 10 N ovember 2016. We consider that
Russia's clarification is sufficient to resolve the European Union's concern, and therefore, we do not
provide any further reasons for our decision here.

375 Appellate Body Report, US – Carbon Steel, para. 126.
376 Appellate Body Report, Korea – Dairy, para. 120.
377 Appellate Body Reports, Argentina – Import Measures, para. 5.42.
378 Appellate Body Reports, Argentina – Import Measures, para. 5.42 (referring to Appellate Body
Report, US – Countervailing and Anti-Dumping Measures (China), para. 4.9).
379 Appellate Body Reports, Argentina – Import Measures, para. 5.42 (referring to Appellate Body
Reports, US – Carbon Steel, para. 127; US – Countervailing and Anti-Dumping Measures (China), para. 4.9).
380 Appellate Body Report, EC – Selected Customs Matters, para. 130. See also Appellate Body
Report, Australia – Apples, paras. 417-421.
381 Russia's response to Panel question No. 5, paras. 24–27.
382 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 12.
383 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, paras. 11–12. See also Russia's first written submission, paras. 141–230.

7.2.2.2.3 Russia's claims 12 through 14 against the LNG and upstream pipeline
networks measures
7.89. Russia's Claim 12 challenges the LNG measure under Article I:1 of the GATT 1994.
Claims 13 and 14 challenge the upstream pipeline networks measure under Articles I:1 and III:4
of the GATT 1994, respectively. 384 The European Union contends th at Russia's panel request fails
to identify and "plainly connect" the measures challenged by Claims 12 through 14 with
Articles I:1 and III:4 of the GATT 1994. 385 The European Union explains that the identification of
the challenged measure is absent from th e second full paragraph of page 5 of the panel request
referred to by Russia in its response to Panel question No. 5. 386 Russia submits that its panel
request plainly satisfies the requirements of Article 6.2 of the DSU with regard to its claims against
both the LNG measure under Article I:1 of the GATT 1994 and the upstream pipeline networks
measure under Articles I:1 and III:4 of the GATT 1994.387
7.90. We consider that, with regard to Claims 12, 13 and 14, the issue before us is more the
precise identification of the relevant part of Russia's panel request, rather than its actual
compliance with the requirements of Article 6.2 of the DSU. The relevant part of Russia's panel
request reads as follows:
Furthermore, the definition of "transmission" in the Directive expressly exempts
"upstream pipeline networks," which are defined separately. The Directive also defines
the functions of transmission and LNG as separate from the functions of natural gas
production and supply. The unbundling provisions, in turn, apply on ly to the
transmission system and TSO, which must be separated from the production and
supply portions of the VIU. Domestic and third -country pipeline transport service
suppliers are thus exempt from the unbundling requirements with regard to their
upstream pipeline networks and LNG facilities. As a result, contrary to the E U's
obligations under Article I:1 of GATT 1994, natural gas originating in third -countries
that is transported and placed on the EU market through either of these types of
infrastructure is accorded an advantage, favor, privilege or immunity that is not
immediately and unconditionally accorded to natural gas originating in Russia, which
is transported and placed on the market by pipeline transport service suppliers that
are subject to the unbundling requirements. Such Russian -origin natural gas is also
accorded less favorable treatment than domestic natural gas that is transported and
placed on the market through upstream pipeline networks, and possibly LNG facilities,
in a manner inconsistent with Article III:4 of GATT 1994.388
7.91. Having consulted the above -quoted paragraph, we are satisfied that Russia's panel request
identifies the specific measures at issue and provides a brief summary of the legal basis of the
complaint in respect of Claims 12 through 14, in accordance with Article 6.2 of the DSU. We
therefore find that Claims 12 through 14 fall within our terms of reference.
7.2.2.2.4 Russia's claim 16 against the third -country certification measure in the
Directive
7.92. Russia's Claim 16 challenges the third-country certification measure under Article II:1 of the
GATS.389 When developing this claim in its first written submission, Russia argues that the third -
country certification measure distinguishes between services and service suppliers from different
third countries.390
7.93. The European Union objects to the manner in which Russia has developed Claim 16 in its
first written submission, arguing that the difference in t reatment to which Russia refers in its first
written submission constitutes a different "prob lem" to the one presented in Russia's panel

384 Russia's response to Panel question No. 5, paras. 38–40.
385 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 24.
386 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 25.
387 Russia's comments on the European Union's comments on Russia's response to Panel question Nos.5
and 17, paras. 25–26.
388 Russia's panel request, pp. 4-5.
389 Russia's response to Panel question No. 5, para. 42.
390 Russia's first written submission, paras. 449–454.

request.391 The European Union adds that the claim described in Russia's panel request raises the
crucial issue of whether the difference in treatment invoked by Russia may be justified under
Article V of the GATS. 392 The European Union thus requests the Panel to find that Claim 16 is
outside its terms of reference.393
7.94. We note that Russia admits that the description of its Claim 16 "varied" in its first written
submission from that of the panel request, but maintains, nonetheless, that the brief summary of
the legal basis of the complaint with respect to Claim 16 provided in the panel request complies
with the requirements of Article 6.2 of the DSU.394
7.95. The European Union's objection regarding Claim 16 relates to Russia's compliance with the
fourth requirement of Article 6.2 of the DSU – to provide a brief summary of the legal basis of the
complaint sufficient to present the "problem" clearly. We understand that the nature of the
European Union's objection concerns the iss ue of whether Russia's Claim 16, as developed in its
first written submission, "matches" the claim included in Russia's panel request.
7.96. We recall that, in order to fall within a panel's terms of reference, a claim must be included
in a panel request in acc ordance with Article 6.2 of the DSU. 395 The fourth requirement of Article
6.2 concerns the specification of claims in a panel request, stipulating that " [i]t shall … provide a
brief summary of the legal basis of the complaint sufficient to present the proble m clearly".396 As
observed by the Appellate Body, even though the fourth requirement demands only a brief
summary of the legal basis of the complaint, the summary must be "sufficient to present the
problem clearly".397
7.97. Thus, in our view, the requirement that the summary "be sufficient to present the problem
clearly" sets the benchmark for the provision of "a brief summary of the legal basis of the
complaint" in a panel request. We consider that this requirement is also indicative of the purpose
that providing "a brief summary of the legal basis of the complaint" serves. As can be inferred
from the text of Article 6.2 of the DSU, the purpose of providing this "summary" is "to present the
problem clearly".
7.98. We consider that the reference to " the problem" in Article 6.2 of the DSU indicates a
particular legal problem that a complainant is seeking to resolve through recourse to dispute
settlement.398 Therefore, in our view, once a complainant has set out in its panel request a brief
summary of the legal basis of the complaint that is "sufficient" to clea rly present a particular legal
problem, a complainant may not assert, in the course of the panel proceedings, a claim t hat
presents a different legal problem . If a complainant were allowed to do so it would mean that a
panel could consider claims not included in a panel request – a result that is, in our view,
manifestly incompatible with Articles 6.2 and 7.1 of the DSU and the due process objective they
serve to protect.
7.99. Bearing these considerations i n mind, we will first determine the problem presented by
Russia's Claim 16, as developed in its first written submission, and then examin e whether it
presents the same problem as the one presented in Russia's panel request.
7.100. Having reviewed the relevant pa rt of Russia's first written submission, we consider that
Russia's Claim 16, as developed in its first written submission, is sufficiently clear to present the
following problem : the third -country certification measure allegedly accords more favourable
treatment to the services and service suppliers of one group of third countries (those that have
concluded certain agreements with the European Union or a member State) than to the services
and service suppliers of another group of third countries (those that have not concluded certain

391 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 47.
392 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 49.
393 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 50.
394 Russia's response to Panel question No. 17, para. 111; and Russia's comments on the European
Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 46–48.
395 Appellate Body Reports, China – Raw Materials, para. 219 (referring to Appellate Body Report, US –
Carbon Steel, para. 125).
396 Article 6.2 of the DSU.
397 Appellate Body Report, Korea – Dairy, para. 120.
398 Article 6.2 of the DSU. (emphasis added)

agreements with the European Union or a member State). 399 We further understand that Russia's
reference to "third countries" in its first written submission means a reference exclusively to those
countries that are not EU member States (non-EU countries).400
7.101. Having determined the problem presented by Russia's Claim 16, as developed in its first
written submission, we proceed to examine whether a brief summary of the legal basis of the
complaint provided in Russia's panel request p resents the same problem . We note that the
relevant part of Russia's panel request provides as follows:
In addition, pursuant to the Directive, requests for certification by a transmission
system owner or TSO located in one EU Member State, but controlled by a person or
persons of another Member State, are not subject to the third -country certification
measure. The services and service suppliers of one EU Member State are thus treated
more favorably by other Member States than are the services and service sup pliers of
other third-countries, including Russia. This is despite the fact that the EU and each
such Member State is also a Member of the WTO. The Russian Federation considers
this measure to be inconsistent, de jure , with the EU Member States' obligatio ns
under Article II:1 of the GATS to accord immediately and unconditionally to services
and service suppliers of each Member treatment no less favorable than that it accords
to like services and service suppliers of any other country.401 (underlining added)
7.102. We observe that the problem presented in Russia's panel request concerns the alleged
more favourable treatment accorded by an EU member State to the services and service suppliers
of other EU member States than to services and service suppliers of third co untries, including
Russia. In its panel request, Russia also refers to "third countries", explicitly distinguishing
between "Member States" and "third countries, including Russia". We thus understand that the
reference to "third countries" in Russia's panel request covers exclusively non-EU countries.
7.103. Therefore, having carefully reviewed Russia's panel request and its first written
submission, we consider that Russia's first written submission does not present the same problem
as its panel request. The pro blem presented by Russia in its first written submission is based on
the alleged differential treatment of services and service suppliers originating from different non -
EU countries. In contrast, as determined abov e, the problem presented by Russia in its panel
request is based on the alleged differential treatment of, on the one hand, services and service
suppliers from EU member States and, on the other, services and service suppliers from non -EU
countries. Therefore, we consider that Claim 16, as develop ed by Russia in its first written
submission402, falls outside our terms of reference.403
7.104. However, we do not consider that R ussia's Claim 16, based on the problem presented in
Russia's panel request, falls outside our terms of reference. In our view, Russia's panel request
provides a brief summary of the legal basis of the complaint in accordance with the fourth
requirement of Article 6.2 of the DSU, and therefore Russia is not precluded from advancing its
Claim 16 within the limits of the problem presented in its panel request.

399 Russia's first written submission, paras. 449-454.
400 Russia distinguishes between the European Union member States and "third countries", including in
this latter group Iceland, Liechtenstein and Norway. See Russia's first written submission, paras. 450-451.
401 Russia's panel request, p. 3.
402 Russia's first written submission, paras. 449-454.
403 We note that a similar approach was adopted by the panel in US – Carbon Steel (India), where the
panel found that the arguments advanced by India in its first written submission concerning the issue of
initiation by the United States of an investigation despite insufficient evidence fell outside the panel's terms of
reference because they did not relate to the claims presented in the panel request. The relevant claim
presented in India's panel request concerned the alleged failure of the United States to initiate or conduct an
investigation to determine the effects of new subsidies included in the administrative reviews. In its
examination of the terms of reference objection raised by the United States, the panel reasoned as follows:
In our view, by clearly and only stating that an investigation was not initiated or conducted,
India's panel request precludes claims relating to the alleged initiation of an investigation, or the
manner in which an investigation was conducted, being included in the scope of the dispute.
(Panel Report, US – Carbon Steel (India), paras. 1.34 and 1.10–1.43) (emphasis original)

7.2.2.2.5 Russia's claim 21 against the infrastructure exemption measure
7.105. Russia's Claim 21 challenges the infrastructure exemption measure under Article X:3(a) of
the GATT 1994. 404 The European Union requests the Panel to rule that Claim 21 falls outside its
terms of reference because Russia challenges a new measure, not identified in its panel request,
and brings a new claim against this non-identified measure.405 According to the European Union, in
its response to Panel question No. 5, Russia chal lenges the infrastructure exemption measure in
general, whereas in the fourth full paragraph of page 4 of Russia's panel request, Russia only
identified the OPAL gas release requirement as the measure violating Article X:3(a) of the GATT
1994.406
7.106. In response to the European Union's objections regarding Claim 21, Russia submits that
three paragraphs of its panel request, read together, laid out the basis for this claim. 407 Russia
explains that the first two paragraphs introduce the infrastructure exemption meas ure challenged
by this claim and the third contains the specific claim regarding Article X:3 of the GATT 1994. 408
Russia further states that it identified the specific measure at issue as "the infrastructure
exemption provisions in the Directive and the SEP".409
7.107. We understand that the disagreement between the parties concerns the measure
challenged by Russia's Claim 21 and its identification in the panel request, under the third
requirement of Article 6.2 of the DSU.
7.108. The Appellate Body has clarified that, unde r the third requirement of Article 6.2, the
measures at issue must be identified with sufficient precision so that what is referred to
adjudication by a panel may be discerned from the panel request.410
7.109. The determination of whether a panel request is sufficiently precise requires scrutiny of the
panel request "as a whole, and on the basis of the language used". 411 Accordingly, in our analysis,
we are required to scrutinize the text of Russia's panel request, the relevant part of which reads as
follows:
The Directive further requires Member States to ensure implementation of a system of
third-party access ("TPA") to the transmission and distribution system and LNG
facilities in the EU. 412 The Directive permits "major new gas infrastructure, i.e.
interconnectors, LNG and storage facilities," to be exempted from the unbundling, TPA
and other requirements under certain conditions. The same exemptions are also
permitted for "significant increases of capacity in existing infrastructure and to
modifications of such in frastructure which enable the development of new sources of
gas supply." 413 The conditions to be examined in assessing such requests permit
Member States and the Commission significant discretion in determining whether to
grant infrastructure exemptions.
A number of infrastructure exemptions have been granted under these provisions of
the Directive. Similar exemptions remain in effect that were previously granted

404 Russia's response to Panel question No. 5, para. 46.
405 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 64-65.
406 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 63.
407 Russia identifies the following paragraphs: the last paragraph on the bottom of p. 3 of the panel
request beginning with the words "The Directive further requires", the first full paragraph on p. 4 beginning
with the words "A number of infrastructure exemptions have been granted" and the paragraph on p. 4
beginning with the words "In addition, requiring that the operator". See Russia's comments on the European
Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 60–61.
408 Russia's comments on the European Union's comments on Russia's response to Panel question Nos.
5 and 17, paras. 61-62.
409 Russia's comments on the European Union's comments on Russia's response to Panel question Nos.
5 and 17, para. 63.
410 Appellate Body Report, US – Continued Zeroing, para. 168.
411 Appellate Body Reports, Argentina – Import Measures, para. 5.41 (quoting Appellate Body Report,
EC and certain member States – Large Civil Aircraft, para. 641). See also Appellate Body Reports, China – HP-
SSST (Japan) / China – HP-SSST (EU), para. 5.13 (quoting Appellate Body Report, EC – Fasteners (China),
para. 562).
412 (footnote original) Directive, Article 32.
413 (footnote original) Directive, Article 36.

pursuant to comparable provisions of Directive 2003/55/EC, as part of the SEP. 414 A
Russian pipel ine transport service supplier controls the Ostseepipeline-
Anbindungsleitung ("OPAL") pipeline. After being categorized as an "inter -connector,"
the Germany authority granted the OPAL pipeline owners a limited infrastructure
exemption for capacity used to transport natural gas from Griefswald, where gas
enters Germany from the Nordstream Pipeline ("Nordstream"), to Brandov, where gas
exits Germany and enters the Czech Republic. However, the Commission imposed a
50 percent cap on the ability of the Russian supplier operating the OPAL pipeline,
described as a "dominant undertaking," to acquire exit capacity at the Czech border.
The Russian supplier may exceed this cap only by implementing a "gas release"
program and selling 3 billion cubic meters ("bcm") of its gas annually at a
government-set, fixed price to competing gas suppliers on the Czech market,
regardless of what amount of additional capacity is booked by the Russian supplier.
No similar gas release requirement was imposed in decisions granting infr astructure
exemptions concerning pipelines defined as interconnectors and controlled by other
third-country suppliers of natural gas and pipeline transport services.
…
In addition, requiring that the operator of the OPAL pipeline adopt the 3 bcm gas
release program has a limiting effect on the volume of Russian gas being imported
into the EU market. The measure thus maintains or institutes a de facto restriction on
importation, contrary to the requirements of Article XI:1 of GATT 1994. The Russian
Federation also considers that the OPAL gas release requirement also violates Article
X:3(a) of GATT 1994. Specifically, by imposing the 3 bcm gas release requirement
under the conditions described above only on imported Russian gas, but not third -
country gas tra nsported through pipelines subject to other exemption decisions, the
EU has failed to administer the infrastructure exemption provisions in the Directive
and the SEP in a uniform, impartial and reasonable manner, including with regard to
the sale, distribution and transportation of natural gas.415
7.110. We observe that, in the first and second paragraphs of the panel request quoted above,
Russia describes the provisions of the Directive, as well as the earlier Directive 2003/55/EC,
permitting infrastructure exemptions. In the second paragraph quoted above, Russia describes the
infrastructure exemption granted to OPAL, including the 50% capacity cap and the 3bcm/year gas
release requirement. The third paragraph connects the alleged administration of the infrastructu re
exemption provisions of both Directives, referring explicitly to both the 50% capacity cap and the
3bcm/year gas release requirement in the OPAL exemption decision, with the alleged violation of
Article X:3(a) of the GATT 1994. Therefore, we consider th at the third paragraph of the panel
request quoted above, when read in the context of the preceding two paragraphs, identifies the
specific measure challenged by Russia's Claim 21 and sets the scope of this challenge.416
7.111. Thus, on the basis of the analysis c onducted, we conclude that Russia's panel request
complies with the third requirement of Article 6.2 of the DSU with respect to its Claim 21.
Consequently, we find that Russia's Claim 21, as described in the relevant part of its panel
request, falls within our terms of reference.
7.2.2.2.6 Russia's claim 27 against the infrastructure exemption/upstream pipeline
networks measures
7.112. In its response to Panel question No. 5, Russia explains that its Claim 27 challenges, under
Article II:1 of the GATS, the "implementation of the infrastructure exemption measure to deny the

414 (footnote original) Directive 2003/55/EC of the European Parliament and of the Council of 26 June
2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC, Article
22, OJ L 176, 15.7.2003, pp. 57-78 ("Directive 2003/55/EC").
415 Russia's panel request, pp. 3–4.
416 As additionally clarified by the Panel in response to the European Union's further concerns raised
after the issuance of the preliminary ruling of 10 November 2016. (Communication by the Panel of 9 December
2016, pp. 1-2).

NEL exemption and impose restrictive conditions on the OPAL exemption, while the Directive
automatically exempts UPNs from the unbundling, TPA and tariff regulation requirements".417
7.113. The European Union contends that Russia is thus challenging a new measure not identified
in the panel request. 418 In the European Union's view, Russia's claim is directed against the
implementation of the provisions in the Directive relating to upstream pipeline networks. 419 The
European Union points out that pages 4 and 5 of the panel request, referred to by Russia, discuss
the infrastructure exemption decisions, but do not discuss the upstream pipeline networks
provisions in the Directive. 420 The European Union also submits that the panel request does not
provide a plain connection between the upstream pipeline networks provisions in the Directive and
Article II:1 of the GATS. 421 Consequently, for the European Union, Claim 27 is a new claim not
presented in the panel request.422 The European Union thus requests us to rule that Claim 27 falls
outside our terms of reference.423
7.114. Russia responds to the European Union's arguments that the third full paragraph on page 4
of the panel request describes the infrastructure exemption measure as well as the fact that both
NEL and OPAL were treated less favourably than other infrastructure projects that were granted
exemptions.424 Russia explains that, in this paragraph, Russia did not restrict its description of this
claim to apply only to pipelines (or LNG facilities) granted exemptions pursuant to the
infrastructure exemption measure.425
7.115. Russia also notes that, in the last paragraph on page 4 of the panel request, it described
the automatic exemption granted under the Directive to upstream pipeline netwo rks.426 Russia
thus submits that, having already discussed the differential treatment accorded under the
Directive to NEL and OPAL earlier on page 4, in the last paragraph on page 4 of the panel request,
it intended to include a separate claim (Claim 27) con necting the denial of the NEL exemption and
the more restrictive OPAL exemption to the automatic exemptions granted to upstream pipeline
networks under the Directive.427
7.116. We understand that the European Union's objections concerning Claim 27 raise two issues :
(a) whether Russia's panel request identifies the specific measure(s) challenged by this claim, in
accordance with the third requirement of Article 6.2 of the DSU; and (b) whether Russia's panel
request provides a brief summary of the legal basis of the complaint sufficient to present the
"problem" clearly, in accordance with the fourth requirement of Article 6.2 of the DSU.
7.117. In considering whether Russia's panel request complies with the third requirement of
Article 6.2 in respect of Claim 27, we note that the "specific measures at issue" to be identified in a
panel request is the object of the challenge, namely, the measures that are alleged to be causing
the violation of an obligation contained in a covered agreement. 428 In other wo rds, the "measure
at issue is what is being challenged by the complaining Member".429

417 Russia's response to Panel question No. 5, para. 50.
418 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 66.
419 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 66.
420 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 66.
421 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 67.
422 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 67.
423 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 68.
424 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, para. 67.
425 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, para. 67.
426 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, para. 68.
427 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, para. 68.
428 Appellate Body Reports, Argentina – Import Measures, para. 5.40 (quoting Appellate Body Report,
429 Appellate Body Report, EC – Selected Customs Matters, para. 130. (emphasis original)

7.118. From Russia's response to Panel question No. 5, we understand that its Claim 27
challenges the infrastructure exemption measure. 430 At the same time, we note that, in its
response to Panel question No. 4, Russia states that it included a claim under Article II:1 of the
GATS "alleging that the UPN measure provides Russian pipeline transport service suppliers that
supply their services via NEL and OPAL less favourable treatment than like services and service
suppliers of other Members, whose services are supplied via UPNs". 431 Thus, from Russia's
response to Panel question No. 4, it would appear that its Claim 27 challenges the upstream
pipeline networks measure.
7.119. Even though we would welcome and expect more clarity from the complaining party
regarding the measures it challenges, we do not consider it necessary, nor do we find it fruitful, to
resolve which measure is challenged by Russia's Claim 27, as summarized in its response to Panel
question No. 5. We note that Russia's panel request identifies both the infrastructure exemption
measure and the upstream pipeline networks measure. The relevant part s of Russia's panel
request read as follows:
The Russian Federation considers that, contrary to its obligations under GATS Article
II:1 in the case of both the OPAL and NEL decisions, the EU accorded Russian services
and service suppliers less favorable treatment than it accorded to like services and
service suppliers of other third -countries pursuant to relevant decisions granting
exemptions to those suppliers. As a result of these measures, natural gas originating
in Russia is not accorded immediately and unconditionally any advantage, favor,
privilege or immunity granted to natural gas originating in certain third -countries,
contrary to the EU's obligations under Article I:1 of GATT 1994.
…
Furthermore, the definition of "transmission" in the Directive expressly exempts
"upstream pipeline networks," which are defined separately. The Directive also defines
the functions of transmission and LNG as separate from the functions of natural gas
production and supply. The unbundling provisions, in turn, apply only to the
transmission system and TSO, wh ich must be separated from the production and
supply portions of the VIU. Domestic and third -country pipeline transport service
suppliers are thus exempt from the unbundling requirements with regard to their
upstream pipeline networks and LNG facilities. As a result, contrary to the EU's
obligations under Article I:1 of GATT 1994, natural gas originating in third -countries
that is transported and placed on the EU market through either of these types of
infrastructure is accorded an advantage, favor, privil ege or immunity that is not
immediately and unconditionally accorded to natural gas originating in Russia, which
is transported and placed on the market by pipeline transport service suppliers that
are subject to the unbundling requirements. Such Russian -origin natural gas is also
accorded less favorable treatment than domestic natural gas that is transported and
placed on the market through upstream pipeline networks, and possibly LNG facilities,
in a manner inconsistent with Article III:4 of GATT 1994.432
7.120. The first paragraph quoted above identifies the implementation of the infrastructure
exemption measure in the decisions regarding NEL and OPAL, while the second paragraph
identifies the upstream pipeline networks measure. We are thus satisfied that Russia' s panel
request complies with the third requirement of Article 6.2, regardless of whether Russia challenges
the infrastructure exemption measure or the upstream pipeline networks measure. We now turn to
examine whether Russia's panel request complies with the fourth requirement of Article 6.2.
7.121. We recall that, as clarified by the Appellate Body in the context of the fourth requirement
of Article 6.2, a panel request must "plainly connect the challenged measure(s) with the

430 In its response to Panel question No. 5, Russia stated that Claim 27 "challenge[s] implementation of
the infrastructure exemption measure to deny the NEL exemption and impose restrictive conditions on the
OPAL exemption". (Russia's response to Panel question No. 5, para. 50).
431 Russia's response to Panel question No. 4, para. 21.
432 Russia's panel request, pp. 4 and 5. The relevant parts of Russia's panel request describing the
infrastructure exemption measure are also provided above in para. 7.109.

provision(s) of the covered agreeme nts claimed to have been infringed" 433 and "explain succinctly
how or why the measure at issue is considered by the complaining Member to be violating the
WTO obligation in question".434
7.122. In the present case, Russia's panel request must "plainly connect" eithe r the infrastructure
exemption measure or the upstream pipeline networks measure with the alleged violation of
Article II:1 of the GATS and provide a "succinct" explanation as to how or why either of these
measures is, in Russia's view, causing an inconsistency with Article II:1 of the GATS.
7.123. Scrutinizing the relevant part of Russia's panel request, we note that the first paragraph
quoted above "plainly connects" the alleged violation of Article II:1 of the GATS with the
infrastructure exemption measure. It also explains that the alleged violation of Article II:1 of the
GATS is caused by a less favourable treatment of services and service suppliers under the NEL and
OPAL infrastructure exemption decisions than services and service suppliers under other
infrastructure exemption decisions.
7.124. We recall that a claim developed in the course of panel proceedings must present the same
problem as the one presented by a brief summary of the legal basis of the complaint in a panel
request, in order for such a claim to f all within a panel's terms of reference, pursuant to
Articles 7.1 and 6.2 of the DSU. 435 Therefore, in order to decide on whether Russia's Claim 27, as
described in Russia's response to Panel question No. 5, falls within our terms of reference, we
must determine whether it presents the same problem as Russia's panel request.
7.125. From Russia's response to Panel question No . 5, we understand that the problem
presented by Russia's Claim 27 concerns allegedly less favourable treatment of services and
service suppliers under the NEL and OPAL infrastructure exemption decisions when compared to
services and service suppliers subject to the upstream pipeline networks measure.436
7.126. In our view, this problem is not the same as the problem presented by Russia in its panel
request, which concerns allegedly less favourable treatment of services and service suppliers
subject to the NEL and OPAL infrastructure exemption decisions than services and service suppliers
subject to other infrastructure exemption decisions.
7.127. Thus, while the problem presented in Russia's panel request focuses on the comparison of
the treatment of services and service suppliers under the NEL and OPAL decisions vis -à-vis the
treatment of services and services suppliers subject to the upstream pipeline networks measure,
the problem presented in the description of Claim 27 in its response to Panel question No. 5
focuses on the comparison of the treatment of services and service suppliers under the NEL and
OPAL infrastructure exemption decisions vis -à-vis the tre atment of services and service suppliers
subject to other infrastructure exemption decisions. Therefore, to the extent Russia's Claim 27
challenges the infrastructure exemption me asure, it presents a different problem from the one
presented by Russia in its panel request and consequently falls outside our terms of reference.
7.128. Turning to the second paragraph of Russia's panel request quoted above, we observe that
it "plainly connects" the upstream pipeline networks measure with an alleged violation of
Articles I:1 and III:4 of the GATT 1994. This paragraph explains that the alleged violation of
Articles I:1 and III:4 of the GATT 1994 stems from a more favourable trea tment of domestic and
third-country gas transported and placed on the EU market through upstream pipeline networks
than Russian gas transported and placed on the market by service suppliers that are subject to the
unbundling requirements. However, this paragraph does not mention Article II:1 of the GATS, and
therefore, does not "plainly connect" the upstream pipeline networks measure with an alleged
violation of Article II:1 of the GATS. This means that, to the extent Russia's Claim 27 challenges
the upstream pipeline networks measure, this claim falls outside our terms of reference because

433 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 162.
434 Appellate Body Report, EC – Selected Customs Matters, para. 130. (emphasis original)
435 See, above paras 7.96- 7.98.
436 Russia's response to Panel question No. 5, para. 50. We note that, despite stating that its Claim 27
challenges the upstream pipeline networks measure instead of the infrastructure exemption measure, Russia's
response to Panel question No. 4 presents the same problem. (Russia's response to Panel question No. 4,
para. 21).

Russia's panel request fails to provide a brief summary of the legal basis of the complaint with
respect to this claim.
7.129. In view of the foregoing, we conclude that, regar dless of whether Russia's Claim 27
challenges the infrastructure exemption measure or the upstream pipeline networks measure, this
claim falls outside our terms of reference.
7.2.2.2.7 Russia's claims 7, 9 and 11 against the unbundling measure in the Directive
7.130. In its response to Panel question No. 5, Russia included Claims 7, 9 and 11, characterizing
these as "as applied" claims. These claims concern Russia's challenge against the unbundling
measure under Article II:1 of the GATS and Articles III:4 and I:1 of the G ATT 1994, respectively.
They mirror Russia's Claims 6, 8 and 10, characterized as claims of de facto violation, inasmuch as
they concern the unbundling measure and allege a violation of the same legal provisions.437
7.131. The European Union objects to Russia's in clusion of Claims 7, 9 and 11 in its response to
Panel question No. 5, and requests the Panel to rule that these claims are outside the Panel's
terms of reference.438 The European Union argues that Russia's panel request fails to identify the
specific measures challenged by Claims 7, 9 and 11 and to provide a brief summary of the legal
basis of the complaint sufficient to present the problem clearly in respect of these claims. The
European Union submits that Russia's panel request does not identify the specif ic instance of
application of unbundling in Lithuania challenged by Claims 7, 9 and 11 ;439 and fails to describe
the problem covered by Claims 7 and 9, namely the comparison of the instance of application of
unbundling in Lithuania with the instances of appl ication of unbundling in Germany (Claim 7) and
France (Claim 9).440
7.132. Russia responds that the European Union's arguments regarding Claims 7, 9 and 11 should
be rejected. 441 Russia submits that the relevant paragraph on pages 2 through 3 of its panel
request fully describes the specific instance of application of the unbundling measure in Lithuania,
from which "as applied" Claim 7 is derived. 442 Therefore, in Russia's view, its panel request meets
the requirements of Article 6.2 of the DSU in respect of Claims 7, 9 and 11. Russia adds that it was
not required to mention Germany, France or any other EU member State that permits the ISO
and/or ITO models for the purposes of comparison.443
7.133. We observe that the European Union argues that Russia's panel request does not me et the
third and the fourth requirements of Article 6.2 of the DSU in respect of Russia's Claims 7, 9
and 11. In our a nalysis, we first determine whether Russia's panel request identifies the specific
measure challenged by this claim, in accordance with th e third requirement of Article 6.2 of the
DSU. If we conclude that Russia's panel request complies with the third requirement of Article 6.2
of the DSU, we will examine whether Russia's panel request provides a brief summary of the legal
basis of the complaint sufficient to present the problem clearly, in accordance with the fourth
requirement of Article 6.2 of the DSU.

437 In its first written submission, Russia explicitly refers to the unbundling measure under the Directive
as "enabling" the European Union member States to draw regulatory distinctions between services, service
suppliers and gas from different WTO Members by implementing different unbundling models (Russia's first
written submission, paras. 326, 353, 371, and 810). Russia then argues that the existence of these distinctions
results in the violation of Articles II:1 of the GATS and Articles III:4 and I:1 of the GATT 1994. (Russia's first
written submission, paras. 314-316, 326, 361, and 371). These arguments correspond to Russia's Claims 6, 8,
and 10 summarized in its response to Panel question No. 5. (Russia's response to Panel question No. 5,
paras. 31-32, 34-35 and 37).
438 European Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 23.
439 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 16 and
19-20.
440 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 17 and 21.
441 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, paras. 15-16.
442 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, paras. 18-19.
443 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, para. 20.

7.134. Based on Russia's description and summaries of Cla ims 7, 9 and 11 in its response to
Panel question No. 5, we understand that these claims challenge a specific instance of application
of unbundling in Lithuania. Consequently, this specific instance of application of unbundling is a
challenged measure that must be identified in Russia's panel request in accordance with the third
requirement of Article 6.2 of the DSU. In considering whether Russia's panel request identifies this
specific measure, we scrutinize the relevant text of Russia's panel request, which reads as follows:
1. Unbundling, Third -Country Certification and Infrastructure Exemption
Measures
The Directive requires "vertically integrated natural gas undertakings" ("VIUs") to
undergo "unbundling" and to separate their transmission system assets , or the
transmission system operator ("TSO"), from assets relating to production and supply.
The Directive grants Member States discretion to select from among three alternative
unbundling models: ownership unbundling, independent system operator ("ISO") , and
independent transmission operator ("ITO"). Ownership unbundling is the most
restrictive model. It precludes the same person or persons from exercising control
over an undertaking performing any of the functions of production or supply and
exercising control or any right over the TSO or the transmission system, and vice
versa. Among the rights that ownership unbundling precludes is the holding of a
majority share. The ISO model, in contrast, permits the VIU to retain full ownership of
the TSO upon designation of an outside entity, the ISO, to operate the TSO. The ITO
model is even less restrictive and permits VIUs to maintain control and operate the
TSO through a separate subsidiary.
…
In addition, in certain Member States that have adopted implemen ting legislation
requiring ownership unbundling, including Lithuania and Estonia, the Russian supplier
of pipeline transport services has been required to cede control in the TSO or will be
required to do so in the future on the basis of existing legislati on. In other Member
States that permit the ISO and/or ITO models, VIUs that are owned or controlled by a
person or persons of other third -countries have been permitted to adopt either of
those unbundling models, and thus to maintain ownership and varying degrees of
control over both the TSO and production or supply portions of the VIU. The Russian
Federation considers that these measures result in less favorable treatment being
accorded to pipeline transport services and service suppliers of Russia than t o like
services and service suppliers of other third-countries, contrary to the EU's obligations
under GATS Article II:1. Moreover, contrary to the requirements of Article I:1 of GATT
1994, the fact that third -country natural gas suppliers in certain Membe r States have
been permitted to adopt the ISO or ITO unbundling models grants an advantage,
favor, privilege or immunity to the natural gas imported from those third -countries
that is not immediately and unconditionally accorded to natural gas originating in
Russia, which is transported and placed on the market in Member States that require
ownership unbundling. Such Russian-origin natural gas is also accorded less favorable
treatment than domestic natural gas that is transported and placed on the market in
Member States permitting the ISO and/or ITO models, contrary to the EU's obligations
under Article III:4 of GATT 1994.444 (footnotes omitted)
7.135. On the basis of our scrutiny of the relevant part of Russia's panel request quoted above,
we establish that the sp ecific measure at issue identified in Russia's panel request in accordance
with Article 6.2 of the DSU is the unbundling measure based on the provisions of the Directive.
7.136. However, we do not find a clear indication in the relevant part of its panel request that
Russia challenges a specific instance of application of unbundling in Lithuania. While Russia's panel
request refers to the implementation of unbundling in Lithuania, and the effect thereof 445, we do

444 Russia's panel request, pp. 2–3.
445 The relevant part of Russia's panel request states that "in certain Member States that have adopted
implementing legislation requiring ownership unbundling, including Lithuania and Estonia, the Russian supplier
of pipeline transport services has been required to cede control in the TSO or will be required to do so in the
future on the basis of existing legislation." (Russia's panel request, p. 2).

not consider that this reference provides a sufficiently clear indication that a particular instance of
application of unbundling in Lithuania is a measure challenged by Russia.
7.137. As clarified by the Appellate Body, Article 6 .2 of the DSU requires the level of
"particularity" in the identification of the measure at issue sufficient to indicate the nature of the
measure and the gist of what is at issue. 446 We do not consider that Russia's reference to the
implementation of unbund ling in Lithuania, and the effect thereof, provide s a sufficient indication
that the nature of the measure it challenges is the application of unbundling in Lithuania.
Therefore, in our view, Russia has failed to provide a sufficiently clear indication tha t its challenge
is directed at a specific instance of application of unbundling in Lithuania in addition to the
unbundling measure based on the provisions of the Directive.
7.138. Thus, having carefully reviewed Russia's panel request, we consider that Russia's panel
request does not identify any instance of application of unbundling in Lithuania with sufficient
specificity as to comply with the third requirement of Article 6.2. Consequently, we find that
Russia's Claims 7, 9 and 11 pursuing a challenge against a specific instance of application of
unbundling in Lithuania fall outside our terms of reference.
7.139. However, we note that, under the third requirement of Article 6.2, a panel request does
not need to identify a measure that a complaining party refers to in its subsequent submissions as
part of its argumentation or evidence in seeking to prove its claim. 447 Therefore, we confirm that,
to the extent Russia refers to the application of unbundling in Lithuania, and the effect thereof, in
its subsequent submissions, as relevant evidence in support of its Claims 6, 8, and 10, it falls
within the scope of our examination.
7.2.2.2.8 Russia's alternative claims 29 through 31 against the TEN-E measure
7.140. In its response to Panel question No. 5, Russia included alternative Claims 29 through 31 ,
characterizing these as "as applied" claims. These "as applied" claims mirror Russia's main
Claims 29 through 31 inasmuch as they concern the challenge against the TEN -E measure and
allege the violation of Article II:1 of the GATS and Articles III:4 and I:1 of the GATT 1994.448
7.141. The European Union objects to Russia's inclusion of alternative "as applied" Claims 29
through 31 in its response to Panel question No. 5, and requests the Panel to rule that these
claims fall outside the Panel's terms of reference. 449 The European Union argues that, while the
panel request makes no reference to "as applied" claims and does not identify any "specific
instances" of application of the TEN -E measure, Russia is now advancing "as app lied" claims (in
the alternative to its de facto claims) against "specific instances of application" of the TEN -E
measure.450 The European Union argues further that this new characterization is contradicted by
Russia's own first written submission, which mak es de jure claims and, alternatively, de facto
claims against the TEN -E measure, but does not advance any "as applied" claims against specific
instances of application of the TEN-E measure.451

446 Appellate Body Report, US – Continued Zeroing, para. 169. The Appellate Body observed as follows:
"Moreover, although a measure cannot be identified without some indication of its contents, the identification
of a measure within the meaning of Article 6.2 need be framed only with sufficient particularity so as to
indicate the nature of the measure and the gist of what is at issue." (Appellate Body Report, US – Continued
Zeroing, para. 169). (emphasis added)
447 Panel Report, India – Agricultural Products, paras. 7.44-7.45 and 7.54.
448 We note that, in its first written submission, Russia argues that the TEN-E measure is inconsistent
with Articles II:1 of the GATS and I:1 and III:4 of the GATT 1994 alleging that it operates in such a way as to
deny the infrastructure projects that benefit Russian gas, services and service suppliers eligibility for being
designated as projects of common interest. See Russia's first written submission, paras. 753-785 (concerning
Article II:1 of the GATS); 786-802 (concerning Article III:4 of the GATT 1994); and 803-809 (concerning
Article I:1 of the GATT 1994). These arguments are also reflected in the summaries of Russia's main Claims 29
through 31 provided in Russia's response to Panel question No. 5. (Russia's response to Panel question No. 5,
paras. 52-53).
449 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 72 and 76.
450 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 69-70
and 73-74.
451 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 71 and 74.

7.142. In response to the European Union's arguments, Russia submits th at section 3 on pages 8
and 9 of the panel request makes clear that Russia challenges both the TEN -E measure "as such"
and its specific instances of application on an "as applied" basis.452 Russia contends that the text of
its panel request is sufficiently p recise as to have enabled the European Union, as the respondent,
to draw this conclusion.453
7.143. In our view, the European Union's arguments raise the issue of whether Russia's panel
request has identified the specific measure challenged by Russia's alternative "as applied"
Claims 29 through 31 under the third requirement of Article 6.2 of the DSU.
7.144. On the basis of Russia's description and summaries of these claims, provided in response
to Panel question No. 5, we consider that Russia's "as applied" Claims 29 th rough 31 pursue a
challenge against the specific instance(s) of application of the TEN -E Regulation, which, in Russia's
view, result(s) in the absence of "Russian projects" designated as PCIs. 454 Therefore, specific
instance(s) of application of the TEN -E Regulation constitute a challenged measure that must be
identified in the panel request in accordance with the third requirement of Article 6.2. In
considering whether Russia's panel request identifies any such specific measure, we scrutini ze the
relevant text of Russia's panel request, which reads as follows:
3. "Projects of Common Interest" Measures
The EU has also enacted regulations establishing "trans -European energy
infrastructure priority corridors and areas," including four specific "priority gas
corridors." The principal regulation, Regulation (EU) No 347/2013, is referred to as
the "TEN -E regulation." It sets forth criteria for identifying "projects of common
interest" or "PCIs," which are accorded priority status, including within priority gas
corridors. The TEN -E regulation provides for the implementation of PCIs, including
those concerning natural gas, to be facilitated by "streamlined and efficient permit
granting procedures," "improved regulatory treatment" and EU financial assistance.
In Octob er 2013, the Commission issued an amendment to the TEN -E regulation
setting out the initial list of PCIs. These include a number of projects that promote and
facilitate the production and transportation of domestic natural gas, as well as the
importation a nd transportation of gas from various third -countries, including
numerous LNG projects. However, the list of PCIs excludes any project designed to
facilitate the importation or transportation of natural gas from Russia. The Russian
Federation is not aware of any such projects currently under consideration for
designation as a PCI.
The Russian Federation considers that, contrary to GATS Article II:1, these measures
accord Russian services and service suppliers less favorable treatment than is
accorded to l ike services and service suppliers of other third -countries, which benefit
from having projects listed as PCIs. Natural gas originating in third -countries that is
transported and placed on the EU market through pipelines or other infrastructure
listed as PCIs is also accorded an advantage, favor, privilege or immunity that is not
immediately and unconditionally accorded to natural gas originating in Russia,
contrary to Article I:1 of GATT 1994. Such Russian-origin natural gas is also accorded
less favorable treatment than domestic natural gas that is transported and placed on
the market through pipelines or other infrastructure listed as PCIs, in a manner
inconsistent with Article III:4 of GATT 1994.455 (footnote omitted)
7.145. We observe that the first paragraph quoted above identifies the measure challenged by
Russia. This measure (the TEN -E measure) comprises the TEN -E Regulation, setting forth the

452 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, para. 74.
453 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, para 74.
454 Russia's response to Panel question No. 5, paras. 52–53. In respect of its Claim 29, Russia explains
that it "challenged specific instances of application by the EU of the TEN-E Measure and contended that, by
excluding Russian projects from designation as projects of common interest (or 'PCIs'), 'as applied,' the TEN-E
Measure provides Russian services and service suppliers less favourable treatment than like services and
service suppliers of other countries". (Russia's response to Panel question No. 5, para. 52).
455 Russia's panel request, p. 8.

criteria for identifying the projects of common interest and the legal regime for such projects, and
its amendment, setting out the list of projects of common interest. However, we do not find in this
paragraph a clear indication that Russia challenges any specific instance(s) of application of the
TEN-E measure. Russia's panel request only refers to the absence of "p rojects designed to
facilitate the importation or transportation of natural gas from Russia" from the list of projects of
common interest.
7.146. As already noted, the level of "particularity" in the identification of the measure at issue,
under the third requirement of Article 6.2 of the DSU, should be sufficient to indicate the nature of
the measure and the gist of what is at issue. 456 We do not deny that the application of the criteria
for PCI designation set out in the TEN -E Regulation by the Commission may res ult in the absence
of certain projects from the list of PCIs. However, to our mind, simply pointing to this outcome
does not provide a sufficient indication that the nature of the challenged measure is the application
of the criteria for the identification of the projects of common interest. Thus, we consider that
Russia's panel request does not provide a sufficient indication that any specific instance(s) of the
application of these criteria, in addition to the criteria themselves, constitutes the challenged
measure.
7.147. In view of the foregoing, we find that Russia's panel request has not identified any specific
instance(s) of the application of the TEN -E measure with sufficient specificity in order to meet the
third requirement of Article 6.2. As a result, Russia's alternative "as applied" Claims 29 through 31
fall outside our terms of reference.
7.148. However, we note that our decision does not preclude us from rev iewing the alleged
absence of "projects designed to facilitate the importation or transportation of natural gas from
Russia" as evidence submitted in support of Russia's remaining Claims 29 through 31.457
7.2.2.3 Decision on the terms of reference issues not resolved in the second preliminary
ruling
7.149. We recall that, in the preliminary ruling of 10 November 2016, guided by the consideration
of ensuring an objective assessment of the matter before us, we refrained from deciding, at that
stage in the proceedings, on ce rtain of the terms of reference objections covered by the European
Union's request for a preliminary ruling. These objections concerned the following matters: (a)
Lithuania's grant of priority to natural gas supplied by Litgas UAB (Litgas) through the Klai peda
LNG Terminal and the supply agreement between Litgas and Statoil in respect of Russia's claim
against the unbundling measure in the Directive under Article I:1 of the GATT 1994, referred to in
Russia's response to Panel question No. 5 as Claim 10 458; (b ) Articles 20(5) and 29(4)(3) of
Lithuania's Law on Natural Gas and Section 123 of Hungary's Gas Act 459 (additional conditions) in
respect of Russia's claim against the third -country certification measure in the national
implementing laws of Croatia, Hungary and Lithuania under Article XVII of the GATS, referred to in
Russia's response to Panel question No. 5 as Claim 15; and (c) Commission certification opinions
regarding TIGF and DESFA in respect of Russia's claim against the third -country certification
measure in the Directive under Article II:1 of the GATS, referred to in Russia's response to Panel
question No. 5 as Claim 17. We address each of these terms of reference objections below.
7.2.2.3.1 Lithuania's grant of priority to na tural gas supplied by Litgas through the
Klaipeda LNG Terminal and the supply agreement between Litgas and Statoil
7.150. In its first written submission, Russia refers to Lithuania's gran t of priority to na tural gas
supplied by Litgas through the Klaipeda LNG Terminal and the supply agreement between Litgas

456 Appellate Body Report, US – Continued Zeroing, para. 169.
457 See, above para. 7.139. See also Panel Report, India – Agricultural Products, paras. 7.44–7.45 and
7.54.
458 In light of the Panel's finding that Russia's Claim 11 fell outside its terms of reference, the Panel did
not consider it necessary to rule on the European Union's objections concerning Russia's reference to
Lithuania's grant of priority to natural gas supplied by Litgas through the Klaipeda LNG Terminal and the supply
agreement between Litgas and Statoil in its first written submission in the context of this claim. (See fn 10 of
the preliminary ruling of 10 November 2016).
459 The specific provisions of Hungary's Gas Act referred to by Russia in its first written submission are
Sections 123(5) and 123(6) (Russia's first written submission para. 431). In our analysis below, we focus on
these two sections.

and Statoil in the context of its claim against the unbundling measure under Article I:1 of the
GATT 1994. 460 The European Union objects to Russia's re ference to these circumstances and
submits that Russia's claim regarding an alleged priority of purchasing natural gas imported
through the Klaipeda LNG terminal in Lithuania is outside the Panel's terms of reference because
this measure was not identified, nor the claim mentioned, in Russia's panel request. 461 According
to the European Union, both Lithuania's grant of priority to natural gas supplied by Litgas through
the Klaipeda LNG Terminal and the five -year deal between Statoil and Litgas "have nothing to do
with the unbundling measure in Directive 2009/73/EC that Russia challenges" 462 and Russia's
panel request does not mention these measures or claims.463
7.151. Russia indicated that it does not a rgue that Lithuania's grant of priority to na tural g as
supplied by Litgas through the Klaipeda LNG Terminal and the supply agreement between Litgas
and Statoil constitute challenged measures. 464 Russia further clarified that it refers to these
arrangements as examples of the alleged discrimination. 465 In light of Russia's clarifications, in the
preliminary ruling of 10 November 2016, we indicated that we would not consider Lithuania's grant
of priority to na tural gas supplied by Litgas through the Klaipeda LNG Terminal and the supply
agreement between Litgas and Statoil as challenged measures in respect of Russia's Claim 10. 466
However, we declined to rule at that stage of the proceedings on whether Russia's reference to
Lithuania's grant of priority to natural gas supplie d by Litgas through the Klaipeda LNG Termin al
and the supply agreement between Litgas and Statoil in its first written submission constituted a
separate claim that fell outside our terms of reference.
7.152. Turning to our consideration of this issue, we observe that, pursuant to Articles 7.1
and 6.2 of the DSU, we are bound by our terms of reference only with respect to our review of
measures and claims, but not evidence. In order to fall within our terms of reference, measures
and claims must be included in a panel request in accordance with Article 6.2 of the DSU. 467
However, Article 6.2 of the DSU does not require that evidence a complainant relies on in
advancing its claims be included in a panel request. 468 Thus, while our terms of reference limit the
scope of our review to those measures and claims that have been included in a panel request, they
do not limit the scope of our review of evidence.
7.153. Having conducted a careful examination of Russia's reference to the Klaipeda LNG Terminal
and the supply agreement between Litgas and Statoil in its first writt en submission, in light of
Russia's further submissions to the Panel, we understand that Russia refers to these circumstances
as evidence in support of its claim against the unbundling measur e under Article I:1 of the
GATT 1994 (Claim 10). Thus, we conside r that, by referring to the Klaipeda LNG Terminal and the
supply agreement between Litgas and Statoil, Russia is not presenting a different problem than
that presented in its panel request , or asserting a separate claim , but rather refers to evidence in

460 Russia's first written submission, paras. 374–375.
461 European Union's first written submission, paras 421–422; and comments on Russia's response to
462 European Union's first written submission, para. 421.
463 European Union's first written submission, paras. 421-422; and comments on Russia's response to
464 Russia's response to Panel question No. 17, para. 106. See also Russia's comments on the European
Union's comments on Russia's response to Panel question Nos. 5 and 17, para. 21.
465 Russia's response to Panel question No. 17, para 106.
466 The European Union objected to Russia's reference to these circumstances in the context of Russia's
Claims 10 and 11. (European Union's comments on Russia's response to Panel question Nos. 5 and 17,
para. 22). As we found Claim 11 to fall outside of our terms of reference, we did not consider it necessary to
decide in the preliminary ruling of 10 November 2016 on the European Union's objections concerning Russia's
reference to Lithuania's grant of priority to natural gas supplied by Litgas through the Klaipeda LNG Terminal
and the supply agreement between Litgas and Statoil in its first written submission in the context of this claim.
See, above paras. 7.138. -7.139 and fn 458.
467 As clarified by the Appellate Body, the measures and claims together constitute the "matter referred
to the DSB". (Appellate Body Reports, Guatemala – Cement I, para. 72; US – Carbon Steel, para. 125;
Australia – Apples, para. 416; EC and certain member States – Large Civil Aircraft, para. 639; and China – Raw
Materials, para. 219) (emphasis original)
468 We recall that the panel in India – Agricultural Products opined as follows:
Like previous panels and the Appellate Body, we are of the view that a measure to which a party
refers solely for the purpose of making a comparison with a cha llenged measure in respect of a
discrimination claim may serve as evidence in the argumentation in support of that claim, and
does not in itself constitute a measure that must be identified in a panel request by virtue of
Article 6.2 of the DSU. (Panel Report, India – Agricultural Products, para. 7.53).

support of its claim against the unbundling measure under Article I:1 of the GATT 1994 (Claim
10). In light of this , we need not make a ruling on whether Lithuania's grant of priority to natural
gas supplied by Litgas through the Klaipeda LNG Terminal and th e supply agreement between
Litgas and Statoil fall within our terms of reference. We consider the relevance and weight of this
evidence in the appropriate part of this Report.
7.2.2.3.2 Additional conditions in respect of the third -country certification measure in
the national implementing laws of Croatia, Hungary and Lithuania
7.154. As noted above, in advancing its claim against the third -country certification measure in
the national implementing laws of Croatia, Hungary and Lithuania under Article XVII of the GATS,
Russia challenges certain additional conditions in Articles 20(5) and 29(4)(3) of Lithuania's Law on
Natural Gas, and Sections 123(5) and (6) of Hungary's Gas Act.469
7.155. The European Union submits that the additional conditions in Sections 123(5) and (6) of
Hungary's Gas Act and Articles 20(5) and 29(4)(3) of Lithuania's Law on Natural Gas challenged by
Russia are outside the Panel's terms of reference. 470 According to the European Union, Russia
failed to identify, in its panel request, the challenged measures in respect of these provisions. 471
The European Union notes that the meas ures challenged pursuant to Russia's panel request
consist of Croatia's, Hungary's and Lithuania's "versions" of the security of supply requirement of
Article 11 of the Directive. 472 In the European Union's view, the mentioned provisions do not
directly implement the security of supply requirement of Article 11 of the Directive, and therefore,
cannot be considered to have been included in Russia's panel request.473 In addition, the European
Union argues that the "problem" referred to by Russia in relation to ea ch of the mentioned
provisions is not presented with sufficient clarity in the panel request.474
7.156. In response to the European Union's terms of reference objections, Russia submits that, by
identifying the EU member State's "versions" of the third -country cer tification measure in the
panel request, Russia has not limited the scope of its potential claims to only those provisions that
correspond precisely to the terms of Article 11 of the Directive. 475 Russia therefore argues that
Sections 123(5) and (6) of Hunga ry's Gas Act and Articles 20(5) and 29(4)(3) of Lithuania's Law
on Natural Gas are within the Panel's terms of reference.476
7.157. We note that the European Union's terms of reference objections with respect to Russia's
challenge against Sections 123(5) and (6) of Hungary's Gas Act and Articles 20(5) and 29(4)(3) of
Lithuania's Law on Natural Gas are based on the alleged failure of Russia to identify these
provisions and to provide a brief summary of the legal basis of the complaint in its panel request.
The European Union thus argues that Russia's panel request fails to comply with the third and
fourth requirements of Article 6.2 of the DSU.
7.158. We note that the relevant part of Russia's panel request provides as follows:
Next, the Directive requires that TSOs in each Member State be certified as complying
with the relevant unbundling requirements. However, when certification is requested
by a transmission system owner or TSO controlled by a person or persons from a
third-country, the Directive requires that the reque st be refused unless it is
demonstrated that certification "will not put at risk the security of supply" of the

469 Russia's first written submission, paras. 430–441 and 446.
470 European Union's first written submission, paras. 546-551 and 553–556; and comments on Russia's
response to Panel question Nos. 5 and 17, paras. 34, 40 and 45.
471 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 29-30, 36-
38 and 41-43.
472 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 29-30, 36-
38 and 41-43.
473 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 29-30, 36-
38 and 41-43.
474 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 31-33, 39
and 44.
475 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, paras. 34, 40 and 44.
476 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, paras. 35, 40 and 45.

Member State and the EU. 477 No similar requirement applies to certification requests
by domestic persons. Croatia, Hungary and Lithuania have impl emented versions of
this "third -country certification measure" in their respective legislation. The Russian
Federation considers these measures to be inconsistent, de jure, with the obligations
of Croatia, Hungary and Lithuania under GATS Article XVII to a ccord services and
service suppliers of any other Member treatment no less favorable than these three
Members' like services and service suppliers.478 (emphasis added)
7.159. We consider it appropriate to commence our examination of the European Union's
objections by first addressing whether Russia's panel request complies with the fourth requirement
of Article 6.2 of the DSU before proceeding to examine its compliance with the third requirement
of Article 6.2 of the DSU.
7.160. Based on our scrutiny of Russia's panel request, we find that Russia complies with the
fourth requirement of Article 6.2 of the DSU. In our view, by explaining that the "versions" of the
third-country certific ation measure implemented by Croatia, Hungary and Lithuania are
inconsistent with Article XVII of the GATS because they require the security of supply assessment
only in case of certification requests by third -country persons, and not domestic persons, Rus sia
has provided a brief summary of the legal basis of the compl aint sufficient to present the problem
clearly in accordance with Article 6.2 of the DSU. Russia's arguments with respect to
Sections 123(5) and (6) of Hungary's Gas Act and Articles 20(5) and 29(4)(3) of Lithuania's Law
on Natural Gas in its first writt en submission present the same problem .479 Therefore, in our
analysis below, we focus only on Russia's compliance with the third requirement of Article 6.2 of
the DSU regarding the identification of Sections 123(5) and (6) of Hungary's Gas Act and
Articles 20(5) and 29(4)(3) of Lithuania's Law on Natural Gas in its panel request.
7.161. We observe that the quoted paragraph of Russia's panel request does not explicitly
mention Sections 123(5) and (6) of H ungary's Gas Act and Articles 20(5) and 29(4)(3) of
Lithuania's Law on Natural Gas. However, this paragraph indicates that Russia brings a challenge
against the "versions of this 'third -country certification measure'" implemented in the laws of
Croatia, Hu ngary and Lithuania. Thus, in considering whether the mentioned provisions of
Hungary's Gas Act and Lithuania's Law on Natural Gas are identified in Russia's panel request in
accordance with the third requirement of Article 6.2 of the DSU, we need to exami ne two issues.
First, we need to determine whether Russia's reference in its panel request to the "versions of this
'third-country certification measure'" implemented in the laws of Croatia, Hungary and Lithuania
satisfies the third requirement of Article 6.2 of the DSU. Second, in case we answer the first
question in the affirmative, we will need to determine whether Russia's reference to the "versions
of this 'third -country certification measure'" covers Sections 123(5) and 123(6) of Hungary's Gas
Act and Articles 20(5) and 29(4)(3) of Lithuania's Law on Natural Gas.
7.162. Turning to the first question, we note that the second sentence of the paragraph quoted
above provides a reference to Article 11 of the Directive, which we understand to indicate that
"this third-country certification measure" means the third -country certification measure found in
Article 11 of the Directive. 480 Therefore, the implemented "versions" of the third -country
certification measure referred to in Russia's panel request are those that i mplement the third -
country certification required by Article 11 of the Directive. This sentence also describes the third -
country certification measure of Article 11 of the Directive as a measure requiring that a
certification request by a transmission syst em owner or TSO controlled by a person or persons
from a third country be refused, unless it is demonstrated that certification "will not put at risk the
security of supply" 481 of the EU member State and the European Union. From this description,
which broad ly corresponds to the text of Article 11 of the Directive, we further infer that the

477 (footnote original) Directive, Article 11.
478 Russia's panel request, p. 3.
479 Russia's first written submission, paras. 430–441 and 446.
480 Russia's panel request, p. 3 and fn 11. See also, above para. 7.158 and fn 478.
481 We note that both parties use the terms "security of energy supply", "security of supply", and "SoS"
interchangeably. (See, e.g., Russia's first written submission, paras. 63, 69, 454, 459, 510 and 512; and
second written submission, paras. 302, 303 and 347; and European Union's first written submission, paras.
177, 468, 471 and 480; and second written submission, paras. 36, 192, 193 and 301). We further note that
Article 11(3)(b) of the Directive uses the term "security of energy supply" and we proceed on the
understanding that all of the terms used by the parties refer to "security of energy supply".

"versions" of the third -country certification measure implemented in the national laws of Croatia,
Hungary and Lithuania are those that include the same requirement.
7.163. We r ecall that the Directive requires EU member States to implement its particular
provisions in national laws. 482 As we have determined above, Russia's panel request refers to
Article 11 of the Directive and explicitly mentions the requirement of the security o f energy supply
assessment stipulated therein. Russia then refers to the "versions of this 'third-country certification
measure'" implemented in the laws of Croatia, Hungary and Lithuania. Thus, given that Russia has
referred to Article 11 of the Directive , and moreover, explicitly mentioned the requirement of the
security of energy supply assessment prescribed by Article 11, we consider that Russia's reference
to the "versions of this 'third -country certification measure'" implemented in the laws of Croati a,
Hungary and Lithuania in its panel request is sufficiently specific to identify the challenged
measure in accordance with Article 6.2 of the DSU.
7.164. Having determined that the "versions" of the third -country measure implemented in the
laws of Croatia, Hun gary and Lithuania constitute a specific measure identified by Russia in its
panel request, in accordance with Article 6.2 of the DSU, we now proceed to examine whether
Sections 123(5) and 123(6) of Hungary's Gas Act and Articles 20(5) and 29(4)(3) of Lith uania's
Law on Natural Gas fall within the scope of such "versions". In our view, to be covered by the
reference to the "versions of this 'third -country certification measure'" in Russia's panel request,
the provisions of the national laws of Croatia, Hung ary and Lithuania need not reproduce the text
of Article 11 of the Directive verbatim. However, our analysis above requires us to ensure that
such provisions, at a minimum, possess the following two characteristics stemming from Article 11
of the Directive : (i) they must concern third -country TSO certification; and (ii) they must include
the requirement to conduct an assessment of the security of energy supply. Thus, in the
subsections below, we examine separately whether, on the basis of these two characte ristics,
Sections 123(5) and (6) of Hungary's Gas Act and Articles 20(5) and 29(4)(3) of Lithuania's Law
on Natural Gas constitute implemented "versions" of the third -country certification measure in
Hungary and Lithuania, respectively.
7.2.2.3.2.1 Sections 123(5) and 123(6) of Hungary's Gas Act
7.165. We recall that Russia challenges Sections 123(5) and 123(6) of Hungary's Gas Act as
providing an additional condition that must be satisfied by a third -country applicant for TSO
certification, aside from satisfying the conditi ons stipulated in Section 128/A of Hungary's Gas
Act.483
7.166. Section 128/A is located in sub -chapter "Certification Procedure" within Chapter XVI of
Hungary's Gas Act entitled "The Office" and governs specifically third -country TSO certification.484
There is no disagreement between the parties that Section 128/A of Hungary's Gas Act constitutes
a "version" of the third-county certification measure implemented in Hungary.485
7.167. In contrast, Sections 123(5) and 123(6) are contained in Chapter XIV of Hungary's Gas Act
entitled "Common Provisions Relating to Corporate Events". 486 As noted above, the European
Union argues that these Sections do not implement the third -country certification measure in
Hungary and therefore fall outside our terms of reference. 487 In determining w hether
Sections 123(5) and 123(6) of Hungary's Gas Act may be covered by the reference to the
"version" of the third-country certification measure implemented in Hungary, we are guided by the
analytical framework we have set out above in paragraph 7.164.
7.168. Therefore, below we examine whether these sections concern third -country TSO
certification and include the requirement to conduct an assessment of the security of energy

482 See, above para. 2.3.
483 Russia's first written submission, para. 431.
484 Hungary's Gas Act, (Exhibits EU-155/RUS-47), Section 128/A(1).
485 Russia's first written submission, para. 430; and European Union's first written submission,
para. 474.
486 Hungary's Gas Act, (Exhibits EU-155/RUS-47), Section 123.
487 European Union's first written submission, paras. 546-551; and comments on Russia's response to

supply. We commence our examination by scrutinizing the text of Sections 123(5) and 123(6) of
Hungary's Gas Act.
7.169. Sections 123(5) and 123(6) of Hungary's Gas Act provide as follows:
(5) The Office's resolution granting consent is required for the ex ecution of any
transaction that would allow a person or persons from a third country or third
countries to acquire control over a transmission system operator or the controlling
shareholder of a transmission system operator.
(6) The Office may refuse to g rant approval or render its approval conditional for the
transactions referred to in Subsections (2) and (5) above and in Subsection (1) of
Section 122, if they are deemed to pose any potential threat to the security of natural
gas supply , to public safety, to the enforcement of compliance with energy policy
objectives, to the discharge of activities subject to authorization under this Act, or the
regulations for determining the price of transmission, storage and distribution
services, and universal s ervices, and the regulations for determining the quality of
such services, furthermore, if the execution of such transactions would infringe upon
the pre-emption right notified to the Office according to Subsection (8).488
7.170. On the basis of the text of Sections 123(5) and 123(6), we note that Section 123(6) allows
the "Office"489 to refuse to grant approval or render its approval conditional for the transactions
referred to in Section 123(5) on the ground that such transactions "are deemed to pose any
potential threat" to "the security of natural gas supply ". Section 123(6) thus requires the Office to
conduct an assessment of the security of energy supply before approving a transaction referred to
in Section 123(5). In our view, this means that Section 123(6), re ad in conjunction with
Section 123(5), possesses one of the two characteristics necessary for them to constitute an
implemented "version" of the third-country certification measure in Hungary.
7.171. The remaining part of our analysis focuses on whether Sections 123(5) and 123(6) concern
third-country TSO certification and thus possess the other characteristic necessary for them to be
considered an implemented "version" of the third -country certification measure in the Directive by
Hungary. In this regard, we not e that the t hird-country certification measure in the Directive sets
out the grounds for the initiation of third -country certification in Articles 11(1) and 11(2) , and its
procedure in Articles 11(3) through 11(8).
7.172. Pursuant to Articles 11(1) through 11(2) of the Directive, the third -country TSO
certification procedure must be initiated in two situations: (i) certification is requested by a
transmission system owner or a TSO which is controlled by a person or persons from a third
country or third countries; (ii) the regulatory authority has acquired knowledge of any
circumstances that would result in a person or persons from a third country or third countries
acquiring control of the transmission system or the TSO. The certification procedure, pursuant to
Articles 11(3) through 11(8) of the Directive, involves inter alia a consideration by the relevant
NRA, and then by the Commission, of whether the certification will not put at risk the security of
energy supply, and issuing the decision by the NRA and the opinion of the Commission within the
set deadlines.
7.173. We note that transactions described in Section 123(5) of Hungary's Gas Act, and which
must be approved under Section 123(6), are those that would allow a person or persons from a
third country or third co untries to acquire control over a TSO or the controlling shareholder of a
TSO. Such transactions will be covered by Article 11(2) of the Directive as the " circumstances"
that would result in a person or persons from a third country or third countries acquiring control of
a transmission system or a TSO. As the circumstances referred to in Article 11(2) of the Directive
require third-country TSO certification490, it may be inferred that, by setting out transactions that
fall within such "circumstances", Section 123(5) of Hungary's Gas Act includes one of the grounds
for the initiation of third-country TSO certification procedure.

488 Hungary's Gas Act, (Exhibits EU-155/RUS-47), Sections 123(5) and 123(6). (emphasis added;
footnotes omitted)
489 The "Office" refers to Hungarian Energy and Public Utilities Office, which is Hungary's NRA for the
purposes of third-country TSO certification (Hungary's Gas Act, (Exhibits EU-155/RUS-47), Section 3(5)).
490 European Union's response to Panel question No. 146, para. 2.

7.174. However, Sections 123(5) and 123(6) of Hungary's Gas Act do not contain a textual
reference to "certification" and refer instead to " approval". Neither party has pointed us to any
provision in Hungary's Gas Act specifying the nature of this approval procedure.
7.175. The European Union argues that the approval procedure under Sections 123(5) and 123(6)
of Hungary's Gas Act is separate and independent from the certification procedure prescribed by
Article 11 of the Directive and implemented in Section 128/A of Hungary's Gas Act. The European
Union submits that approval under Section 123 is a legal pre -condition for registering with the
competent commercial court the transactions described in Sections 123(2) and 123(5), whereas
certification under Article 128/A is a procedure necessary to enable the controlled entity to operate
as a TSO in the gas transmission market. 491 The European Union points to different consequences
of the absence of approval under Section 123 and certification under Section 128/A: in the
absence of the former, the transactions concerned can have no legal effect under Hungarian law;
in the absence of the latter, the controlled entity will not be able to operate as a TSO.492
7.176. We observe, however, that the European Union has provided no evidence to substantiate
its arguments regarding the alleged differences between the ap proval procedure under
Sections 123(5) and 123(6) of Hungary's Gas Act, on the one hand, and the certification procedure
under Section 128/A of Hungary's Gas Act, on the other. The European Union has cited no
provision in Hungary's Gas Act prohibiting the Office from relying on the third -country TSO
certification procedure of Article 11 of the Directive, and implemented in Section 128/A of
Hungary's Gas Act, when granting its approval for transactions referred to in Section 123(5).
7.177. In fact, by subsequently stating that Section 123(5) of Hungary's Gas Act "complies with
the responsibilities of the Regulatory Authority deriving from para (1) and (2) of Article 11 of
Directive 2009/73/EC", the European Union appears to acknowledge an interlinkage between the
third-country TSO certification p rocedure and the approval of transactions under Sections 123(5)
and 123(6).493 Thus, we are not persuaded by the European Union's arguments that the approval
procedure under Sections 123(5) and 123(6) is separate and independent from the third -country
TSO certification procedure under Section 128/A.494
7.178. Our analysis above shows that there are two important features common to the approval
procedure under Sections 123(5) and 123(6) and certification procedure under Section 128/A.
These features include: (a) subst antially the same grounds to commence both procedures –
transactions granting control to persons from third countries over a TSO; and (b) the requirement
to conduct a security of energy supply assessment. Given these similarities, we find it plausible
that, when granting approval under Sections 123(5) and 123(6), the Office may consider the same
factors that it reviews in the context of third -country TSO certification under Section 128/A. The
European Union's statement that Section 123(5) of Hungary's Gas A ct complies with the
responsibilities of the Office deriving from Article 11(1) and 11(2) of the Directive is a further
confirmation that the third -country TSO certification procedure is directly relevant for the
procedure conducted by the Office under Sections 123(5) and 123(6).
7.179. In light of the above, we consider that the approval of transactions under Sections 123(5)
and 123(6) of Hungary's Gas Act is sufficiently closely related to the third-country TSO certification
procedure such that Sections 123(5) and 123(6) can be found to implement the third -country
certification measure of Article 11 of the Directive. Having previously concluded that
Section 123(6), read in conjunction with Section 123(5), contains a requirement to conduct a
security of energy su pply assessment, we therefore find that Sections 123(5) and 123(6) of
Hungary's Gas Act constitute an implemented "version" of the third -country certification measure
in Hungary identified in Russia's panel request.
7.2.2.3.2.2 Article 20(5) of Lithuania's Law on Natural Gas
7.180. We observe that Article 20 of Lithuania's Law on Natural Gas is entitled "Licences and
Certificates in the Natural Gas Sector". 495 Article 20(5) of Lithuania's Law on Natural Gas requires

491 European Union's response to Panel question No. 150, paras. 13-14.
492 European Union's response to Panel question No. 150, paras. 13-14.
493 European Union's comments on Russia's response to Panel question No. 169(c), para. 43.
494 European Union's response to Panel question No. 150, para. 15.
495 Lithuania's Law on Natural Gas, (Exhibit RUS-136rev), Article 20.

that licenses for transmission, distribution, storage and liq uefaction be issued to a legal entity
established in the Republic of Lithuania or a unit of a legal entity or other organization of another
Member State established in the Republic of Lithuania. 496 As is clear from its text, Article 20(5)
does not possess ei ther characteristic necessary for it to be considered a "version" of the third -
country certification measure implemented in Lithuania: (i) it does not concern third -country
certification required by Article 11 of the Directive; and (ii) it does not include the requirement to
conduct a security of energy supply assessment. Therefore, we consider that Article 20(5) of
Lithuania's Law on Natural Gas does not constitute Lithuania's implemented "version" of the third -
country certification measure identified in Russia's panel request.
7.2.2.3.2.3 Article 29(4)(3) of Lithuania's Law on Natural Gas
7.181. Article 29(4)(3) of Lithuania's Law on Natural Gas provides that the NRA of Lithuania shall
designate a third -country TSO provided that it demonstrates that legitimate public securi ty
interests are protected. 497 The European Union maintains that Article 29(4)(3) of Lithuania's Law
on Natural Gas provides a requirement different from Lithuania's "version" of the third -country
certification measure, including the security of energy suppl y requirement, identified in Russia's
panel request.498
7.182. Russia, on the other hand, argues that its panel request does not limit its claim to onl y
those provisions of Lithuania' s law that correspond precisely to the terms of Article 11 regarding
"security of supply", directi ng it instead against Lithuania' s "version" of the third -country
certification measure.499 Russia thus submits that Article 29(4)(3) is part of Lithuania's "version" of
the third -country certification measure that the European Union applies only to third -country
applicants.500
7.183. In examining whether Article 29(4)(3) of Lithuania's Law on Natural Gas is an implemented
"version" of the third-country certification measure, we note that it is one of the three conditions a
third-country applicant must satisfy in order to be certified as a TSO in Lithuania. All three
conditions are provided in Article 29(4) of Lithuania's Law on Natural Gas (entitled "Designation of
a Transmission System Operator in Relation to Third Countries") as follows:
The Commission shall designate an operator provided that it demonstrates that:
1) it complies with the requirements of Chapter Four of this Law;
2) such designation will not put at risk energy supply and the security of such supply
of the Republic of Lithuania, another Member State or the European Union. …

496 The relevant parts of Article 20 of Lithuania's Law on Natural Gas read as follows:
Article 20. Licences and Certificates in the Natural Gas Sector
1. The following are licensed activities in the natural gas sector:
1) transmission;
2) distribution;
3) storage;
4) liquefaction;
5) supply;
6) activities of a market operator.
…
5. Licences for transmission, distribution, storage and liquefaction shall be issued to a legal entity
established in the Republic of Lithuania or a unit of a legal entity or other organisation of another
Member State established in the Republic of Lithuania. Licences shall be issued to persons who
are equipped with adequate technological, financial and managerial capacities which enable the
proper fulfilment of the conditions of licensed activities. Technological, fin ancial and managerial
capacities of persons and the procedure for their evaluation shall be established by the
Commission taking into account the following criteria:
…
(Lithuania's Law on Natural Gas, (Exhibit RUS-136rev), Article 20).

497 Lithuania's Law on Natural Gas, (Exhibit Rus-136rev), Article 29(4)(3).
498 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 37–38.
499 Russia's response to Panel question No. 147, para. 21.
500 Russia's response to Panel question No. 147, para. 21.

3) legitimate public security interests are protected.501
7.184. On the basis of the text of Article 29(4) of Lithuania's Law on Natural Gas, we consider
that Article 29(4)(3) of Lithuania's Law on Natural Gas concerns third-country TSO certification and
possesses the first characteristic necessary for it to be considered a "version" of the third -country
certification measure implemented in Lithuania.
7.185. As for the second characteristic, we observe that the requirement containe d in
Article 29(4)(3) of Lithuania's Law on Natural Gas refers to "legitimate public security interests"
rather than security of energy supply. Thus, on its face, Article 29(4)(3) contains no requirement
to conduct an assessment of the security of such sup ply. We understand that, under EU law, the
concept of "public security" has been interpreted as covering restrictions on the free movement of
goods or capital necessary to ensure the security of supply. 502 This raises the question of whether
the possibility of interpreting the concept of "public security" as including security of energy supply
brings Article 29(4)(3) of Lithuania's Law on Natural Gas within the scope of the implemented
"version" of the third -country certification measure referred to in Russia 's panel request. In
resolving this issue, we consider as follows.
7.186. Article 29(4)(2) of Lithuania's Law on Natural Gas, as quoted above, explicitly requires
Lithuania's NRA503 to conduct a security of energy supply assessment. This implies that, assuming
that Article 29(4)(3) could also cover security of energy supply, Lithuania's NRA would be able to
rely on either Article 29(4)2 or 29(4)(3) of Lithuania's Law on Natural Gas in order to conduct a
security of energy supply assessment. However, we note that, wh ile Article 29(4)(2) explicitly
requires such an assessment in every case of third -country TSO certification, Article 29(4)(3)
would require such a n assessment only in the event security of energy supply is found to fall
within the scope of "legitimate public security interests". Thus, in our view, for a security of energy
supply to be conducted under Article 29(4)(3) of Lithuania's Law on Natural Gas, an additional
interpretative step, subsuming security of energy supply within "legitimate public security
interests", would be necessary. We have not been presented with any evidence, and have no
reason to believe, that Lithuania's NRA would rather rely on the public security concept of
Article 29(4)(3), instead of Article 29(4)(2), to conduct a security of e nergy supply assessment in
the course of third-country TSO certification.
7.187. Russia further submits that Article 11(9) of the Directive "help [s] demonstrate" that
Article 29(4)(3) of Lithuania's Law on Natural Gas is within our terms of reference. 504 Article 11(9)
of the Directive provides that "[n]othing in this Article shall affect the right of Member States to
exercise, in compliance with Community law, national legal controls to protect legitimate public
security interests". Thus, Article 11(9) acknowledges the right of EU member States to protect
their "legitimate public security interests".
7.188. Russia argues, and we agree, that Article 29(4)(3) seeks to codify Lithuania's right "to
exercise … national legal controls to protect legitimate public securi ty inter ests" expressly
recognized by Article 11(9). 505 However, we do not consider that Russia's reference in its panel
request to the implemented "versions" of the third -country certification measure encompasses the
provisions of national laws implementing Article 11(9) of the Directive. As we have established on
the basis of our analysis of Russia's panel request, in order to be considered an implemented
"version" of the third -country certification measure, a provision of a national law that concerns
third-country TSO certification must include the requirement to conduct a security of energy
supply assessment.506 Article 11(9) of the Directive does not contain such a requirement.
7.189. In our view, the analysis conducted above provides sufficient grounds for us to disting uish
the concept of security of energy supply required by the third -country certification measure, as
described in Russia's panel request, from the concept of "legitimate public security interests". Even

501 Lithuania's Law on Natural Gas, (Exhibit RUS-136rev), Article 29(4).
502 European Union's response to Panel question No. 102, para. 247.
503 Lithuania's NRA is the National Control Commission for Prices and Energy, which is referred to as the
"Commission" in Article 29(4) of Lithuania's Law on Natural Gas (Lithuania's Law on Natural Gas, (Exhibit RUS-
136rev), Article 4(2)).
504 Russia's response to Panel question No. 147, para. 14.
505 Russia's response to Panel question No. 147, para. 16.
506 See, above para. 7.164.

in situations where the concept of public security may be interpreted to include security of energy
supply within its scope, the two concepts retain their distinct roles and separate legal existence in
the context of third -country TSO certification. Therefore, we consider that Article 29(4)(3) of
Lithuania's Law on Natural Gas does not constitute an implemented "version" of the third -country
certification measure in Lithuania identified in Russia's panel request.
7.2.2.3.2.4 Conclusion
7.190. Based on the foregoing, we find that Sections 123(5) and 123(6) of Hungary's Gas Act
constitute a "version" of the third -country certification measure implemented in Hungary referred
to in Russia's panel request and fall within our terms of reference. However, we conclude that
Articles 20(5) and 29(4)(3) of Lithuania's Law on Natural Gas are not covered by the reference to
a "version" of the third -country certification measure implemented in Lithuania in Russia's panel
request. Consequently, we find that Articles 20(5) and 29(4)(3) of Lithuania's Law on Natural Gas
fall outside our terms of reference.
7.2.2.3.3 Commission certification opinions regarding TIGF and DESFA
7.191. In its first written submission, Russia refers to the Commission's certification opinions
regarding Transport et Infrastructures Gaz France S.A. (TIGF) and Hellenic Gas Transmission
System Operator S.A. (DESFA), in the context of its claim against the third -country certification
measure under Article II:1 of the GATS (Claim 17).507 The European Union objects to Russia's
reference to these two opinions in its first written submission, ar guing that the "problem"
presented in Russia's panel request is different from the " problem" presented by Russia in its first
written submission.508 The European Union explains that the "problem" Russia has presented in its
panel request concerns the compari son between the Commission's opinions where the security of
energy supply assessment was conducted and other opinions where such an assessment was not
conducted.509 According to the European Union, by referring to the Commission's opinions
regarding TIGF and DESFA in its first written submission, Russia presents a different "problem",
which allegedly involves less stringent security of energy supply assessment.510
7.192. Russia subsequently indicated that it is not challenging the Commission's opinions
regarding TIGF and DESFA as the measures at issue and relies on these opinions as evidence
supporting its discrimination claim. 511 In light of Russia's clarifications, in the pre liminary ruling of
10 November 2016, we indicated that we would not consider the Commission's certification
opinions regarding TIGF and DESFA as challenged measures in respect of Claim 17. However, we
declined to rule at that stage of the proceedings on wh ether Russia's reference to those two
opinions in its first written submission constituted a separate claim that fell outside our terms of
reference.
7.193. On the basis of a careful examination of Russia's reference to the Commission's
certification opinions regarding TIGF and DESFA in its first written submission, in light of Russia's
further submissions to the Panel, we understand that Russia refers to these opinions as evidence
in support of its claim against the third -country certification measure under Ar ticle II:1 of the
GATS (Claim 17). However, we observe that, in relying on these opinions, Russia develops
Claim 17, in its written submissions, on the basis of a "problem" that differs from the "problem"
presented in Russia's panel request.
7.194. The problem p resented by Russia in its first written submission , when referring to the
Commission's certification opinions regarding TIGF and DESFA, is that a Russian service supplier is
treated less favourably than service suppliers of other third countries because the Commission
allegedly conducted the security of supply assessment regarding Gaz-System on more stringent

507 Russia's first written submission, paras. 455-500.
508 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 57-59.
509 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 57-58.
See also European Union's first written submission, paras. 579-581.
510 European Union's comments on Russia's response to Panel question Nos. 5 and 17, paras. 57-58.
See also European Union's first written submission, paras. 579-581.
511 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, paras. 51, 52 and 55.

conditions than the security of supply assessment regarding TIGF and DESFA.512 The relevant part
of Russia's panel request, on the other hand, provides as follows:
Moreover, various Member States have issued certification decisions, most of which
the European Commission ("Commission") has approved. Yet the Commission refused
to approve Poland's certification of Gaz-System S.A. as an ISO for the Polish section of
the Yamal-Europe Pipeline ("Yamal"). Having found that Yamal's owner, Europolgaz,
is jointly controlled by the Polish gas incumbent and a Russian pipeline transport
service supplier, the Commission required Poland to conduct a security of supply
assessment. Previously, however, the Commission approved certification of at least
two TSOs in Member States in which other third -country persons owned up to 100
percent interests, without any control or "security of supply" assessments having been
conducted. In so doing , contrary to its obligations under GATS Article II:1, the EU
accorded Russian services and service suppliers less favorable treatment than like
services and service suppliers of those third-countries.513 (emphasis added)
7.195. We note that the re levant part of Russia's panel request quoted above first states that the
Commission "required" Poland to conduct a security of supply assessment in respect of Gaz -
system S.A. 514 The panel request then continues by alleging that "[p]reviously, however, the
Commission approved certification of at least two TSOs in Member States in which other third -
country persons owned up to 100 percent interests, without any control or 'security of supply'
assessments having been conducted". 515 It then concludes that , "[i]n so doing", the European
Union accorded Russian services and service suppliers less favo urable treatment than like services
and service suppliers of those third countries, contrary to its obligations under Article II:1 of the
GATS.516
7.196. Therefore, based on the te xt of Russia's panel request, we consider that the problem
presented in Russia's panel request concerns the issue of whether or not to conduct a security of
supply assessment, and more particularly a comparison of the Commission's certification opinion
regarding Gaz-System, in which the Commission conducted a security of supply assessment, with
the Commission's opinions regarding the certification of TSOs allegedly owned by third persons , in
which the Commission did not conduct a security of supply assessment.
7.197. In contrast, t he problem presented by Russia in its first written submission, when
referring to the Commission's certification opinions regarding TIGF and DESFA, concerns the
substance of the security of supply assessments conducted by the Commission, and more
particularly a comparison of the security of supply assessment conducted by the Commission in its
certification opinion regarding Gaz -System with the security of supp ly assessment conducted by
the Commission in its opinions regarding the certification of TIGF and DESFA . Thus, we consider
that, in relying o n the Commission's certification opinions regarding TIGF and DESFA in its first
written submission , Russia presents a different problem from the one presented in its panel
request.
7.198. We recall that a claim developed in the course of panel proceedings must present the same
legal "problem" as the one presented by the brief summary of the legal basis of the complaint in
the panel request, in order for such a claim to fall within a panel's terms of reference, pursuant to
Articles 7.1 and 6.2 of the DSU. 517 We have concluded above that, in relying o n the Commission's
certification opinions regarding TIGF and DESFA in its first written submission, Russia presents a
different problem from the one presented in its panel request. On this basis, we find that the
aspects of Russia' s Claim 17 concerning the Commission's certification opinions regarding TIGF
and DESFA, fall outside our terms of reference. The relevance and weight of these opinions as
evidence in respect of Russia's Claim 17 developed within the limits of the problem presented in its
panel request are discussed in the appropriate part of this Report.

512 Russia's first written submission, paras. 482-489 and 491-500.
513 Russia's panel request, p. 3.
514 Russia's panel request, p. 3.
515 Russia's panel request, p. 3.
516 Russia's panel request, p. 3.
517 See, above paragraphs 7.96-7.98.

7.2.3 Other terms of reference issues
7.199. Three further terms of reference issues have been considered by the Panel outside of the
two preliminary rulings. Two of these issues have been raised by the Panel on its own motion and
one has been additionally raised by the European Uni on. Below, we first address the two issues
that we have raised on our own initiative, and then the additional terms of reference objection
submitted by the European Union.
7.2.3.1 Terms of reference issues raised by the Panel on its own motion
7.200. As clarified by the Appellate Body, if necessary, panels must address issues that go to the
root of their jurisdiction on their own motion. 518 The Appellate Body has further confirmed that the
compliance of a panel request with Article 6.2 of the DSU is an issue that concerns a panel's
jurisdiction.519 Following this guidance by the Appellate Body, in the present proceedings, we have
raised two jurisdictional issues on our own motion, which we address below.
7.2.3.1.1 Russia's de facto claim against the public body measure in the national
implementing law of Hungary
7.201. In its first and second written submissions, Russia claims that the public body measure
implemented in Croatia, Hungary and Lithuania is inconsistent de facto with Article XVII of the
GATS because the governments of Croatia, Hu ngary and Lithuania each own and control
undertakings "supplying both transmission and supply services … within their respective
territories".520 The relevant part of Russia's panel request provides as follows:
Moreover, the governments of Croatia and Lithu ania both own and control the TSO
and production or supply portions of the single VIU supplying pipeline transport
services in their respective territories. Therefore, the Russian Federation considers
that these measures are inconsistent, de facto, with th e obligations of Croatia and
Lithuania under GATS Article XVII.521 (underlining added)
7.202. In light of Russia's omission of the word "Hungary" in the relevant part of its panel request
quoted above, we invited the parties to provide their views as to whether the aspect of Russia's
claim against the public body measure that concerns the ownership and control by Hungary's
government of both transmission and supply undertakings in its territory (Russia's de facto claim
concerning Hungary) is within the Panel's terms of reference.
7.203. The European Union submits that Russia did not identify any Hungarian measure to
support its de facto claim and neither did Russia refer to an obligation by Hungary under the GATS
for this claim.522 Hence, in the European Union's view, Russia did not identify the specific measures
at issue and also failed to provide "a brief summary of the legal basis of the complaint sufficient to
present the problem clearly".523 Therefore, the European Union argues that Russia's de facto claim
concerning Hungary is outside the Panel's terms of reference.524
7.204. Russia argues that, at the time it submitted the panel request, Russia was unaware of any
publicly available evidence indicating that the government of Hungary owned and controlled both
the TSO and production or supply undertaking in Hungary. 525 Russia also points to the reference,
in the relevant part of its panel request, to "any amendments or extensions, any replacement
measures, any renewal measures, any other implementing measures or legal instruments, and
other related measures of the foregoing". 526 Russia further emphasizes that it included in its panel
request a de facto claim concerning the ownership and control of the entire transmission and

518 Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 36.
519 Appellate Body Reports, Argentina – Import Measures, para. 5.11.
520 Russia's first written submission, para. 285. See also Russia's first written submission, paras. 235
and 285–303; response to Panel question No. 5, para. 29; and second written submission, paras. 188–197.
521 Russia's panel request, p. 2.
522 European Union's response to Panel question No. 148, para. 11.
523 European Union's response to Panel question No. 148, para. 11.
524 European Union's response to Panel question No. 148, para. 11.
525 Russia's response to Panel question No. 148, para. 29.
526 Russia's response to Panel question No. 148, para. 30.

supply systems by the governments of Croatia and Lithuania withi n their respective territories. 527
Russia thus argues that, viewed in this context and in light of Russia’s lack of information, its panel
request provided the European Union with adequate notice of Russia’s intention to pursue its de
facto claim concerning Hungary.528
7.205. In considering whether Russia's de facto claim concerning Hungary falls within our terms of
reference, we examine whether Russia has identified the measure challenged by this claim and
provided a brief summary of the legal basis of the complaint in respect of this claim in its panel
request, as required by Article 6.2 of the DSU.
7.206. We note that, in the relevant part of the panel request quoted above, Russia refers to
"these measures", which in its view are inconsistent, de facto, with the obligati ons of Croatia and
Lithuania under Article XVII of the GATS. We understand that "these measures" refer to the
measures Russia has described in its panel request as follows:
The Directive also provides that, when the owner of the VIU is the Member State or
another public body, two separate public bodies exercising control over the TSO and
over an undertaking performing production or supply functions shall be deemed not to
be the same person or persons. In reality, this measure permits a Member State
government to own and control both the TSO and the production or supply portions of
the VIU, whereas third -country service suppliers, including those of Russia, may not.
Croatia, Hungary and Lithuania have each implemented versions of this measure in
their respective legislation.529 (footnote omitted; emphasis added)
7.207. Even though Russia's panel request does not explicitly mention Hungary in the context of
its de facto claim, Russia has, in our view, implicitly identified the "version" of the public body
measure implemented in Hungary by its reference to "these measures". Thus, we consider that
Russia has identified in its panel request the specific measure at issue in respect of its de facto
claim concerning Hungary in accordance with the third requirement of Article 6 .2 of the DSU. 530
We now turn to an examination of whether Russia's panel request complies with the fourth
requirement of Article 6.2 of the DSU in respect of this claim.
7.208. We recall that, under the fourth requirement of Article 6.2, a panel request must "plainly
connect the challenged measure(s) with the provision(s) of the covered agreements claimed to
have been infringed"531 and "explain succinctly how or why the measure at issue is considered by
the complaining Member to be violating the WTO obligation in question".532 In setting out its de
facto claim against the public body measure in the panel request (as quoted above), Russia
explicitly mentions the obligations of Croatia and Lithuania under Article XVII of the GATS. Russia
thus "plainly connects" the public body measure implemented in these member States with an
alleged de facto breach of their obligations under Article XVII of the GATS.
7.209. Furthermore, by referring to the ownership and control by the governments of Croatia and
Lithuania of the TSO and p roduction or supply "portions" of the VIU in their respective territories,
Russia has provided an explanation as to why the public body measure implemented in these
member States is, in its view, inconsistent with their obligations under Article XVII of the GATS.
7.210. However, when setting out its de facto claim against the public body measure in the panel
request, Russia refers neither to the obligations of Hungary under Article XVII of the GATS, nor to
the ownership and control by the government of Hungary of the TSO and production or supply
"portions" of the VIU in its territory. In our view, Russia thus fails to "plainly connect" the public

527 Russia's response to Panel question No. 148, para. 30.
528 Russia's response to Panel question No. 148, para. 31.
529 Russia's panel request, p. 2.
530 As discussed above in para. 7.163, in the context of the third-country certification measure in the
national laws of Croatia, Hungary and Lithuania, Russia's identification of these measures by reference to the
"versions" of the third-country certification measure implemented in these member States satisfies the third
requirement of Article 6.2 of the DSU. We consider that, similarly, Russia's identification of the public body
measure in the national laws of Croatia, Hungary and Lithuania by reference to the "versions" of the public
body measure implemented in Croatia, Hungary and Lithuania in its panel request satisfies the third
requirement of Article 6.2 of the DSU.
531 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 162.
532 Appellate Body Report, EC – Selected Customs Matters, para. 130. (emphasis original)

body measure implemented in Hungary with its claim of de facto inconsistency with Article XVII of
the GATS and to provide an explanation as to why this measure is de facto inconsistent with
Article XVII of the GATS. Therefore, we consider that Russia's panel request does not comply with
the fourth requirement of Article 6.2 of the DSU in respect of its de facto claim concerning
Hungary.
7.211. Russia argues that, in deciding whether its de facto claim concerning Hungary falls within
our terms of reference, we should take into account the fact that Russia was not aware of any
publicly available evidence that the government of Hungary owned and controlled both the TSO
and produ ction or supply undertaking in Hungary. According to Russia, it was unaware of the
Commission's opinion concerning certification of Magyar Gáz Tranzit Zrt. (MGT) as the TSO, issued
on 17 February 2015, at the time of the submission of its panel request, on 11 May 2015. 533
Russia alleges that "[t]o the best of Russia’s knowledge, the Commission’s MGT certification
opinion had not been made publicly available on the EU’s website at the time Russia submitted its
panel request in May 2015".534
7.212. We thus understand R ussia's arguments as implying that, to the extent its panel request
does not comply with Article 6.2 of the DSU in respect of its de facto claim concerning Hungary, it
could be remedied by the fact that Russia was not aware that the government of Hungary o wned
and controlled both the TSO and production or supply "portions" of any part of the transmission
system in Hungary.
7.213. We observe that, as confirmed by the Appellate Body, whether a measure can be identified
in conformity with the requirements of Article 6.2 of the DSU may depend on the extent to which
that measure is specified in the public domain. 535 We similarly consider that, a complainant's
ability to "provide a brief summary of the legal basis of the complaint in order to present the
problem clearly" might be affected by the availability of relevant information in the public domain.
In our view, it may well be open to a complainant to argue , with due substantiation, that
information pertinent to its claim was not publicly available and that, as a consequence, its ability
to comply with the requirements of Article 6.2 of the DSU was affected.
7.214. We understand Russia to argue that, due to the absence of relevant information in the
public domain, Russia could n ot have known that the government of Hungary owned and
controlled both the TSO and production or supply undertaking in Hungary. We note, however, that
Russia does not bring any evidence to substantiate its allegation that the Commission’s MGT
certification opinion was not publicly available before Russia's submission of its panel request.
Furthermore, Russia has not provided any evidence demonstrating that there was no other
reasonable opportunity for Russia to gain knowledge of the fact that Hungary's gove rnment owned
and controlled both the TSO and production or supply undertaking in Hungary. Thus, we consider
that Russia has not demonstrated that its ability to comply with the fourth requirement of
Article 6.2 of the DSU in respect of its de facto claim c oncerning Hungary was affected by the
alleged lack of information in the public domain that the government of Hungary owned and
controlled both the TSO and production or supply "portions" of any part of the transmission system
in Hungary.
7.215. In view of the f oregoing, we find that the aspect of Russia's claim against the public body
measure that concerns the ownership and control by Hungary's government of both transmission
and supply undertakings in its territory falls outside our terms of reference.
7.2.3.1.2 Section 123(4) of Hungary's Gas Act in respect of the unbundling measure in
the national implementing law of Hungary
7.216. In advancing its claim against the unbundling measure under Article XVI:2(f) of the GATS
in its first written submission, Russia refers to Section 123(4) of Hungary’s Gas Act 536, which
provides as follows:

533 Russia's response to Panel question No. 148, paras. 29-30.
534 Russia's response to Panel question No. 148, para. 30.
535 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 648.
536 Russia's first written submission, para. 227. See also Russia's response to Panel question No. 169(a),
paras. 78-80. Even though Russia's reference in its first written submission concerns Section 194(4) of the Act

Any company that is involved in the extraction of natural gas, the production of
electricity, or in the supply of natural gas or electricity, and any shareholders
exercising control in such companies may not acquire any share - directly or indirectly
- in a transmission system operator where such share constitutes entitlement to
exercise control. The acquisition of shares in a transmission system operator, or in a
controlling shareholder thereof, whe re such share constitutes entitlement to exercise
control is subject to the Office’s prior approval as well. This provision shall have no
bearing on the provision contained in Subsection (1) of Section 121/B.537
7.217. In its panel request, Russia has identified th e unbundling measure implemented in the
national laws of Croatia, Hungary and Lithuania as a specific measure at issue challenged under
Article XVI:2 of the GATS. 538 The provisions of Hungary's Gas Act implementing the unbundling
rules of the Directive are l ocated in Chapter XIII of Hungary's Gas Act entitled "Separation of
Activities".539 However, like Sections 123(5) and 123(6) examined above, Section 123(4) is
contained in Chapter XIV of Hungary's Gas Act entitled "Common Provisions Relating to Corporate
Events".540 This raises the question of whether Section 123(4) of Hungary's Gas Act falls within our
terms of reference as part of the unbundling measure implemented in the national law of Hungary
identified in Russia's panel request.
7.218. We note that, according to the last sentence of Section 123(4), this provision shall have no
bearing on the provision contained in Section 121/B(1) of Hungary's Gas Act. The latter provision
prescribes as follows:
Subsidiaries of vertically integrated natural gas companies perform ing functions of
production or supply of natural gas shall not have any direct or indirect shareholding
in the transmission system operator. Transmission system operators shall not have
any direct or indirect shareholding in the subsidiaries of vertically integrated natural
gas companies performing functions of production or supply of natural gas.541
7.219. We understand that Section 121/B(1) of Hungary's Gas Act resembles Article 18(3) of the
Directive that concerns the ITO model. In contrast to Section 123(4) of H ungary's Gas Act,

amending Hungary's Gas Act, Russia has subsequently stated that this reference concerns Section 123(4) of
Hungary' Gas Act (Russia's response to Panel question No. 169, paras. 78-80 and 83).
537 Hungary's Gas Act, (Exhibits EU-155/RUS-47), Section 123(4).
538 The relevant part of Russia's panel request provides as follows:

The Directive requires "vertically integrated natural gas undertakings" ("VIUs") to undergo
"unbundling" and to separate their transmission system assets, or the transmission system
operator ("TSO"), from assets relating to produc tion and supply. The Directive grants Member
States discretion to select from among three alternative unbundling models: ownership
unbundling, independent system operator ("ISO"), and independent transmission operator
("ITO"). Ownership unbundling is the m ost restrictive model. It precludes the same person or
persons from exercising control over an undertaking performing any of the functions of
production or supply and exercising control or any right over the TSO or the transmission
system, and vice versa. Among the rights that ownership unbundling precludes is the holding of
a majority share. The ISO model, in contrast, permits the VIU to retain full ownership of the
TSO upon designation of an outside entity, the ISO, to operate the TSO. The ITO model is even
less restrictive and permits VIUs to maintain control and operate the TSO through a separate
subsidiary.

The implementing laws of Croatia and Hungary permit all three unbundling models, whereas
Lithuania permits only the ownership unbundling model. In the pipeline transport services sector,
as set out in their GATS Schedules of Specific Commitments on Services (the "Schedules"),
Croatia, Hungary and Lithuania undertook commitments under Articles XVI and XVII of the GATS
with respect to pipeline tra nsport services. In light of these commitments, the Russian
Federation considers that the unbundling measures, as implemented in the laws of Croatia,
Hungary and Lithuania, are inconsistent with these Members' market access obligations under
GATS Article XVI:1 to accord services and service suppliers of any other Member treatment no
less favorable than that provided for in their Schedules, and that all three Members are each
maintaining or adopting measures set out in GATS Article XVI:2. (Russia's panel re quest, p. 2)
(footnotes omitted)
539 Hungary's Gas Act, (Exhibits EU-155/RUS-47), Sections 121/B-121/I.
540 Hungary's Gas Act, (Exhibits EU-155/RUS-47).
541 Hungary's Gas Act, (Exhibits EU-155/RUS-47), Section 121/B(1).

Section 121/B(1) prohibits any direct or indirect shareholding in a TSO specifically by the
subsidiaries of vertically integrated gas companies performing functions of production or supply of
natural gas, and not by any company, or its co ntrolling shareholders, involved in extraction or
supply of natural gas. Moreover, the prohibition under Section 121/B(1) concerns any direct or
indirect shareholding, while the prohibition under Section 123(4) covers only shareholding that
grants control.
7.220. In response to a question by the Panel, the parties have confirmed that Section 123(4) of
Hungary's Gas Act is not only relevant for the ITO model, but is rather a general rule that applies
to all unbundling models. 542 We further note the European Union's position that Section 123(4) of
Hungary's Gas Act is "fully in line with the Articles of Directive 2009/73/EC and as such
correspond[s] to the principles of unbundling rules".543
7.221. Taking into account the clarifications of the parties, we consider that Sectio n 123(4) of
Hungary's Gas Act constitutes a provision implementing the unbundling measure in Hungary, and
therefore, falls within our terms of reference.
7.2.3.2 Article 20(5) of Lithuania's Law on Natural Gas in respect of the unbundling
measure in the national implementing law of Lithuania
7.222. In advancing its claim against the unbundling measure in the national implementing law of
Lithuania under Article XVI:2(a) of the GATS, Russia refers to Article 20(5) of Lithuania's Law on
Natural Gas.544 In response to Russia' s references to this provision, the European Union submits
that "Russia’s claim regarding Article 20(5) of Lithuania’s Law on Natural Gas is outside the Panel’s
terms of reference, also when it concerns its suggestion that it would violate Article XVI:2(a) of
the GATS". 545 Russia has subsequently indicated that it is not challenging Article 20(5) of
Lithuania’s Law on Natural Gas as a measure at issue in respect of its claim against the unbundling
measure under Article XVI:2(a) of the GATS.546
7.223. The European Union, in its turn, has clarified that it would pursue a terms of reference
objection only if Russia were challenging Article 20(5) of Lithuania's Law on Natural Gas as a
separate measure under Article XVI:2(a) of the GATS.547
7.224. In light of these clarifications by the parties, we understand that, as Russia is not
challenging Article 20(5) of Lithuania's Law on Natural Gas as a separate measure under
Article XVI:2(a) of the GATS, the European Union does not pursue its terms of reference objection.
In view of this, we do not consider it necessary to rule on whether Article 20(5) of Lithuania's Law
on Natural Gas falls within our terms of reference for the purposes of this claim.
7.3 Legal standards
7.225. As indicated above in paragraph 7.5, below we set out the legal standards pursuant to the
relevant legal provisions of the GATS and the GATT 1994 cited by the parties.
7.3.1 GATS
7.3.1.1 Article II:1 of the GATS
7.226. Article II:1 of the GATS provides as follows:
With respect to any measure covered by this Agreement, each Member shall accord
immediately and unconditionally to services and service suppliers of any other

542 Russia's response to Panel question No. 169(c), para. 89; and European Union's comments on
Russia's response to Panel question No. 169(c), para. 42.
543 European Union's comments on Russia's response to Panel question No. 169, para. 38.
544 Russia's first written submission, paras. 218 and 219; and response to Panel question No. 3,
para. 15(a).
545 European Union's second written submission, para. 24. (footnotes omitted)
546 Russia's response to Panel question No. 167(b), para. 77.
547 European Union's response to Panel question No. 167(b), paras. 46-50.

Member treatment no less favourable than that it accords to like services and service
suppliers of any other country.
7.227. In order to establish that a challenged measure is inconsistent with this provision, the
complaining Member must demonstrate the following elements: (i) the measure is covered by the
GATS; (ii) the relev ant services and service suppliers are "like"; and (iii) the measure fails to
accord "immediately and unconditionally" to services and service suppliers of any other Member
"treatment no less favourable" than that the responding Member accords to like serv ices and
service suppliers of any other country.548
7.3.1.2 Article XIV(a) of the GATS
7.228. Article XIV of the GATS provides, in relevant part, as follows:
Subject to the requirement that such measures are not applied in a manner which
would constitute a means of arbitrary or unjustifiable discrimination between countries
where like conditions prevail, or a disguised restriction on trade in services, nothing in
this Agreement shall be construed to prevent the adoption or enforcement by any
Member of measures:
(a) necessary to protect public morals or to maintain public order[.]5
Schedule, are defined as:

548 See Appellate Body Report, Canada – Autos, paras. 170-171. See also Panel Report, EC – Bananas
III (Ecuador), para. 7.381.
549 Appellate Body Reports, US – Gambling, para. 292; and Argentina – Financial Services, paras. 6.161-
6.162 and 6.241. See also Panel Report, Argentina – Financial Services, para. 7.586.
550 Appellate Body Report, US – Gambling, para. 292. The Appellate Body has also articulated this legal
standard for a provisional justification of a challenged measure under a similar general exception contained in
Article XX(a) of the GATT 1994 (for measures "necessary to protect public morals") (Appellate Body Reports,
551 Appellate Body Report, US – Gambling, para. 339.

(a) limitations on the number of service suppliers whether in the form of numerical
quotas, monopolies, exclusive service suppliers or the requirements of an
economic needs test;

…

(e) measures which restrict or require specific types of legal entity or joint
venture through which a service supplier may supply a service;
(f) limitations on the participation of foreign capital in te rms of maximum
percentage limit on foreign share -holding or the total value of individual
or aggregate foreign investment.
7.233. In order to establish that a challenged measure is inconsistent with subparagraphs (a), (e)
or (f) of Article XVI:2 of the GATS, the complaining Member must demonstrate two elements:
(i) the responding Member has undertaken market access commitments in its GATS Schedule with
respect to the relevant sector(s) and mode(s) of supply ; and (ii) the measure constitutes an
impermissible limitation falling within subparagraph (a), (e) or (f) of Article XVI:2 of the GATS.552
7.3.1.4 Article XVII of the GATS
7.234. Article XVII of the GATS provides as follows:
1. In the sectors inscribed in its Schedule, and subject to any conditions and
qualifications set out th erein, each Member shall accord to services and service
suppliers of any other Member, in respect of all measures affecting the supply of
services, treatment no less favourable than that it accords to its own like services and
service suppliers.10
2. A Member may meet the requirement of paragraph 1 by according to services
and service suppliers of any other Member, either formally identical treatment or
formally different treatment to that it accords to its own like services and service
suppliers.
3. Formally identical or formally different treatment shall be considered to be less
favourable if it modifies the conditions of competition in favour of services or service
suppliers of the Member compared to like services or service suppliers of any other
Member.
Member to compensate for any inherent disadvantages which result from the foreign character of
the relevant services or service suppliers.
7.235. In order to estab lish that a challenged measure is inconsistent with Article XVII of the
GATS, the complaining Member must demonstrate the following three elements: (i) the responding
Member has assumed national treatment commitment s in the relevant sector(s) and mode(s) o f
supply in its GATS Schedule; (ii) the measure in question "affect[s] the supply of services" in the
relevant sector(s) and mode(s); (iii) the relevant services and service suppliers are "like"; and (iv)
the measure fails to accord to services and service suppliers of any other Member "treatment no
less favourable" than that accorded by the responding Member to its own like services and service
suppliers.553

552 Appellate Body Report, US – Gambling, para. 143. See also Panel Reports, China – Publications and
Financial Services, para. 7.391.
553 Panel Reports, Argentina – Financial Services, para. 7.448; China – Electronic Payment Services,

7.3.2 GATT 1994
7.3.2.1 Article I:1 of the GATT 1994
7.236. Article I:1 of the GATT 1994 provides as follows:
With respect to customs duties and charges of any kind imposed on or in connection
with importation or exportation or imposed on the international transfer of payments
for imports or exports, and with respect to the method of levying such duties and
charges, and with respect to all rules and formalities in connection with importation
and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of
Article III,* any advantage, favour, privilege or immunity granted by any Member to
any product origin ating in or destined for any other country shall be accorded
immediately and unconditionally to the like product originating in or destined for the
territories of all other Members.
7.237. In order to establish that a challenged measure is inconsistent with Artic le I:1 of the
GATT 1994, the complaining Member must demonstrate the following elements: (i) the measure
falls within the scope of application of Article I:1; (ii) the imported products at issue are "like"
products; (iii) the measure confers an "advantage, favour, privilege, or immunity" on a product
originating in the territory of any country; and (iv) the advantage so accorded is not extended
"immediately" and "unconditionally" to like products originating in the territory of all Members.554
7.3.2.2 Article III:4 of the GATT 1994
7.238. Article III:4 of the GATT 1994 provides as follows:
The products of the territory of any Member imported into the territory of any other
Member shall be accorded treatment no less favourable than that accorded to like
products of national origin in respect of all laws, regulations and requirements
affecting their internal sale, offering for sale, purchase, transportation, distribution or
use. The provisions of this paragraph shall not prevent the application of differential
internal transportation charges which are based exclusively on the economic operation
of the means of transport and not on the nationality of the product.
7.239. In order to establish that a challenged measure is inconsistent with Article III:4 of the
GATT 1994, the complaining Member must demonstrate the following elements: (i) the measure is
a law, regulation, or requirement affecting the internal sale, offering for sale, purchase,
transportation, distribution, or use of the products at issue; (ii) the imported and domestic
products are "like products"; and (iii) the treatment accorded to imported products is "less
favourable" than that accorded to like domestic products.555
7.3.2.3 Article X:3(a) of the GATT 1994
7.240. Article X of the GATT 1994, entitled "Publication and Administration of Tra de Regulations",
provides, in relevant parts, as follows:
1. Laws, regulations, judicial decisions and administrative rulings of general
application, made effective by any contracting party, pertaining to the classification or
the valuation of products for customs purposes, or to rates of duty, taxes or other
charges, or to requirements, restrictions or prohibitions on imports or exports or on
the transfer of payments therefor, or affecting their sale, distribution, transportation,
insurance, warehousing in spection, exhibition, processing, mixing or other use, shall
be published promptly in such a manner as to enable governments and traders to
become acquainted with them. …

554 Appellate Body Reports, EC – Seal Products, para. 5.86.
555 Appellate Body Reports, EC – Seal Products, para. 5.99 (referring to Appellate Body Report, Thailand
– Cigarettes (Philippines), para. 127 (in turn referring to Appellate Body Report, Korea – Various Measures on

…
3. (a) Each contracting party shall administer in a uniform, impartial and reasonable
manner all its laws, regulations, decisions and rulings of the kind described in
paragraph 1 of this Article.
7.241. In order to establish that a challenged measure is inconsistent with Article X:3(a) of the
GATT 1994, the complaining Member must demonstrate the following elements: (i) the measure is
a law, regulation, judicial decision or administrative ruling of general application; (ii) the measure
is of the kind described in Article X:1 of the GATT 1994; and (iii) the measure is not administered
in a "uniform, impartial and reasonable manner".556
7.3.2.4 Article XI:1 of the GATT 1994
7.242. Article XI:1 of the GATT 1994, entitled "General Elimination of Quantitative Restrictions",
provides as follows:
No prohibitions or restrictions other than duties, taxes or other charges, whether
made effective through quotas, import or export licences or other measures, shall be
instituted or maintained by any Member on the importation of any product of the
territory of any other Member or on the exportation or sale for export of any product
destined for the territory of any other Member.
7.243. Based on the text of Article XI:1 of the GATT 1994, in order to establish that a challenged
measure is inconsistent with Article XI:1 of the GATT 1994, the complaining Member must
demonstrate the following elements: (i) the measure falls within the scope of the phrase "quotas,
import or export licences or other measures" (emphasis added); and (ii) the measure constitutes a
prohibition or restriction on the importation or on the exportation or sale for export of any
product.557
7.3.2.5 Article XX(j) of the GATT 1994
7.244. Article XX of the GATT 1994 provides, in relevant part, that nothing in the GATT 1994 shall
be construed to prevent the adoption or enforcement by any Member of measures:
[E]ssential to the acqui sition or distribution of products in general or local short
supply; Provided that any such measures shall be consistent with the principle that all
Members are entitled to an equitable share of the international supply of such
products, and that any such measures, which are inconsistent with the other
provisions of the Agreement shall be discontinued as soon as the conditions giving rise
to them have ceased to exist.
7.245. In order to justify a challenged measure under the general exception in Article XX(j) of the
GATT 1994, the responding Member must demonstrate the following elements: (i) the measure is
provisionally justified under paragraph (j) of Article XX; and (ii) the measure satisfies the
requirements of the chapeau of Article XX.558
7.246. In order to provisio nally justify a challenged measure under paragraph (j) of Article XX,
the responding Member must establish the following elements: (i) the measure is "designed" to
address "the acquisition or distribution of products in general or local short supply"; and (ii) the
measure is "essential" to the acquisition or distribution of products in general or local short
supply.559
7.247. Based on the text of Article XX(j), the provisional justification of a measure under
paragraph (j) of Article XX also includes two additional elements: (i) that the measure must "be

556 See Panel Report, Thailand – Cigarettes (Philippines), para. 7.866.
557 Appellate Body Reports, Argentina – Import Measures, paras. 5.217-5.218.
558 Appellate Body Report, India – Solar Cells, paras. 5.56, 5.57 and 5.60 (referring to Appellate Body
Reports, US – Gasoline, p. 22, DSR 1996:I, 3, at p. 20; Dominican Republic – Import and Sale of Cigarettes,
559 Appellate Body Report, India – Solar Cells, paras. 5.57–5.60.

consistent with the principle that all Members are entitled to an equitable share of the international
supply of the products concerned"; and (ii) that the measure inconsistent with the other provisions
of the GATT 1994 must be "discontinued as soon as the conditions giving rise to [the measure]
have ceased to exist".
7.248. In order to demonstrate that the challenged measure provisionally justified under
paragraph (j) of Article XX satisfies the requirements of the chapeau of Article XX of the
GATT 1994, the responding Member must show that the measure is not "applied in a manner
which would constitute a means of arbitrary or unjustifiable discrimination between countries
where the same conditions prevail or a disguised restriction on international trade".560
7.4 General issues related to Russia's claims under the GATS
7.249. In this section, we shall start with an examination of the meaning and scope of the
services at issue for Russia's claims under the GATS , "natural gas pipeline t ransport services" or
"pipeline transport services", as defined by Russia in its panel request.561
7.250. We shall then turn to an examination of the Schedules of Croatia, Hungary and Lithuania ,
at stake in this dispute. It is well-established that, for purposes of claims under Articles XVI:2 and
XVII of the GATS, a complaining party must demonstrate, as a first step, that the respondent has
undertaken relevant specific commitments in its GATS Schedule .562 Keeping in mind that, in this
dispute, Russia has made claims under Articles XVI:2 and XVII of the GATS against the national
implementing laws of Croatia, Hungary and Lithuania 563, we need therefore to determine whether
Russia has shown that those EU member States have undertaken relevant market access and
national treatment commitments with respect to the services at issue.
7.4.1 The services at issue
7.4.1.1 Introduction
7.251. In its request for the establishment of a panel, Russia submits that "the TEP, like the EU's
natural gas and broader energy policy overall, unjustifiably restrict s imports of natural gas
originating in Russia and discriminates against Russian natural gas pipeline transport services and
service suppliers."564 In a footnote attached to that sentence, Russia explains as follows:
"Natural gas pipeline transport services" (or "pipeline transport services") include, but
are not necessarily limited to, the transmission (or transport) and supply of natural
gas, including LNG, and the services related to the transmission and supply of natural
gas, including LNG services.565
7.252. Russia states that "the services at issue in this dispute consist of 'natural gas pipeline
transport services ', or simply 'pipeline transport services'". 566 In Russia's view, t he services at
issue should be construed "broadly" to include the transmission and sup ply of natural gas,
including LNG, and all services related to or associated with the transmission and supply of natural
gas, including LNG services. 567 Russia submits that "[b]roadly defining the covered services as
including all pipeline transport services, including LNG services, is also consistent with the 'Subject

560 See Appellate Body Reports, EC – Seal Products, para. 5.296. See also Panel Report, India – Solar
Cells, para. 5.296.
561 Russia's panel request, p. 1.
562 See paras. 7.233 and 7.235 above.
563 In this dispute, Russia claims that the unbundling measure in the national implementing laws of
Croatia, Hungary and Lithuania is inconsistent with Article XVI:2(e) and (f) of the GATS, that the unbundling
measure in the national implementing laws of Croatia and Lithuania is inconsistent with Article XVI:2(a) of the
GATS, and that the public body measure and the third-country certification measure in those national
implementing laws are inconsistent with Article XVII of the GATS. See sections 7.5.2, 7.6 and 7.10.2 below.
564 Russia's panel request, p. 1.
565 Russia's panel request, fn 3.
566 Russia's first written submission, para. 93.
567 Russia's first written submission, para. 93; and Russia's second written submission, para. 75.

matter and scope' of the Directive, as set forth in Article 1", although Russia takes issue with
certain definitions contained in the Directive.568
7.253. According to Russia, "transmission" is a segmen t of the energy industry, i.e. the TSO
under the Directive, which is responsible for delivering or transporting natural gas via high
pressure pipelines between the producers/generators and local distribution companies or large end
users.569 Industry definitions of "transmission" recognize the role of the entities involved, including
TSOs, in supplying natural gas, along with the services necessary to transport and supply that gas,
to customers at various stages of the supply chain. 570 Referring to dictionary de finitions of the
term "supply", Russia argues that all services related to the supply of natural gas, including its
transmission, fall within these broad definitions .571 Russia further argues that the entire gas
market can be thought of as a "supply system".572
7.254. In Russia's view, the "supply" of natural gas as a service overlaps with natural gas
production, sale and transmission573, and "a gas supplier, which may well also be a producer, also
supplies the market with pipeline transport services".574 For Russia, natural gas is produced for the
purpose of supplying it to customers and "[t]his takes place through the sale and resale of gas,
including LNG, but also through its transmission, just as the transmission of natural gas naturally
includes its supply."575
7.255. Russia f urther submits that the services at issue also include LNG services as well as
services necessary to convey raw gas from gas fields or gas production projects to the processing
plant or terminals or final coastal landing terminals, which the Directive defi nes as "upstream
pipeline networks".576 While, according to Russia, the supply of natural gas "naturally includes its
'distribution' and related services", Russia indicates that "distribution" and related services, which
are supplied by "distribution system operators", are excluded from the services at issue.577
7.256. The European Union contends that Russia's definition of the services at issue is excessively
broad578, and does not fit with the reality in the gas markets or the objective characteristics of the
activities at stake.579
7.257. The European Union submits that pipeline transport services are very specific services
consisting of the carrying of natural gas from one point to another via pipeline, namely from the
point of production to the point where the gas is trans ferred into local distribution systems for
supply (i.e. sale) to customers at lower pressure. 580 The European Union argues that the
distribution or supply (i.e. the sale) of natural gas 581, and LNG services are not covered under
"pipeline transport services".582
7.258. The European Union further argues that Russia's proposed definition does not correspond
to the ordinary meaning of "pipeline transport services" and ignores the principle of mutual
exclusivity of sectors and sub-sectors in the CPC.583 For the European Union, there is no such thing

568 Russia's first written submission, paras. 96-97.
569 Russia's first written submission, para. 100.
570 Russia's first written submission, paras. 99-100 (referring to Sprague Natural Gas Glossary,
http://www.spragueenergy.com/natgas/additional-resources/glossary (accessed 10 May 2016), (Exhibit
RUS-28)).
571 Russia's first written submission, paras. 101-102.
572 Russia's first written submission, para. 102.
573 Russia's response to the Panel question No. 62, para. 288; and second written submission, para. 79.
574 Russia's response to the Panel question No. 155, para. 1.
575 Russia's first written submission, para. 104.
576 Russia's first written submission, para. 94.
577 Russia's first written submission, fn 117. Russia also excludes storage services from the services at
issue. (See Russia's comments on European Union's response to Panel question No. 156, para. 58).
578 European Union's first written submission, para. 51.
579 European Union's first written submission, para. 50; and opening statement at the second meeting of
the Panel, para. 18.
580 European Union's first written submission, para. 80.
581 European Union's first written submission, paras. 71 and 80; and opening statement at the second
582 European Union's first written submission, para. 80; and opening statement at the second meeting of
the Panel, para. 20.
583 European Union's comments on Russia's response to Panel question No. 155, para. 5.

as "supply services" in the GATS and the basis for interpreting "pipeline transport services" should
not be the business model used by one specific Russian company.584
7.259. We observe, first, that it is the prerogative of Russia, as the complaining party, to identify
the services at issue in this dispute. Nonetheless, this prerogative does not necessarily entail
unlimited discretion when it comes to defining the services at issue.
7.260. In our view, the definition of the services at issue is fundamental for a proper assessment
of claims under the GATS and, consequently, a panel has the authority, indeed the duty, to
address it. 585 We also recall that previous panels looked into the m eaning and scope of the
services at issue identified in the complainant's panel request.586 Likewise, we consider that we are
not bound by Russia's proposed definition and that we must look into the meaning and scope of
the services at issue identified in Ru ssia's panel request before proceeding to an assessment of
Russia's claims under the GATS.
7.261. Two different , albeit closely related , tasks arise with respect to our assessment of the
meaning and scope of the services at issue. One task is for us to look into the meaning and scope
of the phrase "natural gas pipeline transport services" or "pipeline transport services". Another
task is to interpret, in accordance with the rules of treaty interpretation, the meaning and scope of
the relevant sectoral entries in the Schedules of Croatia, Hungary and Lithuania identified by
Russia in the context of its claims under Articles XVI:2 and XVII of the GATS (see section 7.4.2
below).
7.262. In this dispute, we note the similarity between, on the one hand, the terms used by Russia
to identify the services at issue, i.e. "natural gas pipeline transport services" or "pipeline transport
services", and, on the other hand, "Pipeline Transport [ Services]"587, the terms found under
sector 11.G in the Schedules of Croatia, Hungary and Lithuania. In view of this similarity, we need
to ensure a coherent interpretation of the meaning and scope of, respectively, the services at issue
and the terms used in the Schedules.588
7.263. We recall that the parties to the dispute agree that the services at issue are "natural gas
pipeline transport services" or "pipeline transport services". 589 Both parties also concur that the
services at issue encompass transmission of natural gas, which they describe in a similar
manner.590 We also observe that both parties consider that transportation or transmission of

584 European Union's comments on Russia's response to Panel question No. 155, paras. 5-6.
585 The Appellate Body explained that:
Panels have to address and dispose of certain issues of a fundamental nature, even if the parties
to the dispute remain silent on those issues. … panels cannot simply ignore issues which go to
the root of their jurisdiction – that is, to their authority to deal with and dispose of matters.
Rather, panels must deal with such issues – if necessary on their own motion – in order to satisfy
themselves that they have authority to proceed. (Appellate Body Report, Mexico – Corn Syrup
(Article 21.5 – US), para. 36).
586 Panel Reports, China – Electronic Payment Services, paras. 7.25-7.37; and China – Publications and
Audiovisual Products, paras. 7.1147-7.1153.
587 For the use of the expression "Pipeline Transport [Services]", see below footnote 652.
588 According to Russia, "Sector 11G, 'Pipeline Transport' services, includes natural gas pipeline
transport services, including LNG services, the services at issue in this dispute, as broadly defined therein"
(Russia's first written submission, para. 117). We note that, in a response to a question by the Panel, Russia
explains that the "scope issues" concerning the services at issue are "relevant to the commitments of Croatia,
Hungary and Lithuania in Sector 11G of their GATS Schedules, the 'Pipeline Transport' services sector, which
do not necessarily overlap with the scope of covered services, as discussed below". (Russia's response to Panel
question No. 155, para. 2). However, Russia does not further specify to what extent the scope of, respectively,
the services at issue and the services covered under sector 11.G in those three Schedules would "not
necessarily overlap." We also understand that the arguments of the European Union when discussing the
services at issue and the interpretation of the sectoral entries in the Schedules of Croatia, Hungary and
Lithuania are largely based on the same grounds. (See European Union's first written submission, paras. 50 ff.;
and comments on Russia's response to Panel question No. 155, paras. 5-7).
589 For the sake of convenience, we shall use the phrase "pipeline transport services" when referring to
the services at issue in the remainder of our Report.
590 According to Russia, "transmission" includes the industry segment responsible for transporting
natural gas via high pressure pipelines between the producers/generators and local distribution companies or
large end users. (See Russia's first written submission, para. 100). The European Union states that "pipeline
transport services" encompass "the carrying of natural gas from one point to another via pipeline, namely from
the point of production to the point where the gas is transferred to the local distribution system". (See

natural gas through transmission pipelines correspond to the services provided by TSOs under the
Directive.591 We see no reason to disagree with the parties. In our view, "pipeline transport
services" encompass the transportation or transmission of natural gas through transmission
pipelines and also coincide with the services provided by a TSO under the Directive.
7.264. The parties disagree, however, on whether (i) "supply" of natural gas and "supply
services", as well as (ii) LNG services should be encompassed under the definition of "pipeline
transport services".592 We shall therefore turn to these two issues.
7.4.1.2 Analysis by the Panel
"Supply" of natural gas and "supply services" in Russia's proposed definition
7.265. According to Russia, the "supply" of natural gas is not a separate market segment, unlike
the transmission segment, but encompasses the entire gas market which, in Russia's view, can be
thought of as a "supply system". 593 For Russia, it is essential to include the supply of natural gas
or "supply services" – the latter referring, according to Russia, t o a service overlapping with
natural gas production, sale and transmission – in the definition of "natural gas pipeline transport
services".594 In Russia's view, "a producer is, by definition, a supplier of natural gas", and a gas
supplier "also supplies the market with pipeline transport services".595 In response to a question by
the Panel, Russia further explains:
The main components of the "supply" of natural gas as a "service" include services
that overlap with natural gas production, as well as services re lated to the sale of
natural gas, as the EU has argued. Supply services naturally overlap to a broad
degree with the services required for the "transmission" or transport of natural gas.
Russia considered it essential to include both transmission and suppl y services in the
definition of covered services to recognize expressly (1) that this overlapping
relationship is critical to understanding how pipeline transport services are supplied in
the EU and elsewhere and the competitive relationship between relate d types of
service suppliers; and (2) that the EU seeks to separate the supply and transmission
segments of the market in certain instances, but not others, in what Russia believes is
a selective effort to marginalize Russian pipeline transport services an d serv ice
suppliers and fulfil the EU' s overriding objective of reducing reliance on Russian
natural gas.596
7.266. The European Union argues that "natural gas pipeline transport services" do not include
the supply of natural gas which entails the activity of sell ing gas to industrial, commercial and
household consumers. 597 The definition of the word "service" indicates that the production of a
good must be distinguished from the services that are related to that good. 598 Moreover, for the
European Union, there is no such thing as a "supply service" in the GATS.599

European Union's first written submission, para. 80). The parties do not distinguish between transmission of
one's own natural gas versus transmission of somebody else's natural gas and we do not feel it is necessary to
draw such a distinction for the purpose of this case.
591 See Russia's first written submission para. 100; and European Union's second written submission,
para. 72.
592 The parties also disagree as to whether services related to "upstream pipeline networks", as defined
in Article 2(2) fall under the scope of the services at issue. Russia also argues that upstream pipeline networks
services are included the definition of the services at issue. (See Russia's first written submission, para. 94).
The European Union is of the view that upstream pipeline networks do not carry out transmission as pipeline
transport services. (European Union's opening statement at the second meeting of the Panel, para. 21). As we
have determined that Russia's claim under the GATS against the upstream pipeline networks measure is
outside our terms of reference (see para. 7.129), we will not discuss further whether upstream pipeline
network services fall within the scope of "pipeline transport services".
593 Russia's first written submission, para. 102.
594 Russia's response to the Panel question No. 62, para. 288.
595 Russia's response to the Panel question No. 155, para. 1.
596 Russia's response to Panel question No. 62, para. 288.
597 European Union's first written submission, para. 60.
598 European Union's first written submission, paras. 65-66 (referring to Oxford English Dictionary
Online, definition of "service, n.1"

7.267. Russia's explanations with respect to "supply" and "supply services" are not entirely clear.
We understand that Russia views "supply" as referring to the "supply" of natural gas by producers
to consumers, which Russia also refers to as "the entire gas market" or "a supply system". Russia
also seems to equate "supply" of natural gas with "supply services". 600 To our mind, the notions of
"supply" and "supply services" that Russia includes in its proposed definition of the services at
issue raise three types of conceptual and systemic difficulties. They (i) encompass activities falling
outside the scope of the GATS; (ii) are redundant to the extent that "transmission" of gas , in
Russia's own words, "overlaps" with "supply", and (iii) do not allow to identify with sufficient clarity
the services which would be concerned by our findings and cannot be reconciled with the principle
of mutual exclusivity of sectors and sub-sectors. We discuss these three issues in turn below.
7.268. Starting with the first issue raised in the previous paragraph, we observe that Russia
grounds its proposed understanding of the "supply" of natural gas on dictionary definitions of the
word "supply" which, Russia notes, has a broad ordinary meaning. 601 As acknowledged by Russia,
however, "[i]ndustry and other glossaries of natural gas terms normally do not define natural gas
'supply'".602 In any event, assuming that the "supply" of natural gas should be ascribed the broad
definition proposed by Russia 603, we cannot agree with Russia's proposition that the "supply " of
natural gas should be viewed as a service. We recall that the GATS applies to measures affecting
"trade in services", the latter being defined as "the supply of a service" through any of the fou r
modes defined in Article I:2(a) to (d). In turn, the "supply of a service" includes "the production,
distribution, marketing, sale a nd delivery of a service" (GATS Article XXVIII(b)). Hence, the
"supply" of natural gas, namely the supply of a good 604, does not fall within the scope of the
GATS.605
7.269. In addition, b y including production and/or services related to production, transmission
and sale of natural gas, it appears to us that Russia's notion of "supply" seeks to subsume the
entire gas supply chain under the phrase "pipeline transport services" , thus blurring the line
between trade in goods and trade in services . As noted by the European Union, the gas industry

http://www.oed.com/view/Entry/176678?rskey=JSiVqR&result=1&isAdvanced=false#eid (accessed 1 July
2016), (Exhibit EU-24)).
599 European Union's comments on Russia's response to Panel question No. 155, para. 6.
600 See, for instance, Russia's response to Panel question No. 155, para. 8.
601 Russia's first written submission, para. 101, (referring to Shorter Oxford English Dictionary,
W. Trumble and A. Stevenson (eds) (Oxford University Press, 2002), Vol. II, pp.3118-3119, which defines the
verb "supply" as meaning, inter alia, "provide or make available (something needed or wanted); furnish for use
or consumption, esp. commercially; yield, afford"). Russia also refers to the definition of "supply" as a noun
being defined, inter alia, as "A quantity or amount of something supplied, a stock or store of something
provided or obtainable … A system by which such a store (of water, gas, blood, etc.) is made available at a
distance; a network by which something is conveyed to a site". (Ibid.)
602 Russia's first written submission, para. 102, (referring to H. R. Williams and C. J. Myers (eds.),
Manual of Oil and Gas Terms, 15th edn (LexisNexis, 2012) (selected pages), (Exhibit RUS-29); and University
of Texas at Austin, Petroleum Extension Service, A Dictionary for the Oil and Gas Industry, 2nd edn, (Austin,
Texas 2011), p. 165, (Exhibit RUS-270)). Russia also refers to "market descriptions" which, in its view, "tend
instead to describe supply and supply services in the broadest possible sense". (See Russia's first written
submission, para. 102 (referring to A. Goldthau, "The Geopolitics of Natural Gas: The Politics of Natural Gas
Development in the European Union", Harvard University's Belfer Center & Rice University's Baker Institute
Center for Energy Studies, (October 2013), (Exhibit RUS-30))). We observe that this document is a "study on
the geopolitical implications of natural gas" (see p. 5) and Russia does not point to a specific page or
paragraph allegedly supporting its views. Having reviewed this document, we understand that the term
"supply" as used therein chiefly refers to supply of gas and we observe that the notion of "supply services" is
not used in this document.
603 According to the European Union, which refers to the definition contained in Article 2(7) of the
Directive, "supply" includes only the sale of gas. (European Union's first written submission, para. 67). Russia
takes issue with this definition which it considers too narrow. (Russia's first written submission, para. 103). We
do not find it necessary to discuss the appropriateness of the definition of "supply" in the Directive in this case.
604 Natural gas is obviously not "tangible", i.e., "[a]ble to be touched; discernible or perceptible by
touch; having material form" (Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford
University Press, 2007), Vol. 2, p. 3175), but is unquestionably a "good". As noted by the European Union,
natural gas is classified under the Harmonised System, which covers only goods (LNG is found under HS
2711.11 and natural gas in its gaseous state under HS 2711.21). (European Union's first written submission,
para. 71 (referring to Harmonized Commodity Description and Coding System, Chapter 27, available at:
www.wcoomd.org (accessed 3 August 2017), (HS Chapter 27), (Exhibit EU-32))). We also note that Russia
does not argue otherwise.
605 For the same reasons, we cannot accept Russia's proposition that the "supply" of LNG is a service.

does not involve only trade in services, it also involves trade in goods. 606 The production of ga s
does not fall within the scope of the GATS and the sale of gas is not necessarily a service.607 In our
view, it would be improper for a panel to rely on a definition of the services at issue which includes
activities falling outside the scope of the GATS.
7.270. Turning to the second issue raised in paragraph 7.267, we recall that "transmission" and
"supply" are two elements in Russia's definition of "pipeline transport se rvices". Russia explains
that transmission of natural gas "naturally includes its supply" 608 and also that "[s]upply services
naturally overlap to a broad degree with the services required for the 'transmission' or transport of
natural gas".609 As noted above, both parties agree that transmission of gas through pipelines is
encompassed under Russia's proposed definition of the services at issue as per the reference to
the term "transmission (or transport)" included therein. To the extent that the notion s of "supply"
and "supply services" "overlap" with transmission of gas, these notions are redundant.
7.271. Finally, with respect to the third issue raised in paragraph 7.267, we examine more closely
the notion of "supply services". In its first written submission, Russia calls for an interpretation of
"supply" and "supply services" in the "broadest possible sense " to include the services covered by
the Directive.610 In response to a question by the Panel, Russia explains that "supply services"
"overlap with natural gas production ", are "related to the sale of natural gas " and "naturally
overlap to a broad degree wit h the services required for the 'transmission' or transport of natural
gas".611 In response to another question by the Panel, Russia explains that "it is more accurate
and consistent with the ordinary meanings of these terms and actual industry practice to v iew
pipeline transport services as supplied not in a vacuum … but rather as part of a continuum". 612
Russia further explains that the "entire continuum of pipeline transport services" provided by VIUs
"also includes typical 'supply' services, such as cleaning, processing and similar services to prepare
the gas for consumption and facilitate its transmission and sale to traders and consumers;
negotiating supply and purchase commitments and relevant terms of sale, including price and
volume, normally via long t erm services and supply contracts; and injection of the purified (or
"sales") gas into the transmission system to include arranging for and ensuring adequate and
timely pipeline transmission capacity".613
7.272. Based on Russia's explanations, the notion of "suppl y services" appears to be a catch -all
term to subsume under "pipeline transport services" an open-ended list of services that are related
to the "supply" of natural gas.614 For Russia, this notion includes not only "the entire continuum" of
services supplied by VIUs, but also all services referred to in the Directive, except those services
that Russia has decided to exclude from the dispute.615
7.273. Russia's notion of "supply services" calls for two comments. First, we find it impossible to
identify with sufficient clarity the services which are encompassed under the notion of "supply
services", which means that, should we use that notion, we would not be in a position to assess

606 European Union's first written submission, para. 71; and comments on Russia's response to Panel
question No. 155, para. 6. Ukraine also argues that "the sale of gas and services related thereto are clearly
different business activities" and that "the sale of gas as a good, including to end-users" must be dealt with
under the GATT. (See Ukraine's third-party submission, para. 7).
607 In China – Publications and Audiovisual Products, the panel found that "[o]bviously, the simple
production of a good could not be said to constitute a service, nor would it make sense to undertake
commitments under the GATS as regards the production of a good". (Panel Report, China – Publications and
Audiovisual Products, fn 659). Moreover, like the sale of other goods, the sale of gas may entail the direct sale
by producers or the resale by traders (wholesalers or retailers). Wholesale and retail services fall under the
GATS, but not the direct sale of a product by a producer.
608 Russia's first written submission, para. 104.
609 Russia's response to Panel question No. 62, para. 288.
610 Russia's first written submission, paras. 102-103; and Russia's response to Panel question
No. 155(a), paras. 3-12.
611 Russia's response to Panel question No. 62, para. 288 (quoted above at para. 7.265).
612 Russia's response to Panel question No. 155, para. 10.
613 Russia's response to Panel question No. 155, para. 10 (referring to Article 44 of the Directive,
entitled "Record keeping").
614 We also recall that, pursuant to Russia's proposed definition, pipeline transport services "include, but
are not necessarily limited to" transmission, supply and LNG services.
615 We recall that Russia excludes distribution services of gas and storage services from the scope of the
dispute. (See Russia's first written submission, fn 117; response to Panel question No. 57, para. 310; and
comments on European Union's response to Panel question No. 156, para. 58).

the scope of our findings. Second, purs uant to the principle of mutual exclusivity of sectors and
sub-sectors – referred to by the Appellate Body when interpreting GATS Schedules 616 – a given
service cannot fall under two different sectors or subsectors at the same time.
7.274. The importance of the co ncept of "sector" under the GATS is obvious for Members'
obligations on market access (GATS Article XVI) and national treatment (GATS Article XVII)
because these provisions apply in service sectors as listed by each Member in its GATS Schedule.
However, as indicated by the definition of "'sector' of a service" in GATS Article XXVIII(e), the
relevance of the concept of "sector" is not limited to Members' specific commitments. 617 The
application of other GATS provisions is also premised on the identification of sectors618, as is the
application of certain other WTO obligations. 619 By clustering all services related to natural gas
under the notion of "supply services", the latter being in turn meant to be included under the
terms "pipeline transport services", Russia 's proposed definition leads to an artificially broad
construction of the latter terms and cannot be reconciled with the principle of mutual exclusivity of
sectors and sub-sectors.
7.275. Russia also explains that an objective in defining the covered services is "to follow as
closely as possible the scope and subject matter of the Directive", while also including
"corrections" in response to the fact that "the EU attempts in the Directive to manipulate
definitions to serve its regulatory objectives". 620 According t o Russia, the definitions in the
Directive help support the regulatory and policy distinction "between the TSO, transmission system
and services or 'functions of transmission', on the one hand, and the supply portion of the VIU and
'functions of production or supply', on the other" 621, which, in turn, "helps facilitate the European
Union providing discriminatory treatment through the Directive and other measures, to Russian
pipeline transport services and service suppliers".622
7.276. We are not convinced by the proposition that the definition of the services at issue should
be governed by the scope of a challenged instrument when this leads to an artificially broad
construction and/or includes activities falling outside the scope of the GATS. We are similarly
unconvinced by Russia's explanations that its definition seeks to address the "discriminatory
treatment" granted to Russian services and service suppliers that, according to Russia, derives
from the definitions contained in the Directive623 and that all these "overlapping" services would be
in a competitive relationship. 624 While a determination of whether Russian service suppliers are in
a competitive relationship and discriminated against when compared with other services and
service suppliers is an integral part of a panel's assessment under Articles II:1 and XVII of the
GATS, it does not, in and of itself, define the services at issue.
7.277. In light of the foregoing, we conclude that the notion s of "supply" and "supply services"
are not encompassed within the meaning and scope of the terms "pipeline transport services".

616 Appellate Body Report, US – Gambling, para. 172. We discuss this principle further in section 7.4.2
below.
617 Pursuant to Article XXVIII(e) of the GATS, a "'sector' of a service means, (i) with reference to a
specific commitment, one or more, or all, subsectors of that services, as specified in a Member's Schedule,
(ii) otherwise, the whole of that service sector, including all of its subsectors." (emphasis added)
618 For instance, in order to be consistent with Article V of the GATS, an economic integration agreement
needs to have "substantial sectoral coverage", a condition which is understood, inter alia, in terms of "number
of sectors". While the application of the MFN obligation in Article II:1 of the GATS is not explicitly sector-based,
MFN exemptions maintained by Members pursuant to Article II:2 and the GATS Annex on Article II Exemptions
are listed by sector. (See Lists of Article II Exemptions, documents GATS/EL/2 to -/156). Members' Lists of
Article II Exemptions are part of the GATS Annex on Article II Exemption and, consequently, form an integral
part of the GATS.
619 Pursuant to Article 22.3(f)(ii) of the DSU, the suspension of concessions under the GATS also takes
place on the basis of "sectors" as identified in the "Services Sectoral Classification List". The latter refers to
Services Sectoral Classification List, Note by the Secretariat, MTN.GNS/W/120 (10 July 1991), (W/120),
(Exhibits EU-15/RUS-38).
620 Russia's response to the Panel question No. 68, para. 313.
621 Russia's first written submission, para. 110.
622 Russia's first written submission, para. 110.
623 Russia's first written submission, para. 97.
624 Russia explains that by including "both supply and transmission services in the definition of covered
services in this dispute", Russia "sought to emphasise that … pipeline transport services include each of these
overlapping services, many of which along with the suppliers of pipeline transport services are in a competitive
relationship". (Russia's second written submission, para. 79).

LNG services in Russia's proposed definition
7.278. Russia submits that LNG services are included within the meaning of "pipeline transport
services".625 According to Russia, LNG services correspond to the servi ces described in
Articles 2(11) and 2(12) of the Directive and relate to the operation by LNG system operators of
LNG facilities, including the importation, offloading and regasification or reconversion of LNG to its
natural gaseous state, as well as relat ed temporary storage. 626 For Russia, "just as LNG services
are 'supply' services they are 'transmission services', in that they concern the transport or
conveyance of reconverted natural gas either directly from the LNG transport vessel or from the
adjacent regasification facility via pipeline to the transmission system".627
7.279. The European Union argues that LNG services must be distinguished from "pipeline
transport services". 628 For the European Union, the essence of LNG services is liquefaction and
importation, offloading and re -gasification of natural gas, but does not concern transmission via
pipeline.629 The European Union also submits that CPC 2.1, which classifies LNG services and
pipeline transportation services in two different categories, confirms this understanding.630
7.280. We start by observing that Russia's inclusion of LNG services in the definition of the
services at issue stems from the same proposition, discussed in the previous section, that all
services involved in the gas supply chain should fall under th e phrase "pipeline transport services"
on the ground that they are supplied as part of a "continuum" and are covered under the Directive.
When discussing Russia's notions of "supply" and "supply services" in the previous section, we
have addressed the conceptual and systemic problems arising from such a proposition. The various
concerns we raised above are equally relevant when it comes to Russia's proposition that LNG
services should be viewed as "supply" and "transmission" services and, for that reason, i ncluded
within the meaning of "pipeline transport services".
7.281. Furthermore, we note that, according to the parties, LNG services consist principally of the
liquefaction of natural gas and importation, offloading and re -gasification of LNG. 631 Hence, the
essential or core activities carried out in relation to LNG do not entail transportation or
transmission of natural gas. Liquefaction of natural gas and re-gasification of LNG take place at
special terminals, while transportation or transmission of natural gas requires a pipeline
infrastructure.
7.282. We observe that there is complementarity between LNG activities and transport via
pipeline: liquefaction of natural gas permits the transport of LNG in special tankers via sea vessels,
while regasification allows regasified LNG to be delivered to the transmission system and
subsequently to the final consumer.632 Hence, we can agree with Russia that LNG services concern
or enable "pipeline transport services" of regasified LNG .633 However, in our view, a service
concerning or enabling the supply of another service must not necessarily and automatically be
that other service for GATS purposes.
7.283. Finally, the fact that regasified LNG "is … eventually consumed in the same manner as "634
natural gas that has not been previously liquefied does not make LNG services and pipeline
transport services one and the same thing. Russia's argument conflates the service with the good.

625 Russia's first written submission, para. 105.
626 Russia's second written submission, para. 80
627 Russia's second written submission, para. 81.
628 European Union's opening statement at the second meeting of the Panel, para. 20.
629 European Union's opening statement at the second meeting of the Panel, para. 20; and European
Union's response to the Panel question No. 53, para. 145.
630 European Union's comments on Russia's response to Panel question No. 155, para. 12.
631 Both parties define LNG services by reference to the definitions of "LNG facility" and "LNG system
operator" contained, respectively, in Article 2(11) and (12) of the Directive. (See Russia's first written
submission, para. 107; and European Union's first written submission, para. 285). We do not mean to say,
however, that the definitions in the Directive should govern the definition of LNG services for the purpose of
the GATS.
632 As further discussed in para. 7.842 below, regasified LNG is transported and supplied via pipelines in
the same way as natural gas that has not been previously liquefied.
633 Russia's second written submission, para. 81.
634 Russia's first written submission, para. 105.

7.284. On the basis of the foregoing, we conclude that LNG services are not encompassed within
the terms "pipeline transport services".
Conclusion
7.285. Our analysis of Russia's proposed definition of the services at issue leads us to the
conclusion that "pipeline transport services" encompass transportation or transmission of natural
gas through transmission pipelines and coincide with the services provided by TSOs under the
Directive.635 We further conclude that "pipeline transport services" do not include the notions of
"supply" and "supply services", nor do they include LNG services. These conclusions find further
support in our analysis of the meaning and scope of the treaty terms "Pipeline Transport
[Services]" in the Schedules of Croatia, Hungary and Lithuania, as we shall see in section 7.4.2
below.
7.286. Therefore, any finding concerning "pipeline transport services", the services at issue, will
not concern "supply" and "supply services", nor will they concern LNG services.
7.4.2 Interpretation of the Schedules of Croatia, Hungary and Lithuania
7.4.2.1 Introduction
7.287. We turn now to an examination of the Schedules of Croatia, Hungary and Lithuania at
stake in this dispute.
7.288. As will be discussed in more detail below, Russia claims that the unbundling measure in
the national implementing laws of Croatia, Hungary and Lithuania is inconsistent with
Article XVI:2(e) and (f) of the GATS and that the unbundling measure in the national implementing
laws of Croatia and Lithuania is inconsistent with Article XVI:2( a) of the GATS (see section 7.5.2
below). Russia further claims that the public body measure and the third -country certification
measure in the national implementing laws of Croatia, Hungary and Lithuania are inconsistent with
Article XVII of the GATS (see sections 7.6 and 7.10.2 below).
7.289. It is well -established that, in order to establish a prima facie case of violation under
Article XVI:2 of the GATS , a complaining party must first establish that the responding party has
undertaken relevant market access commitm ents.636 Similarly, in order to sustain a claim that a
measure breaches Article XVII of the GATS, a complaining party must first establish that the
responding party has made relevant commitments on national treatment.637
7.290. Russia alleges that Croatia, Hungary and Lithuania have undertaken specific commitments
on market access and national treatment with respect to the services at issue under sector 11.G,
"Pipeline Transport [Services]"638 in their respective Schedules. 639 Russia has also confirmed that
each of its claims under the GATS in this dispute concerns mode 3, namely the commercial
presence mode of supply.640
7.291. Therefore, we need to determine whether Russia has shown that Croatia, Hungary and
Lithuania have undertaken market access and national treatment commitments with respect to the
services at issue under sector 11.G, "Pipeline Transport [Services]" of their Schedules. For that
purpose, we shall turn, first, to an examination of the terms "Pipeline Transport [Service s]" in the
sectoral column of the Schedules concerned. We shall then examine, successively, Croatia's,
Hungary's and Lithuania's market access and national treatment commitments, as identified by
Russia in this dispute.

635 See Russia's first written submission para. 100; and European Union's second written submission,
para. 72.
636 See para. 7.233 above.
637 See para. 7.235 above.
638 For the use of the expression "Pipeline Transport [Services]", see below footnote 652.
639 See Russia's first written submission, headings VI.A, VII.B and VIII.B.
640 Russia's response to Panel question No. 56, para. 285.

7.4.2.2 The terms "Pipeline Transport [Services]"
7.4.2.2.1 Introduction
7.292. We need to determine whether Russia has demonstrated that Croatia, Hungary and
Lithuania have undertaken specific commitments with respect to the services at issue under
sector 11.G, concerning "Pipeline Transport [Services]" in their r espective Schedules of Specific
Commitments.641
7.293. Article XX:1 of the GATS provides that each Member "shall set out in a Schedule the
specific commitments it undertakes", notably on market access and national treatment. Pursuant
to Article XX:3 of the GATS, Schedules of specific commitments "shall form an integral part" of the
GATS and, thus, are legally part of the WTO Agreement. The Appellate Body has confirmed that
GATS Schedules must be interpreted according to customary rules of interpretation of public
international law, as codified in Articles 31 and 32 of the Vienna Convention.642
7.294. We shall therefore interpret the relevant entries in the Schedules of Croatia, Hungary and
Lithuania in accordance with the ordinary meaning to be given to the terms of those Sc hedules in
their context and in light of the object and purpose of the GATS in accordance with Article 31 of
the Vienna Convention . If necessary, w e will turn to supplementary means of interpretation
pursuant to Article 32 of the Vienna Convention.
7.4.2.2.2 Analysis by the Panel
7.295. Russia submits that the inscriptions "Pipeline Transport [Services]" under sector 11.G in
the Schedules of Croatia, Hungary and Lithuania cover natural gas transport pipeline services, i.e.
the services at issue in this dispute, which encomp ass the transmission and supply of natural gas,
including LNG, and the supply of services necessary or otherwise related to the transmission (i.e.
transport) and supply of natural gas, including LNG services. 643 According to Russia, "pipeline
transport" as a specific subsector within the transport services sector includes services related to
each of the categories or types of pipelines, including gathering, transmission and distribution
systems; it also includes the supply of services that enable the transpor t by pipelines of
reconverted natural gas from an LNG carrier through the necessary connection lines and the
transmission system.644
7.296. The European Union argues that Russia's proposed definition is excessively broad and does
not correspond to the ordinary mean ing of the relevant terms read in their context. According to
the European Union, Russia attempts to artificially stretch the meaning of the committed services
in order to make an interpretation of WTO obligations that is also inappropriately broad. 645 The
European Union submits that the relevant entries in the Schedules of Croatia, Hungary and
Lithuania consist of the carrying of natural gas from one point to another via pipeline, namely from
the point of production to the point where the gas is transferred into local distribution systems for
supply to customers at lower pressure. 646 According to the European Union, sector 11.G does not
cover the production and supply or sale of gas, nor does it include transport via other means than
pipelines.647 The European Un ion further contends that pipeline transport services must be
distinguished from liquefaction and regasification of natural gas (LNG services) for which other CPC
codes exist.648
7.297. The relevant sectoral entries in the three Schedules at issue are as follows:

641 Schedule of Specific Commitments of Croatia, GATS/SC/130 (22 December 2000), (Exhibits EU-16/
RUS-37); Schedule of Specific Commitments of Hungary, GATS /SC/40 (15 April 1994), (Exhibits EU-17/RUS-
 36); and Schedule of Specific Commitments of Lithuania, GATS/SC/133 (21 December 2001), (Exhibits EU-19/
RUS-35).
642 See Appellate Body Reports, US – Gambling, para. 160; and China – Publications and Audiovisual
Products, para. 348.
643 Russia's first written submission, para. 128.
644 Russia's first written submission, para. 133.
645 European Union's first written submission, paras. 50-51.
646 European Union's first written submission, para. 80.
647 European Union's first written submission, para. 67.
648 European Union's first written submission, para. 76.

Sector or subsector

Croatia649

Hungary650 Lithuania651

11. Transport Services
…
G. Pipeline Transport Services
 (CPC 713)

11. Transport Services
…
G. Pipeline Transport

11. Transport Services
…
G. Pipeline Transport
 (CPC 713)

7.298. We observe that the sectoral entries in the three Schedules at issue all contain the terms
"Pipeline Transport" and are inscribed under sector G ("Pipeline Transport"), Section 11
("Transport Services"). These entries also exhibit some variations. The entry in Hungary's
Schedule does not contain a reference to "CPC 713" under the heading "Pipeline Transport",
contrary to the entries in the Schedules of Croatia and Lithuania. Another variation is the absence
of the word "Services" following the terms "Pipeline Transport" in the Schedules of Hungary and
Lithuania. Considering the similarities of those entries, we will conduct a holistic analysis of the
three Schedules concerned, taking into account , as appropriate, the variations just noted. 652 We
observe that this approach coincides with the way both parties presented their arguments.
7.299. Following the principles of treaty interpretation, we first determine the ordinary meaning of
the relevant terms used in sector 11.G.
Ordinary meaning of "Pipeline Transport [Services]"
7.300. Russia submits that, given the widely accepted ordinary meaning of "pipeline transport"
and the related terms within the energy and transport service sectors, it follows that the use of
"Pipeline Transport" in sector 11.G of the relevant Schedules was intended to encompass the
natural gas pipeline transport services at issue in this proceeding, i.e. the transmission and supply
of natural gas, including LNG, and the supply of services necessary or otherwise related to the
transmission (i.e. transport) and supply of natural gas, including LNG services.653
7.301. The European Union argues that the ordinary meaning of "pipeline transport services"
based on dictionary definitions and industry -specific descriptions does not involve the production
and processing of gas, nor the s upply (i.e. sale) of gas to consumers. The European Union also
excludes transport via means of transport other than pipeline.654
7.302. We begin our analysis with the ordinary meaning of the term "Pipeline Transport". The
Shorter Oxford English Dictionary defines "pipeline" as "[a] continuous line of pipes; a long pipe for
conveying oil, gas, etc., long distances, esp. underground; a (usu. flexible) tube for carrying liquid
in machinery etc." 655 The term "transport" means "[t]he carrying or conveyance of a p erson or
thing from one place to another". 656 Hence, pursuant to dictionary definitions, "pipeline transport"
refers to the carrying or conveying of oil, gas or other products over long distances through a long
pipe which is often underground.

649 Schedule of Specific Commitments of Croatia, GATS/SC/130 (22 December 2000), (Exhibits EU-16/
RUS-37), p. 33.
650 Schedule of Specific Commitments of Hungary, GATS /SC/40 (15 April 1994), (Exhibits EU-17/RUS-
36), p. 32.
651 Schedule of Specific Commitments of Lithuania, GATS/SC/133 (21 December 2001), (Exhibits EU-19/
RUS-35), p. 23.
652 For the sake of convenience and in order to reflect the variations in those three entries, we shall use
the expression "Pipeline Transport [Services]" throughout this Report when referring collectively to the entry
found under sector 11.G in the Schedules of Croatia, Hungary and Lithuania.
653 Russia's first written submission, para. 128; and second written submission, para. 82-86.
654 European Union's first written submission, paras. 67-68.
655 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 2218.
656 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 3327.

7.303. In the Schedu le of Croatia, the term "Pipeline Transport" is followed by the word
"Services". The ordinary meaning of the term "services" is "[t]he sector of the economy that
supplies the needs of the consumer but produces no tangible goods, as banking or tourism".657
7.304. We note that the Schedules of Hungary and Lithuania do not contain the term "Services"
after "Pipeline Transport". However, in those two Schedules, sector G is found under Section 11,
entitled "Transport Services", which suggests that all the sectors contai ned in Section 11 concern
services of transport, whether or not the word "services" is explicitly mentioned in the sub -
heading.658 Hence, the absence of the word "Services" after "Pipeline Transport" does not make a
material difference with respect to the me aning and scope of the commitments at issue in the
Schedules of Hungary and Lithuania, as, in our view, this word is implied.
7.305. Our analysis of dictionary definitions of the phrase "Pipeline Transport [Services]" in the
Schedules of Croatia, Hungary and Lit huania indicates that this sector covers the activity
consisting in carrying or conveying goods such as oil or gas through a long pipe, often
underground, over long distances. The ordinary meaning of this phrase further indicates that the
sector does not produce tangible goods.659
7.306. Both parties refer to more specific glossaries and industry sources when discussing the
ordinary meaning of "pipeline transport services". The panel in China – Electronic Payment
Services considered it appropriate to examine indust ry sources as potential relevant evidence of
the ordinary meaning of a specific term in a particular industry, in addition to general dictionaries,
for the purpose of determining the meaning of a term appearing in a GATS Schedule. 660 With this
guidance in mi nd, we shall examine the meaning of the terms "Pipeline Transport [Services]" in
industry sources and specialized publications provided to us by the parties.
7.307. The Manual of Oil & Gas Terms , provided by Russia, defines a "pipeline" as "[a] tube or
system of tubes used for the transportation of oil or gas". 661 According to the Illustrated Glossary
for Transport Statistics , also referred to by Russia, the term "pipeline" is defined as "a closed
conduit, with pumps, valves and control devices, for conveying fluids , gases, or finely divided
solids by pumping or compression". 662 In the same Glossary, a "gas pipeline" is defined as "[a]ll
parts of the pipe conduit, complete with such equipment as valves, compressor stations,
communications systems, and meters for transp orting natural and/or supplemental gas from one
point to another, usually from a point in or beyond the producing field or processing plant to
another pipeline or to points of utilization". 663 "Pipeline transport" is defined as "[a]ny movement
of crude or re fined liquid petroleum products or gases in a given pipeline network". 664 A "pipeline
network" means "[a]ll pipelines in a given area".665
7.308. Industry sources provided by the parties also present a similar description of three
different types of natural gas pipe lines, namely gathering pipelines, transportation (or trunk)
pipelines and distribution pipelines, used to convey natural gas from production fields to the

657 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 2766.
658 We observe that, in the W/120, the word "Services" is not used in a consistent manner across the
different sub-sectors in the "Transport Services" Section. For instance, while W/120 refers to "Maritime
Transport Services", "Air Transport Services", "Rail Transport Services", "Road Transport Services", it omits the
word "Services" for "Internal Waterways Transport", "Space Transport" and "Pipeline Transport". (See W/120,
(Exhibits EU-15/RUS-38)). We observe a similar pattern in the Schedules of Hungary and Lithuania. We agree
with Russia that "given that it cannot reasonably be disputed that all of the subsectors concern 'services', the
fact that the description of certain subsectors includes the word 'services' is not a material distinction".
(Russia's first written submission, fn 200).
659 As noted in footnote 604 above, natural gas is not tangible but is a good.
660 Panel Report, China – Electronic Payment Services, para. 7.89. That panel cautioned, however, that
"panels must be mindful of the limitations, such as self-interest, that industry sources may present and should
govern their interpretive task accordingly". (Ibid.)
661 H. R. Williams and C. J. Myers (eds.), Manual of Oil and Gas Terms, 15th edn (LexisNexis, 2012)
(selected pages), (Exhibit RUS-29), p. 766.
662 Illustrated Glossary for Transport Statistics, Chapter D, "Pipeline Transport", 4th edn (UNECE 2009),
pp. 97-103, (UNECE glossary for transport statistics), (Exhibit RUS-41), p. 97.
663 UNECE glossary for transport statistics, (Exhibit RUS-41), p. 97.
664 UNECE glossary for transport statistics, (Exhibit RUS-41), p. 100.
665 UNECE glossary for transport statistics, (Exhibit RUS-41), p. 97.

transmission system and then to the final consumer. 666 The usage of the terms "pipeline" and
"pipeline transport" in industry sources or specialized glossaries does not cause us to question our
understanding reached on the basis of dictionary definitions.
7.309. Russia does not present specific arguments to the effect that the ordinary meaning of
"pipeline transport services" would include the notions of "supply" and "supply services". Our own
assessment based on dictionary definitions, industry sources and other specialized glossaries does
not allow us to read "supply" of natural gas or "supply services" into th e ordinary meaning of the
terms "Pipeline Transport [Services]".
7.310. Russia further asserts that the ordinary meaning of "Pipeline Transport [Services]" in
sector 11.G includes LNG services, and refers to various sources which, in its view, support this
proposition.667 Russia points to the description of the Klaipedos Nafta LNG terminal which states,
inter alia, that "all the services necessary to process that LNG, …, are supplied to facilitate the
pipeline transport of the natural gas to customers". 668 Russia further quotes Article 2(11) of the
Directive which defines a n LNG facility as including "… ancillary services and temporary storage
necessary for the re-gasification process and subsequent delivery to the transmission system…."669
The United Nations Economic Co mmission for Europe's (UNECE) LNG study also quoted by Russia
indicates that, at regasification terminals, "[t]he LNG is then warmed … and the resulting natural
gas is injected into pipelines for delivery to local users".670
7.311. Even if the sources cited by Rus sia constitute relevant evidence to establish the ordinary
meaning of a treaty term 671, they do not go towards demonstrating that the ordinary meaning of
"pipeline transport" includes LNG services. First, the sources referred to by Russia concern LNG
and related activities, not "pipeline transport services". In addition, the fact that LNG services are
supplied "to facilitate the pipeline transport of natural gas", for "subsequent delivery [of gas] to
the transmission system" or with the purpose of injecting gas "into the pipelines for delivery to
local users" indicates that there is a close relationship between LNG services and pipeline transport
services: this does not establish, however, that the ordinary meaning of "pipeline transp ort
services" includes LNG services. Similarly, the fact that LNG facilities may include some pipelines,
for example for the purpose of connecting the LNG facility with the transmission system 672 is not
sufficient to read "LNG services" into the ordinary mea ning of "pipeline transport services".
Therefore, we must conclude that the ordinary meaning of "Pipeline Transport [Services]" does not
refer to LNG services.
7.312. To sum up, our examination of the ordinary meaning of the terms "Pipeline Transport
[Services]" based on dictionary definitions and industry sources indicates that this sector covers
the activity consisting in carrying or conveying goods, usually oil or gas through a long pipe, often

666 UNECE glossary for transport statistics, (Exhibit RUS-41), pp. 97-98; and US Department of
Transportation, Pipeline & Hazardous Materials Safety Administration, "Stakeholder Communications: Natural
Gas Pipeline Systems" https://primis.phmsa.dot.gov/comm/NaturalGasPipelineSystems.htm (accessed 1 July
2016) (Exhibit EU-26); MIT Study on the Future of Natural Gas, Chapter 6, "Infrastructure", pp. 131-146,
available at: http://energy.mit.edu/research/future-natural-gas/ (accessed 3 August 2017), (Exhibit EU-27);
NaturalGas.org, "Natural Gas – From Wellhead to Burner Tip" http://naturalgas.org/naturalgas/ (accessed 3
August 2017) (Exhibit EU-28); and US Energy Information Administration, Natural Gas Transmission Path
http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/ngpipeline/transpath_fig.html
(accessed 1 July 2016), (Exhibit EU-29).
667 Russia's first written submission, paras. 129-130.
668 Russia's first written submission, para. 132 (referring to Commission Decision of 20 November 2013
on the state aid to Klaipedos NAFTA – LNG Terminal (SA.36740 (2013/NN)), C(2013) 7884 final, (Exhibit
RUS-42)).
669 Russia's first written submission, para. 130 (referring to Directive 2009/73/EC, (Exhibit EU-5),
Article 2(11)).
670 Russia's first written submission, para. 120, (referring to United Nations Economic Commission for
Europe, Study on Current Status and Perspectives for LNG in the UNECE Region (UN 2013), Chapter 2,
Figure 1: Illustrations of LNG and Pipeline Value Chains, p. 2, (UNECE LNG Study), (Exhibit RUS-271)) (the
document originally submitted by Russia with its first written submission did not contain the quote referred to
by Russia. At the request of the Panel, Russia submitted the document quoted in its first written submission as
Exhibit RUS-271).
671 For the sake of discussing comprehensively Russia's arguments, we consider the evidence relied to
by Russia and contained in Exhibits RUS-271, RUS-42 and EU-5. We also note that the European Union does
not object to Russia using these sources for the purpose of establishing the ordinary meaning of treaty terms.
672 See Russia's first written submission, paras. 131-132 (referring to the Klaipedos Nafta LNG
terminal).

underground, over long distances. We also found that the ordinary m eaning of those terms does
not refer to "supply" or "supply services", nor does it refer to LNG services.
7.313. We turn now to the contextual elements of the phrase "Pipeline Transport [Services]"
contained in the Schedules of Croatia, Hungary and Lithuania.
Context
7.314. Principles of treaty interpretation direct us to consider the ordinary meaning of treaty
terms in their context, which comprises the text of the treaty, including its preamble and annexes.
For the purpose of interpreting a GATS Schedule, the Appellate Body has explained that the
context includes (a) the remainder of the Member's Schedule; (b) the substantive provisions of the
GATS; (c) the provisions of covered agreements other than the GATS; and (d) the GATS Schedules
of other Members.673
7.315. In this disput e, we consider that our examination of the relevant context should cover
other elements in the Schedules of Croatia, Hungary and Lithuania, in particular: (i) the rest of
sector 11.G; and (ii) the remainder of the Schedules of Croatia, Hungary and Lithuania.
The rest of sector 11.G in the Schedules of Croatia, Hungary and Lithuania
7.316. The phrase "Pipeline Transport [Services]" in the Schedules of Croatia and Lithuania is
immediately followed by the inscription "(CPC 713)" to which we must give meaning and effect.
7.317. The panel in EC – Bananas III observed that, in the Schedule of the European Community,
the terms "(CPC 622)" were inscribed after the terms "wholesale trade services", and concluded
that "[a]ny legal definition of the scope of the EC's commitments in wholesale services should be
based on the CPC description of the sector and the activities it covers". 674 Hence, following the
guidance by the panel in EC – Bananas III, we consider that the legal definition of the scope of the
commitments on "Pipeline Transport [Services]" under sector 11.G in the Schedules of Croatia and
Lithuania should be based on the description found under CPC 713.675
7.318. Before proceeding to an examination of the description found under "CPC 713", we recall
that the sectoral entry in Hungary 's Schedule under sector 11.G, entitled "Pipeline Transport", is
not followed by the inscription "CPC 713". We must therefore determine whether the absence of
the inscription "CPC 713" in the Schedule of Hungary has a material effect on the assessment of
scope of Hungary's commitments under sector 11.G. In addressing this question, we note that the
horizontal section of Hungary's Schedule contains a footnote that states as follows:
Numbering of sectors and sub -sectors is that of the Services Sectoral Classi fication
List (MTN.GNS/W/120). However, if reference to another definition is also made, the
specific commitment relates only to the services covered by that definition. Where an
"ex" is attached to a CPC code, only part of the services defined under the r elevant
code of the UN Central Product Classification is covered.676
7.319. According to the European Union, the CPC is relevant for interpreting Hungary's
commitments because this footnote "refers to W/120, indicating that the numbering is according

673 Appellate Body Report, US – Gambling, para. 7.102. When examining the remainder of a Member's
Schedule as part of a contextual analysis, previous panel and the Appellate Body reports reviewed in particular
the structure of the Schedule, other relevant elements of the subsector at issue, sectoral headings in the sector
concerned, market access and national treatment commitments, as well as commitments scheduled under
another related sector. (Appellate Body Reports, US – Gambling, para. 179; and China – Publications and
Audiovisual Products, paras. 361-372; and Panel Report, China – Electronic Payment Services, para. 7.104).
674 Panel Reports, EC – Bananas III, para. 7.289.
675 CPC codes in the W/120 Services Sectoral Classification List refer to the 1991 Provisional Central
Product Classification and both parties agree that the Schedules of Croatia, Hungary and Lithuania are based
on the classification contained in the W/120. (See Russia's first written submission, paras. 113 and 136,
(referring to W/120, (Exhibits EU-15/RUS-38)); and European Union's first written submission, para. 73).
Hence, CPC references in those Schedules are those of the 1991 Provisional Central Product Classification. The
parties do not argue otherwise.
676 Schedule of Specific Commitments of Hungary, GATS /SC/40 (15 April 1994), (Exhibits EU-17/RUS-
36), p. 2.

to the Service s Sectoral Classification List in W/120" and that "[t]his list in turn refers to the
Provisional CPC, including CPC 7131". 677 Russia states that this footnote has no relevance for
interpreting the scope of Hungary's specific commitments 678, but considers nonet heless that
Hungary has included the "same services as Croatia and Lithuania" under sector 11.G 679 and that
the reference to "CPC 713" is "also relevant for interpreting the commitments undertaken by
Hungary in its Schedule."680
7.320. A review of Hungary's Schedule shows that, as a general rule, Hungary has followed the
structure of W/120, by using the same numbering and language. The wording of the
aforementioned footnote suggests that the services listed in Hungary's Schedule are defined on
the basis of the CPC, unless another definition is referenced. In our view, therefore, the absence of
a CPC code for sector 11.G does not mean that the words used therein have a different meaning
and scope than the same words used in the Schedules of Croatia and Lithuania. 681 The parties do
not opine otherwise. Thus, based on an examination of Hungary's Schedule and keeping in mind
the guidance provided by the Appellate Body, we consider that, although it does not contain the
inscription "CPC 713", the terms "Pipeline Transport" in Hungary's Schedule have the same
meaning and scope as in the Schedules of Croatia and Lithuania. The legal definition of the scope
of the commitments on "Pipeline Transport" under sector 11.G in the Schedule of Hungary should
therefore be based on the CPC description found under CPC 713.
7.321. We examine now the description found under the code "CPC 713". In the CPC, Group 713
"Transport services via pipeline", which corresponds to sector 11.G of W/120 ("Pipeline
Transport"), is broken down into two sub-classes, namely:
7131 71310 Transportation of petroleum and natural gas
7139 71390 Transportation of other goods
7.322. According to the explanatory note for CPC 71310, "Transportation of petroleum and natural
gas" encompasses "[t]ransportation via pipeline of crude or refined petroleum and petroleum
products and of natural gas". By including a reference to CPC 713, Croatia and Lithuania have
undertaken a commitment with respect to the entire Group covered under this code, including
CPC 71310. To the extent that the com mitments on "Pipeline Transport [Services]" under sector
11.G in the Schedule of Hungary should be based on the CPC description of the sector and the
activities covered under CPC 713, Hungary similarly undertook specific commitments with respect
to CPC 71310. Hence, Croatia, Hungary and Lithuania have undertaken specific commitments with
respect CPC 71310, which covers the "transportation via pipeline of … natural gas". We therefore
find that sector 11.G, as defined in the description contained under CPC 71 3, covers transmission
of natural gas via pipelines and we note that the parties do not opine otherwise.
7.323. The parties disagree, however, as to whether "supply" of natural gas and "supply
services", as well as LNG services are also covered under sector 11.G. According to Russia, the
fact that Croatia, Hungary and Lithuania did not limit the coverage of sector 11.G confirms that
these Members intended to include all the services at issue, including LNG services. 682 The

677 European Union's response to Panel question No. 61, para. 168.
678 Russia's response to Panel question No. 61, para. 287.
679 Russia's response to Panel question No. 65, para. 307 ("Hungary did not inscribe any CPC listing.
However, by making its commitments in Sector 11G, Hungary signified its intention to include the same
services as Croatia and Lithuania. After all, Sector 11G in Document W/120 is structured very similarly to CPC
713 in the Provisional CPC. That is, it includes both 'Transportation of fuels 7131' and 'Transportation of other
goods 7139'").
680 Russia's response to Panel question No. 66, para. 308.
681 We recall that, in a previous dispute involving the interpretation of an entry which did not contain a
reference to a CPC code, the Appellate Body observed that the Schedule at issue "generally follows the
structure, and adopts the language, of W/120". These "structural and linguistic similarities" led the Appellate
Body to conclude "that the absence of references to CPC codes does not mean that words used in the []
Schedule must have a different meaning and scope than the same words used in the Schedules of other
Members". (See Appellate Body Report, US – Gambling, para. 183). (emphasis original; footnote omitted)
682 Russia's first written submission, para. 140.

European Union responds that Russia errs w hen it seeks to interpret these entries as covering
"supply" of natural gas as well as LNG services.683
7.324. We therefore turn to other relevant context, namely the remainder of the Schedules of
Croatia, Hungary and Lithuania.
The remainder of the Schedules of Croatia, Hungary and Lithuania
7.325. In considering the remainder of the Schedules of Croatia, Hungary and Lithuania as
providing relevant context for interpreting the scope of the terms "Pipeline Transport [Services]" in
sector 11.G, we keep in mind that a Memb er's Schedule should be considered as a whole because,
as explained by the Appellate Body, sectors and subsectors "must be mutually exclusive". 684 We
note that both parties refer to and agree with the principle of mutual exclusivity of sectors and
sub-sectors as guiding the interpretation of GATS Schedules.685
7.326. Like the European Union 686, we observe that the Schedules of Croatia, Hungary and
Lithuania include commitments in various service sectors which constitute relevant context for the
interpretation of "Pipeline Transport [Services]" in sector 11.G.
7.327. Croatia's Schedule contains commitments with respect to "Services incidental to energy
distribution (CPC 887)" under sector 1.F. ("Other Business Services"), which include, inter alia ,
distribution services of gaseous fuels to household, industrial, commercial and other users. The
explanatory note for CPC 887 further specifies that "transport services via pipeline on a fee or
contract basis of petroleum and natural gas are classified in subclass 71310", thereby
distinguishing distribution services of gas from pipeline transportation services.
7.328. The same observation can be made with respect to Hungary and Lithuania which have
undertaken partial commitments on "Services incidental to energy distribution (CPC 887)"687 under
sector 1.F, "Other Business Services". In the section "Other Business Services" (1.F), Hungary also
has commitments on "Consultancy services incidental to mining (ex CPC 883)". The relevant
definition of the CPC defines "services incidental to mining " as "services rendered on a fee or
contract basis at oil and gas fields […]". Hence, services related to the production of gas are not
found under sector 11.G.
7.329. Continuing our examination of the remainder of the three Schedules at issue, we observe
that al l three Members have undertaken specific commitments on "Distribution Services", in
particular "Whole Trade Services" (sector 4.B) and "Retailing Services" (sector 4.C). The sector
"Whole Trade Services" covers, inter alia, "Wholesale trade services of sol id, liquid and gaseous
fuels and related products (CPC 62271)" and "Retailing Services" encompasses, inter alia , the
"[r]etail sales of fuel oil, bottled gas, coal and wood (CPC 63297)". Thus, wholesaling and retailing
services of natural gas are not found under sector 11.G.
7.330. Furthermore, all three Members have commitments under sector 11.H, "Services Auxiliary
to All Modes of Transport", in particular on "Storage and Warehous e Services (CPC 742)". This
sector encompasses, inter alia , the "[b]ulk storage ser vices of liquids or gases (CPC 7422)".
Finally, we observe that, under sector 11.A, "Maritime Transport", Croatia has commitments on
"Freight transportation (CPC 7212)", which includes, under "Transportation of bulk liquids or gases
(CPC 72122)", "transportation by seagoing vessels of bulk liquids or gases in special tankers". In
our view, this entry encompasses transportation services of LNG in sea tankers.

683 European Union's first written submission, para. 80.
684 Appellate Body Report, US – Gambling, para. 180. The Appellate Body further explained: "If this
were not the case, and a Member scheduled the same service in two different sectors, then the scope of the
Member's commitment would not be clear where, for example, it made a full commitment in one of those
sectors and a limited, or no, commitment, in the other." (Ibid. fn 219).
685 Russia's first written submission, para. 135; and European Union's first written submission, para. 55.
686 European Union's first written submission, fn 71.
687 Hungary has commitments on "Consultancy services incidental to energy distribution (ex CPC 887)"
and Lithuania on "Services incidental to energy distribution (CPC 887[])" which Lithuania defines as covering
"consultancy services related to the transmission and distribution on a fee basis of electricity, gaseous fuels,
steam and hot water to household, industrial, commercial and other users)".

7.331. Our review of the remainder of the Schedules of Croatia, Hungary and Lithuania provides
several pert inent indications. The existence of different commitments encompassing gas -related
services confirms that, under the GATS, the terms "Pipeline Transport [Services]" cannot cover all
services related to natural gas, which, in turn, does not support Russia's proposition that
sector 11.G includes the notions of "supply" and "supply services".688
7.332. None of the three Schedules contains a reference to LNG services. 689 Nonetheless, our
examination of the remainder of those Schedules gives us two useful indications.
7.333. First, the existence of commitments on "Services Auxiliary to All Modes of Transport"
confirms that services closely related to, or enabling, transportation, are classified separately from
transportation per se. Second, the fact that "Transportation of bulk l iquids or gases (CPC 72122)"
encompasses transportation of LNG in sea tankers contradicts Russia's argument that LNG services
fall under sector 11.G, "Pipeline Transport [Services]". The reason is that, if LNG services should
be considered to fall under "P ipeline Transport [Services]" on the ground that the essential role of
re-gasification is to facilitate the transport of natural gas via pipelines, LNG services might also be
considered to fall under "Transportation of bulk liquids or gases (CPC 72122)" on the ground that
liquefaction facilitates the transport of LNG in sea tankers. However, in accordance with the
principle of mutual exclusivity of sectors and sub -sectors, LNG services cannot be classified at the
same time under sector 11.A, "Maritime Trans port ", and sector 11.G, "Pipeline Transport". Thus,
we can only conclude that LNG services must be classified elsewhere. For the purpose of this
dispute, we do not need to determine where LNG services should be classified in the W/120 or in
the CPC, but w e feel confident that they are not found in sector 11.G, "Pipeline Transport
[Services]".
7.334. In light of the foregoing, we find that a consideration of the remainder of the Schedules of
Croatia, Hungary and Lithuania as relevant context confirms that sector 1 1.G does not cover
"supply" or "supply services" nor does it cover LNG services. It also confirms our view that
sector 11.G, "Pipeline Transport [Services]" encompasses the transportation or transmission of
natural gas through transmission pipelines.
Object and purpose of the GATS
7.335. The parties do not make specific arguments with respect to the consistency of their
proposed interpretation with the object and purpose of the GATS.
7.336. In US – Gambling and in China – Publications and Audiovisual Products, the Appellate Body
observed that the objectives contained in the preamble of the GATS did not provide specific
guidance as to the correct interpretation of GATS Schedules. 690 In US – Gambling, the Appellate
Body found nonetheless that the purpose of transparency cont ained in the preamble to the GATS
supported the need for precision and clarity in scheduling GATS commitments, and underlined the
importance of having Schedules that are readily understandable by all other WTO Members, as
well as by service suppliers and consumers.691
7.337. We find that our interpretation of the scope of the commitments undertaken by Croatia,
Hungary and Lithuania under sector 11.G, "Pipeline Transport [Services]" is consistent with the
purpose of transparency contained in the preamble of the GATS because we define the meaning
and scope of the relevant commitments in accordance with the ordinary meaning of the terms
used and the relevant context as described above.

688 GATS Schedules do not contain specific commitments on activities falling outside the scope of the
GATS. Hence, for the reasons explained above (see section 7.4.1.2), the Schedules of Croatia, Hungary and
Lithuania do not include commitments on "supply" of natural gas or LNG.
689 We also note that neither the W/120 nor the CPC contain an explicit reference to LNG services.
However, as confirmed by the Appellate Body in US – Gambling, "the CPC is exhaustive (all goods and services
are covered)". (Appellate Body Report, US – Gambling, para. 172). W/120, which is based on the CPC, should
be considered to be equally exhaustive. The parties concur with this view even though they disagree on where
LNG services should be classified. (See Russia's response to Panel question No. 53, para. 275; and European
Union's response to Panel question No. 53, para. 146).
690 Appellate Body Reports, US – Gambling, para. 189; and China – Publications and Audiovisual
Products, para. 393.
691 Appellate Body Report, US – Gambling, para. 188.

Conclusion
7.338. We conclude that sector 11.G, "Pipeline Transport [Services]", in the Schedules of Croatia,
Hungary and Lithuania encompasses the transportation or transmission of natural gas through
transmission pipelines. We further find that this sector does not cover "supply" or "supply
services", nor does it cover LNG services.692
7.4.2.3 Market access and national treatment commitments
7.4.2.3.1 Introduction
7.339. As indicated above, in order to make a prima facie case of violation under Article XVI:2
and/or XVII of the GATS, a complaining party must first establish that the responding party has
undertaken commitments on market access and/or national treatment with respect to the relevant
sector and mode at issue.693
7.340. In this section, we shall assess whether Russia has demonstrated that Croatia, Hungary
and Lithuania have undertaken specific commitments on market access and/or national treatment
with respect to sector 11.G, "Pipeline Transport [Services]". Russia has confirmed that each of its
claims under the GATS in this dispute concerns mode 3, namely the commercial presence mode of
supply.694
7.341. We shall therefore consider, first, the commitments inscribed under mode 3 in the market
access column for sector 11.G. We sh all then turn to the mode 3 commitments contained in the
national treatment column. In our analysis, we shall also consider the horizontal commitments
contained in the Schedules of Croatia, Hungary and Lithuania.
7.4.2.3.2 Market access commitments
7.342. Russia argues t hat Croatia and Lithuania, having inscribed a "None" for mode 3 in the
market access column with respect to sector 11.G, signified their intention to impose no limitation
on the supply of pipeline transport services through mode 3.695 Russia further argues that Hungary
has made essentially a full mode 3 commitment as, in Russia's view, the phrase included by
Hungary in the market access column with respect to mode 3 does not materially limit Hungary's
market access commitment.696
7.343. The European Union does not mak e specific arguments with respect to the market access
commitments contained in the Schedules of Croatia and Lithuania. The European Union submits,

692 We consider that our interpretation pursuant to Article 31 of the Vienna Convention of the terms
"Pipeline Transport [Services]", in sector 11.G, does not leave the meaning of those terms ambiguous or
obscure, nor does it lead to a result which is manifestly absurd or unreasonable. Accordingly, we do not find it
necessary to resort to supplementary means of interpretation under Article 32 of the Vienna Convention. For
this reason, it is also not necessary for us to determine whether, as argued by the European Union, the
CPC 2.1 constitutes supplementary means of interpretation. We recall that the European Union refers to
the CPC 2.1 to support its view that pipeline transport services must be distinguished from LNG services.
(European Union's first written submission, para. 76). CPC 2.1 distinguishes "Transport services via pipeline of
petroleum and natural gas" (CPC 65131), which includes "transportation via pipeline of natural gas" from
"Other supporting transport services n.e.c."(CPC 67990), the latter including the services of liquefaction of
natural gas and regasification of LNG for transportation. (See CPC Ver.2.1 code 65131, Detailed structure and
explanatory notes, United Nations Statistics Division, Classifications Registry
http://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=31&Lg=1&Co=65131 (accessed 1 July 2016), (CPC 2.1
code 65131), (Exhibit EU-34); and CPC Ver.2.1 code 67990, Detailed structure and explanatory notes, United
Nations Statistics Division, Classifications Registry
http://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=31&Lg=1&Co=67990 (accessed 1 July 2016), (CPC 2.1
code 67990), (Exhibit EU-37)). According to the European Union, CPC 2.1 constitutes "supplementary means of
interpretation" under Article 32 of the Vienna Convention. (European Union's response to Panel question No.60,
para. 165). Russia submits that CPC 2.1 is not relevant for the purpose of interpreting GATS Schedules since
those are based on the 1991 Provisional CPC. (Russia's response to Panel question No. 60, para. 286; and
second written submission, para. 86).
693 See, above paras. 7.233 and 7.235.
694 Russia's response to Panel question No. 56, para. 285.
695 Russia's first written submission, paras. 144 and 146.
696 Russia's first written submission, para. 145.

however, that Hungary has included a "specific limitation" for this mode which, in its view, means
that "[t]hese services may only be provided through a Contract of Concession granted by the state
or the local authority".697
7.344. We recall that Russia has identified the market access commitments under sector 11.G for
mode 3 by, respectively, Croatia, Hungary and Lithuania as follows698:
Limitations on Market Access

Croatia699

Hungary700 Lithuania701

1) None
2) None
3) None

4) Unbound, except as
indicated in the horizontal
section

1) Unbound
2) None
3) Services may be
provided through a Contract of
Concession granted by the
state or the local authority.
4) Unbound, except as
indicated in Part I

1) Unbound
2) None
3) None

4) Unbound, except as
indicated in Part I

7.345. According to Article XX:3 of the GATS, Members' Schedules of Specific Commitments are
an integral part of the GATS and their meaning must be determined in accordance with the rules of
interpretation of the Vienna Convention.702
7.346. We start our analysis with the Schedules of Croatia and Lithuania, both of which contain
the word "None" in the "Limitations on market access" column for mode 3 with respect to
sector 11.G.
7.347. The word "None" is not defined in the GATS, but, in US – Gambling, the Appellate Body
explained that the word "None" in the market access column means that the Member concerned
"has undertaken to provide full market access, within the meaning of Article XVI, in respect of the
services included within the scope of" its commitment in the sector at issue, and, in so doing, the
Member concerned "has committed not to maintain any of the types of measures listed in the six
sub-paragraphs of Article XVI:2".703
7.348. In light of the foregoing, we conclude that, having inscribed "None" in the "Limitations on
market access" with respect to mode 3, Croatia and Lithuania have made a full commitment for
"Pipeline Transport [Services]" under sector 11.G. In other words, Croatia and Lithuania have
undertaken not to maintain any of the six measures listed under Article XVI:2.
7.349. We turn now to the "Limitations on Market Access" column in the Schedule of Hu ngary
which contains the following inscription under mode 3: "Services may be provided through a
Contract of Concession granted by the state or the local authority".

697 European Union's first written submission, para. 46.
698 Russia's first written submission, paras. 144-146.
699 Schedule of Specific Commitments of Croatia, GATS/SC/130 (22 December 2000), (Exhibits EU-16/
RUS-37), p. 33. (emphasis added)
700 Schedule of Specific Commitments of Hungary, GATS /SC/40 (15 April 1994), (Exhibits EU-17/RUS-
 36), p. 32. (emphasis added)
701 Schedule of Specific Commitments of Lithuania, GATS/SC/133 (21 December 2001), (Exhibits EU-19/
RUS-35), p. 23. (emphasis added)
702 Appellate Body Report, US – Gambling, para. 160.
703 Appellate Body Report, US – Gambling, para. 215. As explained by the panel in China – Electronic
Payment Services, the term "None" needs to be read in conjunction with the title of the column in which this
term appears; it means that the Member has undertaken "no" limitation, or, in other words, a full commitment,
with respect to market access (or national treatment) in the mode concerned. (See Panel Report, China –
Electronic Payment Services, para. 7.651).

7.350. The parties hold different views on the meaning and effect of this inscription. According to
Russia, this limitation "only makes the mode 3 supply of pipeline transport services in Hungary
subject to winning a concession tender issued by the state or a local authority" and does not
correspond to any of the six limitations enumerated in Article XVI:2 of the GATS.704 The European
Union replies that the entry at issue "falls under the scope of XVI:2(a) of the GATS, under the
form of service suppliers having a concession" and means that Hungary's commitment "does not
oblige the state or a local autho rity to grant a single concession contract". 705 The European Union
further explains that, at the moment, two service suppliers have the permission to supply pipeline
transport services, but the maximum number of TSOs is not limited under the Hungarian Gas
Act.706
7.351. We observe that, in this dispute, Russia's claim under Article XVI: 2(a) of the GATS
challenges the unbundling measure in the implementing laws of Croatia and Lithuania, but not
Hungary.707 We therefore do not find it necessary to determine whether, as ar gued by the
European Union, the inscription in Hungary's Schedule amounts to a limitation within the meaning
of Article XVI:2(a). We recall, however, that Russia challenges Hungary's unbundling measure
under Article XVI:2(e) and (f) of the GATS .708 Therefore, we need to determine whether th is
inscription amounts to a limitation within the meaning of either, or both, of those two provisions.
7.352. We note, first, that Hungary has not inscribed the term "Unbound" in the "Limitations on
market access" column with respect to mode 3, which is the notation used to indicate that the
Member concerned undertakes no specific commitment. 709 Therefore, we do not consider that
Hungary has undertaken no market access commitments for mode 3. The European Union is not
arguing eit her that the entry at issue amounts to an "Unbound", nor is the European Union
contending that Hungary's inscription in the market access column under mode 3 amounts to a
limitation within the meaning of Article XVI:2(e) or (f).
7.353. We recall that the mode 3 inscription at issue states that "Services may be provided
through a Contract of Concession granted by the state or the local authority". It is clear – and the
parties do not argue otherwise – that, by its own terms, this inscription does not refer to measures
restricting or requiring specific types of legal entity or joint -venture, not does it refer to limitations
on the participation of foreign capital. We conclude, therefore, that, in its "Limitations on Market
Access" column under sector 11.G, "Pipeline Transport", Hungary has not inscribed any limitation
within the meaning of Article XVI:2(e) or (f), or both, with respect to the commercial presence
mode of supply (mode 3).710
7.354. We recall that sectoral entries in a Member's Schedule have to be read together with the
relevant entries in the so-called horizontal section of that Member's Schedule, as the latter applies
to all the sectors and subsectors listed in the Schedule. 711 Hence, as a general matter, the so -

704 Russia's response to Panel question No. 86, paras. 372 and 374.
705 European Union's response to Panel question No. 168, paras. 52-53. See also European Union's
response to Panel question No. 86, paras. 220-221.
706 European Union's response to Panel question No. 168, para. 54.
707 See below section 7.5.2.2. In its response to a question by the Panel after the second substantive
meeting, Russia appears to allege that Hungary's unbundling measure is inconsistent with Article XVI:2(a) of
the GATS. (See Russia's response to Panel question No. 169, para. 83). However, for the reasons explained in
section 7.5.2.2, we shall not rule on this allegation by Russia.
708 See sections 7.5.2.3 and 7.5.2.4 below.
709 Appellate Body Report, US – Gambling, fn 257. We observe that Hungary has used the notation
"Unbound" in a number of sectors and modes across its Schedule, including under sector 11.G, in the market
access column for mode 1. Hence, the fact that Hungary did not inscribe "Unbound" in the "Limitations on
market access" for mode 3 with respect to the same sector indicates that Hungary has undertaken market
access commitment with respect to this sector and mode. (See Schedule of Specific Commitments of Hungary,
GATS/SC/40 (15 April 1994), (Exhibits EU-17/RUS- 36)).
710 We wish to clarify that we have not determined whether this limitation amounts to a limitation on the
number of service suppliers within the meaning of Article XVI:2(a). Nor have we determined whether this entry
amounts to a limitation under sub-paragraphs (b), (c) or (d) in Article XVI:2. Moreover, without further
examination, we cannot exclude that the meaning and effect of this entry does not coincide with any of the six
types of limitations listed under Article XVI:2. However, we do not need to reach a finding on these particular
issues and we do not. We only determine, for the purpose of addressing Russia's claims in this case, that this
particular entry does not amount to a limitation within the meaning of Article XVI:2(e) or (f).
711 See Panel Reports, China – Publications and Audiovisual Products, para. 7.950; and China –
Electronic Payment Services, paras. 7.574 and 7.677.

called "horizontal commitments" contained in the Schedules of Croatia, Hungary and Lithuania
may set out relevant limitations on market access. While Lithuania's Schedule does not contain
any horizontal limitation on market access for mode 3, Croatia and Hungary have listed mode 3
horizontal limitations. We therefore examine the horizontal limitations in the Schedules of Croatia
and Hungary, starting with the Schedule of Croatia.
7.355. Croatia's Schedule contains certain horizontal limitations with respect to mode 3, as
follows712:
Sector or
subsector
Limitations on market access
HORIZONTAL
COMMITMENTS

All sectors
included in this
schedule
3) Investment
Branch offices can perform all kind of business activities, but are not
considered to be independent legal entities. The rights and obligations of the
branch offices are those vested in the parent companies which have founded
them.

3) Real Estate
Unbound in relation to acquisition of real estate by services suppliers not
established and incorporated in Croatia.
Acquisition of real estate necessary for the s upply of services by companies
established and incorporated in Croatia as legal persons is allowed.
Acquisition of real estate necessary for the supply of services by branches
requires the approval of the Ministry of Foreign Affairs.

7.356. In the horizontal section of its Schedule, Croatia has inscribed two entries concerning the
mode 3 mode of supply, which concern, respectively, "Investment" and "Real Estate" in the
column dealing with "Limitations on market access". According to the European Union, this en try
"does not limit the types of legal entities that can be used, but determines merely that a branch is
not considered independent" and, hence, "is merely for transparency purposes". 713 We see no
reason to disagree with the European Union that this entry cl arifies the "rights and obligations" of
"branch offices" vis-à-vis the "parent companies" . Neither party discusses the entry related to
"Real Estate" nor do we have any reason to believe that this entry has relevance in this dispute.
Having reviewed the horizontal section in the Schedule of Croatia, we consider that it does not set
out additional relevant limitations on market access for the purpose of this case. We therefore find
that, with respect to market access, Croatia's horizontal commitments do not modify the
conclusion reached on the basis of the mode 3 entry under sector 11.G in paragraph 7.348 above.
The parties do not argue otherwise.
7.357. Turning to the Sched ule of Hungary, we observe that Hungary has inscribed in the
horizontal section of its Schedules certain limitations on market access under mode 3 as follows714:

712 Schedule of Specific Commitments of Croatia, GATS/SC/130 (22 December 2000), (Exhibits EU-16/
RUS-37), p. 2.
713 European Union's response to Panel question No. 90, para. 229. The European Union explains:
It is well documented that WTO Members have inscribed certain specifications in their schedules
that are not measures that fall within the scope of Articles XVI or XVII of the GATS. Such so -
called "fog" in schedules of commitments, i.e. entries that cannot be associated with any of the
relevant provisions of Article XVI (market access) or Article XVII (national treatment) of the
GATS, is due to the desire of the WTO Members to specify as transparent as possible how each of
them sees its WTO obligations. (European Union's response to Panel question No. 90, para. 230
(referring to R. Adlung, P. Morrison, M. Roy and W. Zhang, "FOG in GATS Commitments – Boon
or Bane?", Staff Working Paper ERSD -2011-04, World Trade Organization, Economic Research
and Statistics Division (31 March 2011), (Exhibit EU-93))).
Russia refers to the horizontal entry related to "Investment" as context to support its interpretation of
Article XVI:2(e). (See Russia's first written submission, para. 173).
714 Schedule of Specific Commitments of Hungary, GATS /SC/40 (15 April 1994), (Exhibits EU-17/RUS-
 36), p. 1.

Sector or subsector Limitations on market access
HORIZONTAL
COMMITMENTS

ALL SECTORS
INCLUDED IN PART II
3) Commercial presence should take the form of limited liability
company, joint -stock company or representative office. Initial entry as
branch is not permitted.

Unbound for the acquisition of state owned properties.

7.358. Under the horizontal section of its Schedule, Hungary has listed two distinct entries in the
market access column for mode 3. The first entry stipulates that "[c]ommercial presence should
take the form of a limited liability company, joint -stock company or representative offic e" and
prohibits "[i]nitial entry as a branch". Both parties concur that this entry limits the scope of
Hungary's market access commitments for mode 3.715 In our view, by stipulating that service
suppliers establishing a commercial presence in Hungary "shoul d take the form of limited liability
company, joint-stock company or representative office", and that "initial entry as branch is not
permitted", this limitation may have relevance for the purpose of assessing Russia's claim against
Hungary under Article XVI:2(e) of the GATS.
7.359. The second mode 3 entry contained in the market access column in the horizontal part of
Hungary's Schedule excludes from Hungary's commitments "the acquisition of state -owned
properties". In our view, this entry does not set out a limitation which is relevant for the purpose
of assessing Russia's claims under Article XVI:2(e) or (f) of the GATS . The parties do not argue
otherwise.
7.360. Having reviewed the relevant sectoral and horizontal entries in the Schedules of Croatia,
Hungary and Lithuania, we conclude that Croatia and Lithuania have undertaken a full mode 3
market access commitment for "Pipeline Transport [Services]" under sector 11.G of their
Schedule. We further conclude that, in its "Limitations on Market Access" column under mode 3 for
"Pipeline Transport", Hungary has undertaken not to maintain any limitation within the meaning of
Article XVI:2(e) or (f). Nonetheless, in the horizontal part of its Schedule, Hungary has inscribed a
limitation stipulating that services suppliers establishing a commercial presence in Hungary "should
take the form of limited liability company, joint -stock company or representative office", and that
"initial entry as branch is not permitted": this limitation may have relevance for the purpose o f
assessing Russia's claim under Article XVI:2(e) of the GATS.
7.4.2.3.3 National treatment commitments
7.361. Russia argues that Croatia, Hungary and Lithuania recorded the word "None" in the
national treatment column for mode 3, thus signifying their commitment without limitation to
permit service suppliers of other Members to supply pipeline transport services through
commercial presence in their respective territories. 716 The European Union does not comment on
this issue.
7.362. Russia has identified the national treatment comm itments under subsector 11.G for
mode 3 by, respectively, Croatia, Hungary and Lithuania as follows717:

715 According to Russia, "Hungary does appear to have limited the permissible 'forms of commercial
presence' and thus the 'specific types of legal entity through which a service supplier may supply a service'.
However, this limitation in no way excludes Hungary's unbundling measure from the coverage of
Article XVI:2(e)." (Russia's first written submission, para. 174; and response to Panel question No. 165,
para. 71). The European Union submits that "Hungary's limitation does limit its commitments for mode 3, by
stating that commercial presence should take the form of a limited liability company, joint-stock company, or
representative office and that initial entry as a branch is not permitted." (European Union's response to Panel
question No. 5, para. 228).
716 Russia's first written submission, para. 236.
717 Russia's first written submission, para. 174; and response to Panel question No. 165, para. 71.

Limitations on National Treatment

Croatia718

Hungary719 Lithuania720

1) None
2) None
3) None
4) Unbound, except as
indicated in the horizontal
section

1) None
2) None
3) None
4) Unbound, except as
indicated in Part I

1) Unbound
2) None
3) None
4) Unbound, except as
indicated in Part I.

7.363. With respect to sector 11.G, Croatia, Hungary and Lithuania have inscribed the word
"None" in the "Limitations on national treatment column" for mode 3.
7.364. In paragraph 7.347 above, we noted that the word "None" in the market access column
means that the Member concerned has undertaken to accord full market access within the
meaning of Article XVI:2 of the GATS. Similarly, the word "None" in the national treatment column
means that the Member must accord full national treatment with respect to the particular sector
and mode of supply, such national treatment extending to "'all measures affecting the supply of
services', which is the scope of Article XVII as defined in t hat provision".721 We see no reason to
depart from that interpretation.
7.365. We conclude, therefore, that, having inscribed the word "None" with respect to mode 3 for
sector 11.G, Croatia, Hungary and Lithuania have undertaken to accord full national treatment fo r
mode 3 in this sector.
7.366. We recall that sectoral entries in a Member's Schedule have to be read together with the
relevant entries in the so-called horizontal section of that Member's Schedule, as the latter applies
to all the sectors listed in the Schedul e.722 Hence, the section on "horizontal commitments"
contained in Schedules of Croatia, Hungary and Lithuania may set out relevant limitations on
national treatment.
7.367. The relevant part of Croatia's Schedule lists the following commitments723:
Sector or
subsector
[…] Limitations on national treatment
HORIZONTAL
COMMITMENTS

All sectors
included in this
schedule
 1), 2), 3) Eligibility for subsidies from the Republic of Croatia may
be limited to legal persons established within the territory of Croatia
or a particular geographical sub-division thereof.
Research and development subsidies are limited to legal persons
established in Croatia.

7.368. We turn to the Schedule of Hungary. The relevant part of Hungary's Schedule lists the
following commitments724:

718 Schedule of Specific Commitments of Croatia, GATS/SC/130 (22 December 2000) (Exhibits EU-16/
RUS-37), p. 33. (emphasis added)
719 Schedule of Specific Commitments of Hungary, GATS /SC/40 (15 April 1994), (Exhibits EU-17/RUS-
 36), p. 32. (emphasis added)
720 Schedule of Specific Commitments of Lithuania, GATS/SC/133 (21 December 2001), (Exhibits EU-19/
RUS-35), p. 23. (emphasis added)
721 Panel Report, Argentina – Financial Services, para. 7.454.
722 See, for instance, Panel Reports, China – Publications and Audiovisual Products, para. 7.950; and
China – Electronic Payment Services, paras. 7.574 and 7.677.
723 Schedule of Specific Commitments of Croatia, GATS/SC/130 (22 December 2000), (Exhibits EU-16/
RUS-37), p. 2.

Sector or subsector […] Limitations on national treatment
HORIZONTAL
COMMITMENTS

ALL SECTORS
INCLUDED IN PART II
 3) Unbound for the acquisition of state owned properties.

 Unbound with respect to subsidies

7.369. Finally, we observe that the relevant part of Lithuania's Schedule is as follows725:
Sector or subsector […] Limitations on national treatment
HORIZONTAL
COMMITMENTS

HORIZONTAL
COMMITMENTS
 3) Investment

None other than investments in organizing the lotteries which
are forbidden under the Law on Foreign Capital Investment.
Eligibility of subsidies may be limited to legal persons established
within the territory of Lithuania or a particular geographical
subdivision thereof.

7.370. We observe that neither party argues that the horizontal limitations above are relevant to
Russia's claims. Likewise, having reviewed these limitations, we consider that they do not modify
the conclusions we have reached above in paragraph 7.365.
7.371. Having examined the relevant sectoral and horizontal entries in the three Schedules at
issue, we conclude that Croatia, Hungary and Lithuania have undertaken a full national treatment
commitment for mode 3 under sector 11.G, "Pipeline Transport [Services]".
7.5 The unbundling measure
7.5.1 The unbundling measure in the Directive
7.5.1.1 Introduction
7.372. Russia challenges the unbundling measure in the Dir ective, described in paragraphs 2.10
through 2.28 above, under Article II:1 of the GATS and Art icles I:1 and III:4 of the GATT 1994.
The European Union rejects all three claims and has raised n o defences in response to these
claims.
7.373. Generally, the question before the Panel in respect of Russia's challenge against the
unbundling measure in the Directive is whether this measure viol ates Article II:1 of the GATS and
Articles I:1 and III:4 of the GATT 1994 by setting out different unbundling models, namely the
ownership unbundling model (OU model), the independent system operator model (ISO model),
and the independent transmission oper ator model (ITO model). Importantly, Russia's claims
against the unbundling measure in the Directive do not challenge the requirement to unbundle per
se, but rather the alleged discrimination stemming from the Directive "enabling" EU member
States to choos e between implementing only the OU model or implementing the ISO and/or the
ITO models in addition to the OU model in respect of transmission systems that belonged to a
vertically integrated undertaking (VIU) on 3 September 2009.726

724 Schedule of Specific Commitments of Hungary, GATS /SC/40 (15 April 1994), (Exhibits EU-17/RUS-
 36), p. 1.
725 Schedule of Specific Commitments of Lithuania, GATS/SC/133 (21 December 2001), (Exhibits EU-19/
RUS-35), p. 2.
726 See, e.g. Russia's first written submission, paras. 314, 318-319, 326-327, 353, 355-356, 360-361,
371 and 810; opening statement at the first meeting of the Panel, para. 35; and second written submission,
paras. 58, 229-230, 237, 258 and 487.

7.374. We note that there are important differences between Russia's claims under Article II:1 of
the GATS, Article I:1 of the GATT 1994 and Article III:4 of the GATT 1994 due to the distinct scope
and subject matter of the GATS and the GATT 1994, respectively, a nd the different nature of the
MFN and national treatment obligations in Articles I:1 and III:4 of the GATT 1994, respectively.
Notably, whereas our assessment of Russia's claim under Article II:1 of the GATS will focus on the
treatment accorded to pipeline transport services and service suppliers under the different
unbundling models, our assessment of Russia's claims under Articles I:1 and III:4 of the
GATT 1994 will focus on the treatment accorded to natural gas under the different unbundling
models. Fur thermore, whereas our assessment of Russia's clai m under Article I:1 of the
GATT 1994 will involve a comparison of the treatment accorded to imported natural gas from
Russia with that accorded to imported natural gas from other non -EU countries, our assessment of
Russia's claim under Article III:4 of the GATT 1994 will involve a comparison of the treatment
accorded to imported Russian natural gas with that accorded to domestic natural gas.
7.375. Regardless of their differences, we note that all three of Russia's claims against the
unbundling me asure in the Directive share a common feature. More particularly, they involve a
comparison of the alleged less favourable treatment accorded to pipeline transport services and
service suppliers or natural gas in EU member S tates, which have only implemented the OU
model, with the alleged more favourable treatment accorded to pipeline transport services and
service suppliers or natural gas in EU member States, which have implemented the ISO and/or the
ITO models in addition to the OU model in respect of transmission systems that belonged to a VIU
on 3 September 2009.
7.376. This specific approach calls upon us to consider the threshold issue of whether to assess
the unbundling measure's consistency with Article II:1 of the GATS and Articles I:1 and III:4 of
the GATT 1994 throughout the European Union or within each individual EU member State. The
parties have opposite views but appear to agree that this issue should be dealt with in the same
manner for Russia's claims under Article I I:1 of the GATS and Articles I:1 and III:4 of the
GATT 1994.727 In light of the approach taken by both parties, and the nature and object of Russia's
claims, we are similarly of the view that , regardless of the differences between the GATS and the
GATT 1994, it would be appropriate to assess this issue uniformly for Russia's three claims.
7.377. Accordingly, we will address, first, whether the unbundling measure's consistency with
Article II:1 of the GATS and Articles I:1 and III:4 of the GATT 1994 should be assessed throughout
the European Union or within each individual EU member State. We will then turn to the
substantive assessment under each of these provisions, beginning with Russia's claim under
Article II:1 of the GATS and followed by Russia's claims under A rticles I:1 and III:4 of the
GATT 1994.
7.5.1.2 Level for assessing the WTO consistency of the unbundling measure
7.378. The European Union argues that the unbundling measure's consistency with Article II:1 of
the GATS and Articles I:1 and III:4 of the GATT 1994 should be assessed within the individual
EU member States and that the same unbundling model(s) apply within each individual EU
member State regardless of the origin of the pipeline transport services and service suppliers or
the natural gas. 728 In support of its p osition, the European Union argues that a measure's
conformity with the MFN and national treatment obligations must be assessed in that measure's
"regulatory jurisdiction", hereby referring to "the jurisdiction of the regulatory authority that
determines the conditions for selling a good or supplying a service." 729 The European Union argues

727 See, e.g. Russia's response to Panel question No. 45(g), paras. 215-216; and second written
submission, paras. 12-74; and European Union's responses to Panel question No. 45(b), paras. 102-104 and
No. 45(g), para. 117; and opening statement at the second meeting of the Panel, para. 39. Russia addresses
this as a "common issue[]" for its three claims, and we note that the European Union, while having addressed
the issue separately for each of Russia's three claims in its written submissions, does not distinguish its
position in regard to either of the three claims and has referred to it as a "common issue" at the second
meeting of the Panel with the parties. (Russia's second written submission, paras. 12-74; and European
Union's first written submission, paras. 289-297, 366-367 and 412-415; second written submission, paras. 63-
71, 90-94 and 140; and opening statement at the second meeting of the Panel, paras. 6-17 and 39).
728 European Union's first written submission, paras. 293-296, 366-367 and 413-415; opening
statement at the first meeting of the Panel, para. 32; and second written submission, paras. 63-64, 90 and
140.
729 European Union's response to Panel question No. 45(b), para. 102.

that the regulatory jurisdiction of the unbundling measure is each individual EU member State
since the "precise conditions" for supplying pipeline transport services and selling natural gas are
determined by the national implementing laws adopted by the regulatory authorities of each EU
member State, rather than the Directive. 730 In the European Union's view , a measure should be
assessed throughout the European Union only if it does not require further implementation by the
EU member States 731 or does not leave any discretion to the EU member States in implementing
it.732 The European Union also argues that there is no genuine relationship between the unbundling
measure in the Directive and any alleged de facto discrimination, as the Directive does not require
EU member States to exercise the discretion to choose between implementing only the OU model
or also the ISO and ITO models "in one or the other manner".733
7.379. Russia disagrees w ith the European Union's position and argues that the unbundling
measure should be assessed throughout the European Union, by comparing the treatment
accorded in EU member States that have only implemented the OU model with the treatment
accorded in EU mem ber States that have implemented the ISO and/or the ITO models in addition
to the OU model in respect of transmission systems that belonged to a VIU on 3 September 2009 .
In support of its position, Russia argues that the European Union is responsible for e ach of its
measures, regardless of their form. 734 In this regard, Russia points out that the Directive required
each EU member State to implement the unbundling measure and that, in doing so, each EU
member State was required to incorporate the OU model and authorized to incorporate the ISO
and/or the ITO models in respect of transmission systems that belonged to a VIU on
3 September 2009.735 Russia also submits that the European Union is responsible for the actions of
its member States , arguing that EU member States are "'regional' governments" for which the
European Union, under Article I:3(a) of the GATS and Article XXIV:12 of the GATT 1994, is
"required to 'take such reasonable measures as may be available to it to ensure observance'" of
the relevant prov isions of the GATS and the GATT 1994.736 Russia submits that the European
Union has acknowledged this responsibility for its member States in previous cases, in a formal
letter responding to Russia's consultations request, and in response to que stions by the Panel. 737
As further support for its position, Russia submits that the European Union was not an "innocent
bystander" in the alleged discriminatory implementation of the Directive by the EU member
States738, but rather had "active involvement in securing this discriminatory result" 739, ranging
from being "fully aware" 740 or knowing 741 which EU member States would implement which

730 European Union's response to Panel question No. 45(b), para. 103.
731 European Union's response to Panel question No. 45(b), para. 102.
732 European Union's response to Panel question No. 45(b), para. 104. Japan appears to agree with the
European Union's position, stating that "to the extent that each model is consistent with GATS Article II …, it is
also reasonable to provide each member state a choice among such models, depending on its distinctive
unbundling necessities." (Japan's third-party submission, para. 37). At the same time, Japan considers that
this issue should be determined on a "case-by-case basis depending on the measure and obligation of the
Member at issue", taking into account "(i) [w]hether the measure … is taken by the EU or a EU member state,
which will partly depend on whether the alleged aspect of the measure is of the exclusive competence of the
EU, the exclusive competence of EU member states, or shared by the EU and its member states" and "(ii)
[w]ith regard to the national treatment obligation in the trade in services, whether the relevant commitment is
made in the name of the EU or the name of a EU member state". (Japan's response to Panel question No. 2,
para. 8). In our assessment below, we take into account the fact that the unbundling measure in the Directive
is an EU measure rather than a measure taken by individual EU member States, but we have not found it
necessary to address the competences, under EU law, of the European Union or its member States in this
regard. Furthermore, as Russia's claims against the unbundling measure in the Directive under Article II:1 of
the GATS do not involve specific commitments, we have not considered whether relevant commitments are
made.
733 European Union's response to Panel question No. 171(c), para. 72.
734 Russia's second written submission, para. 21.
735 Russia's second written submission, para. 17.
736 Russia's second written submission, paras. 27-30 (quoting Article XXIV:12 of the GATT 1994 and
Article I:3(a) of the GATS).
737 Russia's second written submission, paras. 32-33 (referring to Panel Reports, EC – Trademarks and
Geographical Indications (US), para. 7.98 and EC and certain member States – Large Civil Aircraft,
para. 7.172; Letter of 8 May 2014 from the Permanent Mission of the European Union to the WTO regarding
Russia's request for consultations (Exhibit RUS-115bis); and European Union's response to Panel question No.
45(d), para. 106).
738 Russia's second written submission, para. 20.
739 Russia's second written submission, para. 16.
740 Russia's second written submission, para. 14.
741 Russia's second written submission, para. 15.

unbundling model(s) to "authoriz[ing]"742, "encourag[ing] and coordinat[ing]"743 or "enact[ing] and
help[ing]"744 with the implement ation of different combinations of unbundling models in different
EU member States in order to discriminate against Russian pipeline transport services and service
suppliers or imported Russian natural gas.
7.5.1.2.1 Analysis by the Panel
7.380. For purposes of determining whether to assess the unbundling measure on an EU -wide or
EU member State -specific basis, and more generally for assessing Russia's claims, we find it
crucial to know exactly what measure Russia is challenging.
7.381. In this respect, we concur with the concern s raised by the European Union regarding
Russia being "imprecise as to what measure it actually challenges." 745 We note that Russia has
pointed to different measures as the challenged measure throughout these proceedings, including
in response to questions b y the Panel seeking clarification on this matter. 746 More particularly,
Russia has at different times appeared to be challenging either the unbundling measure in the
Directive747, specific instances of application of the unbundling measures in the national
implementing laws of Lithuania and Germany 748, the unbundling measure in the Directive as well
as the unbundling measures in the national implementing laws of all EU member States 749, the
unbundling measure in the Directive and the unbundling measure in the national implementing law
of Lithuania as "a single measure" 750, or the unbundling measure in the Directive and the
unbundling measures in the national implementing laws of all EU member States as "a single
measure".751
7.382. We wish to emphasize that it is the responsi bility of the complaining party to specify which
measure it is challenging. At the same time, and as mentioned above, we believe that it is crucial
to understand exactly what measure Russia is challenging in order to determine whether to assess
this measure on an EU-wide or EU member State -specific basis. We therefore find it necessary to
scrutinize Russia's submissions with a view to clarifying which of the above -listed measures should
be viewed as the challenged measure.
7.383. We consider that an overall readin g of Russia's panel request and the submissions
provided by Russia throughout these proceedings points to the challenged measure being the
unbundling measure in the Directive . As explained by Russia throughout these submissions,
including in its requests f or findings, it is claiming that "the unbundling measure under the
Directive" or "the unbundling measure provided for in the Directive" violates Article II:1 of the
GATS and Articles I:1 and III:4 of the GATT 1994 "by enabling Member States to select from
among the unbundling models". 752 Aside from the limited references, in Russia's various
submissions, to the other measures listed in paragraph 7.381 above, Russia has not provided a
clear explanation of how its claims that "the unbundling measure under the Directive" or "the
unbundling measure provided for in the Directive" violates Artic le II:1 of the GATS and Articles I:1
and III:4 of the GATT 1994 "by enabling Member States to select from among the unbundling
models"753 could be addressed in respect of these other measures. Nor has Russia substantiated

742 Russia's second written submission, paras. 17 and 21.
743 Russia's second written submission, para. 21.
744 Russia's second written submission, para. 41.
745 European Union's response to Panel question No. 171(f), para. 81. See also European Union's closing
statement at the first meeting of the Panel, para. 6.
746 See, e.g. Panel question Nos. 5 and 171(a).
747 See, e.g. Russia's response to Panel question No. 5, para. 31.
748 See, e.g. Russia's response to Panel question No. 5, para. 33. In this regard, we note our preliminary
ruling of 10 November, in which we concluded that Russia's "as applied" claims under Article II:1 of the GATS
and Articles I:1 and III:4 of the GATT 1994, raised by Russia in its response to Panel question No. 5 following
the first meeting of the Panel, fall outside our terms of reference. (Preliminary ruling (conclusions) of
749 See, e.g. Russia's response to Panel question No. 171(a), para. 100.
750 See, e.g. Russia's responses to Panel question No. 5, para. 31 and No. 171(a), para. 101.
751 See, e.g. Russia's comments on the European Union's response to Panel question No. 154,
paras. 6-7.
752 Russia's first written submission, para. 810, bullet points 5-7; and second written submission,
para. 487, bullet points 6-8.
753 Russia's first written submission, para. 810, bullet points 5-7; and second written submission,
para. 487, bullet points 6-8.

its notion of the unbundling measure in the Directive and the unbundling measure in the national
implementing laws of Lithuania being "a single measure" 754, or its alternative notion of the
unbundling measure in the Directive and the unbundling measures in the national implementing
laws of all EU member States being "a single measure".755
7.384. Furthermore, while we agree with the European Union's concerns regarding lack of
precision in Russia's submissions, we do not believe that there has been prejudice to the European
Union's ability to prepare its defence, nor that its due process rights are violated by our decision to
focus on the unbundling measure in the Directive, when assessin g Russia's claims under
Article II:1 of the GATS and Articles I:1 and III:4 of the GATT 1994. The European Union itself
generally appears to focus its responses to these claims on the unbundling measure in the
Directive and has in this regard explicitly referred to Russia's statement that "the 'unbundling
measure in the Directive is the only measure relevant to this claim'."756
7.385. Having established that our assessment should focus on the unbundling measure in the
Directive, we begin this assessment by examining the nature of this measure, including its design,
expected operation and regulatory effects.
7.386. In this regard, we note t hat the European Union, when applying its own notion of
"regulatory jurisdiction" as "the jurisdiction of the regulatory authority that determines the
conditions for selling a good or supplying a service" 757, appears to focus exclusively on the role
played by the national implementing laws while disregarding that of the Directive. The European
Union thus "disagrees that [the Directive] has effects throughout the European Union: the
provisions in the Directive only have effects once implemented in the individual Member States."758
7.387. However, and as pointed out by Russia, the Directive creates a legal obligation for the EU
member States to implement the rules on unbundling, and more particularly requires the EU
member States to implement the OU model and provides them the choice of implementing the ISO
and/or the ITO models in addition to the OU model in respect of transmission systems that
belonged to a VIU on 3 September 2009. 759 In this way, the Directive therefore does "determine
the conditions for selling [natura l gas] or supplying [pipeline transport services]". 760 In other
words, the unbundling measure in the Directive applies in and has the above-mentioned regulatory
effects throughout the EU territory.
7.388. For this reason, the situation before us is also different f rom those addressed by the two
GATT panels referred to by the European Union in support of its position, Canada – Provincial
Liquor Boards (US) and US – Malt Beverages.761 The challenged measures in these two disputes
were measures by certain Canadian provin ces or US states, applicable within these provinces or
states only. Unlike the situation before us, these disputes did not involve any underlying measures
applying throughout Canada or the United States and requiring implementation by their provinces
or states, respectively.
7.389. We also wish to make clear that we are not suggesting that the Directive imposes a direct
requirement to unbundle, or a particular unbundling model, on any economic actor in the
EU territory. We are aware that the notion of "direct effe ct" has a particular meaning in the EU

754 See, e.g. Russia's responses to Panel question No. 5, para. 31, and No. 171(a), para. 101.
755 See, e.g. Russia's opening statement at the second meeting of the Panel, para. 102; and comments
on the European Union's response to Panel question No. 154, paras. 1 and 6-7. We emphasize that while we
consider the unbundling measure in the Directive the challenged measure for purposes of Russia's claims under
Article II:1 of the GATS and Articles I:1 and III:4 of the GATT 1994, we are not precluded from addressing
evidence relating to the implementation of the unbundling measure in the Directive through the national
implementing laws of EU member States, as necessary and appropriate, when assessing Russia's claims
against the unbundling measure in the Directive.
756 European Union's comments of 21 October 2016 regarding terms of reference, para. 15; and
response to Panel question No. 171(f), para. 81 (quoting Russia's first written submission, para. 307).
757 European Union's response to Panel question No. 45(b), para. 102.
758 European Union's response to Panel question No. 171(b), para. 71.
759 Russia's second written submission, para. 17.
760 European Union's response to Panel question No. 45(b), para. 102.
761 European Union's opening statement at the second meeting with the Panel, paras. 10-11 (referring
to GATT Panel Reports, Canada – Provincial Liquor Boards (US), fn 1 to para. 5.4; and US – Malt Beverages,
paras. 5.16-5.17).

legal system, which was a point of discussion among the parties at the second meeting of the
Panel.762 Our finding that the Directive applies in and has regulatory effects throughout the EU
territory does not concern su ch "direct effect". 763 Rather, and as explained above, this finding
concerns the Directive's above -mentioned regulatory effects of creating a legal obligation for EU
member States to implement the rules on unbundling, hereunder requiring EU member States to
implement the OU model and providing them the choice to implement the ISO and/or the ITO
models in addition to the OU model in respect of transmission systems that b elonged to a VIU on
3 September 2009.
7.390. Having determined that the unbundling measure in the Directive applies in and has
regulatory effects throughout the EU territory, we turn to the argument by the European Union
that the discretionary nature of the Directive should entail that the WTO consistency of this
measure should be assessed within the individual EU member States.764
7.391. We begin by noting that the unbundling measure in the Directive is not entirely
discretionary in nature. As acknowledged by both parties, EU member States do not have
discretion to choose whether or not to implement the OU model. Rather, they are allowed
discretion to choose whether or not to implement the ISO and/or the ITO models in addition to the
OU model and only with respect to transmission syst ems that belonged to a VIU on
3 September 2009.765
7.392. We understand the European Union to be arguing that this element of discretion under the
Directive's unbundling measure entails that the WTO consistency of this measure should be
assessed within the territory of individual EU member States rather than throughout the entire EU
territory.766 Effectively, the position of the European Union appears to be that this type of measure
should not be subject to a challenge under the MFN or national treatment obligations in the GATS
and the GATT 1994 and that a complaining Member would instead h ave to challenge the "national
measure transposing the Directive".767
7.393. We have difficulties accepting this position. In our view, the approach suggested by the
European Union would be tantamount to automatically excluding the unbundling measure in the
Directive from review under Article II:1 of the GATS and Articles I:1 and III:4 of the GATT 1994 by
virtue of the fact that this measure involves an element of discretion. As indicated by the European
Union, complaining parties would thus be confined to challengi ng the "national measure[s]
transposing the Directive" and the treatment accorded by such measures in the territory of the
individual EU member States.768 This would, in our view, contradict the Appellate Body's finding in
US – Corrosion-Resistant Steel Suns et Review that there is "no reason for concluding that, in
principle, non-mandatory measures cannot be challenged 'as such'" 769 and that the discretionary
or mandatory nature of a challenged measure "is relevant, if at all, only as part of the panel's
assessment of whether the measure is, as such, inconsistent with particular obligations."770
7.394. In conclusion, and having established that the unbundling measure in the Directive applies
in and has regulatory effects throughout the entire EU territory, we see no rea son to assess the
WTO consistency of this measure within each individual EU member State, simply due to the fact
that its design and expected operation are such that it requires implementation by EU member
States and allows these member States an element of discretion when implementing it.

762 Russia's oral response to advance Panel question No. 26 at the second meeting of the Panel; and
European Union's oral response to advance Panel question No. 26 at the second meeting of the Panel.
763 We understand the European Union's position that "the provisions in the Directive only have effects
once implemented in the individual Member States" to be closely connected to the concept of "direct effect".
(European Union's response to Panel question No. 171(a), para. 71).
764 European Union's response to Panel question No. 171(c), paras. 71-76.
765 Directive 2009/73/EC, (Exhibit EU-5), Article 9(8).
766 European Union's response to Panel question No. 45(b), para. 103.
767 European Union's response to Panel question No. 45(b), para. 103. See also European Union's first
written submission, para. 296; and second written submission, paras. 64-65.
768 European Union's response to Panel question No. 45(b), para. 103. See also European Union's first
written submission, para. 296; and second written submission, paras. 64-65.
769 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 88.
770 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 89.

7.395. Following the approach by the Appellate Body in US – Corrosion-Resistant Steel Sunset
Review, we will consider the element of discretion under the Directive's unbundling measure only if
relevant in the context of our sub stantive assessments under Articl e II:1 of the GATS and
Articles I:1 and III:4 of the GATT 1994. More particularly, should we find that Russia has
demonstrated that its pipeline transport services and service suppliers or its imported natural gas
are accorded less favourable treatment, we will consider whether such potential less favourable
treatment is attributable to the unbundling measure in the Directive, taking into account the
element of discretion allowed under it.
7.396. When reaching this conclusion, we are mindful that the issue of whether to assess the
unbundling measure in the Directive on an EU -wide or a member State -specific basis has been a
contentious one, with both parties raising concerns of a systemic nature. 771 We note, in particular,
the position of the European Union that "[t]he consequence of Russia's claim would be that any
differences that may exist in the laws or regulations that apply in sub -divisions of the territory of a
WTO Member must disappear" 772 and that "[a]n interpretation of the MFN obligation in the GATS
that would require one single harmonised treatment throughout the Member States of the
European Union is manifestly wrong and would have grave consequences for any WTO Member
with a federal system."773 In light of these concerns, we find it useful to provide a few observations
concerning the basis for and scope of our finding, including what we have not found.
7.397. We, first, wish to emphasize that our finding regarding the relevant level for assessing the
WTO consistency of the Directive's unbundling measure is based on the particularities of this
measure and Russia's challenge against it, taking into account the sui generis nature of the
European Union and its member States in the WTO. Hence , our finding does not determine
whether this wou ld be the relevant level in future cases involving a different type of measure or
challenge. In particular, we recall that the challenged measure is an EU measure, which applies in
and has regulatory effects throughout the EU territory , and that the allege d discrimination
challenged by Russia stems from models explicitly provided for by the Directive. This situation is
therefore distinguishable from other situations where "differences … may exist in the laws or
regulations that apply in sub -divisions of the territory of a WTO Member" without the existence of
an underlying measure applying throughout such a WTO Member. For the same reasons, we do
not believe that our finding that the unbundling measure in the Directive should be assessed on an
EU-wide basis w ould automatically "require one single harmonised treatment throughout the
Member States of the European Union". We also emphasize that, u nder Article II:1 of the GATS
and Articles I:1 and III:4 of the GATT 1994, a complaining party would, in any event, be required
to demonstrate that any differences in the treatment or that any lack of "one single harmonised
treatment" throughout the responding party result in less favourable treatment being accorded to
the services and service suppliers or the goods of th e complaining party. In fact, these are the
very issues we address in sections 7.5.1.3 and 7.5.1.4 below.
7.398. Secondly, we wish to point out that we have not found it necessary to address all
arguments submitted by Russia in response to the European Union's position that the unbundling
measure in the Directive should be assessed within the individual EU member States. In particular,
we have not found it necessary to address Russia's argument that EU member States are
"'regional' governments" within the meaning of Article I:3(a) of the GATS and Article XXIV:12 of
the GATT 1994 774, a position the European Union opposes. 775 Nor have we found it necessary to
address Russia's argument that the European Union and its member States are granted "a type of
preferential treatment compared to other WTO Members" by "enjoy[ing] a special relationship with
the WTO" under which both the European Union and its member States are Members of the

771 See, e.g. Russia's opening statement at the first meeting of the Panel, para. 38; second written
submission, para. 38; and opening statement at the second meeting of the Panel, para. 81; and European
Union's first written submission, paras 296-297; opening statement at the first meeting of the Panel, para. 33;
and response to Panel question No. 171(c), para. 77.
772 European Union's first written submission, para. 297.
773 European Union's opening statement at the first meeting of the Panel, para. 33. See also European
Union's response to Panel question No. 171(c), para. 77.
774 Russia's second written submission, paras. 27-30; and opening statement at the second meeting of
the Panel, para. 83.
775 European Union's opening statement at the second meeting of the Panel, para. 14.

WTO.776 Our finding that the unbundling measure in the Directive should be assessed throughout
the EU territory therefore should not be viewed as addressing, let alone resolving, these issues.
7.399. Likewise, we have not found it necessary to address the alleged involvement by the
European Union in the implementation of the unbundling measure in the different EU member
States, including the evidence submitted by Russia, which was obtained through Wikileaks. 777 The
European Union rejects the notion of a "conspiracy" between itself and its member States, and
submits, instead, that the adoption and implementation of the unbundling measure was "the result
of a normal democratic process" 778, and "strongly object[s] to the Panel accepting illegally
obtained confidential documents as evidence in WTO proceedings". 779 In reaching the conclusion
that the unbundling measure in the Directive should be as sessed throughout the EU territory , we
have not found it necessary to address these issues , nor does this finding rely on any evidence
obtained by Russia through Wikileaks.
7.5.1.2.2 Conclusion
7.400. For the reasons explained in paragraphs 7.378 through 7.395 above, we conclude that the
WTO consistency of the Directive's unbundling measure should be assessed throughout the EU
territory.
7.401. Having reached this conclusion, we proceed to examine Russia's claims against the
unbundling measure in the Directive under Article II:1 of the GATS and Articles I:1 and III:4 of the
GATT 1994 by comparing the treatment accorded throughout the EU territory to pipeline transport
services and service suppliers and to natural gas of different origin.
7.5.1.3 Russia's claim under Article II:1 of the GATS
7.5.1.3.1 Introduction
7.402. The gist of Russia's claim against the unbundling measure in the Directive under this
provision is, as explained above, that the unbundling measure in the Directive accords less
favourable treatment to Russian pipeline transport services and service suppliers by "enabling" EU
member States to choose between implementing only the OU model or implementing the ISO
and/or the ITO models in addition to the OU model in respect of transmission systems that
belonged to a VIU on 3 September 2009.780
7.403. In response, the European Union submits that the treatment accorded to pipeline transport
services and service suppliers under the OU model is not less favourable than that accorded to
pipeline transport services and service suppliers under the I SO or ITO models 781 and that the
unbundling measure in the Directive, in any event, does not discriminate against Russian pipeline
transport services and service suppliers, as these are not "predominantly" subject to the OU model
in comparison with the pipel ine transport services and service suppliers of other non -EU
countries.782
7.5.1.3.2 Analysis by the Panel
7.404. In accordance with the legal standard for Article II:1 of the GATS, set out in
paragraphs 7.226 and 7.227 above, our analysis below will focus on whether Russia has
demonstrated that (a) the unbundling measure in the Directive falls within the scope of the GATS;

776 Russia's comments on the European Union's response to Panel question No. 154, paras. 43-46.
777 Russia's second written submission, paras. 48-56 (referring to, e.g. Wikileaks, Public Library of US
Diplomacy, Cable of 7 November 2007 "Grand Coalition Opposes European Union Commission's Unbundling
Directives", (Exhibit RUS-172); and Wikileaks, Public Library of US Diplomacy, Cable of 31 October 2008
"Outlook for the EU's Third Energy Package", (Exhibit RUS-178)).
778 European Union's second written submission, paras. 67 and 71; and response to Panel question
No. 171(c), paras. 73-75.
779 European Union's opening statement at the second meeting of the Panel, paras. 15-16.
780 See, e.g. Russia's first written submission, paras. 318-326.
781 See, e.g. European Union's first written submission, para. 306-337; and second written submission,
para. 72-75.
782 See, e.g. European Union's first written submission, paras. 299-305 and 338-343; and second
written submission, para. 76-87.

(b) the relevant services and service suppliers are like; and (c) the unbundling measure in the
Directive accords less favourable treatment to Russian services and service sup pliers than that
accorded to like services and service suppliers of any other country.
7.405. We address these elements, in turn, below.
7.5.1.3.2.1 Scope of the GATS
7.406. Article I:1 of the GATS sets out the scope of this Agreement as applying to "measures by
Members affecting trade in services" . As explained by the Appellate Bo dy, this requires Russia to
make a prima facie case: (a) that "there is 'trade in services' in th e sense of Article I:2"; and (b )
that the unbundling measure in the Directive "'affects' such trade in services within the meaning of
Article I:1".783
7.407. In this regard, we note that Article I:2 of the GATS defines trade in services as the supply
of a service through one of the four modes of supply set out in this provision. Russia has identified
pipeline transport services as the relevant services 784 and mode 3 or c ommercial presence, within
the meaning of Article I:2(c), as the relevant mode of supply. 785 It is undisputed that pipeline
transport services can be and are supplied through commercial presence in the European Union
and, therefore, that there can be and is trade in pipeline transport services.
7.408. Turning to whether the unbundling measure in the Directive affects trade in pipeline
transport services, we recall that the Appellate Body has clarified that the ordinary meaning of the
term "affecting" implies a measu re that has "an effect on", which indicates a broad scope of
application, wider in coverage than such terms as "regulating" or "governing".786
7.409. We note that the unbundling measure, including all three unbundling models set out by it,
regulates the conditions under which a pipeline transport service supplier may supply such services
and, in particular, the relationship between a pipeline transport service supplier and producers or
suppliers of natural gas. More specifically, and as explained by the European Un ion itself, the OU
model requires a pipeline transport service supplier to be structurally separated from natural or
juridical persons engaged in the production or supply of natural gas in order for it to supply
pipeline transport services in the European Union787, whereas the ISO and ITO models impose
"behavioural and organisational" requirements 788, as well as "increased regulatory oversight". 789
We further note that both parties agree that the unbundling measure in the Directive affects trade
in pipeline transport services and thus falls within the scope of the GATS.790
7.410. Mindful of these considerations , it is clear to us that the unbundling measure in the
Directive does in fact affect the supply of pipeline transport services under mode 3, and we
therefore conclude that this measure falls within the scope of the GATS.
7.5.1.3.2.2 Like services and service suppliers
7.411. As explained in paragraphs 7.226 and 7.227 above, the MFN obligation in Article II:1 of
the GATS applies only with respect to services and service suppliers that are like and we therefore
turn to the issue of whether Russia has made a prima facie case that the relevant services and
service suppliers are like within the meaning of Article II:1 of the GATS.
7.412. Before turning to the actual assessment of likeness, we note that Russia briefly refers to
LNG services and service suppliers when claiming that the relevant services and service suppliers
are like, stating that "pipeline transport services and service suppliers, including LNG services and
service suppliers, are in a competitive relationship with each other and thus satisfy the 'likenes s'

783 Appellate Body Report, Canada – Autos, para. 155.
784 Russia's first written submission, paras. 93-110 and 308.
785 Russia's first written submission, para. 308; and response to Panel question No. 56, para. 285.
786 Appellate Body Report, EC – Bananas III, para. 220.
787 European Union's response to Panel question No. 59, para. 157.
788 European Union's first written submission, para. 313.
789 European Union's second written submission, para. 74.
790 Russia's first written submission, paras. 307-308; and European Union's first written submission,
para. 281.

requirement".791 It is therefore not clear whether the relevant services and service suppliers, for
purposes of Russia's claim under Article II:1 of the GATS against the unbundling measure in the
Directive, include both pipeline transport services and ser vice suppliers a s well as LNG services
and service suppliers.
7.413. For this reason, we consider it helpful to determine the scope of the likeness enquiry to be
conducted for Russia's claim against the unbundling measure in the Directive under Article II:1 of
the GATS, before turning to the actual assessment of likeness.
7.414. In this regard, we recall that Russia's claim under Article II:1 of the GATS pertains to the
alleged less favourable treatment of Russian services and service suppliers stemming from the
Directive "enabling" EU member States to choose between implementing only the OU model or
implementing the ISO and/or the ITO models in addition to the OU model in respect of
transmission systems that belong ed to a VIU on 3 September 2009. More particularly , Russi a
claims concern the alleged less favourable treatment of pipelin e transport services under the OU
model compared to the ISO and/or the ITO models.792
7.415. In substantiating its claim, Russia focuses solely on entities supplying services within the
EU territory through commercial presence in the form of TSOs. 793 Such entities supply pipeline
transport services within the meaning we employ throughout this Report, i.e. transportation or
transmission of natural gas via transmission pipelines.794 While Russia, as mentioned, briefly refers
to LNG services and service suppliers in claiming that the relevant services and service suppliers
are like, such services and service suppliers do not appear relevant for the substance of Russia's
claim under Article II:1 of the GATS against the unbundling measure in the Directive. As explained
above, this particular claim pertains to the alleged discrimination stemming from the Directive
"enabling Member States either to require full ownership unbundling or to permit the ISO and ITO
unbundling models" and not to the requirement to unbundle per se.795
7.416. Both parties agree that the requirement to unbundle does not apply to LNG service
suppliers.796 In other words, LNG service suppliers are not subject to any of the three unbundling
models and are thus not accorded the alleged more favourable treatment under the ISO or the ITO
models or the alleged less favourable treatment under the OU model, challenged by Russia under
its claim against the unbundling measure in the Directive. Notably, the alleged "exemption" of LNG
facilities from the requirement to unbundle (referred to in this Report as "the LNG measure") is not
the object of this particular claim, but is instead challenged by Russia as a "separate, distinct
measure[]" under a separate claim. 797 In our view , this suggests that LNG services and service
suppliers are not relevant to Russia's claim against the unbundling measure in the Directive under
Article II:1 of the GATS. This conclusion is confirmed by the fact that Russia does not rely on any
example or argumentation with respect to LNG services or service suppliers in arguing that the
unbundling measure in the Directive accords less favourable treatment in violation of Article II:1 of
the GATS.
7.417. For the reasons outlined above, we find that only pipeline transport services and service
suppliers are relevant for Russia's claim against the unbundling measure in the Directive under
Article II:1 of the GATS. For the same reasons, it is not necessary or relevant for us to consider, in
the context of this claim, whether pipeline transport services and service suppliers are like LNG
services and service suppliers.
7.418. Having determined that the scope of our likeness enquiry should be limited to pipeline
transport services and service suppliers, we proceed to consider the actual assessment of likeness.
As mentioned above, Russia's claim under Article II:1 of the GATS pertains to the alleged less
favourable treatment of Russian pipeline transport services and service suppliers under the OU

791 Russia's first written submission, para. 309.
792 Russia's first written submission, paras. 318-326; and second written submission, para. 204.
793 Russia's first written submission, paras. 329-339; and second written submission, paras. 209
and 223.
794 See para. 7.285 above.
795 Russia's first written submission, heading IX.D.2.b and paras. 314, 319, and 326-327.
796 Russia's response to Panel question No. 1, paras. 4 and 7; and European Union's first written
submission, para. 433.
797 Russia's first written submission, paras. 380-414; and responses to Panel question No. 4, para. 16,
and No. 5, para. 38.

model in comparison with that accorded to pipeline transport services and service suppliers under
the ISO and/or the ITO models. 798 In light of this, two issues arise in determining whether the
relevant services and service suppliers are like: First, whether pipeline transport services and
service suppliers are like regardless of their origin, and second, whether pipeline transport services
and service suppliers are like regardless of whether these are supplied/supply their services under
the OU model or the ISO or ITO models.
7.419. In addressing these issues of likeness, we recall that the Appellate Body has clarified that
the assessment of whether services and service suppliers are like involves an examination of their
"degrees of 'competitiveness' or 'substitutability'"799, taking into account the specific circumstances
of the particular case including, but not necessarily limited to: (a) the nature and characteristics of
the services and service suppliers; (b) the end -uses of the services; (c) consumers' preferences in
respect of the services and service suppliers; and (d) the classification and description of the
services under, for instance, the CPC.800
7.420. Russia argues that pipeline transport services and service suppliers are like "regardless of
whether the service supplier is located i n Russia or any other third -country and supplies its
services via commercial presence within one or more EU Member States." 801 The European Union
does not dispute that Russian pipeline transport services and service suppliers are like pipeline
transport services and service suppliers of other non-EU countries, as "[a]ll these suppliers are in a
competitive relationship, taking into account the 'nature and characteristics' of the services
transactions and suppliers at stake." 802 Similarly, the European Union con siders that "all
transmission pipeline transport service providers are 'like' and enjoy the same competitive
opportunities to provide services, regardless of the unbundling model under which they
operate."803
7.421. It is undisputed that the nature and characteristics, the end -uses, and the classification
under the CPC 804 of the pipeline transport services and service suppliers described in
paragraph 7.418 above are identical, which suggests that these are like. Furthermore, none of the
evidence and argumentation supplied by the parties suggests that consumers' preferences differ
for these pipeline transport services and service suppliers.
7.422. In light of the above, we hence conclude that the relevant services and service suppliers –
i.e. pipeline transport services and service suppliers of different origins, operating under different
unbundling models – are like within the meaning of Article II:1 of the GATS. Having made this
finding of likeness, we proceed to assess whether Russia has demonstrated that the unbundling
measure in the Directive accords less favourable treatment to Russian pipeline transport services
and service suppliers than that accorded to the like pipeline transport services and service
suppliers of any other non-EU country.
7.5.1.3.2.3 Less favourable treatment
7.423. As explained above, the underlying premise of Russia's claim under Article II:1 of the
GATS is that the unbundling measure in the Directive violates th is provision by "enabling" EU
member States to choose between implementing only the OU model or implementing the ISO
and/or the ITO models in addition to the OU model in respect of transmission systems that
belonged to a VIU on 3 September 2009. More particularly, Russia argues that the implementation
of only the OU model in respect of transmission systems that did not belong to a VIU on
3 September 2009 as well as in respect of transmission systems that did belon g to a VIU on
3 September 2009 in certain EU member States results in less favourable treatment of Russian
pipeline transport service suppliers. Russia contrast s this treatment with that of pipeline transport

798 Russia's first written submission, paras. 318-326; and second written submission, para. 204.
799 Appellate Body Report, Argentina – Financial Services, para. 6.26 (quoting Appellate Body Report, EC
– Asbestos, para. 99).
800 Appellate Body Report, Argentina – Financial Services, para. 6.32.
801 Russia's first written submission, para. 309.
802 European Union's first written submission, para. 282.
803 European Union's response to Panel question No. 182, para. 123.
804 As explained in section 7.4.2 above, pipeline transport services are classified as CPC 713 under the
CPC prov. In addition, we further note that pipeline transport services are classified as CPC 65131 under the
CPC 2.1, an element that, as explained below in paragraph 7.1412, has been found relevant for assessing
likeness of services and service suppliers.

services and service suppliers of other non -EU countries, supplying their services through
commercial presence in certain EU member States that have implemented the ISO and/or the ITO
models in addition to the OU model in respect of transmission syst ems that belonged to a VIU on
3 September 2009.805
7.424. The European Union responds that Russia has failed to demonstrate that pipeline transport
services and service suppliers are accorded less favourable treatment under the OU model in
comparison with the ISO and/or the ITO models.806 In any event, the European Union submits that
Russia has failed to demons trate that the unbundling measure is discriminatory, pointing out that
all pipeline transport service suppliers, regardless of their origin, are subject to the same
unbundling model(s) when operating through commercial presence in any particular EU member
State, and that Russia has not shown that the OU model "predominantly" affects Russian pipeline
transport services and service suppliers.807
7.425. Before addressing the alleged less favourable treatment of Russian pipeline transport
services and service suppliers under the different unbundling models, we find it useful to recall a
few factual aspects concerning these different models.
7.426. As explained in paragraphs 2.10 through 2.28 above, the OU model requires structural
separation between natural or juridical persons engaged in the production and supply of natural
gas, on the one hand, and natural or juridical persons engaged in the transportation or
transmission of natural gas through transmission pipelines, on the other hand. 808 Under this
model, a VIU is therefore required to divest its control and rights, including the power to exercise
voting rights, the power to appoint members of the supervisory board, of the administrative board
or of representative bodies, and the holding of a majority share 809, ov er either its natural gas
production and supply undertakings or its transmission systems and TSOs.810 Under the ISO model
– applicable only in EU member States that have chosen to implement this model and only where
the transmission system belonged to the VI U on 3 September 2009811 – a VIU continues owning
the transmission system but the TSO, also known as the ISO, is required to be separate from the
VIU by complying with the rules on ownership unbundling. 812 Under the ITO model – also
applicable only in EU membe r States that have chosen to implement this model and only where
the transmission system belonged to the VIU on 3 September 2009813 – the owner and operator of

805 See, e.g. Russia's first written submission, paras. 320-326; and second written submission,
para. 204.
806 See, e.g. European Union's first written submission, paras. 306-337; opening statement at the first
meeting of the Panel, paras. 35-37; and second written submission, paras. 72-75.
807 See, e.g. European Union's first written submission, paras. 299-305 and 338-343; opening
statement at the first meeting of the Panel para. 38; and second written submission, paras. 76-87.
808 Directive 2009/73/EC, (Exhibit EU-5), Article 9.
809 We note that Russia, at times, contends that the OU model does not permit passive, minority
shareholding in a transmission system or a TSO whereas the European Union disagrees with this position.
(Russia's opening statement at the second meeting of the Panel, paras. 90 and 96; and response to Panel
question No. 172(a), paras. 116-119; and European Union's first written submission, paras. 28 and 311;
second written submission, paras. 82 and 132; and comments on Russia's response to Panel question
No. 172(a), paras. 58-60). Generally, we have difficulties understanding how the Directive could be construed
so as to prevent the holding of a passive, minority share. Most notably, Recital (8) explicitly states that "a
production or supply undertaking should be able to have a minority shareholding in a transmission system
operator or transmission system." In fact, Russia, at times, appears to agree with the European Union's
position that such passive, minority shareholding is permitted. (See, e.g. Russia's opening statement at the
first meeting of the Panel, para. 41; response to Panel question No. 87, para. 384; and second written
submission, paras. 107, 209, 211 and 234). In any event, and as explained below, our assessment of Russia's
claim under Article II:1 of the GATS focuses on the conditions of competition for pipeline transport services and
service suppliers, rather than financial rights such as passive, minority shareholding. We therefore do not find
it relevant for us to examine further whether or not the OU model under the Directive permits passive, minority
shareholding. Indeed Russia itself, at times, suggests that this issue is not relevant for the assessment of
Russia's claim. (See, e.g. Russia's opening statement at the first meeting of the Panel, para. 41; and second
written submission, para. 234).
810 Directive 2009/73/EC, (Exhibit EU-5), Articles 9(1) and 9(2).
811 Directive 2009/73/EC, (Exhibit EU-5), Article 9(8).
812 Directive 2009/73/EC, (Exhibit EU-5), Article 14.
813 Directive 2009/73/EC, (Exhibit EU-5), Article 9(8). We note that the infrastructure exemption
measure in Article 36 of the Directive allows exemptions to be granted from, among others, the requirement to
unbundle and that Russia at times refers to the TAP infrastructure exemption decision, which allowed TAP AG
to operate as an "'ad hoc' ITO" despite not belonging to a VIU on 3 September 2009. (Russia's first written

the transmission system, the TSO or the ITO, belongs to a VIU but a number of requirements
apply in respect of the relationship between the two.814
7.427. In our view, the parties' argumentation raise s two issues: (a) whether Russia has
demonstrated that pipeline transport services and service suppliers are accorded less favourable
treatment under the OU model in comparison with that accorded to pipeline transport services and
service suppliers under the ISO and/or the ITO models; and (b) if so, whether Russia has
demonstrated that the unbundling measure in the Directive accords less favourable treatment to
Russian pipeline transport services and service suppliers than that accorded to pipeline transport
services and service suppliers of any other non -EU country by "enabling" EU member States to
choose between implementing only the OU model or implementing the I SO and/or the ITO models
in addition to the OU model in respect of transmission syst ems that belonged to a VIU on
3 September 2009.
7.428. Before addressing these issues, we note that there appears to be an underlying
disagreement, or at least a difference in approach, between the parties with respect to the focus of
their argumentation:
7.429. The European Union criticizes Russia for focusing its argumentation on VIUs when arguing
that such entities are "prevented from supplying [their] pipeline transport services to the EU
market through a commercial presence" under the OU model, whereas other VIUs "are able to
continue supplying their lik e pipeline transport services to the EU market through a commercial
presence in the form of an ITO (or ISO)" in EU member States that have implemented the ISO
and/or the ITO models in addition to the OU model in respect of transmission systems that
belonged to a VIU on 3 September 2009.815
7.430. The European Union faults Russia for "equat[ing]" VIUs with pipeline transport service
suppliers an d instead submits that it is TSOs which constitute pipeline transport service
suppliers816, arguing that the ISO and the ITO models are in fact more restrictive for such entities
than the OU model in terms of the "behavioural and organisational" 817 requirements, as well as
increased "regulatory oversight".818
7.431. We consider this issue a fundamental one, which determines the basis for our continued
assessment of Russia's claim under Article II:1 of the GATS. We therefore find it appropriate to
begin our examination of the alleged less favourable treatment of Russian pipeline transport
services and service suppliers by addressing this issue.
Focus of the assessment under Article II:1 of the GATS
7.432. We recall that Russia has identified mode 3 as the relevant mode of suppl y.819 In this
regard, we note that the supply of a service through mode 3 is defined in Article I:2(c) of the
GATS as "the supply of a service … by a service supplier of one Member, through commercial
presence in the territory of any other Member". We furthe r note that "commercial presence" is

submission, paras. 332-334; second written submission, para. 227; and response to Panel question
No. 172(a), para. 120 (referring to Russia's response to Panel question No. 183(a))). As we explained at the
outset of our Report, we consider it important not to conflate the different measures challenged by Russia
under different claims. Since TAP AG is an "'ad hoc' ITO" under the infrastructure exemption measure rather
than an ITO under the unbundling measure in the Directive, we do not believe it is relevant to consider this
example further in the context of addressing Russia's claims against the latter measure. More particularly, and
as further explained below, it is the design, structure and expected operation of the unbundling measure we
must consider when determining whether this measure is WTO consistent or not. Russia does not suggest that
the design, structure and expected operation of the unbundling measure are such that it would have subjected
TAP AG to the ITO model. Indeed, this is the reason why TAP AG was obliged to apply for – and ultimately
receive – an exemption from the rules on unbundling pursuant to the infrastructure exemption measure.
814 Directive 2009/73/EC, (Exhibit EU-5), Articles 17-23.
815 Russia's second written submission, para. 204. See also Russia's first written submission, paras. 316
and 324-325; and second written submission para. 209.
816 European Union's second written submission, para. 72.
817 European Union's first written submission, para. 313. See also European Union's second written
submission, para. 74.
818 European Union's second written submission, para. 74. See also European Union's first written
submission, para. 313.
819 Russia's first written submission, para. 308; and response to Panel question No. 56, para. 285.

defined in Article XXVIII(d) as "any type of business or professional establishment, including
through (i) the constitution, acquisition or maintenance of a juridical person, or (ii) the creation or
maintenance of a bra nch or a representative office, within the territory of a Member for the
purpose of supplying a service".
7.433. These provisions make it clear that two types of entities are involved when a service is
supplied under mode 3. First, the commercial presence within the "host" or "importing" Member,
which according to Article XXVIII(d) of the GATS consists of any type of business or professional
establishment within the territory of that Member "for the purpose of supplying a service",
including a juridical person or a branch or representative office. Second, natural or juridical
persons of another, "exporting" Member, which supply services through the commercial presence,
in accordance with Article I:2(c) of the GATS. We understand from the evidence and
argumentation provided by the parties that TSOs within the EU territory constitute the former type
of entity, the commercial presence, for purposes of the dispute before us. Furthermore, we
understand that natural or juridical persons, including VIUs, from other , exporting Members may
supply services through the commercial presence of such TSOs, in which case these natural or
juridical persons, including VIUs, from other Members would constitute the latter type of entity.
7.434. Bearing in mind the nature of the supply of services under mode 3 described above, we do
not believe it would be appropriate to automatically conclude that only one of these two types of
entities – i.e. the commercial presence in the importing Member or th e natural or juridical persons
in the exporting Member – is the service supplier for purposes of considering claims under the
GATS. We find support for this approach both in the relevant provisions of the GA TS as well as in
prior jurisprudence.
7.435. Beginning with the relevant provisions of the GATS, Article XXVIII(g) defines a "service
supplier" as "any person that supplies a service", which could imply that a service supplier is the
natural or juridical person directly supplying a service.
7.436. We recall, however, the definition of mode 3 in Article I:2(c) of the GATS as "the supply of
a service … by a service supplier of one Member, through commercial presence in the territory of
any other Member". This definition is echoed in Article XXVIII(f)(ii), which defines a service of
another Member as "a service which is supplied, … in the case of the supply of a service through
commercial presence …, by a service supplier of that other Member". In our view, the references in
these provisions to a service supplier supplyin g services through commercial presence suggest
that, while the service may be supplied directly by the commercial presence, the service supplier
cannot necessarily be considered as consisting solely of this commercial presence.
7.437. Furthermore, footnote 12 to the definition of a service supplier in Article XXVIII(g) states
that:
Where the service is not supplied directly by a juridical person but through other
forms of commercial presence such as a branch or a representative office, the service
supplier (i.e. the juridical person) shall, nonetheless, through such presence be
accorded the treatment provided for service suppliers under the Agreement. Such
treatment shall be extended to the presence through which the service is supplied and
need not be extended to any other parts of the supplier located outside the territory
where the service is supplied.820
7.438. The language of this footnote clarifies that, under mode 3, the commercial presence forms
part of the service supplier and that the natural or juridical person i n the exporting Member,
although not directly supplying a service, should also be considered the service supplier. As with
the definitions in Articles I:2(c) and XXVIII(f)(ii) of the GATS, footnote 12 to Article XXVIII(g) thus
suggests that a more comprehe nsive notion of a service supplier is called for when addressing
claims concerning the supply of a service through commercial presence.
7.439. A similarly comprehensive approach has been taken by panels in prior cases. For instance,
in EC – Bananas III, the pane l referred to the commercial presence as the service supplier when
stating that there are "non-EC-owned or controlled service suppliers commercially present in the

820 Emphasis added.

EC for GATS purposes that provide wholesale trade services in bananas" 821 yet, in the same
paragraph, explains that "companies registered in the Complainants' countries provide wholesale
trade services in respect of bananas to and in the EC through commercially present owned or
controlled subsidiaries in the meaning of Art icle XXVIII(n)."822 Similarly, the panel in China –
Publications and Audiovisual Products , clarified that "the term 'service suppliers of another
Member' supplying a service through commercial presence includes entities that have established
a commercial presence in the host Member a nd/or entities that seek to establish in the host
Member".823
7.440. In light of the nature of mode 3, as evidenced by the relevant provisions of the GATS and
prior jurisprudence, we therefore do not believe it would be appropriate to automatically disregard
either the commercial presence in the importing Member or the natural or juridical persons in the
exporting Member, supplying a service through that commercial presence, when considering the
treatment of services and service suppliers in the context of GATS clai ms concerning this mode of
supply. Depending on the particular claim and measure at issue, it may therefore be relevant to
look at either of these two types of entities, or at both.
7.441. With respect to Russia's claim under Article II:1 of the GATS against the unbundling
measure in the Directive, we therefore do not agree with the European Union insofar as it suggests
that we should focus solely on the treatment of TSOs and entirely disregard natural or juridical
persons, including VIUs, that supply pipeline tra nsport services through the commercial presence
of such TSOs. In fact, in response to a question by the Panel, the European Union states that it
"does not exclude that a VIU owning or controlling a TSO within the meaning of GATS
Article XXVIII(m)(ii) may s upply services within the meaning of GATS Article I:2(c) (if a
commercial presence is established) and may be a pipeline transport service supplier."824
7.442. At the same time, we agree with the European Union that the treatment accorded to VIUs
is relevant only insofar as it has been demonstrated that these are in fact pipeline transport
service suppliers, supplying such services in the EU territory through the commercial presence of
TSOs within the meaning of the GATS.825
7.443. Based on the evidence, we understand that the TSOs pointed to by Russia as constituting a
commercial presence take the form of juridical persons rather than, inter alia , branches or
representative offices. 826 When a commercial presence takes the form of a juridical person,

821 Panel Reports, EC – Bananas III, para. 7.329.
822 Panel Reports, EC – Bananas III, para. 7.329.
823 Panel Report, China – Publications and Audiovisual Products, para. 7.974.
824 European Union's response to Panel question No. 176(b), para. 105.
825 European Union's response to Panel question Nos. 176(a) and (b), paras. 104-105. We note that
Ukraine has raised concerns regarding this issue in the context of two particular TSOs, namely the TSOs NEL
Gastransport GmbH (NEL GT) and OPAL Gastransport GmbH & Co. KG (OPAL GT), in respect of which Ukraine
"considers that the Russian Federation has wrongly applied GATS Article XXVIII by designating NEL GT and
OPAL GT as 'commercial presence' of the Russian company Gazprom in Germany." (Ukraine's third-party
submission, para. 72). Both parties agree that Gazprom supplies pipeline transport services through the
commercial presence of the TSOs NEL GT and OPAL GT in Germany. (Russia's response to Panel question No.
52, paras. 263-265; and second written submission, para. 336; and European Union's response to Panel
question No. 52, para. 143). We however agree with the underlying premise of Ukraine's arguments, namely
that it is for Russia to demonstrate that any particular VIU supplies pipeline transport services through the
commercial presence of a TSO within the meaning of the GATS.
826 We note that Russia has not provided a clear characterization of the form(s) of commercial presence
at issue in this dispute. However, Russia has made continuous references to VIUs either having divested or
continuing to have "shares" or an "interest" in TSOs. (See, e.g. Russia's first written submission, paras. 325,
327 and 332-336; and second written submission, paras. 66, 70 and 211). In our view, these references
suggest that the TSOs at issue are separate juridical persons, in which VIUs own a particular share or have a
particular interest, rather than branches or representative offices of the VIUs. We further note that Russia has
made continuous references to VIUs either having divested or continuing to have "control" over TSOs. (See,
e.g. Russia's first written submission, paras. 324-325, 327 and 329-330; and second written submission,
paras. 66, 142, 225 and 227). The term "control" is found in Articles XXVIII(m)(ii) and XXVIII(n)(ii) of the
GATS, which concern juridical persons rather than branches or representative offices. We also recall that
footnote 12 to Article XXVIII(g) of the GATS distinguishes between, on the one hand, services supplied by a
juridical person and, on the other hand, services supplied by "other forms of commercial presence", the latter
including a branch or a representative office. This further confirms our understanding that the TSOs pointed to
by Russia as constituting a commercial presence take the form of juridical persons rather than, inter alia,
branches or representative offices.

Article XXVIII(m)(ii) clar ifies that a "juridical person of another Member" is "a juridical person
which is … in the case of the supply of a service through commercial presence, owned or controlled
by: 1. n atural persons of that Member; or 2 . juridical persons of that other Member" . In other
words, for a natural or juridical person from an exporting Member to supply services through a
commercial presence taking the form of a juridical person in another, importing Member, the
juridical person constituting the commercial presence in t he importing Member must be "owned or
controlled" by the natural or juridical person from the exporting Member.
7.444. In this regard, we note that Article XXVIII(n)(i) of the GATS specifies that a juridical
person is "'owned' by persons of a Member if more than 50 per cent of the equity interest in it is
beneficially owned by persons of that Member" and that Article XXVIII(n)(ii) of the GATS specifies
that a juridical person is "'controlled' by persons of a Member if such persons have the power to
name a majority of its directors or otherwise to legally direct its actions".
7.445. Russia argues that "the GATS does not require the service supplier of one Member that
supplies services through 'commercial presence' within the territory of another Member to have
majority ownership or control of that commercial presence." 827 In Russia's view, it is instead "the
'juridical person of another Member,' which supplies a service through commercial presence within
the territory of the importing Member, that must be majority owned or controlled by natural or
juridical persons of that other Member." 828 Russia appears to suggest that any juridical person of
another exporting Member, which owns shares in a juridical person supplying services within the
territory of the importing Member, sh ould be considered a service supplier, supplying its services
through commercial presence, provided that it is owned or controlled by a "third layer" of natural
or juridical persons from that other, exporting Member.
7.446. In our view, this position has no basi s in the text of the GATS and we therefore cannot
agree with Russia. In line with the position taken by prior panels, we believe that the appropriate
focus under mode 3 is the relationship between the commercial presence in the importing Member
and the nat ural or juridical person in the exporting Member, which supplies services through the
commercial presence.829 We do not believe that it is relevant to consider any potential relationship
between the natural or juridical person in the exporting Member, supply ing services through the
commercial presence in the importing Member by owning or controlling it, and natural or juridical
persons that may, in turn, own or control the former of these two.
7.447. Furthermore, we agree with the European Union that our assessment of the unbundling
measure in the Directive under Article II:1 of the GATS should focus on the treatment of VIUs,
which own or control TSOs within the meaning of Article XXVIII(n)(i) or (ii), only in their capacity
of supplying pipeline transport services through the commercial presence of such TSOs.830
7.448. VIUs are, per definition, engaged in both the supply of pipeline transport services and in
the production or supply of natural gas. As explained at the outset of our Report, however, the
focus under the GATS i s how the challenged measure affects the supply of a service or service
suppliers, not how it affects trade in goods. 831 In accordance with the scope and subject matter of
the GATS, our assessment of the unbundling measure's consistency with Article II:1 of the GATS
will therefore focus on how this measure affects the supply of pipeline transport services and
service suppliers, rather than how it affects trade in natural gas. For these reasons, we do not
consider Russia's arguments concerning the latter, such as the European Union's alleged "objective
of ousting Gazprom from the EU gas market" or the "detrimental impact on the competitive
opportunities for the transportation and sale of Russian gas in the EU market" 832, in the context of
addressing Russia's claim under Article II:1 of the GATS. We address such arguments, instead, in
the context of Russia's claims against the unbundling measure in the Directive under Articles I:1
and III:4 of the GATT 1994.
7.449. Having set out these considerations concerning the focus of our assessment, we turn to
the two issues raised by the parties' argumentation, namely (a) whether Russia has demonstrated

827 Russia's response to Panel question No. 52, para. 269.
828 Russia's responses to Panel question No. 52, para. 269, and No. 92, para. 397.
829 Panel Reports, EC – Bananas III, fn 493 to para. 7.318; and Canada – Autos, para. 10.257.
830 European Union's response to Panel question No. 176(b), para. 105.
831 Appellate Body Report, EC – Bananas III, para. 221.
832 Russia's second written submission, para. 228.

that pipeline transport services and service suppliers are accorded less favourable treatment under
the OU model in comparison with that accorded to pipeline transport services and service suppliers
under the ISO and/or the ITO models; and (b) if so, whether Russia has demonstrated that the
unbundling measure in the Directive a ccords less favourable treatment to Russian pipeline
transport services and service suppliers than that accorded to pipeline transport s ervices and
service suppliers of any other non-EU country by "enabling" EU member States to choose between
implementing only the OU model or implementing the ISO and/or the ITO models in addition to
the OU model in respect of transmission syst ems that belonged to a VIU on 3 September 2009.
Below, we address each of these issues in turn.
Comparison of the treatment of pipeli ne transport services and service suppliers
under the OU model and the ISO and ITO models
7.450. We begin our comparison of the treatment of pipeline transport services and service
suppliers under the OU model and the ISO and ITO models by noting that the Appella te Body has
clarified that the assessment of less favourable tre atment under Article II:1 of the GATS calls for
an examination of whether a measure "modif[ies] the conditions of competition to the detriment of
services or service suppliers of any other Mem ber".833 Our comparison of the different unbundling
models will therefore focus on whether the conditions of competition are modified to the detriment
of pipeline transport services and service suppliers under the OU model in comparison with
pipeline transport services and service suppliers under the ISO and/or the ITO models.
7.451. Russia's main position appears to be that a VIU is "prevented from supplying its pipeline
transport services to the EU market through a commercial presence" under the OU model, whereas
"VIUs are able to continue supplying their like pipeline transport services to the EU market through
a commercial presence in the form of an ITO (or ISO)" under the ISO and ITO models. 834 In
response, the European Union argues that the objective of all thre e models is the same, "ensuring
independence of the transmission interest, on the one hand, from the production and supply
interests, on the other hand ('effective unbundling')" 835 and that "no matter the model that
applies, 'effective unbundling' will need to be ensured, and thus there will be an 'effective
separation of networks from activities of production and supply'".836
7.452. We begin by examining the OU model and Russia's assertion that a VIU is "prevented from
supplying its pipeline transport services throu gh a commercial presence" under th is model. In this
regard, we recall our findings above that a VIU can be considered to supply pipeline transport
services through the commercial presence of a TSO when that VIU owns or controls the TSO within
the meaning o f Article XXVIII(n)(i) or (ii) of the GATS. We further recall that the OU model does
not allow the same person or persons:
[D]irectly or indirectly to exercise control over an undertaking performing any of the
functions of production or supply, and directl y or indirectly to exercise control or
exercise any right over a transmission system operator or over a transmission
system[.]837
7.453. As explained above, these rights include "the power to exercise voting rights" 838, "the
power to appoint members of the supervisor y board, the administrative board or bodies legally
representing the undertaking" 839, and "the holding of a majority share". 840 A VIU, which per
definition performs "at least one of the functions of transmission, distribution, LNG or storage, and

833 Appellate Body Report, Argentina – Financial Services, para. 6.106. See also ibid. paras. 6.103-6105
and 6.127.
834 Russia's second written submission, para. 204. See also Russia's first written submission, paras. 316,
324-325, 329 and 331.
835 European Union's first written submission, para. 306.
836 European Union's first written submission, para. 316.
837 Directive 2009/73/EC, (Exhibit EU-5), Article 9(1)(b)(i). Article 9(1)(b)(ii) mirrors this provision by
not allowing the same person or persons:
[D]irectly or indirectly to exercise control over a transmission system operator or over a
transmission system, and directly or indirectly to exercise control or exercise any right over an
undertaking performing any of the functions of production or supply[.]
838 Directive 2009/73/EC, (Exhibit EU-5), Article 9(2)(a).
839 Directive 2009/73/EC, (Exhibit EU-5), Article 9(2)(b).
840 Directive 2009/73/EC, (Exhibit EU-5), Article 9(2)(c).

at least one of the functions of production or supply of natural gas" 841, is therefore required to
relinquish its control and rights over either the "undertaking performing any of the functions of
production or supply" or the "transmission system operator or [] transmission system".
7.454. Insofar as the VIU chooses to continue to perform any of the functions of production or
supply of natural gas, it will therefore not be permitted to hold a majority share in a TSO. In this
case, the VIU will plainly not be permitted to own a TSO within the meaning of Article XXVIII(n)(i)
of the GATS, defined as "beneficially own[ing]" "more than 50 per cent of the equity interest".
7.455. Furthermore, in this situation, the VIU will not be permitted "[d]irectly or indirectly to
exercise control" over the TSO or to "exercise any right" over it, including the right to exercise
voting rights and to appoint members of the supervisory board, the administrative board or bodies
legally representing the TSO. In our view, the VIU will, in this situation, not be permitted to control
a TSO within the meaning of Article XXVIII(n)(ii) of the GATS, defined as having "the power to
name a majority of [the TSO's] directors or otherwise to legally direct its actions".
7.456. We note that Russia has indicated that the concepts of control used in Article XXVIII(n)(ii)
of the GATS and in the Directive, respectively, "are similar" 842 and the European Union has
indicated that the concept of control used in Article XXVIII(n)(ii) of the GATS "is more limited"
than that used in the Dire ctive.843 We do not believe it is necessary or appropriate for us to
consider, in the abstract, the exact content of the concepts of "control" in the Directive and in
Article XXVIII(n)(ii) of the GATS, respectively, but agree with the spirit underlying both parties'
positions, namely that a VIU which cannot "exercise control" or "exercise any right" over a TSO
within the meaning of the Directive, cannot "control[]" a TS O within the meaning of
Article XXVIII(n)(ii) of the GATS.
7.457. We therefore agree with Russia to the extent that a VIU, which chooses to continue to
perform any of the functions of production or supply of natural gas, will be "prevented from
supplying its pipeline transport services to the EU market through a commercial presence" under
the OU model. At the same time, we do not find it entirely accurate to conclude that the OU model
"prevent[s]" a VIU from supplying its pipeline transport services to the EU market through a
commercial presence per se . Rather, we find it more accurate to conclude that the OU model
imposes the legal necessity for VIUs to make a choice between continuing to perform any of the
functions of production or supply of natural gas, on the one hand, or continuing to supply pipeline
transport services through commercial presence, on the other hand.844
7.458. Before addressing the ISO and ITO models, we note that both parties have provided a
considerable amount of argumentation concerning the issue of whether the OU model permits a
passive, minority shareholding in a transmission system or a TSO. 845 We do not consider this
aspect relevant to our assessment of the OU model under Article II:1 of the GATS and Russia's
claim that a VIU is "prevented from supplying its pipeline transport services to the EU market
through a commercial presence" unde r the OU model. More particularly, even if the OU model

841 Directive 2009/73/EC, (Exhibit EU-5), Article 2(20).
842 Russia's response to Panel question No. 28, para. 144.
843 European Union's response to Panel question No. 28, para. 61.
844 Russia argues that "[i]t seems unlikely that any VIU would 'choose' instead to divest ownership and
control over its production and supply activities" and on this basis appears to conclude that "[t]hus, contrary to
the EU's baseless assertion in response otherwise, that VIU may not continue to supply any amount of services
whatsoever in the EU." (Russia's comments on the European Union's response to Panel question No. 178(b),
para. 136). We do not believe it is appropriate, nor possible, for us to conclude in the abstract how VIUs will
decide to exercise the choice imposed upon them under the OU model. For purposes of considering whether
the conditions of competition are modified to the detriment of pipeline transport services and service suppliers
under the OU model in comparison with pipeline transport services and service suppliers under the ISO and/or
the ITO models, we believe it is sufficient for us to conclude that the OU model imposes the legal necessity for
VIUs to make a choice between continuing to perform any of the functions of production or supply of natural
gas, on the one hand, or continuing to supply pipeline transport services through commercial presence, on the
other hand. We will address the issue of how VIUs have or will exercise this choice, as appropriate, in the
context of considering whether the unbundling measure in the Directive accords less favourable treatment to
Russian pipeline transport services and service suppliers.
845 Russia's opening statement at the second meeting of the Panel, paras. 90 and 96; and response to
Panel question No. 172(a), paras. 116-119; and European Union's first written submission, paras. 28 and 311;
second written submission, paras. 82 and 132; and comments on Russia's response to Panel question
No. 172(a), paras. 58-60.

permits a VIU to have a passive minority sharehol ding, this would, in and of itself , plainly not
entail that the VIU is permitted to own a TSO within the meaning of Article XXVIII(n)(i) of the
GATS. Similarly, such passive minority shareholding would, in our view, not entail that the VIU is
permitted to control a TSO within the meaning of Article XXVIII(n)(ii) of the GATS. Hence, even if
the OU model permits a VIU to have a passive minority shareholding in a TSO, it does not alter the
conclusion we reached in the preceding paragraphs and we therefore do not address this aspect
further.
7.459. Having examined the OU model, we turn to Russia's contention that "VIUs are able to
continue supplying their like pipe line transport services to the EU market through a commercial
presence in the form of an ITO (or ISO)" under the ISO and ITO models.
7.460. Under the ISO model, a VIU owns, partly or fully, the transmission system network, but
not the operator of the transmissio n system. 846 Rather, the TSO, also known as the ISO, is
required to comply with the rules under the OU model. 847 In light of this, it is unclear to us how a
VIU could, in Russia's view, "continue supplying their like pipeline transport services to the EU
market through a commercial presence in the form of an [] ISO" under the ISO model when
Russia itself argues that a VIU is "prevented" from doing so under the OU model.848
7.461. In the context of another claim raising a similar issue 849, Russia has suggested that the
owner of a transmission system serves as "the means through which" pipeline transport services
are supplied and hence constitute a commercial presence within the meaning of Article XXVIII(d)
of the GATS. 850 In support of this position, Russia points out that th e GATS does not define a
"service" and that the ISO model "provides that 'the transmission system owner shall … provide all
relevant cooperation and support' to the ISO 'for the fulfilment of its tasks,' as well as all
necessary financing." 851 In Russia's vi ew, "[t]his 'cooperation' requires some degree of active
participation on the part of the transmission system owner to facilitate operation of the system by
the ISO."852
7.462. In this regard, we recall that, while the GATS does not define a "service", it does defi ne
"supply of a service" as including "the production, distribution, marketing, sale and delivery of a
service" in Article XXVIII(b). In paragraph 7.285 above, we have explained that pipeline transport
services cover transportation or transmission of natural gas through transmission pipelines. The
issue is whether a VIU can be considered to produce, distribute, market, sell or deliver such
pipeline transport services when owning a transmission system under the ISO model. In our view,
Russia has not provided a satisf actory explanation of how this would be the case , by pointing to
the obligation of the transmission system owner to cooperate with the ISO and to provide
financing for the ISO's investment decisions.
7.463. More particularly, we note that Article 14(5)(a) of the Directive requires the owner of the
transmission system to " provide all the relevant cooperation and support to the independent
system operator for the fulfilment of its tasks, including in particular all relevant information", and
Article 14(5)(b) requires the owner of the transmission system to "finance the investments decided
by the independent system operator and approved by the regulatory authority, or give its
agreement to financing by any interested party including the independent system operator." 853 It

846 Directive 2009/73/EC, (Exhibit EU-5), Articles 9(8) and 14(1).
847 Directive 2009/73/EC, (Exhibit EU-5), Article 14(2)(a), stating that an EU member State "may
approve and designate an independent system operator only where … the candidate operator has
demonstrated that it complies with the requirements of Article 9(1)(b), (c) and (d)".
848 Russia's second written submission, para. 204.
849 This claim is Russia's claim of de facto violation under Article II:1 of the GATS against the third-
country certification measure in the Directive, where a similar issue arises in respect of a particular
transmission system owner, Europolgaz, and a particular ISO, Gaz-System. In the context of this claim, Russia
also submits arguments based on the operatorship agreement between Europolgaz and Gaz-System. (Russia's
response to Panel question No. 204(a), paras. 244-251). We do not address these more specific arguments in
the context of examining the ISO model generally for purposes of Russia's claim under Article II:1 of the GATS
against the unbundling measure in the Directive, but rather address these only when examining Russia's
arguments concerning Europolgaz and Gaz-System in the context of its claim against the third-country
certification measure. (See paras. 7.1084 through 7.1095 below).
850 Russia's response to Panel question No. 55, para. 284.
851 Russia's response to Panel question No. 55, para. 284. (omission by Russia)
852 Russia's response to Panel question No. 55, para. 284.
853 Article 14(5)(b) goes on to state that:

is not clear to us how these cooperation and financing re quirements would entail that the
transmission system owner produces, distributes, markets, sells or delivers pipeline transport
services. On the contrary, the Directive makes it clear that it is the ISO, rather than the owner of
the transmission system, which operates the transmission system 854 and provides access for third
parties to the transmission system. 855 As these are the obligations of the ISO, rather than the
owner of the transmission system, we have difficulties understanding how the owner of the
transmission system could be considered as supplying pipeline transport services.
7.464. At other times, Russia appears to acknowledge that the ISO, rather than the owner of the
transmission system, supplies pipeline transport services, but instead suggests that the VIU can
exercise control over the ISO. 856 Russia does not explain , however, how a VIU would be able to
control the ISO within the meaning of Article XXVIII(n)(ii) of the GATS under the ISO model . We
have difficulties understanding Russia's position in this r egard, as the ISO is required to be
unbundled under the OU model. When responding to a Panel question concerning this issue, Russia
argues that the VIU "by being permitted to retain complete ownership of the transmission system"
"is entitled to receive ongoing financial benefits from the operation of that transmission system by
the ISO".857
7.465. The European Union does not dispute that a VIU receives certain sources of revenue when
owning a transmission system under the ISO model. 858 Indeed, Article 41(3 )(d) of the Directive
explicitly requires that the "network access tariffs collected by the independent system operator
include remuneration for the network owner or owners". Russia has, however, provided no
explanation of how such sources of revenue would entail that the VIU supplies pipeline transport
services within the meaning of the GATS or be relevant for our assessment under Article II:1 of
the GATS in any other way.
7.466. In light of this, we do not believe that Russia has demonstrated that "VIUs are able to
continue supplying their like pipeline transport services to the EU market through a commercial
presence" – be that through an ISO or the owner of the transmission system – under the ISO
model.
7.467. Under the ITO model, it is undisputed that a VIU is permitted to own , partly or fully, the
owner and operator of the transmission system, the TSO or the ITO. 859 Hence, the VIU is plainly
able to continue owning the ITO within the meaning of Article XXVIII(n)(i) of the GATS and we
therefore agree with Russia that VIUs are "ab le to continue supplying their like pipeline transport
services to the EU market through a commercial presence in the form of an ITO" under the ITO
model.
7.468. The parties disagree, on the other hand, concerning the issue of whether a VIU is able to
control the ITO under the ITO model. In support of its position that a VIU is able to control the
ITO, Russia points to "the role of the ITO's 'Supervisory Body'" and its relationship with the VIU.860
More particularly, Russia argues that "the Supervisory Body may be c omposed entirely of
'members representing' the VIU" and "[i]n any event, the VIU seems almost certain to control a
majority of the members"861 and points to Article 19(1) of the Directive, stating:

The relevant financing arrangements shall be subject to approval by the regulatory authority. Prior to
such approval, the regulatory authority shall consult the transmission system owner together with other
interested parties[.]
854 Directive 2009/73/EC, (Exhibit EU-5), Articles 13(1)(a) and 14(2)(b).
855 Directive 2009/73/EC, (Exhibit EU-5), Article 14(4).
856 See, e.g. Russia's response to Panel question No. 183(b), para. 184, in which Russia states that:
Even assuming the ISO model is implemented in accordance with the terms of the Directive, a
VIU under the ISO model may still be in a position to exercise at least limited rights or influence
over how the ISO operates, maintains and develops the system.
857 Russia's response to Panel question No. 172(b), para. 126.
858 See, e.g. European Union's response to Russia's question No. 15, para. 9, stating that "[t]he financial
benefits for the VIU would typically consist of a financial remuneration for the commercial use of the
infrastructure from the ISO."
859 Directive 2009/73/EC, (Exhibit EU-5), Article 9.8(b) and Chapter IV.
860 Russia's first written submission, para. 322.
861 Russia's first written submission, para. 323.

Decisions regarding the appointment and renewal, working con ditions including
remuneration, and termination of the term of office, of the persons responsible for the
management and/or members of the administrative bodies of the transmission system
operator shall be taken by the Supervisory Body of the transmission system operator
appointed in accordance with Article 20.862
7.469. The European Union, on the other hand, argues that "[t]he VIU cannot control the network
operation" under the ITO model 863 and that there are "strict rules for independence of the ITO
management"864; that "the VIU can, via the Supervisory Body, only be involved in the decisions
that are specifically provided under the Directive" 865 and that "all decisions concerning the day -to-
day activities of the TSO and the management of the network and ten -year network development
plan" are "explicitly excluded from the decision -making of the Supervisory Body" 866; that "the
Directive ensures control over the Supervisory Body by the national regulatory authority" in
respect of decisions concerning appointment of persons responsible for the management and/or
members of the administrative bodies of the ITO, which only become binding if the relevant NRA
has not raised any objections 867; that there are certain independence requirements for "at least
half of the members of the S upervisory Body minus one" and other requirements for all members
of the Supervisory Body 868; and that "the independence of the ITO is explicitly required by the
Directive".869
7.470. When addressing this issue, we recall that Article XXVIII(n)(ii) of the GATS clarifies that a
juridical person is "'controlled' by persons of a Member if such persons have the power to name a
majority of its directors or otherwise to legally direct its act ions". Generally, we wish to emphasize
that we do not believe that the concept of control under Article XXVIII(n)(ii) of the GATS is a
matter to be assessed in the abstract, but rather on a case -by-case basis. We further note that,
having already agreed wi th Russia that VIUs are "able to continue supplying their like pipeline
transport services to the EU market through a commercial presence in the form of an ITO" under
the ITO model , by virtue of being permitted to own an ITO within the meaning of
Article XXVIII(n)(i) of the GATS, it is less pertinent for us to assess, in detail, whether VIUs are
also "able to continue supplying their like pipeline transport services to the EU market through a
commercial presence in the form of an ITO" under the ITO model , by virtue of being permitted to
control an ITO within the meaning of Article XXVIII(n)(ii) of the GATS.
7.471. Having said this, we consider it useful to provide observations regarding the arguments
submitted by the parties. We begin by noting that while we are not convinced that the Supervisory
Body may be composed entirely of members representing the VIU, as suggested by Russia 870, it is

862 Russia's first written submission, para. 322 (quoting Directive 2009/73/EC, (Exhibit EU-5),
Article 19(1)).
863 European Union's first written submission, para. 319.
864 European Union's first written submission, para. 329 (referring to Directive 2009/73/EC, (Exhibit
EU-5), Article 19).
865 European Union's first written submission, para. 331 (referring to Directive 2009/73/EC, (Exhibit
EU-5), Article 20(1)).
866 European Union's first written submission, para. 330 (referring to Directive 2009/73/EC, (Exhibit
EU 5), Article 20(1)).
867 European Union's first written submission, para. 332 (referring to Directive 2009/73/EC, (Exhibit
EU-5), Article 19(2)).
868 European Union's first written submission, para. 333 (referring to Directive 2009/73/EC, (Exhibit
EU-5), Article 20(3)).
869 European Union's first written submission, para. 334. In this regard, the European Union points to
the "general obligation of independence" under Article 18 of the Directive and to certain specific requirements,
namely the requirement for the ITO to have the power to raise money on the capital market; for subsidiaries of
the VIU performing functions of production or supply not to have any direct or indirect shareholdings in the ITO
and vice versa; for "all commercial and financial relations between the ITO and other parts of the VIU,
including loans from the ITO to other parts of the VIU, [to] comply with market conditions and [to] be
disclosed to the regulatory authority upon request" and for "[a]ll commercial and financial relations with other
parts of the vertically integrated undertaking giving rise to a formal agreement, oral or written, [to] be
submitted for approval to the regulatory authority"; for the VIU to refrain from "any action impeding or
prejudicing the ITO from complying with its obligations"; and for the "overall management structure and the
corporate statutes of the ITO [to] provide for a decision-making structure and rules ensuring effective
independence of the ITO". (Ibid. (referring to Directive 2009/73/EC, (Exhibit EU-5), Articles 18(1)(b), 18(3),
18(4), 18(6), 18(7), and 18(9)).
870 Russia's first written submission, para. 323. In particular, we note that, for "half of the members of
the Supervisory Body minus one", the Directive requires that: (a) these members cannot exercise any

undisputed that a majority of the members of the Supervisory Body may be members representing
the VIU. 871 In light of this, as wel l as the fact that the Supervisory Body is responsible for
"[d]ecisions regarding the appointment … of the persons responsible for the management and/or
members of the administrative bodies" of the ITO 872, we believe that there could be situations
where a VI U would "have the power to name a majority of [the ITO's] directors" and hence to
control it within the meaning of Article XXVIII(n)(ii) of the GATS. At the same time, we reiterate
our position that the concept of control should be addressed on a case -by-case basis, and the
issue of whether a VIU has "the power to name a majority of [the ITO's] directors" will depend on
the corporate statutes of any particular ITO as well as the provision under Article 19(2) of the
Directive that the Supervisory Body's appo intments "become binding only if the regulatory
authority has raised no objections within three weeks of notification".
7.472. We therefore agree with Russia that "VIUs are able to continue supplying their like pipeline
transport services to the EU market through a commercial presence in the form of an ITO" under
the ITO model in the sense that a VIU is permitted to own an ITO within the meaning of
Article XXVIII(n)(i) of the GATS and could, under certain circumstances, be permitted to control an
ITO within the meaning of Article XXVIII(n)(ii) of the GATS under this model.
7.473. In light of the above, we conclude that pipeline transport services and service suppliers are
accorded less favourable treatment under the OU model in comparison with the ITO model in the
sense that the OU model imposes the legal necessity for VIUs to make a choice between
continuing to perform any of the functions of production or supply of natural gas, on the one hand,
or continuing to supply pipeline transport services through commercial prese nce, on the other
hand, which the ITO model does not. Insofar as the VIU chooses to continue to perform any of the
functions of production or supply of natural gas , it will be required to cease supplying pipeline
transport services and its competitive oppo rtunities as a pipeline transport service supplier are
therefore entirely eliminated under the OU model, which is not the case under the ITO model.
7.474. Having reached this conclusion, we wish to emphasize that this conclusion, as well as the
considerations se t out above, concern the different unbundling models and the competitive
conditions for pipeline transport services and service suppliers under these models in general. In
other words, we have addressed the possibilities for VIUs of supplying pipeline tran sport services
through the commercial presence of TSOs, in general, under each of these models. These general
considerations do not prejudge the situations that may occur on a case-by-case basis.
7.475. In particular, we note that Russia, when asserting that the unbundling measure in the
Directive accords less favourable treatment to Russian pipeline transport services and service
suppliers under the OU model, appears to suggest that the Russian VIU Gazprom supplied pipeline
transport services before the entry in to force of the Directive whenever Gazprom had
shareholdings in TSOs, including minority shareholding s. Correspondingly, Russia appears to
suggest that Gazprom was "prevented" or ceased supplying pipeline transport services when
divesting its shares in these TSOs under the OU model.
7.476. As we explained in this , as well as the preceding section, a VIU can be considered to
supply pipeline transport services through the commercial presence of a TSO only when this TSO is
owned or controlled by the VIU within the meaning of Article XXVIII(n)(i) or (ii) of the GATS. While
we have concluded that the OU model imposes the legal necessity for VIUs to make a choice
between continuing to perform any of the functions of production or supply of natural gas, on the
one hand, or continuing to supply pipeline transport services through commercial presence, on the
other hand, the issue of whether a particular VIU can be considered to have supplied pipeline
transport services through commercial presence before the entry into force of the Directive – and

professional position or responsibility, interest or business relationship, either directly or indirectly, with any
part of the VIU (other than the ITO) or its controlling shareholders during a period of three years before their
appointment, during their appointment, or during a period of four years after termination of their appointment;
(b) these members cannot hold an interest in or receive any financial benefit, directly or indirectly, from any
part of the VIU other than the ITO or receive remuneration depending on activities or results of the VIU; and
(c) these members shall be guaranteed "[e]ffective rights of appeal to the regulatory authority … against
premature terminations of their term of office". (Directive 2009/73/EC, (Exhibit EU-5), Articles 19(3)-19(7)
and 20(3)).
871 See Directive 2009/73/EC, (Exhibit EU-5), Articles 20(2) and 20(3). See also European Union's first
written submission, para. 331.
872 Directive 2009/73/EC, (Exhibit EU-5), Article 19(1).

to have ceased doing so following the entry into force of the Directive – is a matter to be
determined on a case-by-case basis.
7.477. Similarly, when asserting that the unbundling measure in the Directive accords more
favourable treatment to pipeline transport services and service suppliers from any other non -EU
country under the ITO model, Russia, at times, appears to suggest that VIUs from any other non -
EU country continue to supply pipeline transport services whenever they have shareho ldings in an
ITO, including minority shareholding s. As we have explained above, a VIU can be considered to
continue supplying pipeline transport services through the commercial presence of an ITO only
insofar as that ITO is owned or controlled by the VIU w ithin the meaning of Articles XXVIII(n)(i) or
(ii) of the GATS. While we have concluded that VIUs, generally, are able or permitted to continue
supplying pipeline transport services through the commercial presence of an ITO under the ITO
model, the issue of whether a particular VIU does in fact supply pipeline transport services through
the commercial presence of a particular ITO should be assessed on a case -by-case basis, taking
into account whether "more than 50 per cent of the equity interest in [the ITO ] is beneficially
owned by [the VIU]" or whether the VIU has "the power to name a majority of [the ITO's]
directors or otherwise to legally direct its actions".
7.478. We further wish to emphasize that the conclusion and considerations set out above
concern only pipeline transport service suppliers in the form of VIUs supplying pipeline transport
services through the commercial presence of TSOs. Russia has, in our view, not submitted any
argumentation suggesting that the different unbundling models modify the cond itions of
competition of pipeline transport service suppliers, which are not VIUs or part thereof. 873
Furthermore, the European Union has not addressed the relevance of pipeline transport service
suppliers, which are not VIUs, except by stating that "the possibilities are the same for all natural
and juridical persons that are service suppliers" 874, when responding to a question by the Panel
concerning this issue. We therefore do not address this situation further in our assessment below.
7.479. We note that Russia ha s also submitted certain further arguments, in addition to its main
line of argumentation . More particularly, Russia generally refers to "the inherent commercial and
logistical competitive advantages associated with vertical integration" 875 and, in this regard, points
to a "simple internet search quickly reveal[ing]" the following advantages: "[l]ower transaction
costs; [s]ynchronization of supply and demand along the chain of products; [l]ower uncertainty

873 In response to a question by the Panel concerning this issue, Russia states that "[t]he possibilities –
or legal rights – of natural or juridical persons that do not meet the definition of a 'VIU' to supply pipeline
transport services in the EU differ depending upon which unbundling model or models is permitted by an
individual Member State." (Russia's response to Panel question No. 179, para. 152). Russia goes on to explain
"situations in which Member State governments have opted to exercise their rights under the [public body]
measure set out in Article 9(6) of the Directive" and that this has "implications" not just for the public body
measure. (Ibid. paras. 154-156). Russia then explains that "for purposes of the ITO model, natural or legal
persons that are not a VIU are legally prohibited from supplying pipeline transport services in the EU …
because, in Member States that permit the ITO model, only those VIUs that owned and controlled the entire
transmission and supply infrastructure as of 3 September 2009 were permitted pursuant to Article 9(8) of the
Directive to adopt the ITO model." (Ibid. para. 157). We have difficulties understanding the position expressed
by Russia in its response. First, the relevance of Russia's arguments concerning the public body measure
remains unclear to us. More particularly, Russia itself explains that the public body measure applies regardless
of the applicable unbundling model(s). (Russia's request for review of the Interim Report, para. 45). In light of
this, it is difficult to understand how or why this distinct measure would be relevant for assessing whether the
different unbundling models modify the conditions of competition for pipeline transport service suppliers,
including those that are not VIUs. Second, we have difficulties understanding Russia's position that "natural or
legal persons that are not a VIU are legally prohibited from supplying pipeline transport services in the EU" in
EU member States that have implemented the ITO model in addition to the OU model in respect of
transmission systems that belonged to a VIU on 3 September 2009. Insofar as a natural or juridical person
does not perform "at least one of the functions of production or supply of natural gas", and is hence not a VIU,
it will already be in compliance with the rules under the OU model and will therefore be able to supply pipeline
transport services without having to unbundle under either of the models. Even assuming that pipeline
transport service suppliers that are not VIUs are prohibited from supplying pipeline transport services where
the ITO model has been implemented, we fail to see how this relates to or supports Russia's position that the
conditions of competition are modified to the detriment of pipeline transport service suppliers under the OU
model in comparison with the ITO model.
874 European Union's response to Panel question No. 179, para. 112.
875 Russia's response to Panel question No. 172(a), para. 121.

and higher investment; [s]trategic independence; and '[c]ompetitive advantages.'" 876 These
arguments appear to involve a comparison of VIUs supplying pipeline transport services through
commercial presence in the EU territory under the ITO model 877 with pipeline transport service
suppliers supplying their services through a commercial presence in the EU territory without being
part of a VIU.
7.480. However, Russia does not provide any concrete explanation of whether the advantages
revealed by a "simple internet search" exist in the relationship between a VIU and an ITO under
the ITO model, taking into account the requirements imposed on their relationship under this
model. Nor does Russia elaborate on how this comparison demonstrates the existence of less
favourable treatment of Russian pipeline transport services and s ervice suppliers. Instead, Russia
submits that it is "clear why multinational energy giants such as the owners of TAP AG and Engie,
the dominant French gas production -supplier, choose the ITO model" and that "[t]hey know it
provides them and their gas a co mpetitive advantage over other suppliers, such as Gazprom and
its imported Russian gas in Lithuania, Estonia and Latvia". 878 We recall that Russia, as the
complaining party, cannot "simply submit evidence and expect the panel to divine from it a claim
of WTO-inconsistency" nor "simply allege facts without relating them to its legal arguments". 879
Accordingly, we cannot simply assume that Russia's assertions concerning the alleged advantages
under the ITO model are demonstrated by the fact that certain private e ntities have opted for this
model over the OU model. We, therefore, do not address this line of argumentation further in
assessing Russia's claim.880
7.481. Having provided these considerations concerning the treatment of pipeline transport
services and service sup pliers under the OU model and the ISO and ITO models, we proceed to
examine the second issue raised by the parties' argumentation: whether Russia has demonstrated
that the unbundling measure in the Directive accords less favourable treatment to Russian pip eline
transport services and service suppliers than that accorded to pipeline transport services and
service suppliers of any other non-EU country by "enabling" EU member States to choose between

876 Russia's response to Panel question No. 172(a), para. 122 (referring to Wikipedia, "Vertical
Integration", https://en.wikipedia.org/wiki/Vertical_integration#Problems_and_benefits (accessed 11 May
2017), (Exhibit RUS-251); and Neil Kokemuller, "The Advantages of a Vertical Integration Strategy"
http://smallbusiness.chron.com/advantages-vertical-integration-strategy-20987.html (accessed 3 August
2017), (Exhibit RUS-252)). Russia also states that a "study conducted concerning unbundling among European
electricity utilities attempted to quantify the cost and other benefits of avoiding unbundling" which, in Russia's
view, "[w]hile not precisely applicable to the gas industry … dramatizes the general principle". (Ibid. fn 106
(referring to K. Gluger, M. Liebensteiner, and S. Schmitt, Vienna University of Economics and Business,
"Assessing the Economies of Scope from Vertical Integration: Evidence from European Electricity Utilities",
PowerPoint Presentation at IAEE Conference held in New York on 18 June 2014, (Exhibit RUS-188)).
877 Notably, these arguments by Russia do not appear to be directed at the ISO model.
878 Russia's response to Panel question No. 172(a), para. 124.
880 In addition to its arguments concerning the "inherent commercial and logistical competitive
advantages associated with vertical integration", Russia has emphasized two other "points" when asked to
clarify its position regarding the treatment of pipeline transport services and service suppliers under the OU
model and the ITO model: (a) Russia argues that the OU model does not "permit 'a producer or supplier' to
maintain 'a passive minority shareholding' in the TSO"; and (b) Russia refers to its response to Panel question
No. 183(a) concerning "the different treatment and competitive advantage accorded to domestic or imported
gas by VIUs subject to the ITO model, compared to Russian-origin natural gas imported via pipelines that were
subjected to the OU model". (Russia's response to Panel question No. 172(a), paras. 116-120 (quoting the
European Union's first written submission, para. 311)). With respect to the first of these points, we recall that
we have already addressed Russia's arguments concerning the possibility for VIUs of maintaining a passive
minority shareholding in TSOs under the OU model and found these arguments irrelevant for Russia's claim
under Article II:1 of the GATS. With respect to the second of these points, we begin by reiterating our position
that the focus under the GATS is how the challenged measure affects the supply of a service or service
suppliers, not how it affects trade in goods. Consequently we consider Russia's arguments concerning the
"different treatment and competitive advantage accorded to domestic or imported gas" irrelevant for Russia's
claim under Article II:1 of the GATS. Russia does, at times, refer to pipeline transport services and service
suppliers in its response to Panel question No. 183(a). More particularly, Russia argues that "[f]rom a services
standpoint, the certainty that its natural gas will have guaranteed access to the EU market through its ITO also
accords more favourable treatment to a third-country VIU supplier and its ITO in the EU". (Russia's response to
Panel question No. 183(a), fn 150). Russia, however, does not provide a more concrete explanation of how the
ITO model allegedly enhances the "certainty that [a VIU's] natural gas will have guaranteed access to the EU
market through its ITO" and how this translates into a competitive advantage for the pipeline transport
services supplied by the VIU. Accordingly, we do not believe that Russia's reference to its response to Panel
question No. 183(a) suffices to make a prima facie case of violation under Article II:1 of the GATS.

implementing only the OU model or implementing the ITO model in addition to the OU model in
respect of transmission systems that belonged to a VIU on 3 September 2009. As we have found
that Russia has not demonstrated that pipeline transport services and service suppliers are
accorded less favourable treatment under the OU model in comparison with the ISO model, we do
not address the latter model any further in our assessment of this second issue.
Whether the unbundling measure in the Directive accords less favourable
treatment to Russian pipeline transport services and service suppliers
7.482. Russia appears to acknowledge that the unbundling measure in the Directive does not
involve any de jure discrimination against Russian pipeline transport services and service
suppliers881 and does not dispute the European Union's posi tion that the Directive is neutral in the
sense that the same unbundling models are applicable at any given time and within any given EU
member State regardless of the origin of the pipeline transport services or service suppliers. 882
Instead, Russia seeks to demonstrate that the Directive accords de facto less favourable treatment
of Russian pipeline transport services and service suppliers in comparison with that accorded to
pipeline transport services and service suppliers of any other non -EU country by referring to its
design, structure and expected operation.883

881 See, e.g. Russia's first written submission, para. 326.
882 See, e.g. European Union's first written submission, paras. 289 and 292.
883 See, e.g. Russia's second written submission, paras. 219-220. Russia also submits some arguments
concerning the objective or intentions of the European Union in adopting the unbundling measure in the
Directive. Notably, Russia at times refers to the European Union having the "major", "overall" or "overriding"
objective of reducing its reliance on imported Russian natural gas or its reliance on Russian pipeline transport
services. (See, e.g. Russia's first written submission, para. 314; and second written submission, paras. 21, 62,
73, 79, 226 and 228). As pointed out by the Appellate Body in EC and certain member States – Large Civil
Aircraft, we note that "the Appellate Body and panels have, on several occasions, cautioned against undue
reliance on the intent of a government behind a measure to determine the WTO-consistency of that measure"
and have found that "the intent, stated or otherwise, of the legislators is not conclusive" although "objectively
reviewable expressions of a government's policy objectives" may constitute relevant evidence. (Appellate Body
Report, EC and certain member States – Large Civil Aircraft, para. 1050 (citing Appellate Body Reports, Japan
– Alcoholic Beverages II, p. 27, DSR 1996:1, 97, at p. 119; US – Offset Act (Byrd Amendment), para. 259;
and Panel Report, Japan – DRAMs (Korea), para. 7.104)). (emphasis original) We begin by noting that Russia
refers to the alleged objectives of reducing reliance on imported Russian natural gas and reducing reliance on
Russian pipeline transport services and service suppliers interchangeably, and at a variety of places in its
submissions and statements. In accordance with the scope and subject-matter of the GATS, we however
believe that the relevant issue is whether Russia has provided "objectively reviewable expressions" of the
European Union's policy objective being to reduce reliance on Russian pipeline transport services or service
suppliers, rather than imported Russian natural gas. (Appellate Body Report, EC – Bananas III, para. 221).
Having reviewed Russia's various arguments, we do not believe it has done so. More particularly, Russia has
made unsubstantiated assertions (Russia's opening statement at the first meeting of the Panel, para. 2);
submitted arguments or evidence concerning the European Union allegedly having a general objective of
reducing reliance on Russian pipeline transport services and service suppliers, without relating it to the
unbundling measure or by relating it to different, distinct measures (Russia's response to the European Union's
first request for a preliminary ruling, para. 26 (referring to Communication from the Commission to the
European Parliament and the Council, European Energy Security Strategy, COM(2014) 330 final,
(28 May 2014), (Exhibit RUS-5)); first written submission, paras. 6-7; and opening statement at the first
meeting of the Panel, para. 2); submitted arguments and evidence relating to the implementation of the
unbundling measure in Lithuania, consisting primarily of individual statements by Lithuanian ministers or
politicians and the notion that the Lithuanian Government "directed a negative public relations campaign
against Gazprom and Lietuvos [dujos] in conjunction with implementing the Directive and requiring adoption of
the OU model" and "launched investigative proceedings against Lietuvos [dujos] and the members of its Board
of Directors nominated by Gazprom" (Russia's response to Panel question No. 32(a), paras. 152-188 (referring
to "Prime Minister: Construction of Terminal Increases", https://lrv.lt/en/news/prime-minister-construction-
ofterminal-increases-br-energy-independence-and-reduces-gas-prices, (Exhibit RUS-129); Baltic Business
News, "Kubilius: Gazprom's influence on Lithuania must decrease", (online, 13 September 2010), (Exhibit RUS-
132); Seimas of the Republic of Lithuania, 6th (Spring) Session, Evening's Plenary Session No. 346, Verbatim
Report, 28 June 2011 (unofficial translation), (Exhibit RUS-133); Seimas of the Republic of Lithuania, 6th
(Spring) Session, Evening's Plenary Session No. 347, Verbatim Report, 30 June 2011 (unofficial translation),
(Exhibit RUS-134); ICIS, "Incumbent opposes Lithuanian grid unbundling decision", (online, 20 May 2010),
(Exhibit RUS-135); V. Žinios, "Interview: Interview with Andrius Kubilius, Lithuania's Prime Minister by Rytas
Staselis", Business News, (Vilnius, 6 September 2010) (unofficial translation), (Exhibit RUS-138); Baltic News
Service, "Energy Minister: Gazprom, Lithuania's Govt Pursue Different Interests With Building of Gas Pipeline to
Klaipedia", (Vilnius, 22 September 2009), (Exhibit RUS-139); Baltic News Service, "Govt Asks Lithuanian Gas'
Top Execs to Resign", (Vilnius, 8 February 2011), (Exhibit RUS-140); Elta, "Prime Minister Armed For

7.483. We begin our assessment of the alleged de facto less favourable treatment of Russian
pipeline transport services and service suppliers under the unbundling measure in the Directive by
addressing certain disagreements between the parties concerning the approach for determining de
facto discrimination or less favourable treatment.
7.484. In its first written submission, Russia points to one example of the Russian VIU Gazprom
having divested its shares in a TSO under the OU model in Lithuania, which has implemented only
this model 884 and three examples of VIUs from other non -EU countries, namely Norway and
Azerbaijan, continuing to have shares in ITOs in Germany, Greece, and Italy, which have
implemented the ITO model in addition to the OU model in respect of transmission systems that
belonged to a VIU on 3 September 2009. 885 On the basis of this, Russia submits that the Russian

Negotiations With Gazprom", (online, 8 September 2011) (unofficial translation), (Exhibit RUS-141); and
Ministry of Energy of the Republic of Lithuania: "Ministry of Energy appeals to court to launch legal
investigation of the operations of AB Lietuvos Dujos", 17 March 2011, (Exhibit RUS-142)); and second written
submission, para. 21 and fn 73); submitted arguments and evidence concerning the EU process of adopting
the unbundling measure in the Directive and the introduction of more unbundling models, which do not appear
to refer to any objective of reducing reliance on or discriminating against Russian pipeline transport services or
service suppliers (Russia's second written submission, paras. 48-52 (referring to Energy Council,
Memo/08/127, (27 February 2009), (Exhibit RUS-166); EurActiv, "EU unveils plan to dismantle big energy
firms", (online, 20 September 2007), (Exhibit RUS-170); Shepherd and Wadderburn LLP, "Full ownership
unbundling: no way or the third way", Lexology, (online, 7 August 2008), (Exhibit RUS-171); Wikileaks, Public
Library of US Diplomacy, Cable of 7 November 2007 "Grand Coalition Opposes European Union Commission's
Unbundling Directives", (Exhibit RUS-172); EurActiv, "Eight EU states oppose unbundling, table 'third way'",
(online, 1 February 2008), (Exhibit RUS-173); E. Chow, "France, Germany Propose End-Run Around
Unbundling", Law360, (online, 29 January 2008), (Exhibit RUS-174); EurActiv, "Commission rebuffs Franco-
German energy proposals", (online, 15 February 2008), (Exhibit RUS-175); I. Wissenbach, "EU Commission
sets strict terms on unbundling", Reuters, (Brussels, 25 April 2008), (Exhibit RUS-176); V. Horváth,
"Compromise in sight on energy liberalization", EurActiv, (online, 16 May 2008), (Exhibit RUS-177); Wikileaks,
Public Library of US Diplomacy, Cable of 31 October 2008 "Outlook for the EU's Third Energy Package", (Exhibit
RUS-178); R. Goldirova, "Parliament rejects full gas company unbundling", Euobserver, (online, 10 July 2008),
(Exhibit RUS-179); S. Stefanini, "EU Backs a Compromise on Gas Unbundling", Law360, (online, 9 July 2008),
(Exhibit RUS-180); and P. Newton, "EU institutions agree unbundling terms for energy networks", Utility Week,
(online 8 April 2009), (Exhibit RUS-181))); and submitted arguments and evidence relating to the
Commission's role in the implementation of the unbundling measure in Lithuania, which do not appear to refer
to any objective of reducing reliance on or discriminating against Russian pipeline transport services or service
suppliers (Russia's second written submission, paras. 61-71 (referring to Draft Decision of the Government of
the Republic of Lithuania "On Approval of the Concept of the Amendment of the Law on Natural Gas of the
Republic of Lithuania", (23 March 2010), (unofficial translation), (Exhibit RUS-130); and V. Pakalkaite,
"Lithuania's Strategic Use of EU Energy Policy Tools: A Transformation of Gas Dynamics" (2016), paper NG111,
Oxford Institute for Energy Studies, (Exhibit RUS-167))). We do not consider the evidence provided by Russia
to be "objectively reviewable expressions" of the European Union's policy objectives, nor do we believe that
Russia has provided a clear explanation of how its evidence demonstrates that the objective of the Directive's
unbundling measure, including its use of different unbundling models, is to reduce reliance on or discriminate
against Russian pipeline transport services or service suppliers.
884 Russia's first written submission, paras. 315-316, 325 and 229-331. This example concerns the
Russian VIU Gazprom having sold its shares in the TSO AB Amber Grid (Amber Grid) under the OU model in
Lithuania, which has implemented only this model. Russia, at times, refers to the entity AB Lietuvos dujos
(Lietuvos dujos) rather than Amber Grid. We understand that Lietuvos dujos operated the transmission system
in Lithuania prior to the implementation of the unbundling measure, after which its transmission assets were
incorporated in the TSO Amber Grid. Gazprom then sold its shares in Amber Grid. (Russia's first written
submission, para. 202). For clarity and ease of reference, we refer only to Amber Grid in our assessment of the
unbundling measure in the Directive. In its first written submission, Russia also points to the example of the
TSO NEL GT in Germany. (Russia's first written submission, paras. 337-339). However, as acknowledged by
both parties, Germany allows all three unbundling models and NEL GT has in fact been certified as an ITO and
Gazprom has accordingly not sold any shares in this TSO. (See Shareholdings of TSOs before and after the
Third Package, (Exhibit RUS-189), row 25; and Shareholdings in TSOs in the European Union (Exhibit EU-110)
(BCI), row 23). We therefore fail to see how this example is relevant for Russia's claim that the unbundling
measure in the Directive violates Article II:1 of the GATS by "enabling" EU member States to select from
among the unbundling models.
885 Russia's first written submission, paras. 324 and 329-336. These examples concern the Norwegian
VIU Statoil and its ITO jordgas under the ITO model implemented in Germany in addition to the OU model in
respect of transmission systems that belonged to a VIU on 3 September 2009; and the Azerbaijani VIU State
Oil Company of the Azerbaijan Republic (SOCAR) and its ITO DESFA under the ITO implemented in Greece in
addition to the OU model in respect of transmission systems that belonged to a VIU on 3 September 2009.
Russia also refers to the Azerbaijani VIU SOCAR and its "'ad hoc' ITO" TAP AG under an infrastructure
exemption granted pursuant to Article 36 of the Directive. As explained above, however, since TAP AG is an
"'ad hoc' ITO" under the infrastructure exemption measure rather than an ITO under the unbundling measure

VIU Gazprom was "prohibited from supplying it s pipeline transport services to the European Union
through a commercial presence in Lithuania" whereas these other VIUs from other non -EU
countries "are able to continue supplying their pipeline transport services to the European Union
through a commercial presence in other Member States".886
7.485. The European Union criticizes this approach, arguing that the treatment of the "group" of
Russian pipeline transport services and service suppliers must be compared with the treatment of
the "group" of like pipeline transport services and service suppliers of any other non-EU country.887
More specifically, the European Union submits that Russia must demonstrate that the detrimental
impact under the OU model is "predominantly" on the group of Russian pipeline transport services
and service suppliers.888
7.486. We also question the approach taken by Russia. As pointed out by the European Union,
similar approaches have been rejected for goods, under the national treatment obligations of the
GATT 1994 and the Agreement on Technical Barriers to Trade (TBT Agreement). In par ticular, we
note the following finding by the panel in US – Clove Cigarettes:
In our view, WTO jurisprudence does not support the proposition that "less favourable
treatment" can be established merely by showing that there are some imported
products that are treated less favourably than some domestic like product[s]. Indeed,
we agree with the United States that this is an "extreme view that has been squarely
rejected by the Appellate Body" in EC – Asbestos.889
This sentiment was echoed by the Appellate Body in the same dispute, stating:
[T]he national treatment obligation of Article 2.1 [of the TBT Agreement] does not
require Members to accord no less favourable treatment to each and every imported
as compared to each and every domestic like product. Article 2 .1 does not preclude
any regulatory distinctions between products that are found to be like, as long as
treatment accorded to the group of imported products is no less favourable than that
accorded to the group of like domestic products.890
7.487. Russia's reliance on the examples listed in paragraph 7.484 above appears to denote a
more general approach under which Russia believes that the assessment of less favourable
treatment under Article II:1 of the GATS should be based on a comparison of Russian pipeline
transport services and service suppliers subject to the less favourable treatment under the OU
model, on the one hand, with the pipeline transport services and service suppliers of other non -EU
countries subject to the more favourable trea tment under the ITO model, on the other hand. In
other words, Russia appears to suggest that evidence concerning Russian pipeline transport
services and service suppliers subject to the more favourable treatment under the ITO model and
pipeline transport s ervices and service suppliers from other non -EU countries subject to the less
favourable treatment under the OU model, is irrelevant.891
7.488. We note that similar approaches have been rejected for goods. In particular, we note the
Appellate Body's warning in US – Tuna II (Mexico) (Article 21.5 – Mexico) that "a panel may not
artificially limit its analysis to only subsets of the relevant groups of like products in a manner that
risks skewing the proper comparison for purposes of determining detrimental impact."892
7.489. In our view, the rationale behind the findings above is equally applicable for claims under
Article II:1 of the GATS. As with the MFN and national treatment obligations under the GATT 1994
and the TBT Agreement, Article II:1 of the GATS contains a fundamen tal non -discrimination

in the Directive, we do not believe it is relevant to consider this example further in the context of addressing
Russia's claims against the latter measure.
886 Russia's first written submission, para. 316. See also Russia's first written submission, paras. 324-
325, 329 and 331.
887 European Union's first written submission, paras. 301-302.
888 European Union's first written submission, para. 301; and second written submission, paras. 76-77.
889 Panel Report, US – Clove Cigarettes, para. 7.273. (emphasis original)
890 Appellate Body Report, US – Clove Cigarettes, para. 193. (emphasis original)
891 See, e.g. Russia's second written submission, para. 221.
892 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 7.71.

obligation and is thus concerned with prohibiting discriminatory measures. 893 If we were to accept
Russia's approach, it would, in our view, "risk[] skewing the proper comparison" in a manner that
would not allow us to discern whether or not the measure is in fact discriminatory. Instead , we
believe that our assessment should "take into consideration 'the totality of facts and circumstances
before [us]'" 894 and assess whether the "design, structure, and expected operation" 895 of the
unbundling measure in the Directive is such that the conditions of competition are modified to the
detriment of the group of Russian pipeline transport services and service suppliers in comparison
with the group of pipeline transport services and service suppliers from any other non-EU country.
7.490. Having said this, we wish to emphasize that we do not mean to suggest that the
"predominant effect" test, set out by the European Union, is the sole means through which a
complaining party may demonstrate de facto discrimination. While such evidence has been relied
on in a number of previous disputes 896, we do not believe it would be appropriate to automatically
limit the standard for demonstrating de facto discrimination to only this type of evidence. There
may be several way s for a complaining Member to demonstrate that the design, structure and
expected operation of a challenged measure is such that this measure, while neutral on its face,
results in de facto discrimination. We do not preclude that, as suggested by Russia as well as
Japan, specific instances of application could serve as relevant evidence in this regard, nor that
this may be particularly relevant for claims under the GATS where the number of service suppliers
in a specific sector could be limited. 897 However, it would be for the complaining party to expound
that such instances of application serve to demonstrate that the challenged measure is, as such, of
a discriminatory nature.898
7.491. Furthermore, we wish to point out that, in deciding to assess Russia's claim by comparing
the treatment of the group of Russian pipeline transport services and service suppliers with that of
the group of pipeline transport services and service suppliers of any other non -EU country, we do
not believe we are accepting the notion of "offsetting", as suggested by Russia. 899 This concept
was introduced in US – Section 337 Tariff Act, where the complaining party challenged the alleged
discrimination stemming from imported products being subject to differen t proceedings in patent -
based actions than those applying to domestic products. In th at dispute, the panel rejected the
argument that the less favourable treatment under the proceedings applicable to imported
products was "offset" by certain advantages und er those proceedings 900, stating that such "an
element of more favourable treatment would only be relevant if it would always accompany and
offset an element of differential treatment causing less favourable treatment."901 In contrast, when
deciding to assess the WTO consistency of the unbundling measure by comparing the treatment of
the group of Russian pipeline transport services and service suppliers with that of the group of
pipeline transport services and service suppliers of any other non -EU country, we a re not
permitting any "element of more favourable treatment" under the OU model to "offset" the less
favourable treatment under this model. Rather, we are examining the design, structure and
expected operation of the unbundling measure in respect of the en tire group of relevant services
and service suppliers, instead of only the subsets pointed to by Russia.

893 See, e.g. Appellate Body Report, Argentina – Financial Services, para. 6.105.
894 Appellate Body Reports, US – COOL, para. 269 (quoting Appellate Body Report, US – Clove
Cigarettes, para. 206).
895 Appellate Body Reports, US – COOL, para. 269 (quoting Appellate Body Report, Thailand – Cigarettes
(Philippines), para. 130).
896 See, e.g. Appellate Body Reports, EC – Bananas III, paras. 243-244 and 246; Korea – Alcoholic
Beverages, para. 150; Chile – Alcoholic Beverages, paras. 50-52, 64 and 76; US – Tuna II (Mexico),
paras. 234-235; and EC – Seal Products, paras. 5.95-5.96; and Panel Reports, EC – Bananas III, paras. 7.332-
7.338, 7.363-7.368, 7.378-7.380 and 7.392-7.393; Korea – Alcoholic Beverages, para. 10.102; Chile –
Alcoholic Beverages, paras. 7.123, 7.128-7.129 and 7.155; EC – Hormones, para. 8.205; and EC – Seal
Products, paras. 7.597 and 7.600.
897 Russia's response to Panel question No 44, para. 197; and second written submission, para. 220;
and Japan's response to Panel question No. 1, paras. 1, 4 and 6-7.
898 In this regard, we note Japan's argument that "less favourable treatment shall not be accidental, but
shall be discerned from the structure, design, and architecture of the measure." (Japan's response to Panel
question No. 1, para. 4).
899 Russia's response to Panel question No. 44, para. 197; and second written submission, para. 221
(citing Appellate Body Report, India – Additional Import Duties, fn 405; and GATT Panel Report, US – Section
337 Tariff Act, para. 5.14).
900 GATT Panel Report, US – Section 337 Tariff Act, paras. 5.15-5.20.
901 GATT Panel Report, US – Section 337 Tariff Act, para. 5.16.

7.492. In light of the above-mentioned considerations, we proceed to assess Russia's claim under
Article II:1 of the GATS by examining whether the design, str ucture and expected operation of the
unbundling measure in the Directive result in de facto discrimination against Russian pipeline
transport services and service suppliers by "enabling" EU member States to choose between
implementing only the OU model or implementing the ITO model in addition to the OU model in
respect of transmission systems th at belonged to a VIU on 3 September 2009. More particularly,
and in accordance with our findings in paragraphs 7.452 through 7.473 above, we examine
whether the unbundling measure in the Directive results in Russian VIUs being prevented from or
ceasing to supply pipeline transport services to the EU market t hrough a commercial presence
under the OU model whereas VIUs from other non -EU countries are "able to continue supplying
their like pipeline transport services to the EU market through a commercial presence" under the
ITO model.902
7.493. In this regard, we note that both parties ap pear to agree on the relevant aspects of the
underlying design and structure of the unbundling measure in the Directive. First, that VIUs are
able to choose between the OU model and the ITO model with respect to TSOs that belonged to
them on 3 September in 2009 in EU member States that have implemented the ITO model in
addition to the OU model in respect of such TSOs. Second, that VIUs are required to undergo
ownership unbundling subject to the OU model with respect to TSOs that did not belong to them
on 3 September 2009 in all EU member States, regardless of the implemented unbundling models,
and with respect to TSOs belonging to them on 3 September 2009 in EU member States that have
implemented only this model.903
7.494. Bearing this in mind, we agree with Russia t hat "the ITO option was being introduced in
the Directive only to benefit a finite number of TSOs". 904 More particularly, we agree that "[a]s the
EU and its Member States had a finite list of TSOs belonging to a VIU on 3 September 2009 – the
date of entry of the Directive into force – the Directive explicitly limits the possibility to apply the
ITO option to these VIUs and TSOs only and to the Member States where they were located." 905
Having said this, we are not convinced that the introduction of the ITO mode l for a "finite list of
TSOs belonging to a VIU on 3 September 2009" results in de facto discrimination against Russian
pipeline transport services and service suppliers. Russia does not dispute that the Russian VIU
Gazprom continues to supply pipeline tra nsport services through the commercial presence of a
number of ITOs in EU member States that have implemented this model in addition to the OU
model in respect of transmissi on systems that belonged to a VIU on 3 September 2009. 906, 907

902 Russia's first written submission, para. 331; and second written submission, para. 204.
903 Russia's first written submission, paras. 31 and 318; second written submission, fn 12 and para.
146; and responses to Panel question No. 171(c), para. 112, and No. 183(a), para. 182; and European Union's
first written submission, para. 257.
904 Russia's comments on the European Union's response to Panel question No. 154, para. 49.
905 Russia's comments on the European Union's response to Panel question No. 154, para. 50.
906 More particularly, both parties agree that the Russian VIU Gazprom continues to supply pipeline
transport services through the commercial presence of the ITO GASCADE and the ITO NEL GT under the ITO
model implemented in Germany in addition to the OU model in respect of transmission systems that belonged
to a VIU on 3 September 2009. (Russia's response to Panel question No. 52, para. 265; and second written
submission, para. 336; and European Union's first written submission, paras. 339 and 341; and response to
Panel question No. 52, para. 143). In addition, both parties appear to agree that Gazprom continued to supply
pipeline transport services through the commercial presence of the ITO ONTRAS VNG in Germany following
implementation of the unbundling measure in the Directive. (Russia's response to Panel question No. 52,
para. 264; and European Union's first written submission, para. 340). Russia points out that Gazprom
subsequently divested its interest in ONTRAS, in 2015, and that it is therefore not a Russian supplier of pipeline
transport services. (Russia's response to Panel question No. 180(b), para. 159). As pointed out by Russia itself,
however, since "ONTRAS operates under [the] ITO model and thus did not have [to] be ownership unbundled,
a change in its shareholding is irrelevant as it was not enforced by the Directive." (Russia's response to Panel
question No. 161(c), para. 45.) We believe that this evidence is still relevant to demonstrate that the Russian
VIU Gazprom continued to supply pipeline transport services through the commercial presence of ITOs
following implementation of the unbundling measure in the Directive.
907 We further note that there are also examples of the Russian VIU Gazprom continuing to supply
pipeline transport services through the commercial presence of a TSO by virtue of having been exempted from
the rules on unbundling in their entirety pursuant to Article 36 of the Directive. More particularly, both parties
agree that the Russian VIU Gazprom continues to supply pipeline transport services through the commercial
presence of the TSO OPAL GT in Germany, having been granted an infrastructure exemption by the German
NRA. (Russia's response to Panel question No. 52, para. 265; and European Union's response to Panel question
No. 52, para. 143). However, and as explained above, we do not consider evidence related to the
infrastructure exemption measure relevant for assessing the WTO consistency of the unbundling measure in

Indeed, when examining the evidence provided by Russia itself, it appears that the "finite list of
TSOs belonging to a VIU on 3 September 2009" involves more instances of the Russian VIU
Gazprom continuing to supply pipeline transport services through the commercial presence of ITOs
than instances of VIUs from any other non -EU country continuing to supply pipeline transport
services through the commercial presence of ITOs.908, 909
7.495. We similarly agree with Russia's position that the Directive is "designed and expected to
operate so as to subject" "all TSOs that were in existence on 3 September 2009 and that did not
form part of a VIU", as well as all new TSOs , to the OU model.910 However, we do not believe that
Russia has demonstrated that these aspects of the design, structure and expected operation of the
unbundling measure in the Directive result in de facto discrimination against Russian pipeline
transport services and service suppliers. Russia argues that the European Union established an
"arbitrary deadline" by only allowing EU membe r States the choice of implementing the ITO model
in respect of transmissi on systems that belonged to a VIU on 3 September 2009, and hereby
"foreclosed the legal right and ability of other VIUs to supply natural gas and pipeline transport
services in the form of transmission services through a commercial presence in the EU market". 911
The issue before us is, however, not whether the Directive's deadline of 3 September 2009 is
arbitrary or not. Rather, the issue is whether Russia has demonstrated that the desi gn, structure
and expected operation of the unbundling measure in the Directive, including this allegedly
arbitrary deadline, result in less favourable treatment of Russia n pipeline transport services and
service suppliers. In our view, Russia has not made such a demonstration. Indeed, Russia does not
contest that VIUs of all origins will be subject to the OU model in respect of TSOs that did not
belong to such VIUs on 3 September 2009.
7.496. Instead, Russia asserts that "only TSOs controlled by the Russian VIU were required to
undergo ownership unbundling" 912 and in this regard points to four instances "where a change in
ownership occurred, pursuant to the Directive" 913, namely those involving the TSOs [***], [***],
[***]914, and [***].915, 916 Having carefully reviewed this evidence, we do not believe that Russia's

the Directive. Such evidence is addressed instead below in section 7.8 when assessing Russia's claims against
the infrastructure exemption measure.
908 In contrast to the three instances of the Russian VIU Gazprom continuing to supply pipeline transport
services through the commercial presence of ITOs, we can identify only one instance of the Norwegian VIU
Statoil continuing to supply pipeline transport services through an ITO, namely the ITO jordgas in Germany;
and one instance of the Azerbaijani VIU SOCAR supplying pipeline transport services through an ITO, namely
the ITO DESFA in Greece. (Russia's response to Panel question No. 52, para. 266; and European Union's
response to Panel question No. 52, paras. 143-144. We note that the European Union's position that SOCAR
supplies pipeline transport services through the commercial presence of DESFA is conditional upon the
projected acquisition by SOCAR of 66% of the shareholdings in DESFA, but do not consider this of further
relevance for our findings concerning the WTO consistency of the unbundling measure in the Directive).
909 As was the case for the Russian VIU Gazprom, there are also examples of VIUs from other non-EU
countries continuing to supply pipeline transport services through the commercial presence of TSOs by virtue
of having been exempted from the rules on unbundling pursuant to Article 36 of the Directive. Indeed, Russia
refers to one such example, namely TAP AG which was granted an infrastructure exemption and hereby
exempted from the requirement to belong to a VIU on 3 September 2009 and certified as an "'ad hoc' ITO".
(Russia's first written submission, paras. 332-334; and second written submission, para. 227). However, and
as explained above, we do not consider evidence related to the infrastructure exemption measure relevant for
assessing the WTO consistency of the unbundling measure in the Directive. Such evidence is addressed instead
below in section 7.8 when assessing Russia's claims against the infrastructure exemption measure.
910 Russia's comments on the European Union's response to Panel question No. 154, para. 53.
911 Russia's response to panel question No. 183(a), para. 182.
912 Russia's response to Panel question No. 12(c), para. 99. See also Russia's second written
submission, para. 223.
913 Russia's opening statement at the second meeting of the Panel, para. 95.
914 We note that Russia appears to acknowledge that Gazprom continues to own shares in the TSO
[***] in Latvia, as Latvia has been granted a derogation from the rules on unbundling, but instead submits
that it is "being unbundled based on the Directive, pursuant to the amendments to the Latvian Energy Law of
February 11, 2016" which will require the OU model from 31 December 2017. (Russia's response to Panel
question No. 173, para. 130. See also Russia's second written submission, para. 253; and response to Panel
question No. 25(a), para. 128). The European Union does not dispute the factual accuracy of this.
915 We note that Russia appears to acknowledge that Gazprom continued to own shares in the TSO
[***] in Estonia following the entry into force of the Directive, as Estonia was granted a derogation from the
rules on unbundling, and instead submits that Gazprom divested its shares once Estonia implemented the OU
model in 2015. (Russia's response to Panel question No. 173, para. 130; and Shareholdings of TSOs before
and after the Third Package, (Exhibit RUS-189), row 52). The European Union does not dispute the factual
accuracy of this.

references to such instances suffice to make a prima facie case that the unbundling measure in the
Directive discriminates, on a de facto basis, against Russian pipeline transport services and service
suppliers for the reasons that follow.
7.497. First of all, Russia's arguments concerning these four TSOs focus on the change in
shareholdings by the Russian VIU Gazprom prior to and following the entry into force of the
Directive. As we have explained above, however, a V IU can be considered to supply pipeline
transport services through the commercial presence of a TSO only when this TSO is owned or
controlled by the VIU within the meaning of Articles XXVIII(n)(i) or (ii) of the GATS.
7.498. We recall that Article XXVIII(n)(i) o f the GATS clarifies that a juridical person is "'owned'
by persons of a Member if more than 50 per cent of the equity interest in it is beneficially owned
by persons of that Memb er". Since Gazprom owned only [*** ], [***], [***], and [***] of the
shares in the TSOs [***], [***], [***] and [***], respectively917, it plainly did not own these
entities within the meaning of Article XXVIII(n)(i). We further recall that Article XXVIII(n)(ii) of the
GATS clarifies that a juridical person is "'controlled' by persons of a Member if such persons have
the power to name a majority of its directors or otherwise to legally direct its actions". T he
European Union submits that it is "uncertain" or "unlikely" that Gazprom was able to control [***],
[***], [***] and [***] within the meaning of Article XXVIII(n)(ii) of the GATS.918 In its comments
on the European Union's responses to questions following the second meeting of the Panel, Russia
has provided [***] and argues, on the basis of these, that Gazprom was able to control [***],
[***], [***] and [***] within the meaning of Article XXVIII(n)(ii) of the GATS by being able to
"legally direct [their] actions".919
7.499. For the TSO [***], Russia submits that Gazprom was able to legally direct its actions, and
in this regard points out that:
[***]920
7.500. Russia points out that [***] and [*** ].921 Russia also points out that [*** ].922 Lastly,
Russia points out that:
[***]923
7.501. In our view, Russia's references to [***] are insufficient to demonstrate that Gazprom
controlled this TSO within the meaning o f Article XXVIII(n)(ii) of the GATS. We recall that Russia
bears the burden of making a prima facie case of violation under Article II:1 of the GATS. I n this
regard, we do not believe that it is sufficient for Russia to merely point to the fact that
shareholders [***], including Gazprom, may have limited possibilities of voting against one
another in respect of certain decisions, without further explanation of how this relates to the ability
of Gazprom to "legally direct" [*** ] actions, and in particular it s actions concerning the supply of
pipeline transport services. Nor do we believe that it is sufficient for Russia to point to the fact that

916 Russia's response to Panel question No. 174(a), para. 132.
917 Shareholdings of TSOs before and after the Third Package, (Exhibit RUS-189), rows 54, 48, 53, and
52; and Shareholdings in TSOs in the European Union, (Exhibit EU-110) (BCI), rows 38, 54, 37, and 10. We
note that Exhibit RUS-189 indicates that Gazprom owned 37.03% of the shares in [***] whereas Exhibit EU-
110 indicates that Gazprom owned [***] of the shares in [***]. In our view, this minor difference in
shareholding does not have any bearing on our findings.
918 European Union's response to Panel question No. 174(b), paras. 85-88.
919 Russia's comments on the European Union's response to Panel question No. 174(b), paras. 108-118.
The European Union was accorded an opportunity to comment on new evidence submitted by Russia in its
comments on the European Union's responses to Panel questions following the second meeting of the Panel,
but did not avail itself of this opportunity in respect of the [***] submitted by Russia, noting that it had "no
further comments". (European Union's comments on new evidence submitted by Russia after the second
meeting, para. 8).
920 Russia's comments on the European Union's response to Panel question No. 174(b), para. 109
(referring to [***], (Exhibit RUS-217) (BCI)).
921 Russia's comments on the European Union's response to Panel question No. 174(b), para. 110
(referring to [***], (Exhibit RUS-217) (BCI)). Russia also points out that [***]. (Ibid.)
922 Russia's comments on the European Union's response to Panel question No. 174(b), para. 111
(referring to [***], (Exhibit RUS-217) (BCI)).
923 Russia's comments on the European Union's response to Panel question No. 174(b), para. 111
(referring to [***], (Exhibit RUS-217) (BCI)).

Gazprom is able to name a minority of [***] board members and [***] without explaining how
this translates into "control" of a supplier of pipeline transport services.
7.502. For the TSO [***], Russia asserts that Gazprom was able to legally direct its actions,
pointing out that:
[***]924
7.503. In our view, thes e brief arguments by Russia do not suffice to demonstrate that Gazpro m
controlled [***] within the meaning of Article XXVIII(n)(ii) of the GATS. More particularly, we do
not believe that it is sufficient for Russia to merely point to the fact that Gazprom had veto rights
or voting rights in respect of certain actions or decisions by [***], without any further explanation
of how these rights relate to the ability o f Gazprom to "legally direct" [*** ] actions, and in
particular its actions concerning the supply of pipeline transport services.
7.504. For the TSO [***], Russia asserts t hat Gazprom was able to legally direct its actions,
pointing out that:
[***]925
7.505. We do not consider these brief arguments sufficient. As explained above, the mere
reference to Gazprom having veto rights in respect of certain specific decisions, which appear to
relate to corporate and financial issues concerning [***] rather than its supply of pipeline
transport services, in our view, falls short of making a prima facie case that Gazprom controlled
[***] within the meaning of Article XXVIII(n)(ii).
7.506. In addition to these [***], Russia provides the [***].926 It is not clear whether Russia
meant for this [***] to be relevant for the TSO [***] and Russia provides no explanation in this
regard. Instead Russia argues that Gazprom was able to legally direct the actions of [***], as
Gazprom:
[***]927
7.507. Even assuming that the [***] provided by Russia relates to [***], we do not consider
Russia's brief a rguments sufficient to demonstrate that Gazprom controlled [***] within the
meaning of Article XXVIII(n)(ii) of the GATS , especially since Gazprom could only appoint a
minority, namely [***]928, of the members of the management board of [***] or [***].
7.508. As ex plained in the preceding paragraphs, we are not convinced that Russia has
demonstrated that the four instances relied upon by it involve Russian pipeline transport services
or service suppliers. In light of this, it is difficult to understand how this evid ence could serve to
substantiate Russia's assertion that the unbundling measure in the Directive accords de facto less
favourable treatment to Russian pipeline transport services and service suppliers.
7.509. Even assuming that Gazprom could be considered to have supplied pipeline transport
services through the commercial presence of these four TSOs before the entry into force of the
Directive and to have ceased doing s o pursuant to the OU model, we nonetheless have difficulties
understanding how Russia reaches th e conclusion that "only TSOs controlled by the Russian VIU
were required to undergo ownership unbundling".929 As pointed out by the European Union, one of
the instances referred to by Russia, namely that involving the TSO [***], demonstrates that not

924 Russia's comments on the European Union's response to Panel question No. 174(b), para. 114
(referring to [***], (Exhibit RUS-218) (BCI)).
925 Russia's comments on the European Union's response to Panel question No. 174(b), para. 117
(referring to [***], (Exhibit RUS-221) (BCI)).
926 Russia's comments on the European Union's response to Panel question No. 174(b), para. 116
(referring to [***], (Exhibit RUS-220) (BCI)).
927 Russia's comments on the European Union's response to Panel question No. 174(b), para. 116
(referring to [***], (Exhibit RUS-220) (BCI)).
928 [***], (Exhibit RUS-220) (BCI).
929 Russia's response to Panel question No. 12(c), para. 99. See also Russia's second written
submission, para. 223.

only Russian VIUs were subject to the OU model. 930 More particularly, the US VIU Conoco Phillips
had shareholdings in [***] equal to those of Gazprom, was a party to th e same [***], and also
divested its shares pursuant to the OU model. 931 Insofar as the Russian V IU Gazprom could be
considered to have supplied pipeline transport services through the commercial presence of
Interconnector UK prior to the entry into force of the Directive and to have ceased doing so
pursuant to the OU model, the US VIU Conoco Phillips should also be considered to have done so.
Likewise, in stating that "only TSOs controlled by the Russian VIU were required to undergo
ownership unbundling", Russia appears to disregard the fact that the OU model, as pointed to by
Russia itself, is the on ly applicable model with respect to TSOs that did not belong to a VIU on
3 September 2009 and that VIUs of all origins will therefore be subject to the OU model in respect
of TSOs that did not belong to such VIUs on 3 September 2009.
7.510. Indeed, even assuming that there are more instances where the Russian VIU Gazprom
ceased supplying pipeline transport services through the commercial presenc e of TSOs that
belonged to it prior to 3 September 2009 pursuant to the OU model than instances where VIUs
from any other non-EU country did so, this is mirrored by the fact that there are more instances
where the Russian VIU Gazprom continue s to supply pipeline transport services through the
commercial presence of ITOs that belonged to it on 3 September 2009 under the ITO m odel than
instances where VIUs from any other non -EU country continue to do so. 932 In our view, this
pattern does not suggest that the unbundling measure in the Directive is discriminatory in nature.
Rather, it seems to reflect the factual particularities of the EU market for pipeline transport
services and more specifically the fact that Russian pipeline transport service suppliers had a
greater commercial presence than those of other non -EU countries, when the Directive entered
into force on 3 September 200 9. It is for this reason, rather than the design, structure and
expected operation of the unbundling measure in the Directive, that there were more instances of
Russian pipeline transport service suppliers subject to both the OU and the ITO models in 2009.
The mere fact that the unbundling measure in the Directive results in more instances of Russian
pipeline transport service suppliers being subject to both the OU and the ITO models in 2009 is, in
our view, not a proper basis for concluding that this measu re violates Article II:1 of the GATS
when this result is explained by factors unrelated to the origin of the pipeline transport services
and service suppliers.933

930 European Union's second written submission, para. 84. We note that the European Union has also
pointed to other examples of persons from other non-EU countries having divested shares in TSOs, namely the
VIU Eni SpA having divested its shares in the TSO Snam SA in Italy after its "successful but temporary
certification under the ITO model", the VIU Sonatrach Petroleum Investment Corporation BV having "modified"
its shares in the TSO Reganosa to be "passive financial rights with no influence or voting power" "in order to
comply with OU" in Spain, the "ownership structure and rights of individual shareholders [being] changed (e.g.
regarding Board Members) in order to comply with OU" in the TSO REN Gasodutos SA "wherein several third
country persons have shareholdings", and "OU [taking] place" in respect of the TSO TIGF in France, where GIC
Private Limited had a shareholding. (European Union's second written submission paras. 85-86). Russia argues
that these examples are "beside the point and ha[ve] nothing to do with the effect of the Directive which is the
subject matter of this dispute." (Russia's opening statement at the second meeting of the Panel, para. 97).
More particularly, Russia points out that the TSOs Snam SA and TIGF were certified as ITOs and that it was a
voluntary decision for VIUs to "exit" these TSOs. For the TSO Reganosa and for the TSO REN Gasodutos SA,
Russia points out that "Portugal had to privatize TSO REN Gasodutos SA pursuant to the Economic Adjustment
Programme, aimed at restoring confidence, enabling the return of the economy to sustainable growth, and
safeguarding financial stability in Portugal, the euro area and the EU" rather than the OU model. (Russia's
opening statement at the second meeting of the Panel, paras. 97-98). The European Union points out that "the
MoU concluded with Portugal in the context of the Economic Adjustment Programme fell in between the
adoption of the Gas Directive in 2009 and the deadline for complying with the unbundling requirements of
March 2012" and "[h]ence, the Programme's requirement to privatise REN Gasodutos was based on and
motivated by the respective provisions of the Gas Directive" and that "the sale of [] shareholding in SNAM and
the subsequent certification as ownership unbundled TSO were based on a decree by the Italian Government"
as well as an antitrust procedure by the Commission, but does not appear to dispute that these examples are
not directly related to the unbundling measure in the Directive. (European Union's response to Panel question
No. 175, paras. 89-94). Since these examples are not directly related to the unbundling measure in the
Directive, we consider them of less relevance to our assessment of the unbundling measure in the Directive
under Article II:1 of the GATS.
931 Shareholdings of TSOs before and after the Third Package, (Exhibit RUS-189), row 48; Shareholdings
in TSOs in the European Union, (Exhibit EU-110) (BCI), row 54; and [***], (Exhibit RUS-218) (BCI).
932 See para. 7.494 and fns 906 and 908 above.
933 See Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes, para. 96.

7.511. In fact, when Russia points out that the unbundling measure in the Directi ve reserves the
ITO model for a "finite list of TSOs belonging to a VIU on 3 September 2009"934, this would seem
to suggest that the design, structure and expected operation of the unbundling measure is such
that pipeline transport services and service suppliers from countries with a greater commercial
presence in the EU market on 3 September 2009 benefit from the Directive "enabling" EU member
States to implement the ITO model in addition to the OU model in respect of transmission system
that belonged to a VIU on this date. Mor e particularly, only VIUs that were commercially present
through VIUs on 3 September 2009 had the possibility of continuing to supply pipeline transport
services through the commercial presence of an ITO, albeit only in EU member States that made
use of th e possibility of implementing the ITO model in respect of transmission systems that
belonged to a VIU on this date.
7.512. Therefore, while the design, structure and expected operation of the unbundling model is
such that regulatory distinctions are drawn betwee n: (a) TSOs that did not belong to a VIU on
3 September 2009; (b) TSOs that did belong to a VIU on 3 September 2009 and are commercially
present in EU member States that have implemented only the OU model; and (c) TSOs that did
belong to a VIU on 3 Septemb er 2009 and are commercially present in EU member States that
have made use of the possibility, provided for in the Directive, of implementing the ITO model in
addition to the OU model, we do not believe that Russia has made a prima facie case that these
regulatory distinctions result in de facto discrimination against Russian pipeline transport services
and service suppliers. In other words, Russia has not demonstrated that the unbundling measure
accords less favourable treatment to the group of Russian pi peline transport services and service
suppliers than that accorded to the group of pipeline transport services and service suppliers from
any other non-EU country.935
7.513. As we have concluded that Russia has not demonstrated the existence of less favourable
treatment of Russian pipeline transport services and service suppliers, we do not find it necessary
or appropriate to consider, in the abstract, whether such – non-existent – less favourable
treatment is attributable to the unbundling measure in the Directive, taking into account the
element of discretion under this measure.
7.5.1.3.3 Conclusion
7.514. Having considered the various arguments and evidence provided by Russia, and for the
reasons explained in paragraphs 7.482 through 7.513 above, we conclude that Rus sia has not
demonstrated that the unbundling measure in the Directive accords less favourable treatment to
Russian pipeline transport services and service suppliers in comparison with that accorded to
pipeline transport services and service suppliers of an y other non-EU country. Hence, we find that
Russia has failed to make a prima facie case of violation under Article II:1 of the GATS with
respect to the unbundling measure in the Directive.

934 Russia's comments on the European Union's response to Panel question No. 154, para. 52.
935 We note that both parties have, at times, also pointed to and submitted arguments and evidence
with respect to VIUs that are not subject to the rules on unbundling in respect of TSOs in EU member States
that are permitted to derogate from these rules all together. (See Russia's response to Panel question No. 158,
para. 39; and comments on the European Union's response to Panel question No. 154, para. 55; and European
Union's second written submission, paras. 69 and 79). In this regard, we recall that EU member States falling
within the categories set out in Article 49 of the Directive are permitted to derogate from the rules on
unbundling in their entirety, including all three models set out herein. It is not entirely clear, in our view, how
such arguments pertain to Russia's overarching claim concerning the unbundling measure in the Directive
"enabling" EU member States to choose between implementing only the OU model or implementing the ITO
model in addition to the OU model in respect of transmission systems that belonged to a VIU on
3 September 2009. In any event, we do not believe that our findings above would alter, taking into account
evidence concerning TSOs operating in EU member States that have been permitted to derogate from the rules
on unbundling altogether. More particularly, the Russian VIU Gazprom continued to have shares in the TSO
[***] in Finland, which has been permitted to derogate from the rules on unbundling. Although Gazprom's
shares in [***] were later divested to the Finnish State, Russia acknowledges that this divestiture was "due to
reasons unrelated to [the implementation of the Directive] – as Finland enjoyed a derogation". (Russia's
response to Panel question No. 161, para. 54). Similarly, we recall that Gazprom continued to have shares in
the TSO [***] during the period in which Estonia was granted a derogation and that Gazprom continues to
have shares in the TSO [***] in Latvia, which has been granted a derogation. (See fns 914-915 above).

7.5.1.4 Russia's claims under Articles I:1 and III:4 of the GATT 1994
7.5.1.4.1 Introduction
7.515. The gist of Russia's claims under Articles I:1 and III:4 of the GATT 1994 is, as explained
above, that the unbundling measure in the Directive accords less favourable treatment to imported
Russian natural gas than that accorded to imported natural gas from other non -EU countries and
to domestic EU natural gas by "enabling" EU member States to choose between implementing only
the OU model or implementing the ISO and/or the ITO models in addition to the OU model in
respect of transmission systems that belonged to a VIU on 3 September 2009. 936 In response, the
European Union submits that the unbundling measure in the Directive does not affect trade in
natural gas and hence falls outside the scope of Articles I:1 and III:4 of the GATT 1994. 937
Furthermore, the European Union argues that natural gas is not accorded less favourable
treatment under the OU model in comparison with that accorded to natural gas under the ISO or
the ITO models 938 and, in any event, that Russia has not demonstrated that the unbundling
measure in the Directive discriminates against imported Russian natural gas, as the OU model
does not "predominantly" impact imported Russian natural gas in comparison with imported
natural gas from other non-EU countries or domestic EU natural gas.939
7.516. Before assessing Russia's claims, we recall that, as explained in paragraph 7.3 above, a
panel has discretion in setting out the order of its analysis. With respect to Russia's claims under
Articles I:1 and III:4 of the GATT 1994 against the unbundling measure in the Directive, we note
that both parties address the latter claim first and, to a large degree, refer to their argumentation
concerning that claim in addressin g the claim under Article I:1 of the GATT 1994. In light of this,
we find it practical to begin with our assessment of Russia's claim under Article III:4 of the
GATT 1994, followed by our assessment of Russia's claim under Article I:1 of the GATT 1994.
7.5.1.4.2 Analysis by the Panel of Russia's claim under Article III:4 of the GATT 1994
7.517. Bearing in mind the legal standard under Article III:4 of the GATT 1994, set out in
paragraphs 7.238 and 7.239 above, we proceed to assess Russia's claim against the unbundling
measure in the Directive under this provision by determining whether Russia has made a prima
facie case that: (a) the unbundling measure in the Directive falls within the scope of Article III:4 of
the GATT 1994; (b) the relevant imported and dome stic products are like; and (c) the unbundling
measure in the Directive accords less favourable treatment to the relevant imported Russian
products than the treatment it accords to the relevant like domestic products.
7.518. We address these elements, in turn, below.
7.5.1.4.2.1 Scope of Article III:4 of the GATT 1994
7.519. As explained by the panel in Argentina – Financial Services , the legal standard for
determining whether a measure is covered by Article III:4 of the GATT 1994 is as follows:
[F]or a measure to be covered by Article III:4 of the GATT 1994 it must (i) consist of
a "law, regulation or requirement" and (ii) "affect[ing] the internal sale, offering for
sale, purchase, transportation, distribution or use" of the products concerned.940
7.520. We note that the European Union does not appear to disagree with Russia's assertion that
the unbundling measure in the Directive is a "'law' or 'regulation,' which imposes 'requirements'"
within the meaning of GATT Article III:4941, and we are similarly of the view that this measure falls
within the types of instruments covered by Article III:4 of the GATT 1994.

936 See, e.g. Russia's first written submission, paras. 353, 356 and 370-371.
937 See, e.g. European Union's first written submission, paras. 361-362 and 403-406.
938 See, e.g. European Union's first written submission, paras. 368-373 and 409; and second written
submission, paras. 95-100 and 140.
939 See, e.g. European Union's first written submission, paras. 365, 374-376 and 417-419; and second
written submission, paras. 101-138 and 140.
940 Panel Report, Argentina – Financial Services, para. 7.1015.
941 Russia's first written submission, para. 342.

7.521. Instead, the main point of contention between the parties relates to the second element,
namely, whether the unbundling measure in the Directive affects the internal sale, offering for
sale, purchase, transportation, distribution or use of natural gas.
7.522. Russia argues that the unbundling measure in the Directive affects "natural gas being sold,
offered for sale, supplied, purchased , transported, etc. on the market by the undertakings subject
to the unbundling requirements in the same manner as it affects the undertakings themselves ."942
More particularly, Russia argues that all three unbundling models affect natural gas since they
impact the ability of VIUs to control TSOs and thus to make "decisions relating to the transmission
or transportation or downstream sale of the gas".943 The European Union argues that any effects of
the unbundling measure in the Directive on the conditions of c ompetition of natural gas in the EU
market are "merely 'hypothetical'". 944 More particularly, the European Union argues that "the
unbundling measure is exactly meant to increase competition between g as of different origin and
to ensure that gas from differen t producers and suppliers is not foreclosed from having access to
the transmission network"945 and that "[t]here is no link between the origin of the gas that flows
through a pipeline and the origin of the service supplier , because of the third party access
principle".946
7.523. At the outset, we wish to emphasize that we agree with the point raised by the European
Union, as well as Japan and Ukraine, that it would not be appropriate to assume that the
unbundling measure in the Directive affects the internal sale, off ering for sale, purchase,
transportation, distribution or use of natural gas solely by virtue of affecting services related to
natural gas.947 As pointed out at the outset of our Report, the subject -matter and scope of the
GATS and the GATT 1994, respectivel y, are distinct and we are mindful of this in assessing
Russia's claims under each Agreement. We therefore reiterate our view mentioned in
paragraph 7.14 above concerning the conflation, at times, by Russia of its various claims under
these two Agreements.
7.524. At the same time, however, Russia has, in our view, not solely substantiated its asserti on
that the unbundling measure in the Directive is covered by Article III:4 of the GATT 1994 by
pointing to this measure's effects on pipeline transport services and service suppliers. In addition
to these effects, Russia also points to the effects on supp liers or producers of natural gas, in
particular VIUs, and their ability to control and make certain decisions relating to the transmission,
transportation or sale of the natural gas produced by them.948
7.525. We agree with Russia that the unbundling measure in t he Directive has effects on
producers and suppliers of natural gas in respect of the supply or transportation of that good. More
particularly, the unbundling measure regulates the relationship that producers or suppliers of
natural gas may have with undert akings involved in transportation of that natural gas.
Importantly, it regulates the manner in which that relationship may impact the competitive
conditions under which the natural gas produced or supplied by the former is transported. As
pointed out by th e European Union itself, it does so either by requiring natural gas producers or
suppliers to be structurally separated from undertakings involved in transportation of natural gas
(the OU model) 949 or by imposing "behavioural and organisational" 950 requirements, as well as
"increased regulatory oversight" 951 concerning the relationship between such undertakings (the
ISO and the ITO models).

942 Russia's second written submission, para. 235.
943 Russia's second written submission, para. 236.
944 European Union's first written submission, para. 361 (quoting Panel Report, Argentina – Financial
Services, para. 7.1028).
945 European Union's first written submission, para. 362.
946 European Union's first written submission, para. 362.
947 See European Union's first written submission, paras. 361-362 (referring to Appellate Body Report,
China – Auto Parts, para. 195; and Panel Report, Argentina – Financial Services, para. 7.1028); Japan's third-
party submission, paras. 41-42; and Ukraine's third-party submission, paras. 20-23 and 36 (referring to
Appellate Body Reports, US – FSC (Article 21.5 – EC), para. 208; and Korea – Various Measures on Beef,
para. 133).
948 Russia's second written submission, paras. 234-236.
949 European Union's response to Panel question No. 59, para. 157.
950 European Union's first written submission, para. 313.
951 European Union's second written submission, para. 74.

7.526. In our view, a number of the arguments put forward by the European Union in the context
of the scope of Article III:4 appear misplaced. More particularly, by arguing that the unbundling
measure is "meant to increase competition between gas of different origin"952, the European Union
seems to suggest that our assessment of the scope of Article III:4 should address not only
whether the unbundling measure in the Directive affects the conditions of competition for natural
gas in the EU market, but also the manner in which those conditions of competition are affected.
We do not believe such an analysis is warranted when considering whether a measure falls within
the scope of Article III:4 of the GATT 1994 a s this would truncate the further assessment under
this provision. Similarly, the European Union's argument that "[t]here is no link between the origin
of the gas that flows through a pipeline and the origin of the service supplier, because of the third
party access principle" 953 seems to relate to the issue of whether there is less favourable
treatment of imported Russian natural gas in comparison with that of domestic EU natural gas,
rather than the preliminary issue of whether the competitive conditions of natural gas are,
generally, affected by the unbundling measure in the Directive.
7.527. Having established that the unbundling measure in the Directive affects the internal sale,
offering f or sale, purchase, transportation, distribution or use of natural gas, we find that this
measure falls within the scope of Article III:4 of the GATT 1994 and proceed to assess whether the
relevant imported and domestic products are like and whether the unb undling measure accords
less favourable treatment to the relevant imported Russian products.
7.5.1.4.2.2 Like products
7.528. As explained in paragraphs 7.238 and 7.239 above, the national treatment obligation in
Article III:4 of the GATT 1994 applies only with respect to like products and we , therefore, turn to
assess whether Russia has made a prima facie case that the relevant products are like within the
meaning of this provision.
7.529. Similarly to Russia's claim against the unbundling measure in the Directive under
Article II:1 of the GATS, the scope of Russia's likeness enquiry is not entirely clear for its claim
under Article III:4 of the GATT 1994. Notably, Russia states that "Russian and domestic gas, like
natural gas imported from any other country, including LNG, are in a perfectly competitive
relationship and thus are 'like products' withi n the broad meaning of that term under
Article III:4."954 Furthermore, Russia includes a few references to LNG when challenging the
unbundling measure under Article III:4 of the GATT 1994, pointing to that fact that "the L SO, the
gas supplier and TSO are now all owned by the [Lithuanian] State" and to the increase in imports
of Norwegian LNG in Lithuania. 955 We therefore begin by determining the scope of the likeness
enquiry before turning to the actual assessment of likeness.
7.530. In this regard , we recall that Rus sia's claim under Article III:4 of the GATT 1994 pertains
to the alleged discrimination against imported Russian natural gas stemming from the Directive
"enabling" EU member States to choose between implementing only the OU model or
implementing the ISO an d/or the ITO models in addition to the OU model in respect of
transmission systems that belonged to a VIU on 3 September 2009.956
7.531. Both parties agree that the requirement to unbundle does not apply to LNG facilities. 957 In
other words, a VIU may produce and supply LNG without having to unbundle any ownership or
control over its LNG facilities or the operators of such facilities under either of the unbundling
models. LNG is thus not accorded the alleged more favourable treatment under the ISO and/or the
ITO models or the alleged less favourable treatment under the OU model, challenged by Russia
under its claim against the unbundling measure in the Directive under Article III:4 of the
GATT 1994. As previously explained, the alleged "exemption" of LNG facilities (referred to in this

952 European Union's first written submission, para. 362.
953 European Union's first written submission, para. 362.
954 Russia's first written submission, para. 349.
955 Russia's second written submission, para. 251.
956 Russia's first written submission, paras. 353 and 356.
957 Russia's response to Panel question No. 1, paras. 4 and 7; and European Union's first written
submission, para. 433.

Report as "the LNG measure") is not the object of this particular claim, but is instead challenged
by Russia as a "separate, distinct measure" under a separate claim (see section 7.7 below).958
7.532. For these reasons, we find that natural gas is the only relevant product for Russia's claim
against the unbundling measure in the Directive under Article III:4 of the G ATT 1994 and do not
consider it necessary or relevant to determine, in the context of this claim, whether LNG is like
natural gas. As explained in paragraphs 7.840 through 7.845 below, we consider that natural gas
and LNG are distinct products.
7.533. Having determined that the scope of our likeness enquiry should be limited to natural gas,
we proceed to the actual assessme nt of likeness. As mentioned above , Russia's claim under
Article III:4 of the GATT 1994 pertains to the alleged discrimination against imported Russian
natural gas stemming from the alleged less favourable treatment of natural gas being s upplied by
VIUs subject to the OU model compared to that of natural gas being supplied by VIUs subject to
the ISO and/or the ITO models. In our view, this claim raises two issues of likeness: first whether
imported Russian natural gas is like domestic EU natural gas and, se cond, whether natural gas is
like regardless of whether it is supplied by VIUs subject to the OU model or by VIUs subject to the
ISO or the ITO models.
7.534. In addressing these issues of likeness, we recall that the Appellate Body has clarified that
the assessm ent of whether products are like for purposes of Article III:4 of the GATT 1994
involves an assessment of the extent of the competitive relationship or substitutability between
these products, taking into account all relevant evidence, including : (a) the physical properties of
the products, including the nature and quality of the products; (b) the end -uses of the products;
(c) consumers' tastes and habits; and (d) the international classification of the products for tariff
purposes.959 The Appellate Body has further explained that panels must examine all the relevant
evidence and determine whether that evidence, as a whole, indicates that the products in question
are like within the meaning of Article III:4 of the GATT 1994.960
7.535. Both parties agree that imported R ussian natural gas and domestic EU natural gas are like
within the meaning of Article III:4 of the GATT 1994 regardless of whether that natural gas is
supplied by VIUs subject to the OU model or by VIUs subject to the ISO or the ITO models. 961 We
are equally convinced that these are like: it is clear that the physical properties, end -uses and
tariff classification of these groups of natural gas are identical. Furthermore, there is nothing on
the record indicating that the preferences of consumers of natural g as differ depending on the
origin of that natural gas or the applicable unbundling model.
7.536. We therefore conclude that imported Russian natural gas and domestic EU natural gas,
supplied by VIUs subject to the different unbundling models , are lik e within the meaning of
Article III:4 of the GATT 1994. Having made this finding of likeness, we proceed to assess whether
Russia has demonstrated that the unbundling measure in the Directive accords less favourable
treatment to imported Russian natural gas than that accorded to domestic EU natural gas.
7.5.1.4.2.3 Less favourable treatment
7.537. As explained above, the underlying premise of Russia's claim under Article III:4 of the
GATT 1994 is that the unbundling measure in the Directive violates this provision by "enabling" EU
member States to choose between implementing only the OU model or implementing the ISO
and/or the ITO models in addition to the OU model in respect of transmission systems that
belonged to a VIU on 3 September 2009. 962 More particularly, Russia argues that the
implementation of only the OU model in respect of transmission systems that did not belong to a
VIU on 3 September 2009 as well as in respect of transmission systems that did belong to a VIU
on 3 September 2009 in certain EU member States results in less favou rable treatment of

958 Russia's first written submission, paras. 380-414; and responses to Panel question No. 4, para. 16,
and No. 5, para. 38.
959 Appellate Body Report, EC – Asbestos, paras. 101-102.
960 Appellate Body Report, EC – Asbestos, para. 103.
961 Russia's first written submission, paras. 343-347; and response to Panel question No. 110(a),
para. 445; and European Union's first written submission, para. 359; and response to Panel question
No. 110(a), para. 285.
962 See, e.g. Russia's first written submission, paras. 353 and 356.

imported Russian natural gas of VIUs subject to this model, in comparison with that accorded to
domestic EU natural gas, produced and supplied by VIUs that continue to own a transmission
system, under the IS O model, or continue to own a n ITO, under the ITO model, in EU member
States that have implemented these models in addition to the OU model in respect of transmission
systems that belonged to a VIU on 3 September 2009. 963 The European Union responds that
Russia has failed to demonstrate that natural gas is accorded less favourable treatment under the
OU model in comparison with the ISO and/or the ITO models.964 In any event, the European Union
submits that Russia has failed to demonstrate that the unbundling measure is discriminatory,
pointing out that the applicable unbundling model does not depend on the origin of the natural gas
and that Russia has not shown that the OU model "predominantly" affects imported Russian
natural gas.965
7.538. In our view, the parties' argumentation raise s two issues: (a) whether Russia has
demonstrated that natural gas is accorded less favourable treatment under the OU model in
comparison with that accorded to natural gas under the ISO and/or the ITO models; and (b) if so,
whether Russia has demonstrated t hat the unbundling measure in the Directive accords less
favourable treatment to imported Russian natural gas than that accorded to domestic EU natural
gas by "enabling" EU member States to choose between implementing only the OU model or
implementing the ISO and/or the ITO models in addition to the OU model in respect of
transmission systems that belonged to a VIU on 3 September 2009.
7.539. We begin our assessment with the first of these issues. In this regard, we recall that the
Appellate Body has expressly found that '"[a] formal difference in treatment between imported and
like domestic products is … neither necessary, nor sufficient, to show a violation' of the national
treatment obligation."966 Instead, our assessment will focus on whether the OU model "modifies
the conditions of competition in the relevant market to the detriment" of natural gas in comparison
with the ISO and/or the ITO models.967
7.540. We note that Russia's argumentation concerning the specific alleged competitive
advantages under the ISO and the IT O models has not been entirely clear throughout these
proceedings. On the basis of a reading of all submissions by Russia, we can, however, discern
three alleged competitive advantages or three specific "aspects of the relevant advantage" 968,
namely (a) that VIUs can "facilitate the importation and supply of their natural gas" by exercising
control over a TSO 969; (b) that VIUs can continue to receive "transport fees and other revenue
associated with being the TSO and helping to operate the transmission system" 970; and (c) that
VIUs "retain[] at least some role in overseeing investments into the transmission system". 971 It is
not always clear from Russia's argumentation whether these alleged advantages pertain to the ISO
model or the ITO model, or both. For the sake of completeness, we will consider both of these
models in addressing the three alleged advantages below:
Control over the TSO

963 See, e.g. Russia's response to Panel question No. 183(a), paras. 160-182 and 183(b) paras. 183-
186.
964 See, e.g. European Union's first written submission, paras. 368-373; and second written submission,
paras. 95-100.
965 See, e.g. European Union's first written submission, paras. 165 and 374-376; and second written
submission, paras. 101-138.
966 Appellate Body Reports, US – COOL, para. 277 (quoting Appellate Body Report, Korea – Various
Measures on Beef, para. 137). (omission by the Appellate Body)
967 Appellate Body Report, Korea – Various Measures on Beef, para. 137. (emphasis original) See also
Appellate Body Reports, EC – Seal Products, para. 5.101 (referring to Appellate Body Reports, US – Clove
Cigarettes, para. 179; Thailand – Cigarettes (Philippines), para. 128; and Korea – Various Measures on Beef,
para. 137).
968 Russia's response to Panel question No. 183(a), para. 160.
969 Russia's response to Panel question No. 114(a), para. 473. See also Russia's first written submission,
970 Russia's response to Panel question No. 114(f), para. 494. See also Russia's first written submission,
No. 183(b), para. 186.
971 Russia's response to Panel question No. 183(b), para. 185. See also Russia's first written submission,
paras. 321 and 354.

7.541. Beginning with Russia's arguments concerning the possibilities of a VIU maintaining some
control over a TSO, we initially note tha t these arguments appear directed at the ITO model. More
particularly, Russia argues that this model allows a VIU to "continue exercising some degree of
control over the ITO, which benefits its gas" 972 or which "helps facilitate the supply and sale" 973 of
that VIU's natural gas. The European Union responds that a VIU "cannot control the network
operation, as this is the very aim of unbundling". 974 Furthermore, the European Union argues that
"[a]ny approach to the ISO or ITO model in which the VIU would try to inf luence TSO decision -
making in order to favour its production or supply interests would … be illegal"975, pointing out that
the rules on third -party access and capacity allocation, which apply under all three unbundling
models, ensure that "the supply branch of a VIU enjoys no privilege vis -a-vis other suppliers on
the market as regards access to the transmission network or booking a certain amount of the
capacity".976
7.542. In addressing this alleged competitive advantage, we are m indful of the fact that
Article III:4 of the GATT 1994 prohibits less favourable treatment of goods only and does not refer
to less favourable treatment of producers, unlike the non -discrimination provisions of the GATS,
which refer to less favourable treatment of services and service suppliers.977 For this reason, we do
not believe that it is sufficient for Russia to point to the ITO model permitting VIUs, which are
producers or suppliers of natural gas, to own and exert some control over the operator of the
transmission system, the ITO . Rathe r, Russia must demonstrate that this translates into a
competitive advantage for the natural gas produced or supplied by the VIU.
7.543. In this regard, we first note that the ITO model does not allow a VIU full control over the
ITO belonging to it. As pointed out by the European Union, the provisions of the ITO model require
the ITO and its staff and management to be independent, both generally and specifically from the
VIU.978 Most notably, Article 18(4) of the Directive specifies that the VIU "shall not determin e,
directly or indirectly, the competitive behaviour of t he transmission system operator in relation to
the day to day activities of the transmission system operator and management of the network, or
in relation to activities necessary for the preparation of the ten-year network development plan".
7.544. In light of provisions such as these, we find it difficult to agree with Russia's assertion
concerning the ITO model that:
VIUs not only retain full ownership of the transmission system, they enjoy ongoing
financial benefits from the ITO, a separate subsidiary, which provides much greater
flexibility and control over the entire transmission system. This includes network
management and investment decisions through the ITO, providing the VIU greater
influence over those assets.979
7.545. Russia makes similar assertions when pointing to the example of GRTgaz S.A. (GRTgaz),
which is an ITO in France and belongs to the French VIU Engie S.A. (Engie) in accordance with the
ITO model, implemented in France pursuant to the Directive. More specifically, Russia asserts that
"Engie continues exercising some degree of control over GRTgaz, its subsidiary and ITO, and thus
over the competitive opportunities for its domestically sourced gas" 980 or that "Engie continues to
exert at least some l evel of control over GRTGaz' s network management and investment
decisions".981 Russia appears to support this assertion by suggesting that the VIU can exert control

972 Russia's response to Panel question No. 183(a), para. 163.
973 Russia's second written submission, para. 245.
974 European Union's first written submission, para. 319.
975 European Union's first written submission, para. 319.
976 European Union's second written submission, paras. 119-120. See also European Union's second
written submission, paras. 96-99.
977 See, e.g. Appellate Body Report, Argentina – Financial Services, para. 6.27.
978 Directive 2009/73/EC, (Exhibit EU-5), Articles 18 and 19. See also European Union's first written
submission, paras. 329-334.
979 Russia's first written submission, para. 321.
980 Russia's first written submission, para. 358.
981 Russia's first written submission, para. 354. See also Russia's first written submission, para. 373
where Russia states as follows concerning the Norwegian VIU Statoil, in the context of its claim under
Article I:1 of the GATT 1994:
Statoil retains at least some control over jor dgas' network management and investment
decisions, including the right to appoint members to the Supervisory Body and other advantages
authorized by the Directive in its ITO provisions.

over the ITO through the so -called Supervisory Body982, which is provided for in Article 20 of the
Directive and may include a majority of members representing the VIU. 983 However, and as
pointed out by the European Union, the role of the Supervisory Body is limited to:
[T]aking decisions which may have a significant impact on the value of the assets of
the shareholders within the transmission system operator, in particular decisions
regarding the approval of the annual and longer -term financial plans, the level of
indebtedness of the transmission system operator and the amount of dividends
distributed to shareholders.984
7.546. Russia suggests that it is for the European Union to clarify what "decisions which may have
a significant impact on the value of the assets of the shareholders within the transmission system
operator" entail.985 While further clarification may have been helpful, we recall that it is for Russia
to make a prima facie case of violation, and we do not believe it would be appropriate for us to
simply assume that the decisions referred to in Article 20(1) of the Directive have a bearing on the
competitive opportunities of the natural gas produced or supplied by the VIU. This is particularly so
in light of the fact that the Supervisory Body is explicitly excluded from making decisions in
relation to "the day to day activities of the transmission sy stem operator and management of the
network, and in relation to activities necessary for the preparation of the ten -year network
development plan".986
7.547. Russia also points to Article 19(1) of the Directive, according to which "[d]ecisions
regarding the appoint ment and renewal, working conditions including remuneration, and
termination of the term of office, of the persons responsible for the management and/or members
of the administrative bodies of the transmission system operator shall be taken by the Supervis ory
Body" as "just one example" of a VIU being able to exert control over an ITO belonging to it under
the ITO model. 987 Russia does not elaborate further on this one example , yet the implication
presumably is that the VIU, through the members representing i t in the Supervisory Body, would
appoint persons that would seek to advance the competitive opportunities of natural gas produced
or supplied by the VIU. We have difficulties agreeing with this notion as Article 19(2) of the
Directive provides that the NRA may object to the Supervisory Body's appointments if "doubts
arise as to the professional independence of a nominated person responsible for the management
and/or member of the administrative bodies", in which case the appointment does not become
binding.988
7.548. In addition to the doubts explained above concerning the possibilities under the ITO model
of a VIU exercising control over an ITO in a manner that impact s the competitive opportunities of
natural gas, we further note the European Union's argument that t he rules on third -party access
and capacity allocation render it "illegal" for an ITO, which belongs to a VIU under the ITO model,
to favour the natural gas of that VIU. 989 In this regard, we note that Article 32 of the Directive
requires the EU member States to implement:
[A] system of third party access to the transmission and distribution system … based
on published tariffs, applicable to all eligible customers, including supply undertakings,
and applied objectively and without discrimination between system users.

982 Russia's first written submission, paras. 322-323 and 358.
983 Directive 2009/73/EC, (Exhibit EU-5), Articles 20(2)-20(3).
984 Directive 2009/73/EC, (Exhibit EU-5), Article 20(1). See also European Union's first written
submission, para. 330.
985 Russia's second written submission, para. 213.
986 Directive 2009/73/EC, (Exhibit EU-5), Article 20(1). See also European Union's first written
submission, para. 330.
988 Directive 2009/73/EC, (Exhibit EU-5), Article 19(2). We note Russia's argument that "there are no
clear consequences following an objection by the regulatory authority to a nomination or termination."
(Russia's first written submission, para. 49). In this regard, we would, however, agree with the European Union
that these consequences are clear from the text of Article 19(2), which explicitly states that these decisions
"become binding only if the regulatory authority has raised no objections within three weeks of notification."
989 European Union's first written submission, para. 319; and second written submission, paras. 96, 99
and 120. Ukraine submits similar arguments, stating that the advantage alleged by Russia "in case of the ITO
or ISO and not available under the OU model consists of the possibility for the VIU to retain its abusive control
over the transmission system." (Ukraine's third-party submission, paras. 29-30).

7.549. It is undisputed that the rules on third -party access apply to all TSOs, regardless of the
applicable unbundling model. In our view, it is therefore clear from Article 32 that ITOs, which
belong to a VIU under the ITO model, cannot give the natu ral gas of that VIU access to the
transmission system on more favourable competitive terms than those given to any other source
of natural gas. In fact, we note that the provisions of the ITO model specifically call for "[a]ny
commercial and financial rela tions between the vertically integrated undertaking and the
transmission system operator … [to] comply with market conditions" 990 and that all commercial
and financial agreements between the ITO and the VIU must be approved by the relevant NRA.991
7.550. Therefore, even assuming that a VIU may exert some control over an ITO belonging to it
under the ITO model, we agree with the European Union that the rules on third-party access would
prohibit the VIU from exerting that control in a manner that would provide its natural gas access to
the transmission system on more favourable competitive terms. At the same time, we note
Russia's argument that:
[A]s the VIUs in Germany and France knew well when insisting on including the ITO
model, it's a game of cat and mouse. The VIUs try to get away with as much as
possible. Some regulators try to catch them more than others, which take long
afternoon naps instead.992
7.551. It may well be true that a VIU might attempt to exert control over its ITO in a manner that
would provide the natural gas of that VIU access to the transmission system on more favourable
competitive terms than those given to natural gas from other sources. However, this would clearly
violate the rules on third -party access. We do not believe it would be appropriate to att ribute, to
the European Union, any potential competitive advantage for natural gas under the ITO model,
which stems from a VIU violating provisions in the Directive, including provisions under the ITO
model itself.
7.552. For these reasons, we find that Russia ha s not demonstrated that the ITO model allows
VIUs to control an ITO in a manner that would accord a competitive advantage to the natural gas
of that VIU.
7.553. Having considered Russia's arguments concerning control over an ITO in respect of the ITO
model, we no te that Russia at times appears to suggest that these arguments apply, at least to
some extent, with respect to the ISO model as well. 993 Russia does not, however, provide any
explanation of the notion that a VIU would be able to control the operator of the transmission
system, the ISO, under the ISO model. As explained above, the ISO model only permits a VIU to
continue to own the transmission system. The operator, the ISO, of this system must be
unbundled from the VIU in accordance with the rules under the OU model994, and we hence have
difficulties understanding how the ISO model would render a VIU more capable of controlling the
operator of a transmission system than the OU model. In any event, we recall that the rules on
third-party access apply also for th e ISO model. In light of this, we do not believe that Russia has
demonstrated that the ISO model allows a VIU to control an ISO in a manner that would provide
the natural gas of that VIU a competitive advantage over the natural gas of a VIU subject to the
OU model or any other source of natural gas.
Financial fees, revenue and dividends
7.554. We turn now to Russia's arguments concerning various sources of revenue that accrue to a
VIU, which owns a transmission system under the ISO model or a n ITO under the ITO mo del.
These arguments appear to concern both the ISO and the ITO models.

990 Directive 2009/73/EC, (Exhibit EU-5), Article 18(6).
991 Directive 2009/73/EC, (Exhibit EU-5), Article 18(7).
992 Russia's second written submission, para. 210.
993 See, e.g. Russia's response to Panel question No. 183(b), para. 184, in which Russia states that
"[e]ven assuming the ISO model is implemented in accordance with the terms of the Directive, a VIU under the
ISO model may still be in a position to exercise at least limited rights or influence over how the ISO operates,
maintains and develops the system." Russia does not expand on this position but instead proceeds to discuss
the possibility of a VIU influencing the investment decisions concerning the transmission system. (Ibid.
para. 185). This alleged advantage is discussed below in paragraphs 7.561 through 7.565.
994 Directive 2009/73/EC, (Exhibit EU-5), Article 14(2)(a).

7.555. In its written submissions, Russia has pointed to certain sources of revenue being available
to a VIU under the ISO or the ITO models, which are not available under the OU model. More
particularly, Russia has pointed to "revenue derived from the TSO 's transmission and supply of []
gas"995, "ongoing financial benefits from the operation of [the] transmission system"996, "transport
fees and other revenue associated with being the TSO and help ing to operate the transmission
system"997, and "dividends that accrue to VIUs as a result of revenue and profits generated by
their ITO-subsidiaries from transmission fees, transmission tariffs and any other sources".998
7.556. In accordance with the approach set out in paragraph 7.542 above, we do not believe it is
sufficient for Russia to point to the fact that a VIU, which is a producer or supplier of natural gas,
may have certain sources of revenue under the ISO and/or the ITO models, which are not
available under the OU model. Rather, Russia must demonstrate that such sources of revenue
translate into a competitive advantage for the natural gas produced or supplied by the VIU. Having
considered all of Russia's arguments, we do not believe it has done so.
7.557. More particularly, and as pointed to by the European Union 999, we note that Article 31(3)
of the Directive requires natural gas undertakings, including VIUs, to:
[K]eep separate accounts for each of their transmission, distribution, LNG and storage
activities as they would be required to do if the activities in question were carried out
by separate undertakings, with a view to avoiding dis crimination, cross-subsidisation
and distortion of competition.
7.558. The European Union has confirmed that the rules on unbundling of accounts and the
prohibition of cross-subsidization apply to all fees, revenue and dividends that may accrue to a VIU
under the ISO or the ITO models 1000, and Russia has not provided any evidence suggesting
otherwise. We further note that these rules apply regardless of the applicable unbundling model.
7.559. Russia argues that the European Union's position is "questionable, at best" and t hat it is
"clear … that the EU itself has not viewed the concept of 'unbundling of accounts' as being
effective."1001 In support of this contention, Russia points out that the predecessors to the
Directive, Directive 98/30/EC and Directive 2003/55/EC, both in cluded rules on unbundling of
accounts, which were "exactly the same in all material respects" and that Recital (7) of the
Directive states that "[t]he rules on legal and functional unbundling as provided for in Directive
2003/55/EC have not, however, led to effective unbundling of the transmission system
operators."1002 It is not clear to us how the existence of similar or identical rules on unbundling of
accounts in previous EU legal packages would necessarily lead to the conclusion that the current
rules should somehow be viewed as allowing cross -subsidization. Alternatively, Russia's argument
concerning the effectiveness of the rules on unbundling of accounts could be viewed as a
reformulation of its argument that a VIU may "try to get away with as much as possible"1003 and
hence attempt to enhance the competitive opportunities of its natural gas by cross -subsidizing it
with revenue accruing from its transmission activities, in contravention of Article 31 of the
Directive. In this regard, we reiterate our view that it would not be appropriate to attribute, to the
European Union, potential effects stemming from economic actors contravening EU law, including
the rules on unbundling of accounts and the prohibition of cross-subsidization.
7.560. Furthermore, Russia argues that "even if the unbundling of accounts requirement, along
with the monitoring by regulatory authorities pursuant to Article 41(1)(b) of the Directive do help
avoid cross-subsidisation, as the EU argues, the fact remains that money is fungible." 1004 Russia
does not, however, expand on the relevance of the fungible nature of money and we do not

995 Russia's response to Panel question No. 183(a), para. 163.
996 Russia's response to Panel question No. 183(b), para. 186.
997 Russia's first written submission, para. 357.
998 Russia's second written submission, para. 255.
999 European Union's second written submission, para. 97.
1000 European Union's response to Panel question No. 183(e), para. 129.
1001 Russia's response to Panel question No. 117, para. 507.
1002 Russia's response to Panel question No. 117, paras. 507-508 (quoting Directive 2009/73/EC,
(Exhibit EU-5), Recital (7)).
1003 Russia's second written submission, para. 210.
1004 Russia's response to Panel question No. 117, para. 509.

believe that it would be appropriate to assume that this would entail a competitive advantage for
natural gas produced or supplied by VIUs subject to the ISO or the ITO models.
Investment in the transmission system
7.561. Lastly, we address Russia's argum ents concerning the role of VIUs in decisions regarding
investment in the transmission system. These arguments appear to concern both the ISO and the
ITO models.
7.562. At the outset, we note that Russia has not provided much further explanation of how the
alleged role by a VIU in investment decisions regarding the transmission system, under the ISO
and the ITO models, would translate into a competitive advantage for the natural gas of that VIU.
The implication of Russia's position presumably is that a VIU can seek to develop the transmission
system in a manner that would enhance the competitive opportunities of its natural gas, through
its alleged role in making investment decisions. H owever, we do not believe that Russia has
substantiated this position.1005
7.563. With respect to the ISO model, Russia argues that the OU model allows a VIU "no input
whatsoever into the investment decisions … and thus no possibility to influence the decisions
regarding its gas being supplied and placed on the EU market" 1006 whereas the provisions of the
ISO model require the owner of the transmission system, which may be a VIU, to "'finance the
investments decided' by the ISO and 'approved by the regulatory authority' ".1007 Russia therefore
appears to suggest that a VIU can influence the investment decisions of an ISO by virtue of being
required to finance such investments. We have difficulties accepting this position. The relevant
provisions of the ISO model require the VIU to finance investments decided by the ISO or to "give
its agreement to financing by any interested party including the independent system operator". 1008
It is, however, the ISO that makes these investment decisions 1009 and, as explained above, the
ISO is req uired to be separate from the VIU, i.e. complying with the rules on ownership
unbundling, under the ISO model. 1010 Furthermore, and as pointed to by Russia itself, such
investment decisions must be approved by the relevant NRA.1011 In light of this, we fail to see how
a VIU would have any more influence over investment decisions under the ISO model than under
the OU model, or be able to influence such investment decisions in a manner that would enhance
the competitive opportunities of its natural gas.
7.564. With respect to the ITO model, Russia similarly argues that a VIU retains control over the
transmission system, including "investment decisions through the ITO, providing the VIU greater
influence over those assets". 1012 Russia does not substantiate its assertion that a VIU can control
or influence "the investment decisions through the ITO", but we note that the ITO model, similarly
to the ISO model, requires that "appropriate financial resources for future investment projects
and/or for the replacement of existing asset s shall be made available to the transmission system
operator in due time by the vertically integrated undertaking following an appropriate request from
the transmission system operator ."1013 However, for the reasons explained above, we do not
believe this fi nancing requirement serves to demonstrate that the ITO model allows a VIU to
influence investment decisions in a manner that would enhance the competitive opportunities of its
natural gas.

1005 See, e.g. Russia's response to Panel question No. 183(b), para. 185, where Russia states, with
respect to the ISO model, that "the owner retains at least some role in overseeing investments into the
transmission system" and that "[i]n so doing, the owner must thereby be presumed to be in a position to
influence the decisions regarding its gas being supplied and placed on the EU market through its transmission
system as operated by the ISO." Without further elaboration, Russia concludes that "[t]his constitutes a
competitive advantage over a VIU such as Gazprom, which was subjected to the OU model".
1006 Russia's response to Panel question No. 183(b), para. 185.
1007 Russia's response to Panel question No. 183(b), para. 184 (quoting Directive 2009/73/EC, (Exhibit
EU-5), Article 14(5)(b)).
1008 Directive 2009/73/EC, (Exhibit EU-5), Article 14(5)(b).
1009 Directive 2009/73/EC, (Exhibit EU-5), Article 14(5)(b).
1010 See Directive 2009/73/EC, (Exhibit EU-5), Article 14(2)(a).
1011 Directive 2009/73/EC, (Exhibit EU-5), Article 14(5)(b).
1013 Directive 2009/73/EC, (Exhibit EU-5), Article 17(1)(d).

7.565. We therefore do not believe that Russia has demonstrated that the I SO or the ITO models
allow a VIU to influence investment decisions in the transmission network in a manner that would
enhance the competitive opportunities of that VIU's natural gas.
Additional considerations
7.566. We note that, in addition to the specific alleged advantages considered above, Russia
submits that the advantages accorded to natural gas under at least the ITO model are "much
broader".1014 In this respect, Russia appears to focus on the notion of "certainty". More
particularly, Russia points to "the cer tainty that [a VIU's] domestic and/or third -country natural
gas will be supplied by and transported through its own transmission system, which is operated
and controlled by its own ITO" and that "[t]his certainty, predicated on the ability to base
investment, supply and transmission decisions on access to the EU market via an ITO, contributes
to the more favourable treatment accorded to the VIU". 1015 In our view, the "certainty" referred to
by Russia does not appear to be distinct from the alleged advantages addressed in
paragraphs 7.541 through 7.565 above, but rather an underlying feature permeating all three, and
in particular the alleged advantage stemming from a VIU supposedly being able to exert control
over the TSO.
7.567. In this regard, we recall our conclusion that Russia has not demonstrated that the ITO
model, or the ISO mod el, allows a VIU to exercise control over the TSO in a manner that would
provide its natural gas access to the transmission system on more favourable competitive terms
than those given to natural gas from any other source. Similarly, since the Directive ca lls for a
system of non-discriminatory third-party access to the transmission system, we do not believe that
Russia has substantiated its contention that the natural gas of a VIU has any greater "certainty" of
access to the transmission system of a TSO belonging to that VIU than the natural gas of any
other source. Furthermore, we recall our conclusions that Russia has not demonstrated that a VIU
can employ financial fees, revenue or dividends, accruing to it under the ISO or the ITO models, to
enhance the competitive opportunities of its natural gas, nor that the ISO or the ITO models allow
a VIU to influence investment decisions in a manner that would enhance the competitive
opportunities of its natural gas. We therefore also do not believe that Russia has demonstrated
any additional "certainty" for natural gas under the ISO model or the ITO model in this regard.
7.568. Having considered the alleged competitive advantages under the ISO and the ITO models,
we therefore conclude that Russia has not demonstrated that natural gas is accorded less
favourable treatment under the OU model in comparison with the treatment accorded to natural
gas under the ISO and/or the ITO models. In light of this conclusion, it is not necessary for us to
address the issue of whether the unbundling measure in the Directive results in de facto
discrimination against imported Russian natural gas by "enabling" EU member States to implement
the ISO and/or the ITO models in addition to the OU model in respect of transmission systems that
belonged to a VIU on 3 September 2009.
7.5.1.4.2.4 Conclusion
7.569. For the reasons explained in paragraphs 7.537 through 7.568 above, we conclude that
Russia has not demonstrated that the unbundling measure in the Directive accords less favourable
treatment to imported Russian natural gas than that accorded to domestic EU natural gas. Hence,
we find that Russia has failed to make a prima facie case of violation under Article III:4 of the
GATT 1994 with respect to the unbundling measure in the Directive.
7.5.1.4.3 Analysis by the Panel of Russia's claim under Article I:1 of the GATT 1994
7.570. Bearing in mind the le gal standard under Article I:1 of the GATT 1994, set out by the
Appellate Body and explained above in paragraphs 7.236 and 7.237, we will assess Russia's claim
against the unbundling measure in the Directive under this provision by determining whether
Russia has made a prima facie case that: (a) the unbundling measure in the Directive falls within
the scope of Article I:1 of the GATT 1994; (b) the relevant imported products are like products; (c)
the unbundling measure in the Directive confers an "advantage, favour, privilege or immunity" on

1014 Russia's response to Panel question No. 183(a), para. 164.
1015 Russia's response to Panel question No. 183(a), paras. 165-166.

a product originating in the territory of any country; and (d) the advantage so accorded is not
extended "immediately" and "unconditionally" to like Russian products.
7.571. Before turning to the assessment of Russia's claim under Article I:1, we note that the legal
standards under Articles I:1 and III:4 of the GATT 1994 are similar in the sense that these are
both "fundamental non -discrimination obligations under the GATT 1994" 1016 and are both
"concerned, fundamentally, with prohibiting discriminatory measures by requiring, in the context
of Article I:1, equality of competitive opportunities for like imported products from all Members,
and, in the context of Article III:4, equality of competitive opportunities for imported products and
like domestic products".1017 At the same time, we note that A rticles I:1 and III:4 differ in respect
of their points of comparison. Most notably, Article I:1 of the GATT 1994 involves a comparison of
the treatment accorded to imported products from different Members, whereas Article III:4 of the
GATT 1994 involves a comparison of the treatment accorded to imported products and domestic
products, respectively.1018
7.572. We further note that Russia's claims against the unbundling measure in the Directive under
these provisions involve certain similarities. In particular, both of Russia's claims under Articles I:1
and III:4 of the GATT 1994 pertain to the alleged discrimination against imported Russian natural
gas stemming from the Directive "enabling" EU member States to choose between implementing
only the OU model or implemen ting the ISO and/or the ITO models in addition to the OU model in
respect of transmission systems that belonged to a VIU on 3 September 2009. 1019 Due to the
similarities between the legal standards under the two provisions as well as between Russia's
claims u nder these two provisions, our assessment of Russia's claim und er Article I:1 of the
GATT 1994 will be guided by our findings on Russia's claim under Article III:4 of the GATT 1994
when relevant and appropriate.
7.5.1.4.3.1 Scope of Article I:1 of the GATT 1994
7.573. With respect to the issue of whether the unbundling measure in the Directive falls within
the scope of Article I:1 of the GATT 1994, we note that this provision covers "all matters referred
to in paragraphs 2 and 4 of Article III". We have already concluded, in paragraphs 7.519
through 7.527 above, that the unbundling measure in the Directive falls within the scope of
Article III:4 of the GATT 1994 as it affects the internal sale, offering for sale, purchase,
transportation, dist ribution or use of natural gas, and we can therefore also conclude that this
measure falls within the scope of Article I:1 of the GATT 1994 for the same reasons.
7.5.1.4.3.2 Like products
7.574. We begin our likeness enquiry for Russia's claim under Article I:1 of the GATT 1 994 by
noting that the scope of this enquiry is unclear in the same manner as was the case for the
likeness enquiry for Russia's claim under Article III:4 of the GATT 1994. More particularly, in
addition to its argumentation concerning natural gas, Russia at times refers to LNG in arguing that
the unbundling measure violates Article I:1 of the GATT 1994.1020 In determining the scope of our
likeness enquiry, we recall that Russia's claim under Article I:1 of the GATT 1994, similarly to its
claim under Article III:4 of the GATT 1994, pertains to the alleged discrimination against imported

1016 Appellate Body Reports, EC – Seal Products, para. 5.79.
1017 Appellate Body Reports, EC – Seal Products, para. 5.82 (referring to Appellate Body Reports, US –
Clove Cigarettes, para. 176, in turn referring to GATT Panel Report, US – Section 337 Tariff Act, para. 5.10;
China – Publications and Audiovisual Products, para. 305, in turn referring to Appellate Body Report, Korea –
Various Measures on Beef, paras. 135-136; Thailand – Cigarettes (Philippines), para. 126, in turn referring to
Appellate Body Report, Japan – Alcoholic Beverages II, p. 16, DSR 1996:I, 97, at p. 109; and Korea – Alcoholic
Beverages, para. 127; and Panel Reports, US – COOL, para. 7.571, in turn referring to Panel Report, Colombia
– Ports of Entry, para. 7.236, in turn referring to Panel Report, Argentina – Hides and Leather, para. 11.20, in
turn referring to Appellate Body Reports, Japan – Alcoholic Beverages II, p. 16, DSR 1996:I, 97, at p. 109; and
Korea – Alcoholic Beverages, paras. 119, 120 and 127).
1018 Appellate Body Reports, EC – Seal Products, para. 5.79.
1019 See, e.g. Russia's first written submission, paras. 353, 356 and 370-371.
1020 See, e.g. Russia's first written submission, paras. 374-376; and second written submission,
paras. 266-267. Furthermore, when arguing that imported Russian natural gas is like imported natural gas
from other non-EU countries, Russia states that "the Panel should find that natural gas imported from Russia is
'like' natural gas, including LNG, imported from other countries within the meaning of Article I:1." (Russia's
first written submission, para. 366). (emphasis added)

Russian natural gas, stemming from the Directive "enabling" EU member States to choose
between implementing only the OU model or implementing the ISO and/or the ITO models in
addition to the OU model in respect of transmission syst ems that belonged to a VIU on
3 September 2009 and , more particularly , the alleged less favourable treatment of natural gas
being supplied by VIUs subject to the OU model compared to natural gas being s upplied by VIUs
subject to the ISO and/or the ITO models. 1021 As explained above in paragraph 7.531, the
requirement to unbundle, including all three unbundling models , does not apply with respect to
VIUs' ownership or control over LNG facilities or LNG system operators and we therefore consider
that natural gas is the only relevant product for Russia's claim under Article I:1 of the GATT 1994
against the unbundling measure in the Directive.1022
7.575. Having determined that the scope of our likeness enquiry should be limited to natural gas,
we further note that Russia's claim under Article I:1 of the GATT 1994 raises two issues of
likeness: first whether imported Russian natural gas is like imported natural gas from other non -
EU countries and, second, whether natural gas is like regardless of whether it is supplied by VIUs
subject to the OU model or by VIUs subject to the ISO or the ITO models.
7.576. We note that both parties agree tha t imported Russian natural gas and imported natural
gas from other non -EU countries are like within the meaning of Article I:1 of the GATT 1994
regardless of whether that natural gas is supplied by VIUs subject to the OU model or by VIUs
subject to the ISO or the ITO models. 1023 We are equally convinced that these are like: more
particularly, and in accordance with the approach taken by previous panels, we believe that our
assessment of these issues of likeness should be informed by the approach taken by the A ppellate
Body in respect of likeness under Article III:4 of the GATT 1994. 1024 In this regard, we reiterate
our position that the physical properties, end -uses and tariff classification of these groups of
natural gas are identical. Furthermore, there is nothi ng on the record indicating that the
preferences of consumers of natural gas differ depending on the origin of that gas or the applicable
unbundling model.
7.577. We therefore conclude that imported Russian natural gas and imported natural gas from
other non -EU c ountries, supplied by VIUs subject to the different unbundling models, are like
within the meaning of Article I:1 of the GATT 1994.
7.5.1.4.3.3 An advantage, favour, privilege or immunity
7.578. Similarly to its claim under Article III:4 of the GATT 1994, the underlying premise of
Russia's claim under Article I:1 of the GATT 1994 is that the unbundling measure in the Directive
violates this provision by "enabling" EU member States to choose between implementing only the
OU model or implementing the ISO and/or the ITO mode ls in addition to the OU model in respect
of transmission systems that belonged to a VIU on 3 September 2009. 1025 As with Russia's claim
under Article III:4, Russia's claim under Article I:1 is thus premised on the notion that natural gas
is accorded an advan tage under the ISO and/or the ITO models, which is not granted under the
OU model.1026 In section 7.5.1.4.2.3 above, we concluded that Russia has not demonstrated this to
be the case for its claim under Article III:4.
7.579. As explained above, both Articles I:1 and III:4 of the GATT 1994 are "concerned,
fundamentally, with prohibiting discriminatory measures by requiring, in the context of Article I:1,
equality of competitiv e opportunities for like imported products from all Members, and, in the
context of Article III:4, equality of competitive opportunities for imported products and like

1021 See, e.g. Russia's first written submission, paras. 370-371.
1022 As explained in paragraphs 7.840 through 7.845 below, we consider that natural gas and LNG are
distinct products.
1023 Russia's first written submission, para. 366; and response to Panel question No. 110(a), para. 445;
and European Union's first written submission, para. 407; and response to Panel question No. 110(a),
para. 285.
1024 See, e.g. Panel Reports, US – Poultry (China), paras. 7.424-7.425 (referring to Appellate Body
Reports, EC – Asbestos, para. 102; and Japan – Alcoholic Beverages II, pp. 21-22, DSR 1996:I, 97, at pp.
113-114; Panel Report, US – Gasoline, para. 6.8; and GATT Panel Reports, EEC – Animal Feed Proteins, para.
4.2; and Japan – Alcoholic Beverages I, para. 5.6); and US – Tuna II (Mexico) (Article 21.5 – Mexico), para.
7.409.
1025 See, e.g. Russia's first written submission, paras. 370-371.
1026 Russia's responses to Panel question No. 183(a), paras. 160-182 and No. 183(b), paras. 183-186.

domestic products".1027 While these provisions have different points of comparison, we reca ll that
the enquiry under Article I:1 of whether a challenged measure confers an advantage, favour,
privilege or immunity to a product involves an assessment of whether this measure "create[s]
'more favourable competitive opportunities ' or affect[s] the co mmercial relationship between
products of different origins". 1028 This enquiry , thus, closely resembles the assessment of less
favourable treatment under Article III:4, which involves an assessment of whether a challenged
measure "modifies the conditions of c ompetition in the relevant market to the detriment of
imported products".1029 We further note that none of the parties suggests that this issue should be
dealt with differently for Russia's claims under Articles I:1 and III:4 of the GATT 1994,
respectively.
7.580. The points of comparison are different under the two claims and Russia therefore also
points to different examples in seeking to demonstrate that the ISO and/or ITO models confer an
advantage, favour, privilege or immun ity to natural gas, within the meaning of Article I:1, that is
not extended to natural gas under the OU model. More particularly, for its claim under Article I:1,
Russia compares the treatment of imported Russian gas with that of imported natural gas from
any other non-EU country, rather than domestic EU natural gas. As examples of this, Russia refers
to the imported natural gas of the Russian VIU Gazprom and compares this with the imported
natural gas of the Norwegian VIU Statoil, which continues to own the ITO jordgas in Germany
under the ITO model1030, rather than the domestic EU natural gas of the French VIU Engie, which
continues to own the ITO GRTgaz in France under the ITO model. 1031 However, Russia does not
indicate that the various unbundling models operate differently, nor that the ISO or I TO models
confer any additional or different advantages, in the context of this comparison.
7.581. Moreover, we note that Russia refers to Lithuania's grant of priority to natural gas supplied
by Litgas through the Klaipeda LNG Terminal and the five-year deal between Statoil and Litgas.1032
As explained above in section 7.2.2.3.1, the European Union has raised a terms of reference
objection in respect of Russia's reliance on these. In our finding concerning this terms of reference
objection, we concluded that Lithuania's grant of priority to natural gas supplied by Litgas through
the Klaipeda LNG Terminal and the five -year deal between Statoil and Litgas should be considered
evidence relied upon by Russia, which does not concern our terms of reference. 1033 Having said
this, we have difficulties understanding the relevance of this evid ence for Russia's claim under
Article I:1 against the unbundling measure in the Directive. When attempting to demonstrate the
relevance of this evidence, Russia argues that:
By requiring that TSOs unbundle, while exempting LSOs and LNG facilities and
providing other preferences for LNG in Lithuania and elsewhere, it should be clear that
the Directive was intended to provide differential treatment between pipeline gas
transported by TSOs and LNG-gas transported by LSOs and LNG facilities.1034
7.582. However, and as ex plained above, Russia's claim under Article I:1 of the GATT 1994
against the unbundling measure pertains to the Directive "enabling" EU member States to choose
between implementing only the OU model or implementing the ISO and/or the ITO models in
addition to the OU model in respect of transmission systems that belonged to a VIU on
3 September 2009.1035 It does not pertain to the alleged exemption of LNG from the requirement

1027 Appellate Body Reports, EC – Seal Products, para. 5.82 (referring to Appellate Body Reports, US –
Clove Cigarettes, para. 176, in turn referring to GATT Panel Report, US – Section 337 Tariff Act, para. 5.10;
China – Publications and Audiovisual Products, para. 305, in turn referring to Appellate Body Report, Korea –
Various Measures on Beef, paras. 135-136; Thailand – Cigarettes (Philippines), para. 126, in turn referring to
Appellate Body Report, Japan – Alcoholic Beverages II, p. 16, DSR 1996:I, 97, at p. 109; and Korea – Alcoholic
Beverages, para. 127; and Panel Reports, US – COOL, para. 7.571, in turn referring to Panel Report, Colombia
– Ports of Entry, para. 7.236, in turn referring to Panel Report, Argentina – Hides and Leather, para. 11.20, in
turn referring to Appellate Body Reports, Japan – Alcoholic Beverages II, p. 16, DSR 1996:I, 97, at p. 109; and
Korea – Alcoholic Beverages, paras. 119, 120, and 127).
1028 Panel Report, US – Poultry (China), para. 7.415 (quoting Panel Report, Colombia – Ports of Entry,
para. 7.341, in turn quoting to Panel Reports, EC – Bananas III, para. 7.239).
1029 Appellate Body Report, Korea – Various Measures on Beef, para. 137. (emphasis omitted)
1030 Russia's first written submission, paras. 372-373; and second written submission, para. 265.
1031 Russia's first written submission, paras. 357-358; and second written submission, paras. 245-246.
1032 Russia's first written submission, paras. 374-375; and second written submission, paras. 266-267.
1033 See section 7.2.2.3.1 above.
1034 Russia's response to Panel question No. 122, para. 514.
1035 See, e.g. Russia's first written submission, paras. 370-371.

to unbundle per se (referred to as the "LNG measure" in this Report), a measure that is challenged
separately by Russia under Article I:1 of the GATT 1994.1036 It is difficult to see how Lithuania's
grant of priority to natural gas supplied by Litgas through the Klaipeda LNG Terminal or a 5 -year
deal between Litgas and Statoil for the supply o f natural gas via the Klaipeda LNG terminal would
have any bearing on the use of different unbundling models in the European Union. In light of this,
we agree w ith the European Union that this evidence lacks relevance for Russia's claim under
Article I:1 against the unbundling measure in the Directive.1037
7.583. Therefore, and consistently with our findings on Russia's claim under Article III:4 of the
GATT 1994, we also conclude that Russia has failed to demonstrate that the unbundling measure
in the Directive conf ers an advantage, favour, privilege or immunity to natural gas under the ISO
and/or the ITO models. In light of this conclusion, it is not necessary for us to address the issue of
whether the unbundling measure in the Directive results in de facto discrimination of imported
Russian natural gas by "enabling" EU member States to implement the ISO and/or the ITO models
in addition to the OU model in respect of transmission syst ems that belonged to a VIU on
3 September 2009.
7.5.1.4.3.4 Conclusion
7.584. For the reasons explained in paragraphs 7.578 through 7.583 above, we conclude that
Russia has not demonstrated that the unbundling measure in the Directive confers an advantage,
favour, privilege or immunity to imported natural gas from other non -EU countries, which is not
accorded immediately and unconditionally to imported Russian natural gas. Henc e, we find that
Russia has failed to make a prima facie case of violatio n under Article I:1 of the GATT 1994 with
respect to the unbundling measure in the Directive.
7.5.2 The unbundling measure in the national implementing laws of Croatia, Hungary
and Lithuania
7.5.2.1 Introduction
7.585. Russia challenges the unbundling measure in the national implementing laws of Croatia,
Hungary and Lithuania under Article XVI:2(e) and XVI:2(f) of the GATS. Russia further challenges
the unbundling measure in the national implementing laws o f Croa tia and Lithuania under
Article XVI:2(a) of the GATS.
7.586. The European Union asks the Panel to reject all claims by Russia and, should the Panel find
otherwise, submits that the unbundling measure in the national implementing laws of Croatia,
Hungary and Lithuania is justified under Article XIV(a) and (c) of the GATS.
7.587. We follow the legal standard, as set out in paragraph 7.233 above, in our examination of
Russia's claims against the unbundling measure in the national implementing laws of Croatia,
Hungary and Lithuania under Article XVI:2(a), (e) and (f) of the GATS.
7.588. The unbundling measure challenged by Russia under Article XVI:2 (a), (e) and (f) of the
GATS consist s of the provisions of the national laws of Croatia, Hungary and Lithuania
implementing the unbundling requirement in the Directive. 1038 Russia has clarified that it is
challenging separately each of the national implementing laws of Croatia, Hungary and
Lithuania.1039 We recall that those laws are legally separate and distinct from each other and from
the Directive, and that the Directive is not a measure at issue under th ese claims. We also recall
that, while Croatia and Hungary have implemented the three unbundling models, Lithuania has
implemented only the OU model.1040

1036 See section 7.7 below, where we assess the consistency of the LNG measure with Article I:1 of the
GATT 1994.
1037 European Union's first written submission, para. 421.
1038 We refer to our factual description of the three unbundling models in section 2.2.2.1 above.
1039 Russia's response to Panel question No. 5, para. 27.
1040 See section 2.2.2.2 above.

7.589. Keeping in mind that a panel has the autonomy to decide on the order of its analysis 1041,
we shall start with Russia's claim under Article XVI:2(a) of the GATS , and will then turn,
successively, to Russia's claims under Article XVI:2(e) and (f) of the GATS.
7.5.2.2 Russia's claims under Article XVI:2(a) of the GATS
7.5.2.2.1 Introduction
7.590. Russia claims that the unbundling measure in the national implementing laws of Croatia
and Lithuania imposes a limitation on the number of service suppliers in a manner inconsistent
with Article XVI:2(a) of the GATS.1042
7.591. Before turning to the assessment of Russia's claim under Article XVI:2(a) of the GATS, we
wish to clarify our understanding of the measu re at issue under this provision as, throughout its
submissions and responses to questions, Russia's characterization of this measure has varied. 1043
Based on an overall reading of Russia's arguments and explanations, in particular Russia's
clarification to q uestion No. 5 by the Panel, we understand that Russia is challenging the
unbundling measure in the national implementing laws of Croatia and Lithuania as imposing an

1041 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 126.
1042 In its response to a question by the Panel concerning its claim under Article XVI:2(f) of the GATS,
Russia appears to allege that Section 123(4) of Hungary's Gas Act violates Article XVI:2(a) of the GATS. Russia
states as follows:
As explained in response to Question 169(a), "Section 194" refers to the relevant provision of
Hungary’s Amendment Act that amended Section 123 of its Gas Act (or GET). It is Subsection
(4) of Section 123 of the Gas Act, as amended by the Amendment Act, that Russia is challenging
under Article XVI:2(f) of the GATS – along with the remaining provisions of the Gas Act that
Russia identified, Sections 120/A, Section 121/B, and Section 121/H, each of which also forms
part of Hungary’s unbundling measure that violates Article XIV:2(a). Specifically, Section 123(4)
provides that any company involved in the extraction of natural gas or the "supply of natural
gas... and any shareholders exercising control in such companies may not acquire any share –
directly or indirectly – in a transmission system operator where such share constitutes
entitlement to exercise control." It is in this regard that Section 123(4) violates Article XIV:2(a).
(Russia's response to Panel question No. 169(b), para. 83). (emphasis original)
We observe that this is the first and only instance where Russia alleges that Hungary's Gas Act is
inconsistent with Article XVI:2(a) of the GATS as, throughout these proceedings, Russia's claim under this
provision only concerned the unbundling measure in the national implementing laws of Croatia and Lithuania.
(See Russia's first written submission, heading VII:E; second written submission, para. 101 and heading III:B;
and response to Panel question No. 5, para. 27). Furthermore, Russia does not substantiate its allegation that
Section 123(4) in Hungary's Gas Act amounts to a limitation on the number of service suppliers within the
meaning of Article XVI:2(a). Since there is no basis on which we can assess Russia's allegation against
Hungary under Article XVI:2(a), we shall not give further consideration to this issue.
1043 In its first written submission, Russia alleges that "Croatia and Lithuania's Unbundling Measures
Impose Limitations on the Number of Service Suppliers, Contrary to Article XVI:2(a) of the GATS" (Russia's
first written submission, heading VII:E), "Croatia and Lithuania, in implementing their unbundling measures,
have adopted quantitative limitations on the number of TSOs within their respective territories" (Russia's first
written submission, para. 210), and "[Croatia] [Lithuania] Adopted a Prohibited Quantitative Limitation, in
Effect, in the Form of a Monopoly or Exclusive Service Supplier, Contrary to Article XVI:2(a)". (Russia's first
written submission, headings VII:E:2; and VII:E:3). In response to a question by the Panel asking Russia to
clarify, with respect to each claim, which measure was being challenged, Russia explains that, under
Article XVI:2(a) of the GATS, it challenges "the unbundling measure in Croatia and Lithuania's implementing
laws as each imposing impermissible quantitative restrictions" and further explains that "the quantitative
restrictions resulting from Croatia and Lithuania's unbundling measures can best be characterized as violating
each of these Members' obligations, as they constitute instances of de facto discrimination". (Russia's response
to Panel question No. 5, para. 25). Russia alleges in its second written submission that it "has made a prima
facie case that Croatia and Lithuania's unbundling measures each violates Article XVI:2(a) of the GATS".
(Russia's second written submission, para. 109). In response to another question by the Panel, Russia explains
that its claim against Lithuania under Article XVI:2(a) "concerns the fact that, through its unbundling measure,
as set out in various provisions of the Law on Natural Gas, as amended, Lithuania has, formally or in effect,
imposed a limitation on the number of service suppliers of pipeline transport services in the form of a
monopoly or exclusive service supplier". (Russia's response to Panel question No. 167, para. 77). (emphasis
original) Finally, with respect to this claim, Russia asks the Panel to find that the European Union and its
member States violate Article XVI:2(a) of the GATS "because Croatia and Lithuania, in implementing their
unbundling measures, have each, in effect, adopted a prohibited quantitative limitation in the form of a
monopoly or exclusive service supplier". (Russia's first written submission, para. 810; and second written
submission, para. 487).

impermissible quantitative limitation on the number of service suppliers in the form of a monopoly
or exclusive service suppliers.
7.592. The text and legal standard to establish a violation un der Article XVI:2 of the GATS are set
out above in paragraphs 7.232 and 7.233. Pursuant to that legal standard, in order to establish a
prima facie case of violation of Article XVI:2(a) of the GATS, Russia needs to demonstrate that:
a. Croatia and Lithuania have undertaken market access commitments in their respective
GATS Schedules with respect to the sector(s) and mode(s) identified by Russia; and that
b. The unbundling measure in the national implementing laws of Croatia and Lithua nia
imposes an impermissible quantitative limitation on the number of service suppliers in
the form of a monopoly or exclusive service suppliers within the meaning of
Article XVI:2(a) of the GATS.
7.593. We concluded above in paragraph 7.360 that Croatia and Lithuania have undertaken a full
market access commitment for mode 3 under sector 11.G, "Pipeline Transport [Services]".
Accordingly, we turn now to t he second element of the legal standard, namely whether the
unbundling measure in the national implementing laws of Croatia and Lithuania breaches
Article XVI:2(a) of the GATS by imposing an impermissible quantitative limitation on the number
of service suppliers in the form of a monopoly or exclusive service suppliers.
7.5.2.2.2 Analysis by the Panel
7.594. Russia argues that, when deciding whether a Member maintains any of the four types of
quantitative limitations on the number of suppliers listed under Article XVI:2(a), consideration
should be given to the substance and effect of a challenged measure, rather than merely its formal
construction. Based on this interpretation, Russia al leges that Croatia and Lithuania, in
implementing their unbundling measures, have adopted quantitative limitations on the number of
TSOs within their respective territories, contrary to their scheduled commitments and in violation
of Article XVI:2(a).1044 Russia further submits that the quantitative limitation Croatia and Lithuania
have each adopted on the number of service suppliers that may supply pipeline transport services
within their territories is in the form of a monopoly or an exclusive service supplier. 1045 According
to Russia, both Croatia and Lithuania, in effect, maintain a state-owned monopoly or, alternatively,
exclusive service suppliers, both with regard to suppliers of transmission services and natural gas
supply services within their respective territory, thus breaching Article XVI:2(a) of the GATS.1046
7.595. According to the European Union, the Appellate Body considered that the focus of
Article XVI:2(a) is on quantitative limitations and stressed that not any measure having a
quantitative effect would fall within the scope of this provision. 1047 The European Union concurs
with Japan that "to q ualify as a measure under sub -paragraph (a), the core characteristic of the
measure must be to limit the number of service suppliers". 1048 For the European Union, the
unbundling requirement does not impose a quantitative maximum limit, but must be rather
regarded as a minimum requirement for being certified as a TSO in the European Union. 1049 The
European Union submits that an unlimited number of service providers can be certified as
transmission service operators in Croatia and Lithuania and that nothing in Croa tia's or Lithuania's
implementing laws challenged by Russia would limit the number of pipeline transport service
suppliers.1050

1044 Russia's first written submission, para. 210; and second written submission, para. 109.
1045 Russia's first written submission, paras. 211 and 215.
1046 Russia's first written submission, paras. 214 and 220; and second written submission, paras. 110-
111.
1047 European Union's first written submission, paras. 121-122; and second written submission, para.
22.
1048 European Union's second written submission, para. 21, (referring to Japan's third-party submission,
para. 11). For Japan, Article XVI:2(a) of the GATS does not capture "limitations which have any characteristics
or any effect", but, rather, "a measure falls under subparagraph (a) only when its core characteristic or effect
is to limit the number of service suppliers." (Ibid.)
1049 European Union's first written submission, paras. 130-131.
1050 European Union's second written submission, para. 23, (referring to the European Union's first
written submission, paras. 132-134).

7.596. Before assessing Russia's claim under Article XVI:2(a), we need to address the parties'
arguments regarding the scope of Article X VI:2(a). Both parties refer to the Appellate Body's
interpretation of Article XVI:2(a) in US – Gambling, but draw different conclusions from this
report.1051
7.597. We recall that, after considering the definitions of the terms "monopoly" and "exclusive
service sup pliers" in, respectively, Articles XXVIII(h) and VIII:5 of the GATS 1052, the Appellate
Body observed as follows:
[T]he reference, in Article XVI:2(a), to limitations on the number of service suppliers
"in the form of monopolies and exclusive suppliers" should be read to include
limitations that are in the form or in effect , monopolies or exclusive service
suppliers.1053
7.598. This led the Appellate Body to consider that the words "in the form of" in Article XVI:2(a)
should not be interpreted so as to require that quantitative limitations be explicitly expressed in
numerical terms.1054 The Appellate Body stressed, however, that the w ords "in the form of" should
not be ignored or replaced by the words "that have the effect of" because, when viewed as a
whole, "it is clear that the thrust of sub -paragraph (a) is not on the form of limitations, but on
their numerical, or quantitative, nature".1055
7.599. Referring to this statement by the Appellate Body, the panel in China – Electronic Payment
Services stressed that, when assessing the consistency of a measure with Article XVI:2(a) of the
GATS, the focus must be on whether the measure at issue "co nstitute[s] a limitation that is
numerical and quantitative in nature" or acts "as a quota would do", and not on whether it
"formally or explicitly institute[s] a monopoly or an exclusive service supplier." 1056 When assessing
more specifically whether the mea sure at issue instituted a monopoly or exclusive service
suppliers, that panel decided to assess whether those measures "are of such a nature that they
limit to one, or a small number", the number of service suppliers.1057
7.600. Hence, following the guidance provid ed by previous Appellate Body and panel reports, we
consider that our analysis must focus on whether the measure at issue constitutes a limitation that
is numerical and quantitative in nature. In other words, our analysis of whether Russia has
demonstrated that the unbundling measure in the national implementing laws of Croatia and
Lithuania breaches Article XVI:2(a) of the GATS by imposing an impermissible quantitative
limitation in the form of a monopoly or exclusive service suppliers must focus on whethe r Russia
has demonstrated that the measure at issue is of such a nature that it "limit [s] to one, or a small
number", the number of pipeline transport service suppliers in Croatia and Lithuania.
7.601. We shall start with the unbundling measure in the national implementing law of Croatia
and will then turn to Lithuania.
Croatia
7.602. Russia submits that, while Croatia's Gas Market Act permits the three unbundling models
and provides procedures for obtaining TSO certification, in reality, however, Croatia has adopted a

1051 See Russia's first written submission, para. 207; and European Union's first written submission,
paras. 121-122.
1052 Pursuant to Article XXVIII(h) of the GATS, a "monopoly supplier of a service" is "any person, public
or private, which in the relevant market of the territory of a Member is authorized or established formally or in
effect by that Member as the sole supplier of that service" (emphasis added). Article VIII:5 of the GATS states
that "[t]he provisions of this Article shall also apply to cases of exclusive service suppliers, where a Member,
formally or in effect, (a) authorizes or establishes a small number of service suppliers and (b) substantially
prevents competition among those suppliers in its territory". (emphasis added)
1053 Appellate Body Report, US – Gambling, para. 230. (emphasis original)
1054 Appellate Body Report, US – Gambling, para. 236.
1055 Appellate Body Report, US – Gambling, para. 232.
1056 Panel Report, China – Electronic Payment Services, paras. 7.592-7.593. We note that the issue
before that panel also involved a determination whether the challenged measures constituted limitations on the
number of service suppliers in the form of a monopoly or an exclusive service supplier within the meaning of
Article XVI:2(a) of the GATS.
1057 Panel Report, China – Electronic Payment Services, para. 7.593.

quantitative limitation in the form of a monopoly or an exclusive service supplier as the Croatian
government owns and controls both the sole TSO, Plinacro, and the sole gas supplier, HEP.1058
7.603. The European Union contends that Russia fails to demonstrate how t he unbundling
measure, as implemented in Croatia's Gas Market Act, is of a quantitative nature, in the sense that
it limits the number of TSOs that can provide pipeline transport services in Croatia. According to
the European Union, merely noting that ther e is, at present, only one TSO in Croatia does not
establish that the unbundling measure would impose a quantitative limitation on the number of
service suppliers in Croatia.1059
7.604. We recall that the measure at issue is the unbundling measure contained in Croa tia’s 2014
Gas Market Act 1060, namely Articles 14, 15 through 17, and 18 through 22 of that Act
implementing the three unbundling models. The question before us is whether Russia has
demonstrated that the unbundling measure in Croatia's national law is of suc h a nature that it
limits to one, or a small number, the number of pipeline transport service suppliers in Croatia.
7.605. We turn to Russia's allegation that Plinacro has been established as a monopoly supplier of
pipeline transport services in Croatia. Accordi ng to Russia, by designating Plinacro as the national
TSO in Croatia for a period of 30 years, "the Croatian government has 'authorized or established'
Plinacro 'formally or in effect' as the sole supplier of transmission services ( i.e. as the sole TSO) in
the country," which, for Russia, constitutes a monopoly supplier of a service prohibited by Article
XVI:2(a).1061 In support of its allegation that Plinacro is authorized or established "formally or in
effect" as a monopoly supplier of transmission services in Croatia, Russia refers to Article 10 of the
2007 Gas Market Act which stipulates as follows: "PLINACRO d.o.o., Zagreb, is appointed gas
transmission system operator in the Republic of Croatia for the period of 30 years."1062
7.606. We note, first, that the 2007 Gas Market Act was superseded by the 2014 Gas Market Act
which implemented the unbundling measure of the Directive (Article 112 of Croatia's Gas Market
Act) and Russia does not explain whether the 2014 Gas Market Act, which implemented the
unbundling measure, has confirmed the designation of Plinacro as TSO in Croatia.1063 Furthermore,
Article 10 of the 2007 Gas Market Act submitted by Russia as evidence merely states that Plinacro
"is appointed gas transmission system operator" in Croatia for 30 years.
7.607. On its own, and in the absence of any other evidence, this statement does not allow us to
conclude that no other TSO can be appointed in Croatia and therefore that, as claimed by Russia,
Croatia maintains "formally or in effect" a state -owned monopoly supplie r of pipeline transport
services.1064 To us, and we agree with the European Union on this point, the fact that Plinacro is
currently the only supplier of pipeline transport services in Croatia 1065 is not sufficient per se to
conclude that it has been established as a monopoly supplier of such services.
7.608. Russia does not explain nor submits evidence as to why, pursuant to the unbundling
measure, other suppliers of pipeline transport services cannot enter the Croatian market. While
referring to the provisions in Cro atia's Gas Market Act setting out the three unbundling models,
Russia does not substantiate why the unbundling measure would be of such a nature that it limits
to one, or a small number, the number of pipeline transport service suppliers. As explained by t he

1058 Russia's first written submission, paras. 211-212; second written submission, para. 110; and
opening statement at the second meeting of the Panel, para. 24.
1059 European Union's first written submission, para. 133; and second written submission, para. 23.
1060 Croatia's Gas Market Act (Exhibit RUS-45).
1061 Russia's first written submission, para. 213; and opening statement at the second meeting of the
Panel, para. 24.
1062 Russia's response to Panel question No. 54, para. 279 (referring to Croatia's Gas Market Act (2007)
(Exhibit RUS-152), Article 10).
1063 The European Union notes that "with respect to the designation of Plinacro as a TSO, Russia does
not refer to any current legislation in force". (European Union's first written submission, fn 120).
1064 Russia's first written submission, para. 212.
1065 The European Union does not contest Russia's argument that Plinacro is currently the only TSO in
Croatia, but argues that "[m]erely noting that there is, at present, only one TSO in Croatia does not establish
that the unbundling measure would impose a quantitative limitation on the number of service suppliers in
Croatia". (European Union's first written submission, para. 133).

Appellate Body, "[a] prima facie case must be based on 'evidence and legal argument' put forward
by the complaining party in relation to each of the elements of the claim."1066
7.609. Croatia has implemented the rules on unbundling in the Directive through its Ga s Market
Act and allows all three unbundling models. We have carefully reviewed the provisions on
unbundling in Croatia's Gas Market Act 1067, as well as the corresponding provisions under the
Directive when assessing Russia's claim under Article II:1 of the GATS.1068 We see nothing in these
provisions indicating that the unbundling requirement is of such a nature that it limits to one, or a
small number, the number of service suppliers and Russia has not pointed to anything in Croatia's
law which would cause us to reach a different conclusion.
7.610. We turn to Russia's allegation that Hrvatska elektroprivreda d.d (HEP) acts as a monopoly
supplier of pipeline transport services. 1069 Russia refers to HEP as, alternatively, "the country's
natural gas supplier", a "monopoly supplie r of pipeline transport supply services" or "a monopoly
supplier of supply services". 1070 Based on the evidence provided by Russia, HEP has been
appointed as a supplier of wholesale services of natural gas until 31 March 2017. 1071 Therefore,
this evidence indicates that HEP does not supply pipeline transport services.
7.611. We recall that Croatia's specific commitments under sector 11.G, "Pipeline Transport
Services", cover transmission of gas through high pressure pipelines and that this sector does not
encompass wholesale services, nor does it encompass "supply" or "supply services".1072 Hence, the
example of HEP cannot constitute relevant evidence for the purpose of demonstrating that the
unbundling measure allegedly breaches Article XVI:2(a) with respect to Croatia's specific
commitments on "Pipeline Transport Services" in sector 11.G of its Schedule. Therefore, we shall
not give further consideration to HEP in our assessment of whether Croatia's unbundling measure
breaches Article XVI:2(a).1073
7.612. In view of the foregoing, we find that Russia has not demonstrated that the unbundling
measure in the national implementing law of Croatia imposes an impermissible quantitative
limitation on the number of service suppliers in the form of a monopoly or exclusive service
suppliers within the meaning of Article XVI:2(a) of the GATS. Hence, we conclude that Russia has
not demonstrated that the unbundling measure in the national implementing law of Croatia is
inconsistent with Article XVI:2(a) of the GATS.
Lithuania
7.613. Russia submits that, in the context of implementing full ownership unbundling, Lithuania
adopted a quantitative limitation in the form of a monopoly or an exclusive service supplier.
According to Russia, Lithuania did so by forcing Gazprom and E.ON, who were holding joint
majority ownership in Lietuvos, to spin off Amber Grid, the new TSO, and then sell their shares in
Amber Grid and Lietuvos to the Lithuanian government.1074 According to Russia, while, in theory, it
would be possible for a domestic entity to obtain a TSO licence under the Law of Natural Gas, in
effect, the establishment of another TSO is not possible because Amber Grid was established for

1066 Appellate Body Report, US – Gambling, para. 140. (emphasis original)
1067 See sections 7.5.2.3 and 7.5.2.4 below.
1068 See section 7.5.1.3 above.
1069 Russia's first written submission, paras. 212-213.
1070 Russia's first written submission, para. 213; and opening statement at the second meeting of the
Panel, para. 24.
1071 Decision of the Government of the Republic of Croatia of 3 October 2016 on Appointing the Supplier
on the Wholesale Gas Market, (Exhibit RUS-151). Pursuant to this Decision, "Hrvatska elektroprivreda d.d.
[HEP] is hereby appointed supplier on the wholesale gas market" for the period until 31 March 2017 and its
task is to "sell the gas to suppliers under public service obligation for the purposes of customers in the
household category, as well as ensure a reliable and secure supply, including the gas import into the Republic
of Croatia".
1072 See paras 7.329-7.331 above.
1073 For the same reason, we do not address Russia's allegation that "[a]lternatively, both Plinacro and
HEP may be viewed as 'exclusive service suppliers'" evidencing, according to Russia, that Croatia has "'formally
or in effect' authorized or established 'a small number of service suppliers', within the meaning of Article VIII:5
of the GATS and 'substantially prevent[ed] competition among those suppliers in its territory'". (See Russia's
first written submission, para. 213).
1074 Russia's first written submission, paras. 215 and 217. See also Russia's response to Panel question
No. 167, para. 77.

the purpose of exclusively owning and operating the transmission grid. Russia further alleges that
the Lithuanian government ha s "authorized or established" Amber Grid "formally or in effect" as
the sole supplier of transmission services in Lithuania and Lietuvos duju tiekimas as the sole
supplier of "natural gas supply services". For Russia, Amber Grid and Lietuvos duju tiekimas may
be alternatively viewed as "exclusive service suppliers" within the meaning of Article XVI:2(a).1075
7.614. The European Union replies that Russia's allegations that Gazprom and E.ON were forced
to sell their shares in Amber Grid and Lietuvos " are merely speculation".1076 The European Union
further asserts that Russia does not demonstrate how the unbundling requirement as implemented
in Lithuania's Law on Natural Gas limits the number of pipeline transport service suppliers to only
one. According to the European Un ion, there are no legal restrictions preventing other entities (be
they domestically owned or owned by a third country person) from operating as a TSO a
transmission network in Lithuania because Amber Grid has no exclusive right to create or operate
the transmission network.1077
7.615. We recall that the measure at issue is the unbundling measure implemented by Lithuania
through its Law on Natural Gas and its Law Implementing the Law Amending the Law on Natural
Gas (the "Implementing Law"). The question before us is whether Russia has demonstrated that
the unbundling measure in Lithuania's national implementing law is of such a nature that it limits
to one, or a small number, the number of pipeline transport service suppliers in Lithuania.
7.616. Russia submits that Amber Grid has been established as a monopoly supplier of pipeline
transport services and that the establishment of another TSO is not possible in Lithuania. 1078 In
support of this allegation, Russia refers to the Certification Opinion by the European Commission
with respect to the Lithuanian NRA's draft decision on the certification of Amber Grid as TSO for
gas (the "Commission Opinion") and points to a statement, contained in that Commission Opinion,
indicating that Amber Grid "owns and operates the entire gas tra nsmission system of Lithuania"
and "was established for the purpose of exclusively owning and operating the transmission
grid".1079
7.617. To us, the text of the Commission Opinion highlighted by Russia does raise a doubt as to
whether Amber Grid has been establish ed as the sole supplier of pipeline transmission services in
Lithuania. By stating that Amber Grid owns and operates "the entire" gas transmission system in
Lithuania and was established "exclusively" for that purpose, this text may be read as indicating
that no other TSO can provide pipeline transport services in Lithuania.
7.618. However, we must note that this evidence consists of a narrative of the Commission
Opinion with no established path showing that it is rooted in a legal text. While Russia further
contends that Lithuania's "Natural Gas Law requires a domestic TSO to own the country's
transmission assets" 1080, Russia does not point to any provision in that Law containing such
"requirement".1081 Russia also submits that "pursuant to the terms of its licence, [L ithuania's
State-owned TSO] supplies pipeline transport services in each of Lithuania's ten counties "1082, but
does not submit any evidence to buttress this allegation. In other words, in the absence of
evidence rooting the Commission Opinion's narrative in Lithuania's Law on Natural Gas or in any
other legal document, we feel reluctant to conclude, on the basis of this Commission Opinion's
narrative alone, that Amber Grid has been established as a monopoly supplier of pipeline transport
services in Lithuania. Moreover, as noted above with respect to Croatia, the fact that there is

1075 Russia's first written submission, paras. 219-220; and second written submission, para. 111.
1076 European Union's first written submission, para. 134.
1077 European Union's first written submission, paras. 135-136; and second written submission,
para. 23.
1078 Russia's first written submission, para. 219-220; and second written submission, para. 111.
1079 Commission Opinion of 23 March 2015 pursuant to Article 3(1) of Regulation (EC) No. 715/2009 and
Article 10(6) of Directive 2009/73/EC - Lithuania - Amber Grid, C(2015) 2135 final, (Commission Opinion on
the Certification of Amber Grid), (Exhibits EU-54/RUS-50), p. 1.
1080 Russia's second written submission, para. 111.
1081 We recall that, as explained by the Appellate Body, it is not sufficient for a complaining party to
"merely to file an entire piece of legislation and expect a panel to discover, on its own, what relevance the
various provisions may or may not have for a party's legal position." (See Appellate Body Report, Canada –
Wheat Exports and Grain Imports, para. 191).
1082 Russia's second written submission, para. 111.

currently only one supplier of pipeline transport services in Lithuania 1083 is not sufficient in and of
itself to conclude that this supplier has been established as a monopoly supplier of such services.
7.619. Russia does not explain nor submits evidence as to why, pursuant to the unbundling
measure, other suppliers of pipeline transport services cannot supply pipeline transport services in
Lithuania. While referring to the provi sions in Lithuania's Law on Natural Gas and Law on
Implementation, Russia does not explain how the OU model is of such a nature that it limits to
one, or a small number, the number of authorized TSOs in Lithuania. As explained by the Appellate
Body, "[a] prima facie case must be based on 'evidence and legal argument' put forward by the
complaining party in relation to each of the elements of the claim."1084
7.620. We have carefully reviewed the provisions on unbundling in Lithuania's Law on Natural Gas
and Implementa tion Law 1085, as well as the corresponding provisions in the Directive when
assessing Russia's claim under Article II:1 of the GATS .1086 We saw nothing in these rules
indicating that the unbundling measure implemented in Lithuania is of such a nature that it lim its
to one, or a small number, the number of service suppliers in Lithuania. Moreover, Russia has not
pointed to anything in Lithuania's law which would cause us to reach a different conclusion. We are
therefore unable to conclude that the unbundling measure in Lithuania's national implementing law
limits to one the number of service suppliers.
7.621. We turn to Russia's allegation that Lietuvos duju tiekimas is the sole supplier of "natural
gas supply services". 1087 Russia contends that this "constitutes a 'monopoly supplier of a service'
within the meaning of Article XXVIII(h) of the GATS", or "[a]lternatively, both Amber Grid and
Lietuvos duju tiekimas may be viewed as 'exclusive service suppliers' within the meaning of Article
XVI:2(a)".1088 As per Russia's explanati ons, Lietuvos duju tiekimas is a supplier of "natural gas
supply services" and we recall our conclusion above that natural gas "supply" or "supply services"
are not encompassed under sector 11.G, "Pipeline Transport" in the Schedule of Lithuania. 1089 We
further note that Russia has submitted no evidence in these proceedings regarding the
establishment of Lietuvos duju tiekimas as the alleged monopoly supplier of "natural gas supply
services". Therefore, we shall not give further consideration to Lietuvos duju tiekimas in our
assessment of whether Lithuania's unbundling measure breaches Article XVI:2(a) of the GATS.1090
7.622. In view of the foregoing, we find that Russia has not demonstrated that the unbundling
measure in the national implementing law of Lithuania impos es an impermissible quantitative
limitation on the number of service suppliers in the form of a monopoly or exclusive service
suppliers within the meaning of Article XVI:2(a) of the GATS. Hence, we conclude that Russia has
not demonstrated that the unbundl ing measure in the national implementing law of Lithuania is
inconsistent with Article XVI:2(a) of the GATS.
7.5.2.3 Russia's claims under Article XVI:2(e) of the GATS
7.5.2.3.1 Introduction
7.623. Russia submits that the unbundling measure in the national implementing laws of Cro atia,
Hungary and Lithuania restrict s or require s specific types of legal entity through which service
suppliers of other Members may supply pipeline transport services, contrary to Article XVI:2(e) of

1083 The European Union does not contest Russia's argument that Amber Grid is currently the only
pipeline transport service supplier in Croatia, but argues that Amber Grid has no exclusive right to create or
operate the transmission network. According to the European Union, an entity may connect new segments of
the transmission pipeline (if the infrastructure is compliant with existing infrastructure) and, thus, may operate
the transmission system or part thereof. (European Union's first written submission, para. 136).
1084 Appellate Body Report, US – Gambling, para. 140. (emphasis original)
1085 See sections 7.5.2.3 and 7.5.2.4 below.
1086 See section 7.5.1.3 above.
1087 Russia's first written submission, para. 220.
1088 Russia's first written submission, para. 220.
1089 See para. 7.338 above.
1090 For the same reason, we also decline to address Russia's allegation that "both Amber Grid and
Lietuvos duju tiekimas may be viewed as 'exclusive service suppliers' within the meaning of Article XVI:2(a)."
(Russia's first written submission, para. 220).

the GATS.1091 The European Union responds that the unbund ling requirement, as implemented in
the laws of Croatia, Hungary and Lithuania, is not a measure that falls within the scope of
Article XVI:2(e) of the GATS.1092
7.624. Pursuant to the relevant legal stan dard set out above in paragraphs 7.232 and 7.233, in
order to make a prima facie case of violation of Article XVI:2(e), Russia is required to demonstrate
that:
a. Croatia, Hungary and Lithuania have undertaken market access commitments in their
respective GATS Schedules with respect to the sector(s) and mode(s) identified by
Russia; and that
b. The unbundling measure in the national implem enting laws of Croatia, Hungary and
Lithuania constitutes an impermissible limitation within the meaning of Article XVI:2(e)
of the GATS.
7.625. With respect to the first element, we concluded that Croatia and Lithuania have
undertaken a full market access commit ment for mode 3 in sector 11.G, "Pipeline Transport
[Services]". We further concluded that, for the same sector and mode, Hungary has undertaken
not to maintain any limitation within the meaning of Article XVI:2(e) of the GATS. Nonetheless, in
the horizontal section of its Schedule, Hungary has inscribed a limitation stipulating that service
suppliers establishing a commercial presence in Hungary "should take the form of limited liability
company, joint -stock company or representative office", and " [i]nitial entry as branch is not
permitted". We found that this limitation may have relevance for the purpose of assessing Russia's
claim under Article XVI:2(e) of the GATS.1093
7.626. Accordingly, we turn now to the second element of the legal standard, namely whe ther the
unbundling measure in the national implementing laws of Croatia, Hungary and Lithuania breaches
Article XVI:2(e) of the GATS by impermissibly restricting or requiring specific types of legal entity
or joint-venture through which a service supplier may supply a service.
7.5.2.3.2 Analysis by the Panel
7.5.2.3.2.1 Introduction
7.627. We note at the outset that this is the first time that Article XVI:2(e) of the GATS is invoked
in a WTO dispute. Article 3.2 of the DSU directs us to interpret this provision "in accordance with
customary rules of interpretation of public international law". In line with the principles of treaty
interpretation in Article 31 of the Vienna Convention, we shall interpret Article XVI:2(e) of the
GATS in accordance with the ordinar y meaning to be given to the terms of this provision in their
context, and in the light of the object and purpose of the GATS and the WTO Agreement. We may
have recourse to supplementary means of interpretation in accordance with Article 32 of the
Vienna C onvention to confirm the meaning resulting from the application of Article 31, or to
determine the meaning of the terms if we conclude that the interpretation according to Article 31
leaves the meaning ambiguous or obscure, or leads to a result that is man ifestly absurd or
unreasonable.
7.628. According to Russia, Article XVI:2(e) defines measures as prohibited based on their nature
or characteristics, and must be interpreted broadly.1094 Russia submits that dictionary definitions of
the term "legal entity" do not de scribe or in any way restrict how a "legal entity" must be formed,
organized or structured. 1095 Russia further alleges that Article XVI:2(e) broadly prohibits all
measures that restrict the ability of service suppliers to supply services, whether through "jur idical
persons" directly or through other specific "forms of commercial presence". 1096 For Russia, this

1091 Russia's first written submission, heading VII.D and para. 178; and second written submission,
para. 102.
1092 European Union's first written submission, para. 119.
1093 See para. 7.360 above.
1094 Russia's first written submission, para. 154 and heading VII.D.1.a; and second written submission,
para. 103.
1095 Russia's first written submission, para. 157.
1096 Russia's first written submission, para. 176.

prohibition applies to measures that require total divestment of control over the legal entity
through which that service supplier would otherwise supply t he service.1097 Russia urges the Panel
to reject the interpretation proposed by the European Union because it would , in Russia's view,
create a loophole for Members to enact and implement coercive measures, such as unbundling.1098
7.629. The European Union distinguishe s the "existence" of an entity, as created by law, from
"qualitative requirements" that may be attached to that entity regarding its formation,
organization or structure. 1099 For the European Union, Article XVI:2(e) prohibits measures that
restrict or require specific types of legal entity, but does not cover measures that lay down
characteristics of those types of legal entities and how these entities can do business, for instance
the different activities they can or cannot deploy simultaneously.1100
7.630. We recall t hat, in sectors where specific commitments are undertaken, Article XVI:2(e)
prohibits – unless they are scheduled – measures which "restrict or require specific types of legal
entity or joint venture through which a service supplier may supply a service." We understand that
the parties' disagreement focuses on the meaning and scope of the terms "specific types of legal
entity" in Article XVI:2(e).
7.631. The term "legal entity" is not defined in the GATS and we start our analysis with its
ordinary meaning. An "ent ity" is defined as "[e]xistence, being, as opp. to non -existence; the
existence of a thing as opp. to its qualities or relations" 1101 or "an organization (as a business or
governmental unit) that has an identity separate from those of its members". 1102 The term "legal"
means "[o]f or pertaining to law; falling within the province of law". 1103 Continuing our textual
analysis with the phrase "specific types of" which precedes the phrase "legal entity", we note that
the adjective "specific" means "[c]learly or explicit ly defined; precise, exact; definite". 1104 The
noun "type" is defined as "[a] class of people or things distinguished by common essential
characteristics; a kind, a sort."1105
7.632. Hence, based on the ordinary meaning of relevant terms, Article XVI:2(e) appears to cover
measures which restrict or require clearly defined kinds of organization falling within the province
of law. Measures falling within the purview of Article XVI:2(e) do not "restrict or require" a "legal
entity" itself, but rather, "restrict or require " clearly defined kinds of legal entity. Thus, measures
falling within the purview of Article XVI:2(e) do not generally restrict a legal entity from doing
something, nor do they require a legal entity to do something. Rather, such measures restrict or
require clearly defined kinds of legal entity through which a service supplier may supply a service.
To us, the ordinary meaning of the terms "specific types of legal entity" indicates that measures
falling within the purview of Article XVI:2(e) concern the legal form of a legal entity.1106
7.633. The remainder of Article XVI:2(e) refers to "specific types of … joint -venture" which
measures falling within the scope of that provision cannot restrict or require. A joint -venture is
defined as "[a] business undertaking by two or more persons engag ed in a single defined

1097 Russia's first written submission, paras. 157 and 176-177; and second written submission,
paras. 103-104.
1098 Russia's second written submission, para. 108.
1099 European Union's first written submission, para. 94.
1100 European Union's first written submission, paras. 94 and 100; and second written submission,
para. 11.
1101 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 1, p. 843.
1102 Merriam Webster online, at http://www.merriam-webster.com/dictionary/entity, visited on
14 November 2016.
1103 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 1, p. 1575.
1104 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 2944.
1105 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 3392.
1106 Japan reaches a similar conclusion. According to Japan, "[t]he term 'types of legal entity' … can only
be properly interpreted as the corporate form of the entity itself … not the broader structure of the group of
companies, or the assignment of ownership or control." (See Japan's third-party submission, para. 14; and
response to Panel question No. 9, para. 25). The European Union agrees with the interpretation proposed by
Japan. (See European Union's second written submission, para. 12).

project."1107 We note that the parties concur that a joint venture could be viewed as a specific type
of legal entity.1108 Finally, the expression "through which a service supplier may supply a service"
in Article XVI:2(e) indicates, in ou r view, that this limitation concerns primarily the commercial
presence mode of supply. Hence, nothing in the remainder of Article XVI:2(e) causes us to
question the conclusion reached in the previous paragraph.
7.634. As observed by both parties, the definition of "juridical person" contained in
Article XXVIII(l) of the GATS provides relevant context for the interpretation of Article XVI:2(e).
Pursuant to that provision,
"juridical person" means any legal entity duly constituted or otherwise organized
under applicable law, whether for profit or otherwise, and whether privately -owned or
governmentally-owned, including any corporation, trust, partnership, joint venture,
sole proprietorship or association.
7.635. Both parties concur that, in its latter part, Article XXVIII (l) lists certain "types of legal
entity"1109 and that this list is non-exhaustive, as evidenced by the use of the word "including".1110
7.636. We find it instructive to consider the ordinary meaning of the terms "corporation", "trust",
"partnership", "joint venture", "sole proprietorship" or "association" in Article XXVIII(l).
7.637. A "corporation" is "[a]n entity (usu. a business) having authority under law to act as a
single person distinct from the shareholders who own it and having rights to issue stock and exist
indefinitely."1111 A "trust" is "the right, enforceable solely in equity, to the beneficial enjoyment of
property to which another person holds the legal title; a property interest held by one person (the
trustee) at the request of another (the settlor) for the be nefit of a third party (the
beneficiary)."1112 A "partnership" is a "voluntary association of two or more persons who jointly
own and carry on a business for profit." 1113 A "sole proprietorship" is "a business in which one
person owns all the assets, owes all the liabilities, and operates in his or her personal capacity."1114
An "association" is an "unincorporated organization that is not a legal entity separate from the
persons who compose it."1115
7.638. To us, a review of these definitions indicates that the different types of legal entity listed in
a non-exhaustive manner in Article XXVIII(l) are identified by reference to the possible legal form
that those entities may take.
7.639. Article XXVIII(l) also contains other elements which may potentially shed light on the
terms "sp ecific types of legal entity". Turning to the phrase, "duly constituted or otherwise
organized under applicable law", we observe that "constitute" is defined as "make up, go to form"
and "[e]stablish (an institution etc.); give legal form to." 1116 "Duly" mean s "[i]n due manner,

1107 Black's Law Dictionary, 9th ed., B.A. Garner (ed.) (West Group, 2009), p. 915.
1108 Article XXVIII(l) of the GATS contains the terms "legal entity" and "joint venture", but, unlike
Article XVI:2(e), Article XXVIII(l) does not mention the term "joint venture" alongside the term "legal entity"
(or as alternatives). Pursuant to Article XXVIII(l), a joint venture would appear to be a type of legal entity. In
response to a question by the Panel, both parties submit that there is no material difference between the
concepts of "legal entity" and "joint venture" as used in, respectively, Articles XVI:2(e) and XXVIII(l) of the
GATS. Both parties also consider that a joint venture is a type of legal entity. (See Russia's response to Panel
question No. 88, paras. 387-388; and European Union's response to Panel question No. 88, paras. 225 and
227). Russia considers that "joint venture" "is of less relevance in this proceeding". (See Russia's first written
submission, fn 214).
1109 Russia's first written submission, para. 167; and European Union's first written submission,
para. 99.
1110 Russia's response to Panel question No. 88, para. 387; and European Union's second written
submission, para. 13.
1111 Black's Law Dictionary, 9th ed., B.A. Garner (ed.) (West Group, 2009), p. 391.
1112 Black's Law Dictionary, 9th ed., B.A. Garner (ed.) (West Group, 2009), p. 1647.
1113 Black's Law Dictionary, 9th ed., B.A. Garner (ed.) (West Group, 2009), p. 1230.
1114 Black's Law Dictionary, 9th ed., B.A. Garner (ed.) (West Group, 2009), p. 1520.
1115 Black's Law Dictionary, 9th ed., B.A. Garner (ed.) (West Group, 2009), p. 141.
1116 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 1, p. 500.

order, form or season; …". 1117 "Organized" is defined as "[f]ormed into a whole with
interdependent parts; coordinated so as to form an orderly structure." 1118 To our mind, the
expression "duly constituted or otherwise organized under applica ble law" conveys the idea that
the "specific types of legal entity" are established or given legal form, or in another way formed
under "applicable law", namely under the domestic law applicable in the Member concerned.
7.640. Turning to the phrase "whether for p rofit or otherwise, and whether privately -owned or
governmentally-owned" in Article XXVIII(l), we note that, according to the European Union, these
elements "indicate possible characteristics of legal entities" as opposed to the "types of" such
entities which are found in the latter part of the definition. 1119 Russia does not comment on this
issue. We can agree with the European Union that terms such as "for profit or otherwise", or
"privately-owned" vs. "governmentally -owned" may refer to certain characterist ics of a legal
entity. However, depending on applicable domestic law, we do not exclude that these
characteristics could also relate to the legal form of an entity. We are therefore reluctant to
endorse in the abstract the categorization proposed by the Eu ropean Union with respect to these
particular elements of the definition contained in Article XXVIII(l). In any event, the phrase
"whether for profit or otherwise, and whether privately -owned or governmentally -owned" in
Article XXVIII(l) does not cause us to question our analysis so far.
7.641. Our contextual analysis based on Article XXVIII(l) of the GATS indicates that the legal
entities listed in a non -exhaustive manner in that provision refer to different types of legal entity
as distinguished by their legal f orm. Moreover, those legal entities are established or given legal
form under applicable domestic law in the Member concerned.1120
7.642. In light of the foregoing, our interpretation of Article XVI:2(e) based on the ordinary
meaning of relevant terms read in their context leads us to conclude that measures falling under
Article XVI:2(e) restrict or require the legal form of a legal entity through which a service supplier
may supply a service under the applicable law of the Member concerned . Such measures do not
generally restrict legal entities from doing something, nor do they require legal entities to do
something. In other words, the phrase "restrict or require specific types of legal entity" in
Article XVI:2(e) does not cover any measure that may affect a legal entity, either by requiring a
legal entity to do something or by restricting a legal entity from doing something. Those "specific
types of legal entities" are established or given legal form under applicable domestic law in the
Member where the service is supplied.1121 The application of Article XVI:2(e) calls for a case -by-
case approach and it is up to the complaining Member to show, with reference to applicable
domestic law in the Member concerned, that the measure at issue "restrict[s] or require[s] specifi c
types of legal entity."
7.643. Having reached our conclusion on what is, in our view, the proper scope of
Article XVI:2(e), we wish nevertheless to address further arguments presented by Russia on this
issue to ensure that nothing in these arguments causes us to question our interpretation.
7.644. While agreeing that the non -exhaustive list in Article XXVIII(l) identifies "certain types of
'legal entity' by reference to business or organizational form that a 'juridical person' might
adopt"1122, Russia contests the idea t hat Article XVI:2(e) would prohibit only measures that
expressly identify the type or types of legal entity that a service supplier may or may not

1117 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 1, p. 776.
1118 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 2013.
1119 See European Union's first written submission, para. 99.
1120 We note Russia's argument that the entries found in the horizontal sections of the Schedules of
Croatia and Hungary may serve as relevant context for the purpose of interpreting Article XVI:2(e). (Russia's
first written submission, paras. 173-174). In our view, it is not necessary to address this argument in further
detail for the purpose of our contextual interpretation. We would like to recall in this regard that, while
Members' Schedules are an integral part of the GATS, each Schedule "has its own intrinsic logic". (Appellate
Body Report, US – Gambling, para. 182). While this word of caution by the Appellate Body concerned the use
of Members' Schedules as context when interpreting an entry in a particular Schedule, it should also be kept in
mind when interpreting a provision of the GATS.
1121 To our mind, Members have left themselves a degree of flexibility to articulate, in their respective
jurisdictions, the specific types of legal entity through which service suppliers can supply services under the
GATS.
1122 Russia's first written submission, para. 167.

establish.1123 Based on the alleged "broad ordinary meaning" of the term "legal entity", Russia
asserts that using that term to define prohibited measures in Article XVI:2(e) "should be presumed
as intending a broad interpretation of the provision." 1124 While the term "legal entity" may be
viewed as having a "broad" ordinary meaning, we do not believe that this term al one defines the
scope of Article XVI:2(e) or, in Russia's words, "defines prohibited measures" in that provision. To
us, an important flaw in Russia's proposed interpretation is that, by focusing on the term "legal
entity", Russia fails to give meaning and effect to the terms "specific types of" which precedes the
term "legal entity". However, as underlined by the Appellate Body, "[o]ne of the corollaries of the
'general rule of interpretation' … is that interpretation must give meaning and effect to all th e
terms of the treaty."1125
7.645. Russia also refers to various GATS provisions (e.g., Article XXVIII(d), (g) and (l) and
footnote 121126) which, in its view, demonstrate that "the GATS recognizes various means by which
a 'service supplier (i.e. the juridical person)' (in the words of footnote 12) of one Member may
supply services 'through commercial presence' in the territory of another Member – as well as the
means by which that Member may improperly seek to restrict or require the supply of that
service."1127 For Russi a, "the various 'forms of commercial presence' are each 'specific types of
legal entity', all of which 'shall … be accorded the treatment provided for service suppliers under
the Agreement."1128 Russia concludes
Members can and will distinguish an equally broad range of clearly or explicitly defined
common or essential characteristics (from the definitions of "specific" and "type") to
apply in seeking to design measures that restrict or require the supply of a service
through commercial presence in their terr itory. In accordance with the express terms
of Article XVI:2(e), however, absent a properly scheduled limitation, any such
measure is prohibited from restricting or requiring the "specific types of legal entity"
(i.e. "forms of commercial presence") throug h which a service supplier may supply
services in another Member's territory.1129
7.646. To us, Russia seems to blend different GATS concepts ("types of legal entity", "forms of
commercial presence", "service supplier", "juridical person") and this is potentially p roblematic as
we do not believe that these concepts are synonymous or can be used interchangeably under the
GATS. Although, conceivably, the drafters of the GATS could have used the expression "forms of
commercial presence" in Article XVI:2(e), they chose instead the phrase "specific types of legal
entity". We therefore do not consider it appropriate to use the expressions "specific types of legal
entity" and "forms of commercial presence" interchangeably.
7.647. For Russia, Article XVI:2(e) "broadly prohibits all measures that restrict the ability of
service suppliers to supply services, whether through 'juridical persons' directly or through other
specific 'forms of commercial presence'." 1130 Russia also argues that Article XVI:2(e) covers
measures "designed" to res trict service suppliers from establishing one or more type(s) of legal
entity, as well as measures that "have the effect" of requiring specific types of legal entity by
restricting the ability of service suppliers to establish other types without expressly identifying any
of the entities in question.1131
7.648. In view of our conclusion above regarding the proper scope of Article XVI:2(e), w e are not
persuaded by Russia's arguments. We share Japan's concern that, pursuant to Russia's proposed
interpretation, any mea sure indirectly resulting in a market access limitation may fall under the

1123 Russia's response to Panel question No. 87, para. 376.
1124 Russia's first written submission, para. 158.
1125 Appellate Body Report, US – Gasoline, p. 23, DSR 1996:I, 3, at p. 21.
1126 These provisions are cited above in paras. 7.432, 7.435, 7.634 and 7.437, respectively.
1127 Russia's first written submission, paras. 168-170.
1128 Russia's first written submission, para. 171. See also Russia's response to Panel question No. 87,
para. 378.
1129 Russia's first written submission, para. 172 (emphasis original); and second written submission,
para. 107.
1130 Russia's first written submission, para. 176. (emphasis original)
1131 Russia's response to Panel question No. 87, para.381; second written submission, para. 106; and
opening statement at the second meeting of the Panel, para. 5.

scope of Article XVI:2.1132 Like the European Union 1133, we find it difficult to reconcile Russia's
proposed interpretation with the case -law under Article XVI:2. We recall that previous panels
stressed that "the scope of the market access obligation does not extend generally to 'all measures
affecting the supply of services'", but, applies, instead, "to six carefully defined categories of
measures …" 1134, which form a closed or exhaustive li st, as indicated in the chapeau of
Article XVI:2 which provides that the six measures listed below "are defined as". 1135 As explained
by the panel in Argentina – Financial Services "the list of measures in the six subparagraphs of
Article XVI:2 … also fulfils the function of establishing clearly, exactly and precisely the types of
limitation on market access that are prohibited and hence may not be maintained or adopted in
those sectors where a Member had adopted specific commitments, unless it has specificall y
mentioned this possibility in its Schedule. "1136 We also agree with this panel that " any
interpretation of Article XVI:2 of the GATS must give effect to each of the six subparagraphs of the
provision."1137
7.649. Having considered Russia's arguments, we see nothing that causes us to modify the
conclusion reached above in paragraph 7.642.
7.650. We find that our interpretation of Article XVI:2(e) is consistent with the object and purpose
of the GATS as reflected in the preamble of the Agreement, which confirms, inter alia, Members'
intention to expand trade in services " under conditions of transparency" 1138 and underlines "the
right of Members to regulate, and to introduce new regulations , on the supply of services … in
order to meet national policy objectives …". 1139 As observed by a previous panel, "Members retain
the right to regulate in order to meet their national policy objectives, subject to relevant GATS
disciplines, Article VI in par ticular, including in those sectors where they have made specific
commitments under Article XVI of the GATS". 1140 Our interpretation of Article XVI:2(e) respects
Members' right to regulate, including in sectors where they have made specific commitments.
7.651. Our interpretation pursuant to Article 31 of the Vienna Convention does not leave the
meaning of those terms ambiguous or obscure, nor does it lead to a result which is manifestly

1132 Japan considers that "Russia, in this case, improperly attempts to expand this list to include
measures that indirectly result in the market access limitations listed under Article XVI:2." (See Japan's third-
party submission, para. 2). (emphasis original) This concern is also shared by the European Union which
considers that Russia's proposed interpretation would cover "any measure that somehow would affect the
possibility of a service supplier from one WTO Member to provide services through commercial presence in a
host WTO Member." (See European Union's second written submission, para. 9).
1133 According to the European Union, Russia's proposed interpretation of Article XVI:2(a) "ignores past
WTO jurisprudence that has stressed the exhaustive nature of the list of measures in Article XVI:2, precisely to
respect the delicate balance carefully sought by the drafters of the GATS between the right to regulate and the
principle of trade liberalization". (European Union's second written submission, para. 11 (referring to Panel
Reports, US – Gambling, para. 6.298; China – Publications and Audiovisual Products, para. 7.1353; China –
Electronic Payment Services, para. 7.629; and Argentina – Financial Services, para. 7.418)). Similarly, for
Japan, a broad interpretation of Article XVI:2(e) "would excessively restrict the Members' 'right . . . to
regulate, and to introduce new regulations, on the supply of services within their territories in order to meet
national policy objectives', which is expressly recognized by WTO Members in the fourth recital of the GATS."
(See Japan's third-party submission, para. 5).
1134 Panel Report, China – Electronic Payment Services, para. 7.652. We also recall that, when
examining a claim under Article XVI:2(a) of the GATS, the Appellate Body stated that "the words 'in the form
of' [in Article XVI:2(a)] should [not] be ignored or replaced by the words 'that have the effect of'". (Appellate
Body Report, US – Gambling, para. 232). This statement indicates, in our view, that, while cautioning that the
words used in Article XVI:2(a) (in casu "in the form of") should not be read as "prescribing a rigid mechanical
formula", the Appellate Body nonetheless considered that a broad "effect" test was inappropriate under this
provision. (Ibid. para. 231). While the Appellate Body's pronouncement was made in relation to a particular
subparagraph of Article XVI:2, we believe that its gist should equally guide the assessment of other
subparagraphs contained in that provision.
1135 Panel Reports, China – Publications and Audiovisual Products, para. 7.1353; China – Electronic
Payment Services, para. 7.629 and 7.652; and Argentina – Financial Services, para. 7.418. We note that the
word "define" means "[d]etermine or indicate the boundary or extent of … Set out precisely, describe or
explain the nature, properties, scope, or essential qualities of (a thing or concept)". (Shorter Oxford English
Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol. 1, p. 629).
1136 Panel Report, Argentina – Financial Services, para. 7.418.
1137 Panel Report, Argentina – Financial Services, para. 7.420.
1138 Second recital of the GATS preamble.
1139 Fourth recital of the GATS preamble.
1140 Panel Report, Argentina – Financial Services, para. 7.423. See also Panel Report, US – Gambling,
paras. 6.314-6.317.

absurd or unreasonable. Accordingly, we do not find it necessary to resort to su pplementary
means of interpretation under Article 32 of the Vienna Convention.
7.5.2.3.2.2 Whether the measures at issue constitute impermissible limitations within
the meaning of Article XVI:2(e)
7.652. Russia claims that the unbundling measure in the national implementing laws of Croatia,
Hungary and Lithuania is inconsistent with Article XVI:2(e) as each unbundling model improperly
restricts or requires specific types of legal entity through which service suppliers may supply
transmission services.1141
7.653. The European Union res ponds that the unbundling requirement, as implemented in the
laws of Croatia, Hungary and Lithuania, is not a measure that falls within the scope of
Article XVI:2(e) of the GATS.1142
7.654. The question before the Panel is whether Russia has made a prima facie case that the
unbundling measure implemented in the national laws of Croatia, Hungary and Lithuania breaches
Article XVI:2(e) of the GATS by impermissibly restricting or requiring specific types of legal entity
or joint-venture through which a service supplier may supply a service.
7.655. We begin our analysis with Russia's claim against the national implementing law of Croatia,
and will then turn to the national implementing laws of Hungary and Lithuania, respectively.
Croatia
7.656. Croatia has implemented the ISO and ITO models, in addition to the OU model.
7.657. With respect to the OU model, Russia claims that Article 14 of Croatia's Gas Market Act is
inconsistent with Article XVI:2(e). Russia points to Article 14(1) which stipulates that "[t]he
transmission system operat or must be the owner of the transmission system and shall be
organized as a legal entity, independently of other activities in the gas sector". 1143 Hence, Russia
submits that "Article 14(1) of Croatia's Gas Market Act expressly requires that the TSO be
'organized as a legal entity', but fundamentally restricts how that legal entity may be
organized."1144
7.658. The European Union responds that, by merely focusing on the words "shall be organized as
a legal entity" in Article 14(1) of Croatia's Gas Market Act, Russia ig nores that the TSO can take
the form of any type of legal entity. For the European Union, ownership unbundling in Croatia's law
merely requires that the TSO be "independent of other activities in the gas sector".1145

1141 Russia's first written submission, paras. 180 (Croatia), 194 (Hungary) and 203 (Lithuania);
response to Panel question No. 5, para. 24; and second written submission, para. 107.
1142 European Union's first written submission, para. 119.
1143 Russia's first written submission, paras. 182-183, (referring to Croatia's Gas Market Act (Exhibit
RUS-45), Article 14(1)).
1144 Russia's first written submission, para. 183.
1145 European Union's second written submission, para. 15. We also note the European Union's
argument that the WTO Working Party on Domestic Regulation has identified measures very similar to the
unbundling requirement, i.e. prohibition to combine certain activities, as falling within the scope of Article VI:4
of the GATS and not within the scope of Article XVI. (See European Union's first written submission, para. 100
and second written submission, para. 13, (referring to Working Party on Domestic Regulation, Informal Note by
the Secretariat, "Examples of measures to be addressed by Disciplines under GATS Article VI:4",
JOB(02)/20/Rev.10 (31 January 2005), (Exhibit EU-40))). The two examples cited by the European Union are
"[l]icensing is conditional upon the observance of the prohibition for service suppliers in the wholesale
subsector to undertake retailing activities simultaneously" and "[l]icense is conditional upon the observance of
the prohibition for service suppliers acting in the fixed telephony subsector to undertake activities in the mobile
telephony subsector simultaneously". Commenting on the evidence submitted by the European Union, Russia
replies that the measures described by the Working Party do not appear to be particularly similar to the
European Union's unbundling regime and further notes that the Working Party declined to reach any conclusion
about the GATS provisions under which the various measures should fall. (See Russia's opening statement at
the second meeting of the Panel, para. 19).

7.659. We agree with the European Union that, by merely requiring that a TSO "shall be
organized as a legal entity", Article 14(1) does not restrict or require the legal form through which
a pipeline transport service supplier may supply services in Croatia. To our mind, pursuant to
Article 14(1) of Croatia's Gas Market Act, a TSO can take any legal form as long as it is organized
independently from other activities in the gas sector. Similarly, merely asserting that a TSO is a
"legal entity"1146 does not amount to a demonstration that the OU model in Artic le 14 of Croatia's
Gas Market Act "restricts or requires a specific type of legal entity" within the meaning of
Article XVI:2(e). In fact, it rather connotes that no specific type of legal entity is restricted or
required.
7.660. Russia further points to Article s 14(3)1147 and 14(4)1148 of Croatia's Gas Market Act, but
does not substantiate how these particular provisions allegedly breach Article XVI:2(e).1149
7.661. We observe that Article 14(3) enforces the independence requirement between, on the one
hand, the TSO and, on th e other hand, the production or supply undertaking. Pursuant to that
provision, the independence of the TSO "shall be ensured in a manner that prevents the same
person or persons to simultaneously perform" certain activities, including (i) "directly or ind irectly
control" the production or supply undertaking and "directly or indirectly control or execute other
rights" over the TSO; and (ii) "directly or indirectly control" the TSO, and "directly or indirectly
control or execute other rights" over the produc tion or supply undertaking. Article 14(4) applies
the prohibitions in Article 14(3) to "the use of voting rights", "the right to appoint members of the
supervisory board, members of the management board or any other body representing the legal
entity" or " owning a majority s take." These two provisions address therefore the combination of
activities, including services, that an entity can or cannot carry out simultaneously by preventing
an entity to control (or "execute other rights over") another entity. Th ese provisions, however, do
not speak to the legal form of either entity. Hence, we see nothing in Articles 14(3) and 14(4)
which would "restrict or require specific types of legal entity" through which a service supplier may
supply pipeline transmission services in Croatia.
7.662. Russia also argues that, "pursuant to Article 14, a VIU is required to fully divest control (or
is restricted from acquiring control), including majority ownership, of its TSO."1150 Russia argues:
Article 14 restricts – to the point of non existence – the specific types of legal entity
through which a foreign VIU may supply transmission services in Croatia. In other
words, the service supplier is prohibited from providing transmission services through

1146 Russia's first written submission, para. 183.
1147 Article 14 is entitled "Separation of the transmission system and the transmission system operator".
Article 14(3) stipulates that:
The independence of the transmission system operator shall be ensured in a manner that
prevents the same person or persons to simultaneously perform one of the following activities:
1. directly or indirectly control the energy undertaking performing any of the activities of
production, trade or supply of gas and the activity of the production of natural gas, and directly
or indirectly control or execute other rights over the transmission system operator or the
transmission system,
2. directly or indirectly control the transmission system operator or the transmission system, and
directly or indirectly control or execute other rights over the energy undertaking performing any
of the activities of production, trade, supply and the activity of the production of natural gas,
3. appoint members of the supervisory board, members of the management board or any other
body which represents the energy undertaking in case of transmission system operator or the
transmission system, and directly or indirectly control or execute other rights over the energy
undertaking performing any of the activities of production, trade or supply and the activity of the
production of natural gas and
4. act as a member of the supervisory board, the management board or any other body which
represents the energy undertaking or performs any of the activities of production, trade or
supply and the activity of the production of natural gas, transmission system operator or
transmission system.
1148 Article 14(4) stipulates as follows:
The prohibitions from paragraph 3 of this Article shall in particular apply to:
1. the use of voting rights,
2. the right to appoint members of the supervisory board, members of the management board or
any other body representing the legal entity or
3. owning a majority stake.
1149 Russia's first written submission, para. 182.
1150 Russia's first written submission, para. 184.

any "form of commercial presence" in Cro atia. Similarly, the TSO may not be
controlled, including through majority ownership, by a foreign VIU.1151
7.663. As noted in paragraph 7.646, the concepts "specific types of legal entity" and "forms of
commercial presence" are not synonymous and cannot be used interchangeably. We also recall our
conclusion above, in paragraph 7.642, that Article XVI:2(e) covers measures which restrict or
require the legal form a service supplier may take to supply a service under the applicable law of
the Member concerned, but does not cover any measure which affects a legal entity, either by
requiring a legal entity to do something or by restricting a legal entity from doing something. To
us, the mere fact that an entity may (or may not) own or control another entity is not sufficient to
make the former entity (or the l atter) a "specific type of legal entity" within the meaning of
Article XVI:2(e) because ownership or control per se does not speak to the legal form of either
entity.1152 As noted above, Article 14 of Croatia's Gas Market Act restricts the combination of
activities, including services, that an entity can or cannot carry out simultaneously in Croatia 1153,
but it does not address the legal form of the entities concerned.1154
7.664. Moreover, if Russia is to be understood as arguing that, by preventing a VIU from
supplying c ertain services, the measure at issue indirectly "restricts the specific type of legal
entity" through which such service may be supplied, acceptance of Russia's argument would mean
in fine that any measure affecting the supply of a service through commerc ial presence could fall
under Article XVI:2(e). We explained above why, in our view, Russia's proposed interpretation of
Article XVI:2(e) is incorrect. We recall that, as explained by a previous panel, "the scope of the
market access obligation does not ex tend generally to 'all measures affecting the supply of
services'", but applies "to six carefully defined categories of measures". 1155 We also refer to our
conclusion above that Article XVI:2(e) covers measures which restrict or require the legal form a
service supplier may take to supply a service under the applicable law of the Member concerned.
Thus, while a measure restricting the types of service that a service supplier is allowed to supply in
the host Member may "affect trade in services", it is not, for that reason, a measure falling within
the "carefully defined" scope of Article XVI:2(e).

1151 Russia's first written submission, para. 184. See also Russia's second written submission, para. 107.
Pursuant to Article 3(55) of Croatia's Gas Market Act, a VIU is "a gas undertaking or a group of undertakings
under the direct or indirect control of the same person or persons and performing at least one of the following
activities: transmission of gas, distribution of gas, storage of gas and operating LNG facility and one of the
following activities: production, trade or supply of gas, or production of natural gas". (Croatia's Gas Market Act,
(Exhibit RUS-45), Article 3(55)). We note that Russia does not further substantiate why, in its view, a VIU is a
specific type of legal entity within the meaning of Article XVI:2(e). (Russia's first written submission,
para. 183).
1152 We note that Japan disagrees with Russia's view that "measures restricting the vertical structure of
a service supplier (e.g., the structure of a group of companies, or the relationship of ownership or control –
through capital or management – in a group of companies) in the pipeline sector would be prohibited under
GATS Article XVI:2(e)". For Japan, Article XVI:2(e) does not address "the broader structure of the group of
companies, or the assignment of ownership or control." (Japan's third-party submission, paras. 13-14; and
response to Panel question No. 9, paras. 24-25. See also European Union's second written submission,
para. 12).
1153 We also recall that, as noted above in our assessment of Russia's claim against the unbundling
measure in the Directive, it is not entirely accurate to conclude that the OU model prevents a VIU from
supplying its pipeline transport services to the EU market through a commercial presence per se. Rather, we
find it more accurate to conclude that the OU model imposes the legal necessity for VIUs to make a choice
between continuing to perform any of the functions of production or supply, on the one hand, or continuing to
supply pipeline transport services through commercial presence, on the other hand. However, this choice
relates to the combination of services that an entity may or may not supply simultaneously and, for the
reasons explained above, this kind of measure does not fall within the scope of Article XVI:2(e) of the GATS.
1154 This view is also shared by Japan:
[U]nbundling requirements by Croatia, Hungary and Lithuania in this case concern the
combination of services (e.g., supply and transmission, or operating and owning) that a group of
companies having a certain vertical structure can provide, regardless of the corporate form of the
individual companies themselves. In other words, the unbundling measure s do not restrict the
corporate structure of the service supplier. In fact, a s ervice supplier may belong to a VIU as
long as the other companies in the same VIU do not engage in the restricted combination of
services. (Japan's third -party submission, para. 15; and response to Panel question No. 9,
para. 26).
1155 Panel Report, China – Electronic Payment Services, para. 7.652.

7.665. On the basis of the foregoing, we find that Russia has not demonstrated that the OU model
implemented in Croatia's national law restricts or requires the "specific ty pes of legal entity"
through which a service supplier may supply pipeline transport services in Croatia.
7.666. Concerning the ISO model, Russia challenges Articles 15 to 17 of Croatia's Gas Market Act.
Russia's arguments with respect to how these different provi sions violate Article XVI:2(e) are
succinct. Russia refers to the definition of the "independent system operator" contained in the Act
on the Regulation of Energy Activities 1156 and argues that, pursuant to that definition, the VIU
must "relinquish control" of the TSO to the ISO. According to Russia, as per Article 151157, "the VIU
is required to arrange a separate legal entity to supply the services through commercial presence
in the form of an ISO."1158
7.667. We recall that, under the ISO model, the TSO, i.e. the pipel ine transport service supplier,
is required to undergo ownership unbundling, while the VIU can continue to own the transmission
system.
7.668. Pursuant to Article 15(3)1 of Croatia's Gas Market Act, the ISO must therefore "meet[] all
the requirements of article 14(3)" of the same Act. As observed above, the mere requirement that
a legal entity be "established as an independent company" does not speak to the legal form of that
legal entity.1159 By requiring the VIU to relinquish control of the TSO, this provision sec ures the
separation between two entities, namely the VIU – which owns the transmission system – and the
ISO which operates that transmission system, i.e. which supplies pipeline transport services. As
observed above with respect to the OU model in Croatia' s Gas Market act, a TSO can take any
legal form as long as it is organized independently from other activities in the gas sector; hence,
this provision addresses the combination of activities, including services, that an entity can or
cannot carry out simultaneously. Moreover, the mere fact that an entity may (or may not) own or
control another entity is not sufficient to make the former entity (or the latter) a "specific type of
legal entity" within the meaning of Article XVI:2(e) because ownership or cont rol per se does not
speak to the legal form of either entity. Thus, Article 15 of Croatia's Gas Market Act is not a
measure restricting or requiring the "specific types of legal entity" through which a service supplier
may supply a service within the meaning of Article XVI:2(e).

1156 Pursuant to Article 3(7) of the Act on the Regulation of Energy Activities, an ISO is "an independent
operator of a transmission/transport system, established as an independent company that carries out the
activities of a transmission/transport system operator, whereas the facilities of a transmission/transport
network remain in the ownership of a vertically integrated undertaking." (Croatia's Act on the Regulation of
Energy Activities of 25 October 2012, (Croatia's Act on the Regulation of Energy Activities), (Exhibit RUS-46),
Article 3(7)).
1157 Article 15, entitled "Requirements for designating an independent system operator", provides as
follows:
(1) Notwithstanding the provisions of Article 14 of this Act, the Agency may, at the proposal of
the owner of the transmission system or the Agency, designate an independent system operator.
(2) The certification of the independent system operator shall be performed by the Agency under
the conditions and in the manner prescribed by this Act.
(3) An independent system operator may be designated only if the following conditions are met:
1. the proposed operator meets all the requirements of article 14(3) of this Act,
2. the proposed operator has the financial, material and technical capacity and staff necessary
for the performance of its duties,
3. the proposed operator has undertaken to harmonize its system with the ten-year development
plan of the transmission system monitored by the Agency,
4. the proposed operator has p roven its ability to meet obligations as set out in Regulation (EC)
715/2009 and the ability to establish cooperation with transport system operators at the regional
and European level, and
5. the owner of the transmission system has demonstrated its ability to meet the obligations laid
down in Article 16(2) of this Act. To this end, all draft agreements with the proposed operator or
another competent entity shall be delivered to the Agency.
1158 Russia's first written submission, para. 186.
1159 In response to a question by the Panel, Russia, argues that, based on its ordinary meaning, a
"company" "easily satisfies the definition of 'legal entity' within the meaning of the GATS". (Russia's response
to Panel question No. 177(a), para. 75). The European Union considers that the ordinary meaning of that word
indicates that a company "takes the form of a particular 'type of legal entity', but is not a specific type of legal
entity itself, in the sense of Article XVI:2(e) of the GATS." (European Union's response to Panel question
No. 166(a), paras. 42-44). In our view, referring to a "company" as a "legal entity" does not necessarily mean
that a "company" is a "specific type of legal entity" within the meaning of Article XVI:2(e) of the GATS.

7.669. We note that Russia does not make any specific argument with respect to Article 16 of
Croatia's Gas Market Act and we shall therefore refrain from examining this provision.
7.670. Russia further alleges that Article 17 of Croatia's Gas Market Act contains "additional
restrictions on the form of the legal entity that may provide transmission services". 1160 Russia
refers to Article 17(1) and (2), but does not substantiate what these "additional restrictions"
allegedly entail for the service supplier . We note that Article 17 of Croatia's Gas Market Act lays
out the rules for the independence of the owner of the transmission system. To us, and as
discussed in mo re detail in paragraphs 7.460 to 7.466 above, the owner of the transmi ssion
system is not a service supplier within the meaning of the GATS. Hence, Russia has not made a
prima facie case that Article 17 restricts or requires "specific types of legal entity … through which
a service supplier may supply a service."
7.671. On the bas is of the foregoing, we find that Russia has not demonstrated that the ISO
model implemented in Croatia's national law restricts or requires the "specific types of legal entity"
through which a service supplier may supply pipeline transport services in Croatia.
7.672. With respect to the ITO model , Russia focuses on Article 3(6) of Croatia's Act on the
Regulation of Energy Activities and on Article 18 of Croatia's Gas Market Act.1161
7.673. Russia points to the definition of an ITO contained in Article 3(6) of Croatia's Act on the
Regulation of Energy Activities and argues that the reference to "an independent company
separate from" the VIU in that definition means that the ITO is "possibly organized in the form of a
subsidiary."1162
7.674. The European Union responds that Article 3(6) does not entail a requirement to use a
specific type of legal entity, but only requires that the TSO be "independent" and thus "separate
from a vertically integrated undertaking."1163
7.675. To us, the requirement that the ITO be "established as an independen t
transmission/transport operator from a vertically integrated undertaking" does not in and of itself
restrict or require the legal form that a pipeline transport service supplier may take to supply
services in Croatia. The fact that the ITO may be owned b y the VIU does not modify our
conclusion, since, as noted above, ownership or control per se does not speak to the legal form of
either entity.
7.676. We note that, in response to a question by the Panel, both parties consider that a
"subsidiary" is a "specific t ype of legal entity" within the meaning of Article XVI:2(e). 1164 The
parties provide different definitions of the term "subsidiary". While Russia focuses on "control", the
European Union puts the emphasis on the fact that the subsidiary has a "separate legal
personality" from the parent company. However, we are of the view that the mere fact that an
entity is controlled by another entity or has a separate legal personality , does not speak to the
legal form of either entity. Hence, to the extent that these char acteristics would define a

1160 Russia's first written submission, fn 248. Pursuant to Article 17(1), "the owner of the transmission
system that is a part of the structure of the vertically integrated undertaking shall be independent at least in
terms of its legal form, organization and decision-making capabilities and shall be independent of other
activities not related to the transmission of gas". Pursuant to Article 17(2), "[t]he independence of the owner
of the transmission system referred to in paragraph 1 of this Article shall be secured as follows: 1. persons
responsible for the management of the transmission system owner may not participate in structures of the
vertically integrated entity that are, directly or indirectly, responsible for the daily operation of gas production,
gas distribution and gas supply".
1161 Russia's first written submission, paras. 187-188.
1162 Russia's first written submission, para. 188 (referring to Article 3(6) of Croatia's Act on the
Regulation of Energy Activities, (Exhibit RUS-46)). Pursuant to this provision, an ITO is "an independent
transmission/transport operator, established as an independent company separate from a vertically integrated
undertaking, which may be owned by that undertaking, but has to be equipped with all financial, physical and
human resources necessary for carrying out its activity."
1163 European Union's second written submission, para. 16.
1164 According to Russia, a "subsidiary" is defined as "[a]n enterprise controlled by another (called the
parent) through the ownership of greater than 50 per cent of its voting stock". (Russia's response to Panel
question No. 166(b), para. 76). For the European Union, a subsidiary is "an entity for which the law determines
that it is legally distinct, and thus has a separate legal personality, from the parent entity (e.g. a holding)".
(European Union's response to Panel question No. 166(b), para. 45).

"subsidiary", they would not be sufficient in and of themselves to find that a subsidiary is a
"specific type of legal entity" within the meaning of Article XVI:2(e). 1165 Moreover, merely alleging
that the ITO is "possibly organized in the form of a subsidiary" is not enough in and of itself to
establish that the ITO is required to take a particular legal form. 1166 Therefore, Russia's
demonstration does not reach the level required for us to conclude that Article 2(6) of Croatia's Act
on the Regulation of Energy Activities "restricts or requires a specific type of legal entity" within
the meaning of Article XVI:2(e).1167
7.677. Russia further takes issue with Article 18 of Croatia's Gas Market Act ("Requirements for
designating an independent tran smission operator – assets, equipment, staff and identity"), in
particular Articles 18(4) and (6), which, in Russia's view, restrict the specific types of legal entity
or forms of commercial presence through which the VIU may supply transmission services i n
Croatia, contrary to the requirements of Article XVI:2(e). 1168 The European Union responds that
this is not a measure within the scope of Article XVI:2(e) because the essence of this requirement
is that the ITO be "clearly separated" from the parent company and any type of legal entity is
permitted.1169
7.678. Russia quotes Article 18(4) 1170, but provides limited substantiation for its proposition that
this provision restricts or requires "a specific type of legal entity" within the meaning of
Article XVI:2(e) of the GAT S. We understand that Article 18(4) prevents production or supply
subsidiaries in the VIU from having "ownership interest" in the TSO. To our mind, this provision
does not speak to the legal form of the TSO.
7.679. In addition, merely requiring an entity to have a "special corporate entity, communication,
brand name and business premises clearly separating it from the parent company" (Article
18(6)1171) does not, in our view, restrict or require the legal form a TSO may take to supply

1165 In fact, the European Union itself considers that the mere requirement that a service supplier (in
casu an ITO) be "separate" from the parent undertaking is not a measure falling within the scope of
Article XVI:2(e). (See European Union's second written submission, para. 15). Hence, we have difficulties
understanding the European Union's position that a "subsidiary" is a "specific type of legal entity" within the
meaning of Article XVI:2(e) on the ground that a subsidiary has a "separate" legal personality from the parent
entity.
1166 Russia's first written submission, para. 188. We observe that Russia does not point to any provision
in Croatia's Gas Market Act which would refer to the ITO as a "subsidiary".
1167 We also note that, in response to a question by Russia on the existence, nature and extent of the
financial benefits accruing to a VIU under the ISO and ITO models, the European Union states that "[t]he ITO
is a subsidiary of the VIU". (European Union's response to Russia's question No. 15, para. 8). We understand
that this statement by the European Union, made in the context of a discussion concerning the financial
benefits accruing to the VIU under the ISO and ITO models, relates to the fact that the VIU owns the ITO, but
does not address the legal form of the ITO. This being said, we note that, on the one hand, the European Union
asserts that "the legal form that the entity providing transmission pipeline transport services can take is not
disciplined by the Directive under any of the unbundling models" and that "any type of legal entity is
permitted" under the ITO provisions of Croatia's Gas Market Act and, on the other hand, the European Union
contends that "[t]he ITO is a subsidiary" and that a "subsidiary" is a type of legal entity within the meaning of
Article XVI:2(e). (European Union's first written submission, para. 110; second written submission, para. 15;
response to Russia's question No. 15, para. 8; and response to Panel question No. 166(b), para. 45). In any
event, these statements by the European Union do not cause us to question our view that, pursuant to the
legal test we have developed, Russia has not demonstrated that the provisions of Croatia's Gas Market Act
speak to the legal form of the ITO, hence, restrict or require a "specific type of legal entity" within the meaning
of Article XVI:2(e).
1168 Russia's first written submission, para. 188.
1169 European Union's second written submission, para. 15.
1170 Article 18(4) of Croatia's Gas Market Act provides as follows:
(4) The subsi diaries within the structure of a vertically integrated undertaking performing the
activities of gas production and the production of natural gas or gas supply shall not, directly or
indirectly, have ownership interests in the independent transmission operator.
The independent transmission operator shall not, directly or indirectly, have ownership interests
in a subsidiary within the structure of the vertically integrated undertaking performing activities
of gas production and natural gas production or gas supply, not shall it have the right to receive
dividends or other financial benefit from this subsidiary. (Croatia's Gas Market Act, (Exhibit RUS -
45), Article 18(4)).
1171 Croatia's Gas Market Act, (Exhibit RUS-45), Article 18(6). This provision stipulates as follows:
The independent transmission operator shall have a special corporate identity, communication,
brand name and business premises clearly separating it from the parent company in the system
of the vertically integrated undertaking and not misleading as to the identity of the vertically

pipeline transport services in Croatia. As indicated in the second sentence of Article 18(6), this
provision enforces a separation requirement between two entities so as to, in fine , "clearly
distinguish the activities or services" of the ITO from the activities or services of other parts of the
VIU. Article 18(6) does not speak to the legal form of the ITO.
7.680. On the basis of the above, we find that Russia has not demonstrated that the ITO model
implemented in Croatia's national law restricts or requires the "specific types of legal entit y"
through which a service supplier may supply pipeline transport services in Croatia.
7.681. In light of the foregoing analysis, w e conclude that Russia has not demonstrated that the
unbundling measure implemented in Croatia's national law is inconsistent with A rticle XVI:2(e) of
the GATS.1172
Hungary
7.682. Hungary has implemented the ISO and ITO models, in addition to the OU model.
7.683. We must observe at the outset that Russia's arguments in support of its claim that
Hungary's unbundling measure is incompatible with Article XVI:2(e) of the GATS are succinct.
Russia refers to the provisions in Hungary's Gas Act implementing the three unbundling models,
which, in its view, are "closely modelled after", "similar to" or "closely resemble" the corresponding
provisions in the Directive, and concludes that "[a]s in the case of Croatia, the provisions of
Hungary's law setting forth the respective unbundling models … each restricts or requires specific
types of legal entity" in a manner inconsistent with Article XVI:2(e). 1173 Russia does not really
substantiate how the provisions in Hungary's Gas Act allegedly breach Article XVI:2(e).1174 We
must recall that, as explained by the Appellate Body, it is not sufficient for a complaining party to
"merely to file an entire piece of legislation and expect a panel to discover, on its own, what
relevance the various provisions may or may not have for a party's legal position."1175
7.684. Concerning the OU m odel, Russia asserts that Section 121/H of Hungary's Gas Act
"prohibits a VIU from providing services through any type of legal entity or form of commercial
presence in Hungary" 1176, but does not further substantiate its legal position. To the extent that
Russia's claim with respect to Hungary's implementation of the OU model appears to be based on
the same proposition as Russia's claim with respect to the OU model in Croatia's Gas Market Act,

integrated undertaking or any parts thereof. It may only use signs, designs, names, letters,
numbers, shapes and images that clearly distinguish the activities or services of the independent
transmission operator from those performed by the vertically integrated undertaking.
1172 In light of the foregoing, we do not find it necessary to address Russia's argument that, in addition
to violating Article XVI:2(e), "the provisions of Croatia's law regarding each unbundling model … do just the
opposite of what the horizontal limitation requires". (Russia's first written submission, para. 191, (referring to
Schedule of Specific Commitments of Croatia, GATS/SC/130 (22 December 2000), (Exhibits EU-16/RUS-37),
p. 2). We also note that Russia does not point to any provision in Croatia's Gas Market Act which would refer to
TSOs as "branch offices" and does not explain whether, pursuant to Croatian law, TSOs should be viewed as
"branch offices".
1173 Russia's first written submission, paras. 192 and 194. See also Russia's second written submission,
para. 107.
1174 Russia also refers to two TSO supplying transmission services in Hungary, namely FGSZ
Földgázszállító Zártköruen Muködo Részvénytársaság (FGSZ) and MOL Magyar Olaj-és Gázipari Nyrt (MOL).
(See Russia's first written submission, para. 193) Beyond asserting that FGSZ and MOL are a "type of legal
entity" and a "service supplier" (Russia's first written submission, para. 194). Russia does not further explain
the relevance of these two examples for its claim that the unbundling measure in Hungary's national
implementing law is incompatible with Article XVI:2(e) of the GATS.
1175 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 191.
1176 Russia's first written submission, para. 194 (referring to Hungary's Gas Act, (Exhibits EU-155/RUS-
47)). We note that Section 121/H, while using a different wording, implements essentially the same
requirement as Article 14 of Croatia's Gas Market Act discussed above. In particular, paragraph (1)(b) of
Section 121/H of Hungary's Gas act states as follows:
the same person or persons are entitled neither: ba) directly or indirectly to exercise control over
a company performing any of the functions of production or supply, and directly or indirectly to
exercise control or exercise any right over a transmission system operator or over a transmission
system, nor bb) directly or indirectly to exercise control over a transmission system operator or
over a transmission system, and directly or indirectly to exercise control or exercise any right
over a company performing any of the functions of production or supply of natural gas.
Hungary's Gas Act, (Exhibits EU-155/RUS-47), Section 121/H).

we refer to our discussion above, in particular in paragraphs 7.663 and 7.664, which, in our view
is similarly relevant for the OU model in Hungary's Gas Act. This also leads us to conclude that
Russia has not demonstrated that the OU model implemented in Hungary's Gas Act is inconsistent
with Article XVI:2(e) of the GATS.
7.685. Russia claims that the ISO model in Section 121/I of Hungary's Gas Act "requires that the
services be supplied through an independent legal entity in the form of an ISO separate from the
VIU, and also restrict (or requires) the specific types of legal entity permitted". 1177 Russia does not
further substantiate how the text of S ection 121/I supports its legal position that the ISO model is
inconsistent with Article XVI:2(e).
7.686. We recall that, under the ISO model, the TSO, i.e. the pipeline transport service supplier,
is required to undergo ownership unbundling, while the VIU can c ontinue to own the transmission
system. Accordingly, pursuant to Section 121/I(1)a) of Hungary's Gas Act, the ISO must "meet the
requirements set out in Paragraphs b), c) and d) of Subsection (1) of Section 121/H." 1178 We
therefore refer to our finding with r espect to Section 121/H of Hungary's Gas Act above, and also
recall our discussion and conclusion above concerning the ISO provisions in Croatia's Gas Market
Act.
7.687. To us, the requirement, in Section 121/I(1)a) of Hungary's Gas Act, that the ISO be an
"independent legal entity… separate from the VIU" does not in and of itself speak to the legal form
of the ISO. Thus, Russia has not demonstrated that the ISO model in Hungary's Gas Act is
inconsistent with Article XVI:2(e) of the GATS.
7.688. With respect to the ITO model, Russia argues that " the ITO provisions in Sections 121/B -
121/G impose unwarranted restrictions on the types of legal entity by requiring that a VIU supply
services through a separate subsidiary or other form of commercial presence in the form o f an
ITO."1179 Russia does not further substantiate how the text of Sections 121/B -121/G supports its
legal position. Referring in particular t o our observations in paragraph 7.676 above, we consider
that an allegation that services are required to be supplied "through a separate subsidiary or other
form of commercial presence" is not sufficient in and of itself to show that a measure restricts or
requires a specific t ype of legal entity within the meaning of Article XVI:2(e). In response to a
question by the Panel1180, Russia further explains that "[t]here is no provision in Hungary’s Gas Act
that expressly requires a VIU, when adopting the ITO model, to supply its pipeli ne transport
services through a separate 'subsidiary'." 1181 Hence, Russia's response to our question appears to
contradict Russia's assertions in its first written submission.1182
7.689. Furthermore, in response to the same question by the Panel, Russia submits that it "should
also have identified Section 117(1) of the Gas Act" 1183 which, in Russia's view, "expressly restricts
the specific types of legal entity through which a service supplier may supply its pipeline transport
services in the form of an ITO in Hungary."1184
7.690. We have difficulties following Russia's allegations under this claim. Section 117(1), for
which Russia now appears to make an allegation of incompatibility, was identified in response to a
question by the Panel concerning other provisions of Hungary's Gas Act. We also note that this

1177 Russia's first written submission, para. 194, (referring to Hungary's Gas Act, (Exhibits EU-155/RUS-
47)).
1178 Hungary's Gas Act, (Exhibits EU-155/RUS-47), Section 121/I.
1179 Russia's first written submission, para. 194, (referring to Hungary's Gas Act, (Exhibits EU-155/RUS-
47)). We note, like Russia, that the term "Independent Transmission Operator" or "ITO" does not appear in the
Gas Act, which uses instead the terms the "transmission system operator" or "transmission system operator
member," including in the ITO provisions. (See Russia's response to Panel question No. 165, para. 68). We do
not consider, however, that this different wording has a material impact on our assessment of Russia's claim
and the parties do not argue otherwise.
1180 Panel question No. 165 to Russia, (referring to Russia's first written submission, para. 194).
1181 Russia's response to Panel question No. 165, para. 68.
1182 Russia's first written submission, para. 194; and second written submission, para. 107.
1183 Russia's response to Panel question No. 165, para. 69, (referring to Hungary's Gas Act, (Exhibits
EU-155/RUS-47), pp. 37-38). Section 117(1) stipulates in relevant parts: "The transmission system operator
shall function as a business association operating in the form of a limited company". This provision is contained
in Chapter VI ("Authorization Procedures") of Hungary's Gas Act, (Exhibits EU-155/RUS-47).
1184 Russia's response to Panel question No. 165, para. 73, (referring to Hungary's Gas Act, (Exhibits
EU-155/RUS-47)), pp. 37-38.

new allegation comes at a late stage in these proceedings. 1185 Furthermore, Section 117(1) is
contained in Chapter VI ("Authorization Procedures") of Hungary's Gas Act and Russia does not
explain how this Section implements the ITO model (or any other model) . Finally, Russia also
asserts that Section 117(1) is "consistent with" Hungary's horizontal market access limitation
inscribed in its Schedule. 1186 We would agree with the European Union that, by arguing that
Section 117(1) is "consistent" with that horizontal limitation, Russia seems to acknowledge that
this provision is not inconsistent with Article XVI:2(e).1187
7.691. In light of the foregoing, we find th at Russia has not demonstrated that the ITO model in
Hungary's Gas Act is inconsistent with Article XVI:2(e) of the GATS.
7.692. We therefore conclude that Russia has not demonstrated that the unbundling measure
implemented in Hungary's national law is inconsistent with Article XVI:2(e) of the GATS.1188
Lithuania
7.693. We recall that Lithuania has implemented only the OU model.
7.694. Russia challenges Articles 40 to 43 in Chapter 8 ("Unbundling of activities and accounts")
of the Law on Natural Gas 1189 implementing the OU model . Ru ssia refers to Article 40(1)
("Activities subject to unbundling") which provides for the obligation to separate the activities of
gas production and supply from transmission 1190, Article 41 ("Unauthorized control"), in particular
Article 41(1)1191 and 41(4).1192 Russia also takes issue with an alleged "additional requirement not
found in the Directive" and contained in Article 41(2) of the Law on Natural Gas. 1193 According to
Russia, this provision "expressly prohibits any third -country undertaking that supplies natura l gas

1185 Russia made this allegation in response to a question by the Panel after the second substantive
meeting.
1186 Russia's response to Panel question No. 165, para. 71, (referring to Hungary's horizontal limitation
stipulating in relevant parts that "[c]ommercial presence should take the form of limited liability company,
joint-stock company or representative office …". (See Schedule of Specific Commitments of Hungary,
GATS/SC/40 (15 April 1994), (Exhibits EU-17/RUS- 36), p. 1)).
1187 European Union's comments on Russia's response to Panel question No. 165, para. 30.
1188 Consequently, we do not consider it necessary to assess the relevance for that measure of the
market access limitation inscribed in the horizontal part of Hungary's Schedule. (See, above para. 7.360).
1189 Lithuania's Law on Natural Gas, (Exhibit RUS-136rev).
1190 Pursuant to Article 40(1) of the Lithuania's Law on Natural Gas, (Exhibit RUS-136rev): "The
activities of natural gas transmission carried out in the Republic of Lithuania must be separated from the
activities of natural gas production and supply by separating the assets of a transmission system and/or a
transmission system operator from natural gas undertakings engaged in the activities of production and/or
supply.".
1191 Pursuant to Article 41(1) of Lithuania's Law on Natural Gas, (Exhibit RUS-136rev):
1. The same person or persons shall not be entitled:
1) directly or indirectly to exercise control over a production or supply undertak ing and, at the
same time, exercise direct or indirect control or any control or management right over a
transmission system operator or transmission system;
2) directly or indirectly to exercise control over a transmission system operator or transmission
system and, at the same time, exercise direct or indirect control or any control or management
right over a production or supply undertaking;
3) to appoint members of the supervisory board or the board of a transmission system operator
or bodies representing an undertaking and, at the same time, exercise direct or indirect control
or any control or management right over a production or supply undertaking.
1192 Pursuant to Article 41(4) of the Law on Natural Gas (which Russia erroneously refers to as
Article 41(3) in para. 199 of its first written submission):
The rights referred to in paragraphs 1 and 2 of this Article shall include, in particular:
1) the power to exercise voting rights;
2) the power to appoint members of supervisory bodies, administrative bodies and other
bodies legally representing the undertaking;
3) the management and holding of a majority share.
1193 Russia's first written submission, para. 198. Article 41(2) of the Law on Natural Gas reads as
follows: "A undertaking performing any of the functions of production or supply in any other country whose
transmission system is connected to the natural gas transmission system of the Republic of Lithuania shall not
be entitled directly or indirectly to exercise control or exercise any right over a transmission system operator".

to Lithuania via a connection between the two countries' transmission systems (i.e. via pipelines)
from any possibility of exercising control or any right over the TSO in Lithuania."1194
7.695. The European Union submits that Article 41(2) is not an additiona l requirement but merely
specifies what is already the case under the Directive, namely that the prohibition established
under Article 41(1) is also applicable in cases where the undertakings perform the respective
production or supply activities in any other countries which are interconnected with Lithuania.1195
7.696. Turning to this last issue first, we consider that, as Russia's challenge under
Article XVI:2(e) is directed against Lithuania's Law on Natural Gas, the question whether
Article 41(2) is "an additional requirement" not contained in the Directive is not pertinent. Our task
is to assess the compatibility of Lithuania's Law with Article XVI:2(e), not the compatibility of that
Law with the Directive.
7.697. According to Russia, "[i]n terms of Article XVI:2(e), Lithuanian law restricts – to the point
of nonexistence – the specific types of legal entity through which a foreign VIU may supply
transmission services in Lithuania."1196 While Russia provides limited su bstantiation for its legal
position, we understand nonetheless that the gist of Russia's arguments concerning the OU model
implemented in Lithuania's Law on Natural Gas is similar to that underlying its claims against the
OU model implemented by Croatia and Hungary.
7.698. We observe that Article 40 of Lithuania's Law on Natural Gas calls for "separating the
assets" of a TSO from undertakings engaged in production and/or supply. Article 41(1) provides
that the "same person or persons" may not exercise control ove r a production or supply
undertaking and, at the same time, exercise control or management rights over a TSO (and vice-
versa). Article 41(2) contains the same type of requirement as Article 41(1), with the added
clarification that prohibition for a product ion or supply undertaking to "directly or indirectly
exercise control or exercise any right" over a TSO shall also apply in cases where such undertaking
is situated in "any other country whose transmission system" is connected with Lithuania's natural
gas transmission system. Article 41(4) further specifies the "rights" that "the same person or
persons" shall not be entitled to exercise pursuant to Articles 41(1) and 41(2).
7.699. To us, the OU model implemented in Lithuania's national law calls for the same analy sis as
that made with respect to the OU model implemented in the national laws of Croatia and Hungary
and we therefore refer to our discussion above, in particular paragraphs 7.663 and 7.664. This
also leads us to conclude that Russia has not demonstrated that the OU model implemented in
Lithuania's Law on Natural Gas is inconsistent with Article XVI:2(e) of the GATS.
7.700. Russia further refers to the Law on Implementation 1197, in particular the two procedures
available for complying with the unbundling requirement, namely the "reform of control" procedure
(Article 3) and the "reo rganisation" procedure (Article 4). 1198 Russia argues that Article 3(1)
"appears to require that the VIU divest ownership of its TSO". 1199 We fail to see, and Russia does

1194 Russia's first written submission, para. 198.
1195 European Union's first written submission, para. 114; and second written submission, paras. 17-18.
1196 Russia's first written submission, para. 203; and second written submission, para. 107.
1197 Lithuania's Law on Implementation, (Exhibit RUS-22).
1198 Russia does not develop specific arguments with respect to Article 4 of Lithuania's Law on
Implementation.
1199 Russia's first written submission, para. 200. Article 3(1) of Lithuania's Law on Implementation
stipulates as follows:
In order to achieve compliance with the requirements of Chapter Eight "Unbundling of Activities
and Accounts" of the Law on Natural Gas, non -compliant natural Gas undertakings may see
compliance with the requirements of Chapter Eight "Unbundling of Activities and Accounts" of the
Law on Natural Gas by reforming the control of an undertaking on their own initiative. Reforming
of control of the natural gas undertaking shall be effected through transactions (transfer of
assets or shares, assignment of rights, transfer of shareholders' rights, shareholders agreement,
increasing or decreasing of the authorised capital or any other) made in accordance with the
procedure established in paragraph 2 of this Article. (Lithuania's Law on Implementation (Exhibit
RUS-22), Article 3(1))

not further substantiate, how and why an alleged requirement to divest restricts or require s
"specific types of legal entity" within the meaning of Article XVI:2(e).1200
7.701. In light of the foregoing, we conclude that Russia has not demonstrated that the
unbundling measure implemented in Lithuania's national law is inconsistent with Article XVI:2(e) of
the GATS.
7.5.2.4 Russia's claims under Article XVI:2(f) of the GATS
7.5.2.4.1 Introduction
7.702. Russia submits that the national implementing laws of Croatia, Hungary and Lithuania set
forth formal limitations on the participation of foreign capital relating to TSOs within th e meaning
of Article XVI:2(f), in contradiction with the mode 3 market access commitments undertaken by
these three Members under sector 11.G in their respective Schedules.1201
7.703. The text and legal standard to establish a violation under any of the six subparag raphs
contained in Article XVI:2 of the GATS are set out in paragraph s 7.232 and 7.233 above. Pursuant
to that legal standard, in order to establish a prima facie case of violation of Article XVI:2(f) of the
GATS, Russia is required to demonstrate that:
a. Croatia, Hungary and Lithuania have undertaken market access commitments i n their
respective GATS Schedules with respect to the sector(s) and mode(s) identified by
Russia; and that
b. The unbundling measure in the national implementing laws of Croatia, Hungary and
Lithuania constitutes an impermissible limitation within the meaning of Article XVI:2(f).
7.704. We concluded, in paragraph 7.360 above, that Croatia and Lithuania have undertaken a
full market access commitment for mode 3 under sector 11.G, "Pipeline Transport [Services]" , and
that Hungary has undertaken not to maintai n any limitation pursuant to Article XVI:2(f) of the
GATS for mode 3 in that same sector. Accordingly, we turn now to the second element of the legal
standard, namely whether Russia has demonstrated that the unbundling measure in the national
implementing laws of Croatia, Hungary and Lithuania constitutes an impermissible limitation on
the participation of foreign capital within the meaning of Article XVI:2(f) of the GATS.
7.5.2.4.2 Analysis by the Panel
7.705. Russia claims that the unbundling rule in each of the implement ing laws of Croatia,
Hungary and Lithuania expressly prohibits a supply undertaking from owning a majority share in
the TSO or transmission system. According to Russia, a limitation on the ability of investors to hold
majority ownership is the same as a "m aximum percentage of capital that can be held". 1202 Russia
also submits that Article XVI:2(f) does not forbid measures containing majority ownership
prohibitions that apply only to foreign capital investment, but forbids any and all measures

1200 In relation to its allegation concerning Article 3 of Lithuania's Law on Implementation, Russia also
explains that Gazprom, which used to own 37.1 % of the shares in the VIU Lietuvos dujos, formerly
responsible for supplying the Lithuanian market with natural gas, sold its share in the new TSO Amber Grid to
the Lithuanian Ministry of Energy following enactment of the unbundling measure in Lithuania. According to
Russia, while a VIU may choose between two OU methods set out in Articles 3 and 4 of the Law on
Implementation, in reality, the "example demonstrates" that Gazprom, was required "to fully divest" its shares.
(See Russia's first written submission, paras. 201-203). The European Union considers that Russia engages in
speculations in respect of Lietuvos' decision when seeking to comply with the unbundling requirement in
Lithuania's law. In particular, according to the European Union, there were no circumstances or conditions
which may have forced Lietuvos' shareholders to sell their shares in Lietuvos dujos. (See European Union's first
written submission, paras. 115-118). In our view, these facts are not relevant for the purpose of assessing
Russia's claim against the unbundling measure implemented in Lithuania's national law under Article XVI:2(e).
1201 Russia's first written submission, para. 224; and second written submission, para. 113.
1202 Russia's first written submission, paras. 221 and 223; opening statement at the first meeting of the
Panel, para. 13; second written submission, paras. 112-113; and opening statement at the second meeting of
the Panel, para. 30.

imposing majority ownership prohibitions on foreign capital investment, including measures that
also impose majority ownership prohibitions on domestic investment.1203
7.706. The European Union argues that measures prohibited under Article XVI:2(f) of the GATS
are essentially of a q uantitative nature and must impose a quantitative maximum ceiling for
foreign investment in order to fall within the scope of that provision. 1204 According to the European
Union, prohibited limitations must specifically target foreign investment, which means that
measures which apply without distinction to domestic and foreign investment are not covered by
sub-paragraph (f).1205 The European Union submits that the Croatian, Hungarian and Lithuanian
measures challenged by Russia are not covered by Article XVI:2(f) because they apply without
distinction to domestic and foreign investment.1206
7.707. We recall that Article XVI:2(f) of the GATS applies to "limitations on the participation of
foreign capital in terms of maximum percentage limit on foreign share-holding or the total value of
individual or aggregate foreign investment ." To our mind, a measure must fulfil two conditions in
order to constitute an impermissible limitation within the meaning of Article XVI:2(f) of the GATS.
First, the measure must be a limitation on th e "participation of foreign capital ." Second, and as
observed by a previous panel, the measure must take one of the two forms provided for in that
provision, namely (i) a maximum percentage of capital that can be held by foreign investors; or
(ii) a total value of foreign investment, either by an individual investor or foreign investors as a
whole.1207
7.708. We turn to the first question, namely whether the measures at issue amount to a limitation
on the "participation of foreign capital" within the meaning of Artic le XVI:2(f) of the GATS . If we
find that the measures at issue meet this first condition, we shall then examine whether those
measures take one of the two forms provided for in that provision.
7.5.2.4.2.1 Whether the measures at issue limit "the participation of foreign capital"
7.709. The European Union argues Article XVI:2(f) is specifically concerned with limitations tied to
the fact that the capital originates outside the Member adopting the limitation. 1208 In contrast,
Russia posits that Article XVI:2(f) forbids any and all measures that impose majority ownership
prohibitions on foreign capital, and considers the fact that the measure also forbids domestic
majority ownership irrelevant.1209
7.710. The issue before the Panel is therefore whether Article XVI:2(f) prohibits limitations on the
participation of foreign capital due to the foreign origin of the capital or whether this provision
encompasses any limitation on capital participation, regardless of the origin (domestic or foreign)
of the capital. This is a novel issue for which no previous panel or Appellate Body guidance exists.
7.711. We turn to the text of Article XVI:2(f) and observe that the "capital", the participation of
which is subject to a limitation is preceded by the word "foreign". Moreover, the two forms which a
measure falling under this provision may take are also qualified by the word "foreign" ("foreign
share-holding" and "foreign investment"). Consistent with the principle of effective treaty
interpretation, the word "foreign", which is used three times in Article XVI: 2(f), must be given
meaning and effect.1210

1203 Russia's second written submission, para. 116.
1204 European Union's first written submission, para. 143.
1205 European Union's first written submission, para. 144; and second written submission, paras. 26-27.
This view is shared by Japan which submitted that the use of the term "foreign" to qualify "capital" clearly
indicates that this provision does not cover all limitations on capital participation, but specifically concerns
limitations tied to the origin of the capital and, more particularly, to the fact that the capital originates outside
the Member adopting the limitation. (Japan's third-party submission, para. 18; and response to Panel question
No. 10, para. 28).
1206 European Union's first written submission, paras. 147-154.
1207 Panel Report, China – Publications and Audiovisual Products, para. 7.1360.
1208 European Union's second written submission, para. 26.
1209 Russia's second written submission, para. 116.
1210 According to the Appellate Body:
One of the corollaries of the 'general rule of interpretation' in the Vienna Convention is that
interpretation must give meaning and effect to all the terms of the treaty. An interpreter is not free to adopt a

7.712. The ordinary meaning of "foreign" is "[b]elonging to, coming from, or characteristic of,
another country or nation". 1211 The ordinary meaning of the word "foreign" indicates that
Article XVI:2(f) covers limitation s on the participation of capital "belonging to", or "coming from"
another country or nation. Similarly, the share -holding whose maximum percentage level may be
limited, as well as the individual or aggregate investment whose total value may also be limited
within the meaning of Article XVI:2(f) "belongs to" or "comes from" another country or nation. The
parties concur that limitations targeting foreign capital due to its foreign origin fall under the scope
of this provision. Parties disagree, however, on wheth er Article XVI:2(f) also encompasses
limitations applying without distinction to domestic and foreign investment.
7.713. Turning to the context of Article XVI:2(f), which includes the rest of Article XVI:2, we note
that the word "foreign" is absent from the other five limitations listed in Article XVI:2. The fact that
these provisions are drafted in an origin -neutral manner suggests that they apply to the listed
limitations regardless of the origin of services and service suppliers. We note that this
interpretation was endorsed by a previous panel. 1212 To us, the fact that subparagraphs (a) to (e)
are drafted in an origin -neutral manner and cover limitations applying to both foreign and
domestic services and service suppliers supports the view that the explicit origi n-based distinction
found in subparagraph (f) indicates that, in contrast, this provision encompasses limitations on the
participation of foreign capital due to the foreign origin of the capital . In other words, if the
drafters of the GATS had intended Art icle XVI:2(f) to cover discriminatory and non -discriminatory
capital limitations, they would not have inserted the word "foreign" in Article XVI:2(f).
7.714. In response to a question by the Panel seeking Russia's view on the fact that only
Article XVI:2(f) contains the word "foreign" (three times) while the other five sub -paragraphs are
origin-neutral, Russia submits that the reference to joint-ventures in Article XVI:2(e) indicates that
this provision is also inherently discriminatory as, according to Russia, th is business form is very
likely applicable only to foreign service suppliers. 1213 Russia also argues that the words
"monopolies" and "exclusive service suppliers" in Article XVI:2(a) are not necessarily origin-neutral
because, according to Russia, it does not seem likely that a Member would establish a foreign
person as a monopoly service supplier or exclusive service supplier in its territory.1214
7.715. We do not find Russia's arguments entirely convincing. While in practice, joint -ventures
may often refer to an asso ciation between a domestic and a foreign firm, and monopolies and
exclusive service suppliers may tend to be of domestic origin, none of these concepts is "expressly
discriminatory". The ordinary meaning of "joint -venture"1215 indicates that this term tends t o be
origin-neutral and, therefore, can also refer to an association between two domestic firms. Also, in
practice, nothing would prevent a monopoly and/or exclusive service suppliers from being of
foreign origin.1216 The fact that these situations may be les s frequent or even uncommon does not
contradict the view that, on their face, these provisions are origin -neutral, contrary to
subparagraph (f) which is "expressly discriminatory".1217
7.716. We also recall that, as evidenced by the terms "are defined as" in the chapeau of
Article XVI:2, this provision contains a closed or exhaustive list of measures which, unless
scheduled, shall not be maintained or applied in sectors and modes where market access

reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.
(Appellate Body Report, US – Gasoline, p. 23, DSR 1996:I, 3, at p. 21).
1211 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 1, p. 1015.
1212 The panel in China – Electronic Payment Services found that "the wording of the quantitative
measures described in subparagraphs (a)-(d) contains nothing that would suggest that measures having
discriminatory aspects are for this reason excluded", thus indicating that those provisions encompass non-
discriminatory limitations. (Panel Report, China – Electronic Payment Services, para. 7.654).
1213 Russia's response to Panel question No. 89, para. 392 (referring Panel Report in China – Electronic
1214 Russia's response to Panel question No. 89, paras. 393-394.
1215 A "joint venture" is defined as "[a] business undertaking by two or more persons engaged in a
single defined project" (Black's Law Dictionary, 9th ed., B.A. Garner (ed.) (West Group, 2009), p. 915).
1216 The GATS definitions of "monopoly supplier of a service" (Article XXVIII(h) of the GATS) and
"exclusive service suppliers" (Article VIII:5 of the GATS) do not make any reference to the origin (domestic or
foreign) of those suppliers.
1217 As observed by the panel in China – Electronic Payment Services, "subparagraph (f) … is expressly
discriminatory". (Panel Report, China – Electronic Payment Services, para. 7.653).

commitments have been undertaken. 1218 Another panel also noted that th is provision applies to
"six carefully defined categories of measures". 1219 The fact that Article XVI:2 encompasses an
exhaustive and carefully defined list of measures enables Members "wishing to undertake specific
commitments on market access, as well as al l the other Members, to understand precisely the
scope of such commitments ".1220 Following the guidance by previous panels, we consider that the
presence of the word "foreign" in Article XVI:2(f), while this word is absent from the other
subparagraphs in Arti cle XVI:2 must be given meaning and effect. We therefore agree with the
European Union and Japan that Article XVI:2(f) is not concerned with all limitations on capital
participation, but is specifically concerned with limitations on foreign capital due to its foreign
origin.1221
7.717. Russia also argues that the presence of the word "foreign" in Article XVI:2(f) is explained
by the fact that "governments have historically tended to impose restrictions on foreign direct
investment" and concludes that it was these types of concerns that the drafters of the GATS
sought to address in Article XVI:2(f). 1222 Russia does not explain, however, why this alleged
historical trend would support an interpretation whereby the word "foreign" would now be erased
from subparagraph (f) . If anything, the fact that governments used to impose restrictions on
foreign direct investment1223 would rather support an interpretation that Article XVI:2(f) concerns
limitations on the participation of foreign capital due to its foreign origin.
7.718. In our v iew, limitations falling within the scope of Article XVI:2(f) must target foreign
capital participation due to the foreign origin of the capital; limitations applying without distinction
to both foreign and domestic capital participation are not covered by this provision. We wish to
clarify that we do not mean to say that only limitations which explicitly refer to foreign capital
participation fall under subparagraph (f). For example, a measure articulating a condition in
relation to domestic capital partic ipation may be encompassed within the scope Article XVI:2(f) if
such measure targets foreign capital participation due to the foreign origin of the capital (e.g.
domestic capital participation shall be no less than X per cent).
7.719. We examine now whether the u nbundling measure in the national implementing laws of
Croatia, Hungary and Lithuania limit s the "participation of foreign capital" within the meaning of
Article XVI:2(f) of the GATS.
Assessment of the measures at issue
7.720. Russia claims that the unbundling me asure in the implementing laws of Croatia, Hungary
and Lithuania each sets forth limitations on the participation of foreign capital in violation of
Article XVI:2(f) of the GATS. 1224 The European Union responds that the measures challenged by

1218 Panel Report, China – Publications and Audiovisual Products, para. 7.1353.
1219 Panel Report, China – Electronic Payment Services, para. 7.652.
1220 Panel Report, Argentina – Financial Services, para. 7.418. (footnote omitted)
1221 European Union's second written submission, para. 26; and Japan's third-party submission,
para. 18.
1222 Russia's response to Panel question No. 89, para. 390; and second written submission, para. 118. In
order to support that view, Russia refers to a 2003 OECD Report and a 2010 World Bank report, both of which
found, according to Russia, that most economies had "specific restrictions that hindered foreign investment".
(OECD Economic Outlook No. 73, Chapter 7, "Foreign direct investment restrictions in OECD countries" (OECD
2003), (Exhibit RUS-154); and World Bank, Investing Across Borders 2010, pp. 7-20, (Exhibit RUS-155)).
1223 The 2010 World Bank report provided by Russia is based on the results of a survey conducted
between April and December 2009 in 87 economies. As noted by Russia, the World Bank found that, while
there were few restrictions on foreign ownership in the primary sectors and manufacturing, "services – such as
media, transportation, and electricity – have stricter limits on foreign participation." We observe that the report
further indicates that, in sectors such as banking, insurance and media "laws often limit the share of foreign
equity ownership allowed in enterprises". (See Russia's response to Panel question No. 89, para. 390; and
World Bank, Investing Across Borders 2010, pp. 7-20, (Exhibit RUS-155), p. 8). Similarly, the 2003 OECD
Economic Outlook also finds that "FDI restrictions are concentrated in services sectors". (OECD Economic
Outlook No. 73, Chapter 7, "Foreign direct investment restrictions in OECD countries" (OECD 2003), (Exhibit
RUS-154), p. 2).
1224 Russia's first written submission, para. 224; and second written submission, para. 113. In response
to a question by the Panel asking Russia to clarify the scope of the challenged measures, Russia responded
that, under Article XVI:2(f) of the GATS, it:
[C]hallenges the unbundling measures in Croatia, Hungary and Lithuania’s implementing laws
because each improperly imposes ownership prohibitions on majority capital investment,
including foreign capital. In Russia’s view, these violations are also de facto in nature. In

Russia apply wit hout distinction to foreign and domestic investors and, therefore, fall outside the
scope of Article XVI:2(f).1225
7.721. Keeping in mind the interpretation of Article XVI:2(f) set forth above, we must determine
whether Russia has demonstrated that the measures at issue negatively impact foreign capital due
to the foreign origin of the capital. Russia challenges the following provisions in the implementing
laws of Croatia, Hungary and Lithuania: (i) Article 14(4) of Croatia's Gas Market Act, (ii)
Section 120/A, Section 121/B, Section 121/H and Section 123(4) of Hungary's Gas Act; and (iii)
Article 41(4)(3) of Lithuania's Law on Natural Gas.
7.722. Article 14(3) of Croatia's Gas Market Act prevents the same person or persons to "directly
or indirectly control the energy undertaking performing any of the activities of production, trade or
supply of gas and the activity of the production of natural gas, and directly or indirectly control or
execute other rights over the transmission system operator or the transmission system" (Article
14(3)(1)). Conversely, Article 14(3)(2) prevents the same person or persons to "directly or
indirectly control the transmission system operator or the transmissi on system, and directly or
indirectly control or execute other rights over the energy undertaking performing any of the
activities of production, trade, supply and the activity of the production of natural gas". Pursuant
to Article 14(4), "[t]he prohibitio ns from paragraph 3 [of Article 14] shall apply to … owning a
majority stake".1226
7.723. Pursuant to Section 120/A(3) of Hungary's Gas Act , a system operator "may not acquire
any share in any other authorized operator engaged in activities other than his own activi ties."
Section 121/B provides in relevant parts that " [s]ubsidiaries of vertically integrated natural gas
companies performing functions of production or supply of natural gas shall not have any direct or
indirect shareholding in the transmission system op erator". Pursuant to Section 121/H, the same
person or persons cannot exercise control over an undertaking performing production or supply
and "exercise any right" over a TSO. Such "right" includes "the holding of a majority share".
Pursuant to Section 123(4), "any company that is involved in the extraction of natural gas … or in
the supply of natural gas …, and any shareholders exercising control in such companies may not
acquire any share – directly or indirectly – in a transmission system operator where such share
constitutes entitlement to exercise control."1227
7.724. Article 40 of Lithuania's Law on N atural Gas sets forth the OU model. Pursuant to
Article 41(4)(4) of that Law, the "rights" that a person or persons directly or indirectly controlling
an undertaki ng engaged in production or supply of natural gas cannot exercise include "the
management and holding of a majority share" in a TSO.1228
7.725. We observe that, on their face, the provisions cited by Russia are origin -neutral. These
provisions prohibit production/su pply undertakings from owning /holding "a majority share", "any
share", "any direct or indirect shareholding", "the holding of a majority share", in a TSO.
Conversely, TSOs are prevented from owning/holding "a majority share", "any share", "any direct
or in direct shareholding" in a production/supply undertaking. Russia itself describes these
provisions as "not specific to foreign investors" 1229 and asserts that they preclude "any investor
(foreign or domestic) who is also 'directly or indirectly' in control of production or supply services
from owning more than 50% of a TSO in the country ."1230 Russia considers, however, that the fact

prohibiting majority ownership, the measures do not distinguish on the basis of origin, as would
typically demonstrate a de jure violation. The effect of the measures is to prohibit foreign
majority ownership, thereby resulting in de facto discrimination. (Russia's response to Panel
question No. 5, para. 26).
We note, however, that Russia does not develop this de facto discrimination claim in these proceedings.
We shall therefore not consider this issue further.
1225 Japan supports the view that, as the unbundling measures at issue are not specifically tied to the
origin of the capital, but apply equally to domestic and foreign investors, they do not constitute a violation of
Article XVI:2(f). (Japan's third-party submission, para. 18).
1226 Croatia's Gas Market Act, (Exhibit RUS-45), Articles 14(3) and (4).
1227 Hungary's Gas Act, (Exhibits EU-155/RUS-47). We recall that Section 123(4) of Hungary's Gas Act is
referred to as Section 194(4) in Russia's first written submission and Exhibit RUS-47.
1228 Lithuania's Law on Natural Gas, (Exhibit RUS-136rev).
1229 Russia's first written submission, para. 226 (regarding Croatia); para. 228 (regarding Hungary), and
para. 230 (regarding Lithuania).
1230 Russia's first written submission, para. 226 (regarding Croatia); para. 228 (regarding Hungary), and
para. 230 (regarding Lithuania).

that these laws "prohibit both domestic and foreign majority ownership is irrelevant ."1231 We
disagree with Russia. As established above, Article XVI:2(f) covers limitations negatively impacting
foreign capital due to the foreign origin of the capital, but does not cover limitations that apply
without distinctions to foreign and domestic capital.1232
7.726. In light of the foregoing, we find that R ussia has not demonstrated that the measures at
issue limit the "participation of foreign capital" within the meaning of Article XVI:2(f) of the GATS.
Having found that the measures at issue do not amount to limitations "on the participation of
foreign cap ital" within the meaning of Article XVI:2(f) of the GATS , we refrain from assessing
whether those measures take one of the two forms provided for in that provision.
7.727. We therefore conclude that Russia has not demonstrated that the unbundling measure in
the national implementing laws of Croatia, Hungary and Lithuania is inconsistent with
Article XVI:2(f) of the GATS.
7.5.2.5 Conclusion
7.728. In view of the foregoing analysis, we conclude that Russia has not demonstrated that the
unbundling measure in the national implementing laws of Croatia and Lithuania is inconsistent with
Article XVI:2(a) of the GATS. We further conclude that Russia has not demonstrated that the
unbundling measure in the national implementing laws of Croatia, Hungary and Lithuania is
inconsistent with Article XVI:2(e) and (f) of the GATS. As we have not found an inconsistency with
Article XVI:2(a), (e) or (f) of the GATS, we do not consider it necessary to examine the European
Union's defence under Article XIV(a) or (c) of the GATS.
7.6 The public body measure
7.6.1 Introduction
7.729. In this section we examine Russia's claim against the public body measure in the national
implementing laws of Croatia, Hungary and Lithuania. We have set out the descripti on of the
public body measure above .1233 Russia challenges the pub lic body measure under Article XVII of
the GATS. The European Union argues that the public body measure is not inconsistent with Article
XVII of the GATS, and that , in case we find otherwise, it is justified under Article XIV(c) of the
GATS. We first exami ne whether Russia has demonstrated that the public body measure is
inconsistent with Article XVII of the GATS. I n the event we find an inconsistency with Article XVII
of the GATS, we will assess the European Union's defence under Article XIV(c) of the GATS.
7.6.2 Russia's claim under Article XVII of the GATS
7.6.2.1 Introduction
7.730. Russia argues that the public body measure in the national implementing laws of Croatia,
Hungary and Lithuania "exempts" pipeline transport service suppliers owned and controlled by
member State governments from the requirement to unbundle. 1234 Russia submits that, by not
extending the same "exemption" to service suppliers of other Members, the public body measure
modifies the conditions of competition to the detriment of like service suppliers of other Members,
in breach of Article XVII of the GATS. 1235 Russia also argues that the implementation of the public
body measure by Croatia, Hungary and Lithuania results in the violation of Article XVII of the GATS

1231 Russia's second written submission, para. 120; and response to Panel question No. 89, para. 395.
1232 As noted above, Russia claims that the measures at issue also result in de facto discrimination, but
does not develop this claim in these proceedings. We shall therefore not consider this issue further.
1233 See, above paras. 2.32-2.33.
1234 Russia's first written submission, paras. 233, 269, 272, 275, 277 and 280; responses to Panel
1235 Russia's first written submission, paras. 275, 277, 280 and 284; and second written submission,
paras. 177-178.

because the governments of Croatia, Hungary a nd Lithuania own and control both the TSO and
supply undertaking within their respective territories.1236
7.731. The European Union contests Russia's claim that the public body measure is inconsistent
with Article XVII. According to the European Union, the public b ody measure requires an
examination of whether the two public bodies are truly separate in addition to verifying whether
the entities concerned comply with the unbundling requirements, and therefore the public body
measure does not constitute an "exemption " from the requirement to unbundle. 1237 The European
Union submits that the public body measure does not prevent service suppliers controlled by public
bodies of third countries from relying on this measure when they apply to be certified as TSOs. 1238
In the Eur opean Union's view, the fact that the governments of Croatia, Hungary and Lithuania
each control, at present, a TSO as well as an undertaking performing production or supply, does
not imply that third-country operators may not rely on the public body measu re nor that any TSO
owned by third country persons would be in a less favourable competitive position.1239
7.732. We recall that the measure challenged by Russia consists of the national implementing
laws of Croatia, Hungary and Lithuania. While all three national laws implement Article 9(6) of the
Directive in the territories of Croatia, Hungary and Lithuania, they are legally distinct from each
other, as well as from Article 9(6) of the Directive. However, we note that the parties have
developed a significant part of their argumentation solely on the basis of Article 9(6) of the
Directive, without clearly distinguishing Article 9(6) of the Directive and each of the national
implementing laws. In light of the manner the parties developed their arguments, we will con duct
a joint assessment of Russia's claim concerning each of the three national implementing laws. We
emphasize, however, that Article 9(6) of the Directive is not a measure at issue in this dispute.1240
7.6.2.2 Analysis by the Panel
7.733. In accordance with the legal stan dard under Article XVII of the GATS, as set out in
paragraphs 7.234 and 7.235 above, we proceed to assess Russia's claim by examining whether
Russia has demonstrated that (a) Croatia, Hungary, and Lithuania have assumed national
treatment commitments in the relevant sector(s) and mode(s) in their GATS Schedules; (b) the
public body measure affects the supply of services in the relevant sector(s) and mode(s); (c) the
relevant services and service suppliers are like; and (d) the public body measure fails to accord to
services and service suppliers of any other Member treatment n o less favourable than that
accorded by the Member concerned to its own like services and service suppliers.

1236 Russia's first written submission, paras. 235 and 285–303; response to Panel question No. 5,
para. 29; and second written submission, paras. 188–197.
1237 European Union's first written submission, paras. 225-226.
1238 European Union's first written submission, para. 228; and second written submission, paras. 52-53.
1239 European Union's first written submission, para. 231.
1240 In its second written submission, Russia requests the Panel to find inter alia that the European
Union and its member States have violated their obligations under Article XVII:1 of the GATS, because "Article
9(6) of the Directive", exempts government-controlled pipeline transport services and service suppliers from
the unbundling requirements "as evidenced by the Croatian, Hungarian and Lithuanian government exemption
measures". (Russia's second written submission, para. 487). (emphasis added) We observe that this request
for findings is different from the request for findings in Russia's first written submission, where Russia asks the
Panel to find that the European Union and its member States violate their WTO obligations under Article XVII of
the GATS because "Croatia, Hungary and Lithuania's government exemption measures, adopted pursuant to
Article 9(6) of the Directive, arbitrarily exempt government-controlled pipeline transport services and service
suppliers from the unbundling requirements". (Russia's first written submission, para. 810). (emphasis added)
Moreover, Russia's request for findings in its second written submission is not based on the claim Russia
developed in these proceedings which is that the national laws of Croatia, Hungary and Lithuania implementing
Article 9(6) of the Directive are inconsistent with Article XVII of the GATS. (Russia's first written submission,
paras. 269-285; response to Panel question No. 5, paras. 28-29; and second written submission, paras. 167-
168). Consequently, it is the national implementing laws of Croatia, Hungary and Lithuania that constitute the
measure at issue challenged by Russia, and not Article 9(6) of the Directive, as would appear from Russia's
request for findings in its second written submission.

7.6.2.2.1 National treatment commitments by Croatia, Hungary and Lithuania in the
relevant sector(s) and mode(s)
7.734. We have determined above that Croatia, Hungary and Lithuania undertook national
treatment commitments in their respective GATS Schedules for sector 11.G, "Transport Pipeline
[Services]", for mode 3.1241
7.6.2.2.2 Affecting the supply of services in the relevant sector(s) and mode(s)
7.735. The second element of our Article XVII enquiry calls for an analysis of whether Russia has
demonstrated that the public body measure "affects the supply of services" in the relevant
sector(s) and mode(s). As we have concluded above, the re levant sector for the purposes of our
enquiry is sector 11.G, "Transport Pipeline [Services]". 1242 Furthermore, as clarified by Russia, the
relevant mode of supply for its GATS claims is mode 3 (commercial presence). 1243 Russia submits
that the public body measure, which Russia considers to be an "aspect of the unbundling
measure"1244, "affects" the supply of pipeline transport services via mode 3 for the same reasons
as the unbundling measure.1245 The European Union does not contest Russia's arguments.
7.736. We recall that the Appellate Body has clarified, in the context of Article I:1 of the GATS,
that the ordinary meaning of the term "affecting" implies a measure that has "an effect on", which
indicates a broad scope of applicatio n, wider in coverage than such terms as "regulating" or
"governing".1246 As considered by the panel in China – Electronic Payment Services, while the
clarification of the Appellate Body was made in relation to the term "affecting" in the context of
Article I: 1 of the GATS, it is equally relevant and persuasive when looked at in the context of
Article XVII analysis.1247 Accordingly, we need to determine whether, as a minimum threshold, the
public body measure has "an effect on"1248 the supply of pipeline transport services.
7.737. As set out above, the public body measure is applicable in situations where public bodies
exercise control over, on the one hand, a TSO or transmission system, and on the other hand, an
undertaking performing the function of natural gas production and/or supply.1249 We recall that, for
the purposes of the present dispute, we consider that TSOs supply pipeline transport services in
the European Union and that natural or juridical persons from non -EU countries can and do supply
pipeline transport services through the commercial presence of such TSOs.1250 Thus, by prescribing
rules that concern TSOs, the public body measure affects suppliers of pipeline transport services,
and consequently, has "an effect on" the supply of pipeline transport services within the meaning
of Article XVII.
7.6.2.2.3 Like services and service suppliers
7.738. We note that, in the context of the public body measure, Russia argues that LNG services
and service suppliers and pipeline transport services and service suppliers are like within the
meaning of Article XVII. 1251 It is therefore not clear whether the relevant services and service
suppliers, for purposes of Russia's claim under Article XVII against the public body measure,
include both pipeline transport services and service suppliers and LNG se rvices and service
suppliers. We consider it helpful to determine the scope of the likeness enquiry to be conducted
before turning to the actual assessment of likeness.
7.739. In this regard, we note that the public body measure concerns unbundling where public
bodies exercise control over, on the one hand, a TSO or transmission system, and on the other
hand, an undertaking involved in production or supply activities. Both parties agree that LNG

1241 See above para. 7.371.
1242 See above para. 7.291.
1243 Russia's response to Panel question No. 56, para. 285.
1244 Russia's first written submission, para. 233.
1245 Russia's first written submission, para. 237 (referring to section VII.C of its first written submission).
1246 Appellate Body Report, EC – Bananas III, para. 220.
1247 Panel Report, China – Electronic Payment Services, para. 7.681 and fn 873 to para. 6.781.
1248 Appellate Body Report, EC – Bananas III, para. 220.
1249 See above paras. 2.32 and 2.33.
1250 See above paras. 7.263 and 7.407.
1251 Russia's first written submission, paras. 254–261.

service suppliers are not subject to unbundling 1252 and, consequently, they are not subject to the
public body measure. We also observe that Russia does not develop any arguments with respect to
the application of the public body measure to LNG service suppliers. For these reasons, we find
that only pipeline transport service s and service suppliers are relevant for Russia's claim against
the public body measure under Article XVII.
7.740. Russia argues that the public body measure distinguishes between foreign and domestic
services and service suppliers based "exclusively on origin", and therefore the relevant services
and service suppliers are presumed to be like.1253 Russia further submits that, "to the extent a
'more detailed analysis' is considered necessary", such an analysis demonstrates that domestic
pipeline transport services an d service suppliers and those of other Members are in a competitive
relationship with each other and thus satisfy the likeness requirement pursuant to Article XVII. 1254
The European Union contests Russia's arguments that the public body measure distinguishes
between foreign and domestic service suppliers based exclusively on origin. 1255 However, the
European Union does not contest Russia's arguments that the relevant services and service
suppliers are like within the meaning of Article XVII.
7.741. We recall that, acco rding to the Appellate Body, "where a measure provides for a
distinction based exclusively on origin, there will or can be services and service suppliers that are
the same in all respects except for origin and, accordingly, 'likeness' can be presumed". 1256 In our
view, the text of the public body measure, as implemented in the national laws of Croatia,
Hungary and Lithuania, does not, on its face, distinguish between service suppliers based
exclusively on origin. The relevant provisions of the national impleme nting laws of Croatia,
Hungary and Lithuania refer to " two separate public authorities "1257, "economic operators defined
by law acting in the name of Hungary or other public bodies"1258 and "a Member State or another
public body ".1259 The references to "two separate public authorities", "other public bodies" and
"another public body" in the mentioned laws may be read as covering both domestic public bodies
(or authorities) and foreign public bodies (or authorities). Therefore, we see n o support in the text
of the national laws of Croatia, Hungary and Lithuania for the proposition that such laws
distinguish between service suppliers based exclusively on origin. In these circumstances, we do
not consider that the relevant domestic service s and service suppliers can be presumed to be like
services and service suppliers of any other Member within the meaning of Article XVII.
7.742. In the context of its "more detailed analysis" of likeness, Russia argues that "domestic and
third-country pipeline t ransport services are closely similar if not identical", referring to the
industry definition of natural gas pipeline transport service and sector 11.G of the Schedules of
Croatia, Hungary and Lithuania.1260 Russia further asserts that foreign -owned and controlled TSOs
supply the same directly competitive pipeline transport services as domestic suppliers. 1261 In
Russia's view, the natural gas and the services for supplying that gas serve the same end -uses
and there is no known indication that consumers prefer dom estic or certain third -country gas or
related services.1262
7.743. We recall that, as determined above, foreign service suppliers established as TSOs in the
European Union supply identical pipeline transport services, and are like service suppliers within
the meani ng of Article II:1 of the GATS. 1263 Based on the same considerations, we find that
domestic suppliers of pipeline transport services and pipeline transport service suppliers of other
Members established as TSOs in Croatia, Hungary and Lithuania are like service suppliers within

1252 Russia's response to Panel question No. 1, para. 4; and European Union's first written submission,
paras. 433 and 452.
1253 Russia's first written submission, paras. 234 and 248.
1254 Russia's first written submission, para. 252. (footnote omitted)
1255 European Union's first written submission, para. 228.
1256 Appellate Body Report, Argentina – Financial Services, para. 6.38. The Appellate Body referred to
the establishment of likeness in this manner as the "presumption approach". (Appellate Body Report, Argentina
– Financial Services, para. 6.35).
1257 Croatia's Gas Market Act, (Exhibit RUS-45), Article 14(6). (emphasis added)
1258 Hungary's Gas Act, (Exhibits EU-155/EU-47), Section 121/H(4). (emphasis added)
1259 Lithuania's Law on Natural Gas, (Exhibit RUS-136rev), Article 41(5). (emphasis added)
1260 Russia's first written submission, paras. 254-255.
1261 Russia's first written submission, para. 255.
1262 Russia's first written submission, para. 255.
1263 See above paras. 7.421 and 7.422.

the meaning of Article XVII of the GATS. 1264 In our view, this conclusion is not affected by the fact
that, in the context of this measure, certain TSOs are controlled by public bodies.
7.6.2.2.4 Less favourable treatment
7.744. Scrutinizing the text of A rticle XVII of the GATS, the Appellate Body has considered that
the "treatment no less favourable" standard calls for an examination of whether a measure
modifies the conditions of competition between, on the one hand, domestic services and service
suppliers, and on the other, services and service suppliers of any other Member.1265 If the measure
at issue modifies the conditions of competition to the detriment of services and service suppliers of
any other Member, it will be inconsistent with Article XVII. 1266 Thus, in the present case, we shall
assess whether Russia has demonstrated that the public body measure modifies the conditions of
competition to the detriment of service suppliers of any other Member in comparison to like
domestic service suppliers.
7.745. Under Article XVII, a measure can modify the conditions of competition to the detriment of
services and service suppliers of any other Member by according to services and service suppliers
of any other Member, either formally identical treatment or formally diff erent treatment to that it
accords to domestic services and service suppliers.1267
7.746. We note that Russia bases its claim on the interpretation of the text of the public body
measure, as well as on the fact that the governments of Croatia, Hungary and Lithuania own and
control both a TSO and supply undertaking within their respective territories. 1268 Therefore, in our
assessment of whether the public body measure modifies the conditions of competition to the
detriment of service suppliers of any other Member in com parison to like domestic service
suppliers, we will examine closely its design, structure and expected operation.
7.747. As Russia brings its challenge on the basis of the interpretation of the text of the public
body measure in the implementing national laws of Croatia, Hungary and Lithuania , we will also
establish the meaning and scope of the public body measure in these national implementing laws,
as the municipal law s at issue. The Appellate Body has observed that, "[a]s part of their duties
under Article 11 of the DSU, panels have the obligation to examine the meaning and scope of the
municipal law at issue in order to make an objective assessment of the matter before it." 1269 We
further recall that, "under the usual allocation of the burden of proof, a respondi ng Member's
measure will be treated as WTO -consistent, until sufficient evidence is presented to prove the
contrary".1270 In these proceedings, Russia, as the complaining party, bears the burden of

1264 We note that, in the context of the public body measure, Russia argues that LNG service suppliers
and pipeline transport service suppliers are like within the meaning of Article XVII of the GATS. (Russia's first
written submission, paras. 254-261). We do not consider LNG service suppliers to be relevant for our
assessment of Russia's claims against the public body measure because the public body measure only concerns
TSOs, that is pipeline transport service suppliers. LNG system operators (LNG service suppliers) are not subject
to the requirement to unbundle (see above paras. 2.34 and 2.35), and consequently are not subject to the
public body measure. We also observe that Russia does not develop any arguments with respect to the
application of the public body measure to LNG service suppliers.
1265 Appellate Body Report, Argentina – Financial Services, paras. 6.103-6.104.
1266 Appellate Body Report, Argentina – Financial Services, para. 6.106.
1267 Article XVII:3 of the GATS provides as follows:
Formally identical or formally different treatment shall be considered to be less favourable if it modifies
the conditions of competition in favour of services or service suppliers of the Member compared to like services
or service suppliers of any other Member.
1268 We note that Russia divided its claim against the public body measure in the national implementing
laws of Croatia, Hungary and Lithuania into de facto and de jure claims. (Russia's first written submission,
paras. 269-285; response to Panel question No. 5, paras. 28-29; and second written submission, paras. 167-
168). We find it appropriate to conduct a single analysis of the consistency of this measure with Article XVII of
the GATS based on its design, structure and expected operation.
1269 Appellate Body Report, US – Shrimp II (Viet Nam), para 4.31 (quoting Appellate Body Report, US –
Countervailing and Anti-Dumping Measures (China), para. 4.98).
1270 Appellate Body Report, Canada – Dairy (Article 21.5 – New Zealand and US II), para. 66. (emphasis
original)

providing sufficient evidence that the public body measure is inconsistent with Article XVII,
including on the basis of its meaning and scope as municipal law.1271
7.748. As regards the evidentiary elements that may be used in establishing the meaning and
scope of municipal law, the Appellate Body has clarified as follows:
A party asserting that another party's municipal law is inconsistent "as such" with
relevant WTO obligations bears the burden of introducing evidence as to the meaning
of such law to substantiate that assertion. 1272 When a municipal law is challenged "as
such", the starting point for the analysis will be the text of that municipal law, on its
face.1273 A complainant may seek to support its understanding of the meaning of the
municipal law on the basis of the text of that municipal law only. A complainant may
also seek to support its understanding of the meaning of the municipal law at issue
with additional elements such as "evidence of the consistent application of such laws,
the pronouncements of domestic courts on the meaning of such laws, the opinions of
legal e xperts and the writings of recognized scholars". 1274 Likewise, in addition to
setting out its understanding of the text of the municipal law at issue, the respondent
may submit evidence relating to such additional elements to rebut the complainant's
arguments. In conducting its independent assessment of the meaning of the municipal
law at issue, a panel must undertake a holistic assessment of all the relevant
elements before it.1275, 1276
7.749. We recall that the Appellate Body has held that the "treatment no less favoura ble"
standard calls for an examination of whether a measure modifies the conditions of competition
between, on the one hand, domestic services and service suppliers, and on the other, services and
service suppliers of any other Member. 1277 Therefore, Russia needs to demonstrate that the public
body measure modifies the conditions of competition to the detriment of service suppliers of any
other Member in comparison to like domestic service suppliers.
7.750. Bearing these considerations in mind, we proceed with our a ssessment of whether the
public body measure modifies the conditions of competition to the detriment of service suppliers of
any other Member in comparison to like domestic service suppliers, in accordance with the
analytical framework set out above in paragraphs 7.746 and 7.747.
7.751. We understand Russia to argue that the alleged modification of the conditions of
competition to the detriment of service suppliers of any other Member in comparison to like
domestic service suppliers stems from the alleged competitive advantage granted to domestic
service suppliers as a result of bein g "exempted" from the requirement to unbundle. 1278 In the
specific circumstances of this claim, and based on our understanding of Russia's arguments, in
order for its claim to succeed, Russia needs to demonstrate two elements: (i) that the public body
measure is an "exemption" from the requirement to unbundle , and (ii) that it applies only to
domestic service suppliers, excluding like service suppliers of other Members , and hence modifies
the conditions of competition to the detriment of service suppliers of any other Member.
7.752. Below, we examine each of these elements separately. However, we wish to stress that
neither of them, taken separately, is sufficient for Russia to demonstrate that the public body
measure is inconsistent with Article XVII. Rather, t hese two elements represent distinct yet
integral aspects of a demonstration that the public body measure modifies the conditions of

1271 It is well established that "[t]he party asserting that another party's municipal law, as such, is
inconsistent with relevant treaty obligations bears the burden of introducing evidence as to the scope and
meaning of such law to substantiate that assertion". (Appellate Body Report, US – Carbon Steel, para. 157).
1272 (footnote original) The nature and extent of the evidence required to satisfy the burden of proof will
vary from case to case. (Appellate Body Report, US – Carbon Steel, para. 157)
1273 (footnote original) Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, para. 168.
1274 (footnote original) Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China),
1275 (footnote original) Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China),
para. 4.101.
1276 Appellate Body Report, EU – Biodiesel (Argentina), para. 6.156.
1277 Appellate Body Report, Argentina – Financial Services, paras. 6.103-6.104.
1278 Russia's first written submission, paras. 275, 277, 280 and 284; and second written submission,
paras. 177-178.

competition to the detri ment of service suppliers of any other Member in comparison to like
domestic service suppliers.
7.753. We begin our assessment with the first element of Russia's claim and examine whether
Russia has demonstrated that the public body measure constitutes an "exemption" from the
requirement to unbundle.
Whether the public body measure is an "exemption" from the requirement to
unbundle
7.754. In Russia's view, the public body measure provides an "exemption" from the requirement
to unbundle to service suppliers controlled by domestic public bodies. 1279 Russia alleges that the
public body measure treats "two separate public bodies" as "deemed not to be" the same person
or persons, while, in reality, they are the same person in the form of the same member State
government.1280 Thus, according to Russia, provided the member State government arranges for
control over, on the one ha nd, a TSO or transmission system, and on the other, an undertaking
involved in supply or production activities, to be exercised by "two separate public bodies", the
government is exempted from the requirement to unbundle.1281
7.755. The European Union opposes Russi a's characterization of the public body measure as an
"exemption" from the requirement to unbundle. According to the European Union, the public body
measure is meant to ensure that the principle of non -discrimination between public and private
sectors is r espected in the implementation of effective unbundling. 1282 The European Union
submits that the public body measure requires an examination of whether the two public bodies
exercising control over, on the one hand , a TSO or transmission system, and on the oth er hand,
an undertaking involved in supply or production activities, are "truly separate" in addition to
ascertaining that these two public bodies meet the unbundling requirement.1283
7.756. We recall that, under the unbundling measure, the function of transmission network
operation must be separated from the function of natural gas production and/or supply on the
basis of one of the applicable unbundling models: the OU model, the ITO model or the ISO
model.1284 The OU model, as implemented in the national laws of Croa tia, Hungary and Lithuania,
prohibits the same person or persons from directly or indirectly exercising control over, on the one
hand, a TSO or transmission system, and on the other, an undertaking performing any of the
functions of production or supply.1285 Pursuant to the public body measure, as implemented in the
national laws of Croatia, Hungary and Lithuania, where the person subject to the ownership
unbundling requirement is a public body, two separate public bodies exercising control over a TSO
or a tra nsmission system on the one hand, and over an undertaking performing any of the
functions of production or supply on the other, shall be deemed not to be the same person or
persons.1286 Thus, the public body measure in these national implementing laws sets ou t a legal

1279 Russia's first written submission, paras. 233, 269, 272, 275, 277 and 280; responses to Panel
1280 Russia's response to Panel question No. 1, para. 3. See also Russia's first written submission,
para. 245; and opening statement at the first meeting of the Panel, para. 29.
1281 Russia's opening statement at the first meeting of the Panel, para. 29.
1282 European Union's first written submission, para. 223 (referring to the Directive 2009/73/EC, (Exhibit
EU-5), Recital (20)).
1283 European Union's first written submission, paras. 226 and 228; and second written submission,
para. 49.
1284 Commission Staff Working Paper, Interpretative Note on Directive 2009/72/EC Concerning Common
Rules for the Internal Market in Electricity and Directive 2009/73/EC Concerning Common Rules for the
Internal Market in Natural Gas – The Unbundling Regime (22 January 2010), (Commission Interpretative Note
on the Unbundling Regime), (Exhibits EU-42/RUS-19), p. 4.
1285 See above para. 2.11.
1286 Article 14(6) of Croatia's Gas Market Act, Section 121/H(4) of Hungary's Gas Act and Article 41(5)
of Lithuania's Law on Natural Gas implementing Article 9(6) of the Directive. The wording of the national
implementing laws differs, to various degrees, from that of Article 9(6) of the Directive. The national
implementing laws also differ in wording among each other. The text of Article 9(6) of the Directive, as well as
the national implementing laws, is provided below.

Article 9(6) of the Directive contains the following rule:

regime for service suppliers controlled by public bodies that is different from the ownership
unbundling requirement provided by the unbundling measure for all other service suppliers.1287
7.757. In our view, however, the mere fact that the public body me asure in the national
implementing laws of Croatia, Hungary and Lithuania sets a legal regime that is different from the
ownership unbundling requirement does not necessarily mean that this measure is an exemption
from this requirement. Such a conclusion can only be reached on the basis of a rigorous scrutiny of
the design, structure and expected operation of the public body measure, as well as its
relationship with the unbundling measure.
7.758. We note that the ordinary meaning of the word "exemption" is "the action of exempting, or
the state of being exempted from a liability, obligation, penalty, law, or authority". 1288 "To
exempt", in turn, means "to grant to (a person, etc.) immunity or freedom from a liability to which
others are subject", such as "a burden, d uty, or obligation, a burdensome state or condition". 1289
Therefore, an assessment of whether the public body measure constitutes an exemption from the
ownership unbundling requirement involves a determination of whether it "releases" service
suppliers controlled by public bodies from the prohibition of exercising control over, on the one
hand, a TSO or transmission system, and on the other, an undertaking performing the function of
natural gas production and/or supply.
7.759. We recall that, in arguing that the pub lic body measure constitutes an "exemption" from
the requirement to unbundle, Russia focuses on the words "shall be deemed not to be the same
person or persons" used in Article 9(6) of the Directive. In Russia's view, even though a "separate"
public body e xercising control over a TSO or transmission system and a "separate" public body

For the implementation of this Article, where the person referred to in points (b), (c) and (d) of
paragraph 1 is the Member State or another public body, two separate public bodies exercising
control over a transmission system operator or over a transmission system on the one hand, and
over an undertaking performing any of the functions of production or supply on the other, shall
be deemed not to be the same person or persons. (Directive 2009/73/EC, (Exhibit EU -5), Article
9(6)) (emphasis added)

Article 14(6) of Croatia's Gas Market Act provides as follows:

Two separate public authorities that control the transmission system operator or the transmission
system and that control the energy undertaking performing any of the activities of production,
trade or supply and the activity of the production of natural gas shall not be considered the same
person or persons within the meaning of [the relevant ownership unbundling provisions of the
Gas Market Act]. (Croatia's Gas Market Act, (Exhibit RUS-45), Article 14(6)). (emphasis added)

Section 121/H/4 of Hungary's Gas Act states that:

The obligation set out in [the relevant ownership unbundling provisions of the Gas Act] shall be
deemed to be fulfilled in a situation where economic operators defined by law acting in the name
of Hungary or other public bodies exercising control over a transmission system operator or over
a transmission line on the one hand, and over a company performing any of the functions of
production or supply of natural gas on the other. (Hungary's Gas Act, (Exhibits EU-155/RUS-47),
Section 121/H(4).

Article 41(5) of Lithuania's Law on Natural Gas is worded as follows:

Where the person referred to in [the relevant ownership unbundling provisions of the Law on
Natural Gas] is a Member State or ano ther public body, two separate public bodies exercising
control over a transmission system operator or over a transmission system on the one hand, and
over an undertaking performing any of the functions of production or supply on the other, shall
be deemed not to be the same person or persons. (Lithuania's Law on Natural Gas, (Exhibit RUS-
136rev), Article 41(5)). (emphasis added)

1287 According to Russia, the "exemption" pursuant to Article 9(6) of the Directive covers "the general
and full ownership unbundling provisions of Article 9, as well as the ISO and ITO provisions of Article 14 and
Chapter IV, respectively". (Russia's first written submission, para. 270). The European Union does not discuss
the relationship between the public body measure and the ISO and ITO models.
1288 Oxford English Dictionary Online, definition of "exemption, n.2.a"
http://www.oed.com/view/Entry/66070?redirectedFrom=exemption (accessed 3 August 2017).
1289 Oxford English Dictionary Online, definition of "exempt, v.4.d"
http://www.oed.com/view/Entry/66066?rskey=UdEDfX&result=2&isAdvanced=false (accessed 3 August 2017).

exercising control over an undertaking involved in production or supply activities are part of the
same member State government, they are "deemed", for purposes of the unbundl ing measure,
"not to be the same person or persons". 1290 Russia contends that the public body measure thus
created a "legal fiction" to preserve the right of EU member States under the Treaty on the
Functioning of the European Union to continue owning and controlling the entire VIU.1291
7.760. In our view, words such as "shall not be considered the same person or persons" and
"shall be deemed not to be the same person or persons" in the text of the public body measure
may indicate that, while the government in question is one and the same person, it is considered
as consisting of two persons for the purposes of the ownership unbundling requirement. In this
sense, the public body measure could be understood as creating a "legal fiction". We also note
that, when assess ing a "deeming" provision in municipal law, the Appellate Body in US – FSC
(Article 21.5 - EC) ignored the "legal fiction" created by that provision and found that the legal
consequences prescribed by that provision did not correspond to the factual situat ion described
therein.1292 Deriving guidance from this approach of the Appellate Body, we consider that,
similarly, in the present case, we should examine relevant facts and evidence, as submitted to us
by the parties.
7.761. We observe that, pursuant to the public body measure in the national implementing laws
of Croatia, Hungary and Lithuania, the ownership unbundling requirement will be fulfilled (i.e. the
two public bodies will be "deemed" not to be the same person or persons) when the public body
exercising control over a TSO or transmission system and the public body exercising control over
an undertaking performing the function of natural gas supply and/or production are "separate".1293
Therefore, in determining whether, by treating the same government as not bei ng one person, the
public body measure creates a "legal fiction", and by that means exempts service suppliers
controlled by public bodies from the requirement to unbundle, it is relevant for us to examine the
role of the word "separate" used in the text of this measure. In particular, as part of our holistic
assessment of the design, structure and expected operation of the public body measure, we
consider it important to establish whether this word imposes a requirement that the public bodies
in question be "separate", and if so, how this requirement compares with the ownership
unbundling requirement.
7.762. We understand Russia to argue that a government, by virtue of its nature, is not able to
effectively "unbundle" within the meaning of the Directive. 1294 We furth er understand that, in
Russia's view, this is confirmed by the fact that, despite being controlled by two "separate"
ministries, the "central government[s]" of Hungary and Lithuania retain control over a TSO and
supply undertaking in their territories.1295

1290 Russia's second written submission, para. 175.
1291 Russia's response to Panel question No. 179, para. 155.
1292 The Appellate Body held that "because the manufacturer and distributor are related, the measure
deems the foreign economic process requirement to have been met in the sales transaction between the
related parties, when, in fact, it was not met". (Appellate Body Report, US – FSC (Article 21.5 - EC),
para. 159).
1293 Croatia's Gas Market Act, (Exhibit RUS-45), Article 14(6); and Lithuania's Law on Natural Gas,
(Exhibit RUS-136rev), Article 41(5). We note, however, that the text of Section 121/H(4) of Hungary's Gas Act
does not contain the word "separate". While none of the parties provided any arguments regarding the
relevance of this omission, it is also uncontested that Section 121/H(4) implements Article 9(6) of the
Directive, which contains the word "separate". For the texts of the relevant provisions of the national
implementing laws at issue see above fn 1286.
1294 Russia's response to Panel question No. 1, para. 3. See also Russia's second written submission,
paras. 192-195; and opening statement at the first meeting of the Panel, para. 29.
1295 Russia's second written submission, paras. 188-195. See also Russia's first written submission,
paras. 285–305. In support of its arguments, Russia refers to the Commission's certification opinions
concerning MGT in Hungary and Amber Grid in Lithuania. We discuss Russia's arguments below in
paragraphs 7.777. through 7.782. We note that Russia submits these arguments in the context of developing
its claim on the basis of the ownership and control by the governments of Croatia, Hungary and Lithuania of a
TSO and supply undertaking within their respective territories. (Russia's second written submission, paras.
188-197). We recall that we have found that the aspect of Russia's claim that concerns the ownership and
control by the government of Hungary of a TSO and supply undertaking in its territory falls outside our terms
of reference. (See above para. 7.215). We understand that Russia relies on the Commission's certification
opinion concerning MGT in Hungary not only to prove that, in its view, the government of Hungary owns and
controls a TSO and supply undertaking in its territory but also as a support for its more general proposition
that a government cannot unbundle. We thus consider that our decision that the aspect of Russia's claim

7.763. We understand the European Union to argue that the word "separate" used in the text of
the public body measure constitutes a requirement that must be fulfilled by the two public bodies
in question in order to be able to rely on the public body measure. 1296 Russia does not contest this
argument but submits that, like Article 9(6) of the Directive, the national implementing laws of
Croatia, Hungary and Lithuania do not define their "key terms", including the word "separate". 1297
In Russia's view, the public body measure thus leaves the European Union and the member States
a broad discretion to interpret these terms "as desired".1298
7.764. In support of its arguments that the public body measure requires an assessment of
whether the two public bodies in question comply with th e unbundling requirement and are "truly
separate"1299, the European Union provides four certification opinions of the Commission where the
Commission allegedly conducted such an assessment. We observe that the Commission's
certification opinions are based on the application by the Commission of Article 9(6) of the
Directive, rather than national implementing laws of Croatia, Hungary and Lithuania. We recall that
Article 9(6) of the Directive is not a challenged measure. 1300 However, as the national laws in
question implement Article 9(6) of the Directive, the evidence regarding the meaning and scope of
Article 9(6) of the Directive may be relevant for our assessment to the extent that such evidence
may clarify the meaning and scope of the national implementing laws.1301
7.765. The Commission's certification opinions provided by the European Union concern the
interpretation of the word "separate" used in the text of Article 9(6) of the Directive. We recall that
the same word is used in the national implementing laws of Croat ia and Lithuania. In our view,
given that the same word appears both in Article 9(6) of the Directive and national implementing
laws, the interpretation of the word "separate" by the Commission is relevant for our assessment
of whether this word imposes a requirement to be fulfilled by the public bodies, and if so, how this
requirement compares to the ownership unbundling requirement. Therefore, in our view , the
interpretation of the word "separate" used in Article 9(6) of the Directive can shed light on th e
meaning of the same word, as used in the national implementing laws. Bearing these
considerations in mind, we proceed to the analysis of the Commission's certification opinions
provided by the European Union.
7.766. The European Union relies on the Commission's opinions concerning the certification, under
Article 9(6) of the Directive, of the following TSOs: Energinet.dk (Denmark) 1302, Gat Transport
Services B.V. ( GTS) (the Netherlands) 1303, MGT (Hungary) 1304, and Amber Grid (Lithuania) .1305
Russia does not directly challe nge the European Union's contention that, in the certification
opinions under Article 9(6) of the Directive, the Commission conducts an examination of whether
the two public bodies comply with the ownership unbundling requirement and are "truly separate".

concerning the ownership and control by the government of Hungary of a TSO and supply undertaking in its
territory falls outside our terms of reference does not preclude us from reviewing Russia's arguments and
evidence related to this general proposition.
1296 European Union's first written submission, paras. 226 and 228; and second written submission,
para. 49.
1297 Russia's first written submission, paras. 271, 275 and 278.
1298 Russia's first written submission, para. 271.
1299 European Union's first written submission, paras. 224–226; and second written submission,
para. 49.
1300 See above para. 7.732.
1301 This seems to also be the view of the parties, which, as mentioned above, have developed a
significant part of their arguments on the basis of Article 9(6) of the Directive.
1302 Commission Opinion of 9 January 2012 pursuant to Article 3(1) of Regulation (EC) No 715/2009 and
Article 10(6) of Directive 2009/73/EC - Denmark - Certification of Energinet.dk (gas), C(2012) 88 final,
(Commission Opinion on the Certification of Energinet.dk), (Exhibit EU-51), pp. 3-5.
1303 Commission Opinion of 1 July 2013 pursuant to Article 3(1) of Regulation (EC) No 715/2009 and
Article 10(6) of Directive 2009/73/EC – the Netherlands - Certification of Gas Transport Services B.V., C(2013)
4205 final, (Commission Opinion on the Certification of GTS), (Exhibit EU-52), pp. 2-5.
1304 Commission Opinion of 17 February 2015 pursuant to Article 3(1) of Regulation (EC) No 715/2009
and Article 10(6) of Directive 2009/73/EC – Hungary – Certification of Magyar Gáz Tranzit Zrt., C(2015) 1046
final, (Commission Opinion on the Certification of MGT), (Exhibits EU-53/RUS-53), pp. 3-4.
1305 Commission Opinion on the Certification of Amber Grid, (Exhibits EU-54/RUS-50), pp. 1-3.

Russia discusses, however, the Commission's certification opinions concerning MGT and Amber
Grid when advancing its own position that no effective unbundling applies to public bodies.1306
7.767. In its opinion concerning the certification of Energinet.dk, a TSO fully owned by the Danish
State, the Commission noted that Article 9(6) provides the possibility for the State to control
transmission activities, as well as generation, production and supply activities, provided however
that the respective activities are exercised by separate public entities. Thus, according to the
Commission, two separate public bodies should be seen as two distinct persons and should be able
to control generation and supply activities on the one hand and transmission activities on the
other, provided that it can be demonstrated that they are not under the common influence of
another public entity in violation of the rules on ownership unbundling. 1307 In its assessment, the
Commission found that Energinet.dk is fully owned by the Danish State , which also owns 76.49 %
of the shares in DONG Energy A/S, which is active in production and supply of natural gas. The
ownership of Energinet.dk is administered by the Danish Minister of Climate, Energy and Building,
who exercises control over Energinet. dk and can make decisions on any matters pertaining to
Energinet.dk. The ownership of DONG Energy A/S is administered by the Danish Minister of
Finance.1308
7.768. The Commission confirmed that two separate ministries controlling, on the one hand,
transmission of natural gas, and on the other hand, activities of production and supply of natural
gas, can under certain circumstances constitute public bodies with a sufficient degree of separation
as required by Article 9(6) Gas Directive.1309 The Commission established that, according to Danish
constitutional law, individual ministers have an independent power of decision in the areas for
which they are responsible, and enjoy a high degree of independence. The minister of finance, who
controls the production and supply inte rests of DONG Energy S.A., has no legal means to give
instructions to the minister of climate, energy and building, who controls the transmission
activities of Energinet.dk, and vice versa. The ministers are ultimately both legally and politically
responsible for their own ministry, and have as a consequence an independent power of decision in
their areas of competence. The Commission also established that the independence of the
individual ministers in the areas of their competence also precludes the prime minister from giving
orders or instructions as regards the minister's responsibilities concerning the transmission of
natural gas. Having identified several other relevant elements, including the independence of the
day-to-day running of Energinet.dk and the separateness of its financial resources, the
Commission considered that the requirements of Article 9(6) of the Gas Directive were complied
with.1310
7.769. In its opinion concerning the certification of GTS, the operator of the entire Dutch onshore
gas transmission grid owned by the Dutch State, the Commission conducted a similar analysis. The
Commission enquired whether the Dutch minister of finance, in charge of administering the state
ownership of GTS, and the Dutch ministry of economic affairs (MEA), managing the participation of
the Dutch State in two companies active in the production and supply of gas (Energie Beheer
Nederland and GasTerra), were separate and not under the common influence of another public
entity in violation of the rules on ownership unbundling.1311
7.770. In its review of the preliminary decision of the Dutch regulatory authority, the Commission
noted that, according to the Dutch Constitution, ministers have separate tasks for which they are
personally and politically responsible. This includes independent decision -making powers
concerning the participation of the State in energy undertakings managed by a ministry. The prime
minister is responsible only for the areas that are not covered by the ministries. Neither the prime
minister nor the ministry of finance can give instructions to MEA, or vice versa. The separation of
competences applies throughout the entire organization of a ministry, including each individual
public official employed by the ministries concerned. On the basis of this ana lysis, the Commission
agreed with the conclusion of the Dutch regulatory authority that the structural separation of

1306 Russia's second written submission, paras. 188–195. See also Russia's first written submission,
paras. 285–305. We discuss Russia's arguments below in paras. 7.777. through 7.782.
1307 Commission Opinion on the Certification of Energinet.dk, (Exhibit EU-51), p. 4.
1308 Commission Opinion on the Certification of Energinet.dk, (Exhibit EU-51), p. 4.
1309 Commission Opinion on the Certification of Energinet.dk, (Exhibit EU-51), p. 4.
1310 Commission Opinion on the Certification of Energinet.dk, (Exhibit EU-51), pp. 4-5.
1311 Commission Opinion on the Certification of GTS, (Exhibit EU-52), pp. 2-3.

competences provides for a degree of separation between the ministry of finance and MEA
sufficient to comply with Article 9(6) of the Directive.1312
7.771. However, the Commission raised concern about a number of explicit tasks and
competences that MEA has with regard to GTS on the basis of the Dutch Gas Act, including the
power of approval of the bylaws of GTS and the power of approval of special inv estments. The
Commission noted that complying with the OU model within the State does not only imply
compliance with Article 9(6), but also with Article 9(1)(b), (c) and (d) of the Directive, which
means inter alia that the competences of MEA, insofar as i ts power over GasTerra and/or Energie
Beheer Nederland amounts to control, with regard to GTS may not amount to any right within the
meaning of Article 9(1) and (2) of the Directive. On the basis of further analysis of the Dutch Gas
Act, the Commission rec ommended that, before taking its final certification decision, the Dutch
regulatory authority should assess in detail the way in which MEA can carry out these two tasks
and whether or not this gives rise to the incentive and the ability of MEA to influence the TSO
decision making in order to favour MEA's generation and supply interests to the detriment of other
network users.1313
7.772. In its opinion concerning the certification of MGT, the promoter of the Hungarian section of
the natural gas pipeline interconnecting the Slovakian and Hungarian gas systems 100% owned by
the Hungarian State, the Commission assessed the separation between the ministry of interior
exercising control over MGT and the ministry of national development, which exercises control
over the Hun garian electricity and gas incumbent Magyar Villamos Művek Zrt. ( MVM).1314 The
Commission found that ministers in Hungary are in charge of their ministries and responsible for
the issues assigned to them. Ministers carry out the tasks falling within their com petence
autonomously, excluding the possibility of exercising influence over multiple ministries by the
prime minister. Based on its analysis, the Commission concluded that the requirements of
Article 9(6) of the Gas Directive were complied with.1315
7.773. A similar analysis was conducted by the Commission in providing its opinion on the
certification of Amber Grid , a TSO in Lithuania, 96.58% of shares in which are ultimately held by
the Lithuanian State via the ministry of energy.1316 The Commission found that the Lithuanian
State also has "participations" in energy supply and generation companies, including Litgas, which
would fall under the remit of the ministry of finance.1317 The Commission established that the
ministry of energy indirectly holds 23.52% of the shares and votes in Litgas. 1318 The Commission
was concerned that the financial incentives of the ministry of energy as a shareholder in a gas
supplier may lead it to unduly influence Amber Grid, for instance on issues related to capacity
allocation, maintenance or investment. The Commission therefore urged the Lithuanian regulatory
authority to make the certification of Amber Grid conditional upon the relinquishing by the ministry
of energy of its indirect shareholding in Litgas.1319
7.774. Having now examined the Com mission's certification opinions provided by the European
Union, we observe that, in all of these opinions, the Commission conducted an assessment of
whether a public body controlling a TSO or transmission system and a public body controlling an
undertaking performing the function of natural gas production and/or supply were separate.
7.775. Therefore, we consider that the word "separate" in the text of the public body measure in
the national implementing laws of Croatia, Hungary and Lithuania indeed constitutes a
requirement that the public bodies must fulfil in order to be able to rely on the public body
measure. The Commission's assessment indicates that, substantively, this requirement
presupposes that the two public bodies in question do not exercise any infl uence over each other
and are not under a common influence of another public body. In the four certification opinions
analysed above, the Commission conducted its assessment on the basis of the review of the
competencies, organisational structure and decis ion-making of the public bodies involved, under
the law of the State in question.

1312 Commission Opinion on the Certification of GTS, (Exhibit EU-52), p. 3.
1313 Commission Opinion on the Certification of GTS, (Exhibit EU-52), pp. 4-5.
1314 Commission Opinion on the Certification of MGT, (Exhibits EU-53/RUS-53), p. 3.
1315 Commission Opinion on the Certification of MGT, (Exhibits EU-53/RUS-53), p. 4.
1316 Commission Opinion on the Certification of Amber Grid, (Exhibits EU-54/RUS-50), p. 1.
1317 Commission Opinion on the Certification of Amber Grid, (Exhibits EU-54/RUS-50), p. 2.
1318 Commission Opinion on the Certification of Amber Grid, (Exhibits EU-54/RUS-50), p. 2.
1319 Commission Opinion on the Certification of Amber Grid, (Exhibits EU-54/RUS-50), pp. 2-3.

7.776. As we have established above, the OU model, as implemented in the national laws of
Croatia, Hungary and Lithuania, prohibits the same person or persons from directly or indi rectly
exercising control over, on the one hand, a TSO or transmission system, and on the other, an
undertaking performing any of the functions of production or supply. 1320 The prohibition of this
control is aimed at ensuring the separation of the function of natural gas transmission from the
function of natural gas supply and/or production.1321 In our view, the Commission's assessment of
whether the two public bodies in question do not exercise any influence over each other and are
not under a common influence o f another public body, in order to establish that these two public
bodies are "separate", serves to ensure separation between the function of natural gas
transmission and the function of natural gas production and/or supply entrusted to each of these
public bodies. Thus, even though the "separation" requirement applicable to service suppliers
controlled by public bodies differs from the ownership unbundling requirement applicable to all
other service suppliers, we understand these two requirements as functi onally equivalent in
ensuring separation between the function of natural gas transmission and the function of natural
gas production and/or supply.
7.777. We recall that, in support of its proposition that a government cannot effectively unbundle,
Russia argues that, despite being controlled by two "separate" ministries, the "central
government[s]" of Hungary and Lithuania retain control over a TSO and supply undertaking in
their territories.1322
7.778. In respect of MGT in Hungary, Russia argues that "it should not matte r that the
transmission and supply portions of this service supplier are supplied by different undertakings
(MGT and MVM) and ostensibly controlled by separate ministries", as long as both ministries are
the integral parts of the Hungarian central government.1323 In Russia's view, the Hungarian central
government "clearly" restricts the alleged autonomy of the minister of national development and
the ministry of interior to act independently vis-à-vis MGT and MVM.1324
7.779. In respect of Amber Grid in Lithuania, Russia contends that allocating control between the
ministry of energy and the ministry of finance over the transmission and supply systems in no way
diminishes the Lithuanian central government's ability to directly influence both the supply and
transmission.1325
7.780. Russia also alleges that, as with Hungary and Lithuania, the government of Croatia is able
to "coordinate and direct the provision of both transmission and supply services", acknowledging
however that, in the a bsence of a certification decision, "little is known about how the Croatian
government has structured ownership and control of Plinacro and HEP".1326
7.781. Russia did not provide any evidence in support of its allegation that the "central
government[s]" of Hungary and Lithuania "directly influence[] " both functions of natural gas
transmission and supply.1327
7.782. We acknowledge that, due to its specific nature, a government may not be able to
"unbundle" in the same way as a private undertaking would within the meaning of the Directive.
The rules of the Directive applicable to service suppliers controlled by public bodies, often acting in

1320 See above para. 2.11. See also Commission Interpretative Note on the Unbundling Regime,
(Exhibits EU-42/RUS-19), pp. 7-8.
1321 Commission Interpretative Note on the Unbundling Regime, (Exhibits EU-42/RUS-19), p. 4.
1322 Russia's response to Panel question No. 1, para. 3. See also Russia's first written submission,
para. 245; second written submission, paras. 188–195; and opening statement at the first meeting of the
1323 Russia's first written submission, paras. 287–289 (referring to Commission Opinion on the
Certification of MGT, (Exhibits EU-53/RUS-53)).
1324 Russia's first written submission, paras. 287–289 (referring to Commission Opinion on the
Certification of MGT, (Exhibits EU-53/RUS-53)).
1325 Russia's first written submission, paras. 296–298 (referring to Commission Opinion on the
Certification of Amber Grid, (Exhibits EU-54/RUS-50)).
1326 Russia's first written submission, para. 302. According to Russia, Plinacro is a TSO in Croatia owned
and controlled by the government of Croatia and HEP is a gas supplier in Croatia. (Russia's first written
submission, paras. 300–301).
1327 In addition, we note that the Commission's opinions concerning the certification of MGT in Hungary
and Amber Grid in Lithuania, reviewed in paragraphs 7.772 and 7.773 above, do not provide support for this
proposition.

the form of separate ministries of the same government, are different from the unbundling rules
applicable to all other service suppliers.
7.783. However, as we noted above, a difference in the legal regime does not automatically
amount to an "exemption". To the contrary, our analysis shows that the requirement that the
public bodies in question be separate serves to ensure the same result – a se paration of the
function of natural gas transmission from the function of natural gas production and/or supply.
While the precise manner in which this separation must be achieved in respect of service suppliers
controlled by public bodies and in respect of all other service suppliers is different, Russia has not
argued that the mere existence of this difference amounts to a violation of Article XVII of the
GATS.1328
7.784. We recall that Article XVII:3 of the GATS makes it clear that formally different treatment of
domestic services and service suppliers and like services and service suppliers of any other
Member is insufficient to establish a viola tion of Article XVII. In order for a violation of Article XVII
to ensue, it must be shown that such formally different t reatment modifies the conditions of
competition in favour of domestic services and service suppliers compared to like services and
service suppliers of any other Member.
7.785. Thus, we consider that, even if Russia were to prove that the public body measure app lies
only to domestic service suppliers (the issue we examine below), the fact that this measure would
provide formally different treatment to domestic service suppliers and like service suppliers of
other Members would not be sufficient to demonstrate tha t it violates Article XVII. Russia would
still need to demonstrate that this formally different treatment "modifies the conditions of
competition in favour of" domestic services and service suppliers compared to like services and
service suppliers of any other Member.1329
7.786. In concluding, we recall that, as established above, the public body measure provides
different rules for service suppliers controlled by public bodies than those prescribed by the
unbundling measure for all other service suppliers. However, we have found these rules to be
functionally equivalent to those provided by the unbundling measure in ensuring a separation of
the function of natural gas transmission from the function of natural gas production and/or supply.
7.787. Being designed to ensure a separation of the function of natural gas transmission from the
function of natural gas production and/or supply, the public body measure thus cannot be
considered as "releasing" service suppliers controlled by public bodies from the prohibition of
exercising control over, on the one hand, a TSO or transmission system, and on the other, an
undertaking performing the function of natural gas production and/or supply. Therefore, we
conclude that Russia has not established that the public body measure "exempts" service suppliers
controlled by public bodies from the requirement to unbundle.
7.788. In the specific circumstances of this dispute and for reasons of completeness , we find it
useful to continue with our analysis of alleged less favourable treatment by examining the parties'
arguments concerning the issue of whether the public body measure applies exclusively to
domestic service suppliers.
Whether the public body measure applies exclusively to domestic service suppliers

1328 We recall that Russia argues that the public body measure modifies the conditions of competition to
the detriment of service suppliers of any other Member in comparison to like domestic service suppliers
because, in its view, this measure grants an "exemption" to domestic service suppliers. (Russia's first written
submission, paras. 275, 277, 280 and 284; and second written submission, paras. 177-178).
1329 We note that the Appellate Body in Argentina – Financial Services observed as follows:
In our view, while Article XVII:3 refers to the modification of conditions of competition in favour
of domestic services or service suppliers, the legal standard set out in Article XVII:3 calls for an
examination of whether a measure modifies the conditions of competition to the detriment of
services or service suppliers of any other Member. Less favourable treatment of foreign services
or service suppliers and more favourable treatment of like domestic services or service suppliers
are flip-sides of the same coin. (Appellate Body Report, Argentina – Financial Services,
para. 6.103).

7.789. We have addressed the first element of Russia's claim – whether the public body measure
is an "exemption" from the requirement to unbundle. We now turn to examine the other element
of Russia's claim – whether the public body measure applies exclusively to domestic service
suppliers. We recall Russia's position that the public body measure in the national implementing
laws of Croatia, Hungary and Lithuania grants an "exemption" from the requirement to unbundle
to service suppliers controlled by domestic public bodie s.1330 Thus, according to Russia, the
"exemption" provided by the public body measure applies only to service suppliers controlled by
domestic public bodies, excluding service suppliers of other Members.1331
7.790. Russia does not indicate whether, as a result of the a lleged "exemption", service suppliers
controlled by foreign public bodies would be excluded from the scope of this measure or whether
foreign service suppliers not controlled by public bodies would be excluded from its scope. 1332 In
other words, Russia does n ot specify whether it compares the treatment of service suppliers
controlled by domestic public bodies with the treatment of service suppliers controlled by foreign
public bodies or with the treatment of foreign service suppliers not controlled by public bodies.1333
7.791. In paragraph 7.756 above, we have determined that the public body measure in the
national implementing laws of Croatia, Hungary and Lithuania sets out a legal regime for service
suppliers controlled by public bodies that is different from the ownership unbundling requirement
provided by the unbundling measure for all other service suppliers. Thus, on its face, the only
category of service suppliers subject to the public body measure is service suppliers controlled by
public bodies. Service suppliers not controlled by public bodies are subject to the OU model, as
well as the other two unbundling models, where applicable. Therefore, in our analysis below, we
will assess whether Russia has demonstrated that the public body measure applies exclusively to

1330 Russia's first written submission, paras. 233, 235 and 269–303; second written submission,
paras. 176–197; and response to Panel question No. 5, para. 29.
1331 Russia's first written submission, paras. 275, 277, 280 and 284; and second written submission,
paras. 177-178.
1332 We note that, in its panel request, Russia describes this claim as follows:
The Directive also provides that, when the owner of the VIU is the Member State or another
public body, two separate public bodies exercising control over the TSO and over an undertaking
performing production or supply functions shall be deemed not to be the same person or
persons. In reality, this measure permits a Member State governm ent to own and control both
the TSO and the production or supply portions of the VIU, whereas third -country service
suppliers, including those of Russia, may not. (Russia's panel request, p. 2) (footnote omitted)
In its first written submission, Russia argues that the public body measure "arbitrarily exempts
government-owned and controlled VIUs from the requirements of the unbundling measure" and thus "provides
pipeline transport services and service suppliers of other Members formally different treatment than like
government-controlled services and service suppliers". (Russia's first written submission, paras. 233-234).
Russia similarly alleges that "[a]fter all, as a legal matter, the service suppliers actually owned and controlled
by the respective governments are all exempt from the unbundling requirements entirely because they are
domestic (government-owned) rather than third-country entities". (Russia's first written submission,
para. 250). In its second written submission, Russia first argues that, "[p]rovided the government arranges for
control to be exercised by 'two separate public bodies,' … it is exempted from the unbundling requirements"
and then concludes that this measure "expand[s] the competitive opportunities of government-controlled
service suppliers to supply both transmission and supply/production services, while denying those same
opportunities to other Members' service suppliers, including those of Russia". (Russia's second written
submission, paras. 175 and 178). The resulting ambiguity, however, concerns only our determination of
whether the public body measure applies exclusively to domestic service suppliers. It has no impact on our
assessment of whether the public body measure is an "exemption" from the requirement to unbundle and does
not affect our conclusion that Russia has not demonstrated so.
1333 At the same time, we observe that Russia does not assert that domestic service suppliers not
controlled by public bodies may be certified on the basis of the public body measure. Likewise, aside from its
allegations that service suppliers controlled only by domestic public bodies may be certified under this
measure, Russia does not develop any arguments that, in its operation, the public body measure excludes
foreign service suppliers not controlled by public bodies. In other words, we do not see in Russia's submissions
any arguments that, in Russia's view, the public body measure excludes foreign service suppliers not controlled
by public bodies any more than it excludes domestic service suppliers not controlled by public bodies. There is
no evidence on the record that would allow us to reach such a conclusion. In any event, even if Russia were to
be understood as arguing that, by allegedly providing an "exemption" from the requirement to unbundle to
only service suppliers controlled by domestic public bodies, the public body measure modified the conditions of
competition to the detriment of foreign service suppliers not controlled by public bodies, our conclusion above
that Russia has not demonstrated that this measure constitutes an "exemption" from the requirement to
unbundle means that Russia's claim understood this way would not succeed.

service suppliers controlled by domestic public bodies (domestic service suppliers) and excludes
service suppliers controlled by foreign public bodies (foreign service suppliers).1334
7.792. We commence our examination by observing that, as we have determined in
paragraph 7.741, the text of the public body measure in the national impl ementing laws of
Croatia, Hungary and Lithuania is origin -neutral. Thus, on its face, the public body measure, as
implemented in the national laws of Croatia, Hungary and Lithuania, can be read as covering
service suppliers controlled by domestic public bo dies, as well as service suppliers controlled by
foreign public bodies.
7.793. However, we recall that the Appellate Body has underscored that the text of the municipal
law is only the starting point in establishing its meaning and scope. 1335 As further clarified b y the
Appellate Body, a complainant may seek to support its understanding of the meaning and scope of
the municipal law on the basis of additional elements such as evidence of the consistent
application of the municipal law at issue, the pronouncements of domestic courts on the meaning
of such law, the opinions of legal experts and the writings of recognized scholars. 1336 Thus, taking
into account this clarification, we continue our analysis to examine whether Russia has provided
pertinent evidence with respect to such other elements. We shall also consider evidence submitted
by the European Union in order to rebut Russia's arguments.
7.794. We note that, aside from the text of the national implementing laws of Croatia, Hungary
and Lithuania, Russia does not provide any direct evidence in support of its understanding of the
meaning and scope of these laws. Russia relies, instead, on the evidence pertaining to the
meaning and scope of Article 9(6) of the Directive. We recall that Article 9(6) of the Directive is
not a challenged measure.1337 However, the national laws in question implement Article 9(6) of the
Directive. Therefore, as we have already noted, evidence regarding the meaning and scope of
Article 9(6) of the Directive may be relevant for our assessment to the ex tent that such evidence
may clarify the meaning and scope of the national laws. 1338 Thus, we will take into account
evidence regarding the meaning and scope of Article 9(6) of the Directive inasmuch as it can shed
light on the meaning and scope of the national implementing laws at issue.
7.795. We recall that Article 9(6) of the Directive provides as follows:
For the implementation of this Article, where the person referred to in points (b), (c)
and (d) of paragraph 1 is the Member State or another public body , two separate
public bodies exercising control over a transmission system operator or over a
transmission system on the one hand, and over an undertaking performing any of the
functions of production or supply on the other, shall be deemed not to be the same
person or persons.1339 (emphasis added)
7.796. Russia argues that Recital (20) of the Directive, the Explanatory Memorandum of the
Commission to the Proposal of the Directive, and the Commission Interpretative Note on the
Unbundling Regime demonstrate that Article 9(6) of the Directive covers only EU public bodies. 1340
We understand that, on this basis, Russia draws the same conclusion in respect of the national
implementing laws of Croatia, Hungary and Lithuania.
7.797. We observe that the relevant part of Recital (20) of the Directive provides as follows:

1334 We note that the European Union understands Russia's claim in the same manner, arguing that the
public body measure in the national implementing laws of Croatia, Hungary and Lithuania applies to service
suppliers controlled by domestic public bodies, as well as those controlled by foreign public bodies. (European
Union's second written submission, paras. 52-53). In the course of the panel proceedings, Russia has been
engaging with the arguments provided by the European Union and has not indicated that they are premised on
an incorrect understanding of its claim.
1335 Appellate Body Report, EU – Biodiesel (Argentina), para. 6.156.
1336 Appellate Body Report, EU – Biodiesel (Argentina), para. 6.156.
1337 See para. 7.732.
1338 This seems to also be the view of the parties, which, as mentioned above, have developed a
significant part of their arguments on the basis of Article 9(6) of the Directive.
1339 Directive 2009/73/EC, (Exhibit EU-5), Article 9(6).
1340 Russia's response to Panel question No. 7(a), paras. 64–69.

With regard to ownership unbundling and the independent system operator solution,
provided that the Member State in question is able to demonstrate that the
requirement is complied with, two separate public bodies should be able to control
production and supply activities on the one hand and transmission activities on the
other.1341 (emphasis added)
7.798. Russia contends that the reference to "the Member State in question" in the text of Recital
(20) means that "another public body" in Article 9(6) should be understood as a public body of an
EU member State.1342
7.799. Russia also refers to the following part of the Explanatory Memorandum of the Commission
to the Proposal of the Directive:
In keeping with Article 295 EC, the proposal applies in the same way to publicly and
privately owned companies. This means that irrespective of its public or private
nature, no person or group of persons would be able alone or jointly to influence the
composition of the boards, the voting or decision making of either transmission
system operators or the supply or production companies. This ensures that where
supply or production activities are in public ownershi p, the independence of a publicly
owned transmission system operator is still guaranteed; but these proposals do not
require state owned companies to sell their network to a privately owned company .
For instance, to comply with this requirement, any public entity or the State could
transfer the rights (which provide the "influence") to another publicly or privately
owned legal person. The important thing is that in all cases where unbundling is
carried out, the Member State in question must demonstrate that in practice, the
results are truly effective and that the companies operate entirely separate from one
another, providing a real level -playing field across the whole of the EU .1343 (emphasis
added)
7.800. According to Russia, the italici zed text supports its positi on that Article 9(6) of the
Directive does not cover TSOs controlled by a non-EU public body.1344
7.801. Similarly, Russia relies on the Commission Interpretative Note on the Unbundling
Regime1345, the relevant part of which provides:
The rules on unbundling apply equally to private and public entities. For the purpose
of the rules on ownership unbundling, two separate public bodies should therefore be
seen as two distinct persons and should be able to control generation and supply
activities on the one hand and tra nsmission activities on the other provided they are
not under the common influence of another public entity in violation of the rules on
ownership unbundling provided for in Article 9 Electricity and Gas Directives; the
public bodies concerned must be trul y separate. In these cases, the Member State in
question will need to be able to demonstrate that the requirements of ownership
unbundling of Article 9 Electricity and Gas Directives are enshrined in national law and
are duly complied with.1346 (emphasis added)
7.802. The European Union disagrees with Russia that Recital (20) of the Directive and the
documents referred to above support the interpretation of Article 9(6) of the Directive (and by
implication the national implementing laws) advocated by Russia. Accordin g to the European
Union, in the certification procedure under the Directive, including under Article 9(6), the TSO
seeking certification must demonstrate to the regulatory authority in the EU member State that it
complies with the relevant requirements.1347 The European Union argues that, since ultimately it is

1341 Directive 2009/73/EC, (Exhibit EU-5), Recital (20).
1342 Russia's response to Panel question No. 7(a), para. 67.
1343 Russia's response to Panel question No. 7(a), para. 68 (referring to European Commission, Proposal
for a Directive of the European Parliament and of the Council amending Directive 2003/55/EC concerning
common rules for the internal market in natural gas, COM(2007) 529 final, 2007/0196 (COD)
(19 September 2007), (Commission Proposal for the Directive), (Exhibit RUS-119), p. 6).
1344 Russia's response to Panel question No. 7(a), para. 69.
1345 Russia's response to Panel question No. 7(a), para. 67; and second written submission, para. 180.
1346 Commission Interpretative Note on the Unbundling Regime, (Exhibits EU-42/RUS-19), p. 10.
1347 European Union's response to Panel question No. 14(c), para. 33.

the EU member State that has to ensure that the TSO operating on its territory is compliant with
the unbundling rules, explanatory documents on unbundling, as well as Recital (20) of the
Directive, refer to the obligations of the EU member States. 1348 Thus, the European Union submits
that, "[e]ven if the TSO or system owner is controlled by (a) third country person(s), it is for the
EU Member State where the TSO operates to ultimately ensure compliance with unbundling".1349
7.803. Russia challenges this explanation, alleging that the European Union has cited no actual
evidence showing that there was any intention at the time of inclusion of Article 9(6) of the
Directive for "the Member State … to demonstrate" complia nce on behalf of a third -country
government.1350
7.804. We observe that, as quoted above, Article 9(6) of the Directive refers to "the Member
State or another public body". We understand that, relying on the references to "the Member State
in question" in Recital (2 0) of the Directive, the Explanatory Memorandum of the Commission to
the Proposal of the Directive, and in the Commission Interpretative Note on the Unbundling
Regime, Russia contends that the phrase "another public body" in Article 9(6) of the Directive
should be understood as meaning a public body of an EU member State.
7.805. Commencing our own analysis, we observe that Recital (20) of the Directive and the two
documents cited by Russia explicitly refer to "the Member State in question" in the context of the
latter's obligation to ensure effective compliance with the unbundling requirement. In our view, the
question raised by Russia's arguments is whether it can be inferred from the explicit reference to
the "Member State" in this obligation that only the publi c bodies of this State may seek application
on the basis of Article 9(6) of the Directive. For the reasons explained below, we consider that,
while plausible, this is not the only inference that may be drawn.
7.806. We observe that the Commission Interpretative Note on the Unbundling Regime states, in
the relevant part, that "the Member State in question will need to be able to demonstrate that the
requirements of ownership unbundling of Article 9 Electricity and Gas Directives are enshrined in
national law and are duly complied with".1351 This statement thus speaks of two obligations of "the
Member State in question": (i) the obligation to demonstrate that the ownership unbundling
requirements are "duly complied with"; a nd (ii) the obligation to demonstrate that such
requirements are "enshrined" in national law. As mentioned above, the reference to "the Member
State in question" in the former obligation could imply that only the public bodies of an EU
member State may req uest certification on the basis of Article 9(6) of the Directive. However, in
our view, the reference to "the Member State in question" in the latter obligation could suggest
that public bodies of other States, including non -EU States, may request certific ation on the basis
of Article 9(6) of the Directive.
7.807. As "the Member State in question" will be able to comply with its latter obligation even if
the public bodies seeking certification under Article 9(6) of the Directive are not the public bodies
of this member State, it could be inferred that the reference to "the Member State in question"
does not necessarily imply any limitation on the origin of public bodies that may seek certification
under Article 9(6). In light of this , we consider that the referenc e to "the Member State in
question" in the Commission Interpretative Note on the Unbundling Regime allows different
inferences as to whether the phrase "another public body" in Article 9(6) of the Directive covers
public bodies of non-EU States, leaving the meaning and scope of this phrase ambiguous.
7.808. In our view, this ambiguity is not resolved by Recital (20) of the Directive and the
Explanatory Memorandum of the Commission to the Proposal of the Directive. The latter document
states, in relevant part, that "[t]he important thing is that in all cases where unbundling is carried
out, the Member State in question must demonstrate that in practice, the results are truly effective
and that the companies operate entirely separate from one another, providing a re al level-playing
field across the whole of the EU". 1352 The quoted passage does not unambiguously indicate that
"the Member State in question" must demonstrate "effective" compliance with the requirement to
unbundle only on behalf of its own public bodies. Li kewise, we consider that Recital (20) of the

1348 European Union's response to Panel question No. 14(c), para. 33.
1349 European Union's response to Panel question No. 14(c), para. 33.
1350 Russia's opening statement at the second meeting of the Panel, para. 68.
1351 Commission Interpretative Note on the Unbundling Regime, (Exhibits EU-42/RUS-19), p. 10.
1352 Commission Proposal for the Directive, (Exhibit RUS-119), p. 6.

Directive does not clarify the origin of public bodies in respect of which "the Member State in
question" should be able to demonstrate that the ownership unbundling requirement is complied
with.
7.809. We recall that the European Union advances its own explanation as to why Recital (20) of
the Directive and the two documents relied on by Russia refer to "the Member State in question".
According to the European Union's explanation, this reference denotes the ultimate re sponsibility
of the member State in which a TSO controlled by a public body operates to ensure compliance of
this TSO with the unbundling requirement, without implying any limitation on the origin of the
public body controlling such a TSO. 1353 While arguing t hat the European Union has not provided
any evidence to support its position, Russia does not offer any arguments refuting this
explanation. In light of our own analysis, we do not find the explanation provided by the European
Union implausible. We further consider that it is Russia who bears the burden of introducing
evidence that the public body measure is inconsistent with Article XVII of the GATS, including with
respect to its meaning and scope. 1354 Therefore, to the extent the parties advance divergent
interpretations of the public body measure, it is, in our view, insufficient for Russia to simply point
to the absence of evidence supporting the European Union's interpretation. Rather, as the
complainant, Russia needs to prove the interpretation of the pub lic body measure it relies on in
advancing its claim that this measure is inconsistent with Article XVII.
7.810. Russia further argues that, in the certification opinions concerning Lithuania and Hungary
under Article 9(6) of the Directive, the Commission titles the relevant section of its opinion
"Separation within the State", which in Russia's view, means that it is only within an EU member
State government that this "[s]eparation" is contemplated. 1355 We understand that, on this basis,
Russia draws the conclusion that the public body measure covers only service suppliers controlled
by public bodies of EU member States. We are not persuaded that the mentioned certification
opinions support Russia's interpretation of Article 9(6) of the Directive. We consider that th e mere
reference to "the State" does not necessarily mean it is a reference to an EU member State. In our
view, this reference may also cover non -EU States. As the certification opinions in question
concern EU member States (in casu, Hungary and Lithuania), the reference to "the State" in those
opinions is ultimately a reference to the EU member State. However, it does not follow from this
fact that the word "State" means an EU member State, and therefore, limits the scope of the
public body measure exclusi vely to service suppliers controlled by public bodies of EU member
States.
7.811. We observe that neither party has referred to any domestic court pronouncements
regarding the meaning of Article 9(6) of the Directive or the national implementing laws at issue.
Furthermore, aside from referring to the titles of cert ain sections in the Commission certification
opinions, which we have examined in the previous paragraph, Russia has provided no evidence of
the application of Article 9(6) of the Directive, or the nation al implementing laws at issue, in
support of its arguments that the public body measure applies exclusively to service suppliers
controlled by public bodies of EU member States. However, we note that the European Union has
provided evidence of the alleged application of the term "public body" by the Commission in the
merger control context.
7.812. According to the European Union, the Commission Merger Jurisdictional Notice1356 refers to
"Member States or other public bodies" and has been applied to undertakings owned by the
Chinese state in several merger control decisions. 1357 The European Union thus argues that this

1353 European Union's response to Panel question No. 14(c), para. 33.
1354 See para. 7.747 above.
1355 Russia's second written submission, para. 181 (referring to Commission Opinion on the Certification
of Amber Grid, (Exhibits EU-54/RUS-50), p. 2; and Commission Opinion on the Certification of MGT, (Exhibits
EU-53/RUS-53), p. 3)).
1356 Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No. 139/2004 on the
control of concentrations between undertakings, 2008/C 95/01, (Commission Merger Jurisdictional Notice),
(Exhibit EU-101).
1357 European Union's second written submission, paras. 54-55; and response to Panel question No. 236,
paras. 312–315.

demonstrates that the reference to "another public body" in Art icle 9(6) of the Directive was
intended to extend to third-country public bodies.1358
7.813. Russia contests the relevance of the evidence introduced by the European Union regarding
the alleged application of the term "public body" in the merger control context, su bmitting that the
Commission Merger Jurisdictional Notice and the Commission's decisions referred to by the
European Union do not define the concept of "public body". 1359 We observe that paragraph 193 of
the Commission Merger Jurisdictional Notice refers to " Member States (or other public bodies)",
and in the relevant part clarifies as follows:
Member States (or other public bodies) are not considered as "undertakings" under
Article 5(4) simply because they have interests in other undertakings which satisfy the
conditions of Article 5(4). Therefore, for the purposes of calculating turnover of State -
owned undertakings, account is only taken of those undertakings which belong to the
same economic unit, having the same independent power of decision.1360
7.814. We are satisf ied that, in the two decisions cited by the European Union, the Commission
assessed whether the decision -making of China's state -owned companies involved in a
concentration was independent referring inter alia to paragraph 193 of the Commission Merger
Jurisdictional Notice.1361 Thus, we confirm that, while neither the Commission Merger Jurisdictional
Notice nor the Commission's decisions referred to by the European Union define the concept of the
"public body", the Commission applied the phrase "Member States (or other public bodies)" to
China's state-owned undertakings in the merger control context.
7.815. We are mindful that the application of the same term ("public bodies") in the merger
control context may not be automatically transposable into the public body me asure context.
However, in our view, this does not render the evidence of such application adduced by the
European Union irrelevant for our analysis, as Russia appears to suggest. 1362 We consider that the
application of the term "public bodies" to non-EU entities in the merger control context constitutes
indirect evidence that the term "public body" may conceivably cover non -EU public bodies, also in
the context of the public body measure.
7.816. Thus, having carefully reviewed the arguments and evidence presented by the parties, we
consider that Russia has not demonstrated that the phrase "another public body" used in
Article 9(6) of the Directive covers only service suppliers controlled by EU public bodies.
Consequently, evidence pertaining to the meaning and scope of Article 9(6) of the Directive does
not support Russia's position that the national implementing laws of Croatia, Hungary and
Lithuania apply only to service suppliers controlled by domestic public bodies. We also recall that,
aside from the text of the national implementing laws, Russia has provided no direct evidence
supporting its claim that the references to "two separate public authorities", "other public bodies"
and "another public body" in the national implementing laws of Croatia, Hungary and Lith uania,
respectively, cover only domestic public bodies.
7.817. We now turn to the issue of whether in advancing its claim on the basis of the alleged
ownership and control by the governments of Croatia, Hungary and Lithuania of a TSO and supply
undertaking withi n their respective territories, Russia has demonstrated that the public body
measure in practice operates to exclude service suppliers controlled by foreign public bodies.
7.818. Russia explains the basis for its claim as follows:

1358 European Union's second written submission, para. 55; and response to Panel question No. 236,
paras. 312–315.
1359 Russia's opening statement at the second meeting of the Panel, paras. 62-63. See also Russia's
comments on the European Union's response to Panel question No. 236, para. 245.
1360 Commission Merger Jurisdictional Notice, (Exhibit EU-101), para. 193.
1361 Commission Decision of 31 March 2011 on China National Bluestar/Elkem notification pursuant to
Article 4 of Council Regulation No. 139/2004, Case COMP/M.6082, (Exhibit EU-104), para. 8 and fn 4; and
Commission Decision of 19 May 2011 on DSM/Sinochem/JV notification pursuant to Article 4 of Council
Regulation (EC) No. 139/2004, Case COMP/M.6113, (Exhibit EU-106), para. 9 and fn 4.
1362 Russia's comments on the European Union's response to Panel question No. 236, para. 245.

The governments of Croatia, Hungary and Lithuania each owns and controls the entire
pipeline transport service supplier supplying both transmission and supply services to
all or a portion of the natural gas market within their respective territories. These
Member States do so through t heir government exemption measures adopted
pursuant to Article 9(6) of the Directive. Accordingly, as implemented, Croatia,
Hungary and Lithuania's government exemption measures provide their respective
domestic, government -controlled services and service suppliers different treatment
than they do like services and service suppliers of other Members.1363
7.819. We thus understand Russia to argue that, because the implementation of the public body
measure in Croatia, Lithuania and Hungary results in the governments of these EU member States
owning and controlling a TSO and supply undertaking within their territories, service suppliers
controlled by foreign public bodies are effectively prevented from making use of the public body
measure in these EU member States. 1364 As we have determined above, the aspect of Russia's
claim that concerns the ownership and control by the government of Hungary of a TSO and supply
undertaking in its territory falls outside our terms of reference and we shall therefore not consider
it further.1365
7.820. In respect of the alleged ownership and control by the governments of Croatia and
Lithuania of a TSO and supply undertaking within their respective territories, Russia only argues
that this ownership and control are based on the application of the "ine ffective" concept of
unbundling.1366 However, Russia has not argued that the fact that the governments of Croatia and
Lithuania own and control a TSO and supply undertaking within their respective territories actually
prevents service suppliers controlled by foreign public bodies from being certified on the basis of
the public body measure in these member States. Furthermore, Russia has developed no other
arguments that the public body measure in practice operates to exclude from its scope service
suppliers co ntrolled by foreign public bodies, and, in response to a question by the Panel,
confirmed that no Russian entity sought certification under the public body measure.1367
7.821. We recall that, on the basis of our analysis of the meaning and scope of the public body
measure, in light of the arguments of the parties and pertinent evidence, including the references
to "the Member State in question" in Recital (20) of the Directive, the Explanatory Memorandum of
the Commission to the Proposal of the Directive, and the Co mmission Interpretative Note on the
Unbundling Regime, we have concluded that Russia has not demonstrated that the public body
measure in the national laws of Croatia, Hungary and Lithuania applies only to service suppliers
controlled by domestic public bodies.
7.822. Based on our examination of Russia's arguments with respect to the additional basis for its
claim, we further conclude that Russia has not demonstrated that the public body measure in the
national laws of Croatia, Hungary and Lithuania in practice o perates to exclude service suppliers
controlled by foreign public bodies.
7.6.2.3 Conclusion
7.823. As indicated in paragraph 7.751 above, in the specific circumstances of this claim, and
based on our understanding of Russia's arguments, in order for its claim to succeed, Russia needs

1363 Russia's first written submission, para. 285. See also Russia's second written submission, para. 188.
1364 Russia's first written submission, paras. 233–235 and 285–303; response to Panel question No. 5,
para. 29; and second written submission, paras. 188–197.
1365 See above para. 7.215.
1366 Russia's second written submission, paras. 192–195.
1367 Russia's response to Panel question No.7(c), paras. 73-74. The European Union further confirms
that there have been no instances where a TSO controlled by a public body from a third country sought the
application of Article 9(6) of Directive or the corresponding national implementing provisions. (European
Union's response to Panel question No. 14(a), para. 31). Russia explains that no Russian entity has sought
certification on the basis of Article 9(6) of the Directive or the corresponding provisions in the national
implementing laws due to the following reasons: there is no objective indication that the public bodies of non-
EU countries, including Russian, could make use of this provision; the term "public body" is "intentionally
vague" to ensure that the member states can own and control their entire transmission and supply systems
and comply with "the Directive's technical requirements"; and there are no Russian TSOs operating within the
EU that could possibly be considered a "public body" within the meaning of Article 9(6) of the Directive.
(Russia's response to Panel question No. 7(c), paras. 73-74).

to demonstrate two elements: (i) that the public body measure is an "exemption" from the
requirement to unbundle, and (ii) that it applies only to domestic service suppliers, excluding like
service suppliers of other Members, and hence modifies the conditions of competition to the
detriment o f service suppliers of any other Mem ber. The analysis conducted above leads us to
conclude that Russia has demonstrated neither of these elements. Therefore, we find that Russia
has not demonstrated that the public body measure in the national implementing laws of Croatia,
Hungary and Lithuania modifies the conditions of competit ion to the detriment of service suppliers
of other Members in comparison to like domestic service suppliers, and is, for this reason,
inconsistent with Article XVII of the GATS. As we have not found an inconsistency with Article
XVII, we do not consider it necessary to examine the European Union's defence un der Article
XIV(c) of the GATS.
7.7 The LNG measure
7.7.1 Introduction
7.824. As noted above in section 2.2.4, the LNG measure challenged by Russia stems from the
provisions of the Directive defining a "LNG facility" and "LNG system operator". LNG facilities are
terminals used for the importation, offloading, and regasification of LNG in the European Union.1368
LNG system operators are responsible for operating a LNG facility and carry out the importation,
offloading, and regasification of LNG.1369
7.7.2 Russia's claim under Article I:1 of the GATT 1994
7.7.2.1 Introduction
7.825. Russia's claim under Article I:1 of the GATT 1994 arises from the fact that, as a
consequence of how LNG facilities and LNG system operators are defined in the Directive, LNG
system operators are not subject to the requirement to unbundle applicable t o TSOs.1370 Russia
argues that, because LNG system operators are not required to unbundle and TSOs are required to
do so, LNG imported into the European Union via LNG facilities receives an advantage within the
meaning of Article I:1 of the GATT that is not accorded to Russian natural gas imported into the
European Union via pipelines.1371
7.826. The European Union submits that Russia has not demonstrated how the different rules
applicable to LNG system operat ors impact the competitive opportunities of natural gas imported
from Russia.1372 The European Union also argues that LNG and natural gas are not like products
within the meaning of Article I:1 of the GATT 1994. 1373 According to the European Union, due to
the specific nature of LNG facilities, in comparison to transmission networks, the non-application of
the unbundling requirement of the Directive to LNG system operators does not grant any
advantage to LNG imported into the European Union via LNG facilities. 1374 The European Union
further points out that the Directive requires third-party access to all LNG facilities in the European
Union, regardless of ownership. 1375 The European Union thus maintains that nothing prevents
Russian gas from being imported via LNG facilities in the European Union.1376
7.7.2.2 Analysis by the Panel
7.827. In light of the legal standard under Article I:1 of the GATT 1994, as set out in
paragraphs 7.236 and 7.237 above, our analysis below will focus on whether Russia has

1368 Directive 2009/73/EC, (Exhibit EU-5), Article 2(11).
1369 Directive 2009/73/EC, (Exhibit EU-5), Article 2(12).
1370 See above section 2.2.4.
1371 Russia's first written submission, paras. 391–396; responses to Panel question No. 1 paras. 1 and 5,
No. 6, paras. 54–63, and No. 184, paras. 200-201; and second written submission, para. 273.
1372 European Union's first written submission, paras. 440 and 446; and second written submission,
para. 150.
1373 European Union's first written submission, paras. 360 and 437; and second written submission,
paras. 147–149.
1374 European Union's first written submission, paras. 427-434 and 441; response to Panel question
1375 European Union's first written submission, paras. 442 and 444.
1376 European Union's first written submission, para. 442; and second written submission, para. 153.

established the following elements: (a) that the LNG measure falls within the scope of Article I:1;
(b) that the relevant imported products are like products; (c) that the LNG measure confers an
"advantage, favour, privilege, or immunity" on a product originating in the territory of any
country; and (d ) that the advantage so accorded is not extended "immedia tely" and
"unconditionally" to like Russian products.
7.7.2.2.1 Scope of Article I:1 of the GATT 1994
7.828. Russia asserts that the LNG measure is a law, regulation or requirement affecting the
internal sale, offering for sale, purchase, transportation, distribution or use of natural gas imported
from Russia and other third -countries within the meaning of Article III:4 of the GATT 1994, and
consequently, falls within the scope of Article I:1 of the GATT 1994. 1377 The European Union does
not contest Russia's arguments that the LNG measure falls within the scope of Article I:1 of the
GATT 1994.
7.829. As observed by the Appellate Body, Article I:1 of the GATT 1994 "incorporates all matters
referred to in paragraphs 2 and 4 of Article III". 1378 Thus, in light of Russia's arguments, we need
to determine whether the LNG measure falls within the scope of the "matters" referred to in Article
III:4 of the GATT 1994 in order to determine whether it falls within the scope of Article I:1 of the
GATT 1994. For a measure to fall within the scope of Arti cle III:4 of the GATT 1994, such a
measure must constitute a law, regulation or requirement "affecting" the "internal sale, offering for
sale, purchase, transportation, distribution or use" of imported natural gas.1379
7.830. We note that the parties do not disagree that the Directive constitutes a law, regulation or
requirement within the meaning of Article III:4 of the GATT 1994. In our view, the Directive is
undeniably a law, regulation or requirement within the meaning of this provision. However, a s
clarified by the Appellate Body, it is "not any 'laws, regulations and requirements' which are
covered by Article III:4, but only those which "' affect' the specific transactions, activities and uses
mentioned in that provision".1380 According to the Appellate Body, "the word 'affecting' operates as
a link between identified types of government action ('laws, regulations and requirements') and
specific transactions, activities and uses relating to the products in the marketplace ('internal sale,
offering for sale, purchase, transportation, distribution or use')".1381
7.831. Turning to the question of whether the LNG measure "affects" any of the transactions,
activities or uses mentioned in Article III:4 of the GATT 1994, we recall that, as a consequence of
how LNG facilities and LNG system operators are defined in the Directive, LNG system operators
are not subject to the requirement to unbundle. As applicable to TSOs, the obligation to unbundle
requires a separation of gas transmission function from the function of gas production and /or
supply on the basis of one of the applicable unbundling models, including ownership unbundling.
Under the OU model, the same person is prohibited from directly or indirectly exercising control
over, on the one hand, a TSO or transmission system, and on the other, an undertaking
performing any of the functions of production or supply. 1382 Applied mutatis mutandis to LNG
system operators, the unbundling obligation would require a separation of the function of LNG
system operation from the function of LNG production and/or supply. As LNG system operators are
not subject to the requirement to unbundle, it means that, in practice, an LNG supply undertaking
may exercise control over an LNG system operator.
7.832. Russia submits that, as a consequence of the non-applicability of the unbundling obligation
to LNG system operators, "LSOs and their foreign production -supply owners can thereby reduce
their costs and otherwise [increase] competitive opportunities for the sale, purchase and
transportation of their natural gas products on the EU market". 1383 We understand that, on this

1377 Russia's first written submission, paras. 342, 364-365 and 382; and second written submission,
para. 271.
1378 Appellate Body Reports, EC – Seal Products, para. 5.80.
1379 Panel Report, Argentina – Financial Services, para. 7.1015.
1380 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 208. (emphasis original)
1381 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 208.
1382 See above para. 2.11. See also Commission Interpretative Note on the Unbundling Regime,
(Exhibits EU-42/RUS-19), pp. 7–8.
1383 Russia's response to Panel question No. 113, para. 467.

basis, Russia argues that the LNG measure affects the internal sale, offering for sale, purchase,
transportation, distribution or use of natural gas.1384
7.833. In our view, it is conceivable that the ability of a n LNG supply undertaking to exercise
control over an LNG system operator could allow such an undertaking to adjust its costs associated
with the internal sale of imported LNG. The LNG measure may, as a result, affect imported LNG
supplied by such an undertaking and gas imported into the European Union via pipelines.
Therefore, we consider that the LNG measure affects the internal sale of imported natural gas in
the European Union and consequently falls within the scope of the "matters" referred to in
Article III:4 of the GATT 1994. On this basis, we find that the LNG measure falls within the scope
of Article I:1 of the GATT 1994.
7.7.2.2.2 Like products
7.834. Russia argues that natural gas imported from Russia and LNG imported from other
countries are like products within the meaning of Article I:1 of the GATT 1994. 1385 For Russia, LNG
is natural gas and the only difference betw een the two is the method of importation and the form
in which LNG is imported. 1386 According to Russia, n atural gas is converted into liquid form to
facilitate long distance ocean transport, and w hen LNG reaches the European Union it is
necessarily reconverted to its gaseous state (regasified) for insertion in the transmission system
and marketing to consumers.1387 Thus, natural gas imported via pipelines and in the form of LNG is
"marketed in an equally close, competitive relationship". 1388 On this basis, Russia c oncludes that
natural gas imported from Russia and LNG imported from other countries are "identical in terms of
physical characteristics and perfectly substitutable in terms of consumer perceptions and end uses,
as required to satisfy the like products standard under Article I:1".1389
7.835. The European Union submits that LNG and natural gas are not like products within the
meaning of Article I:1 of the GATT 1994. 1390 For the European Union, LNG and natural gas are at
different stages in production, and therefore do no t constitute "like or directly competitive
products".1391 The European Union contends that the physical characteristics of LNG and natural
gas are different: LNG is liquid, while natural gas is in gaseous form. 1392 The European Union also
alleges that LNG and natural gas have different end -uses, pointing to the use of LNG as a
transport fuel. 1393 Furthermore, in the European Union's view, consumers of LNG purchase this
product in order to transport it by ships or trucks and trade or store LNG.1394 In addition, according
to the European Union, LNG and natural gas have a different tariff classification: in the
Harmonized Commodity Description and Coding System of the World Customs Organization (HS),
LNG is classified under s ubheading 2711.11 while natural gas is classified under subheading
2711.21.1395
7.836. Russia submits that the Directive treats natural gas as including LNG. 1396 Responding to
the European Union's arguments that the end -uses of LNG and natural gas are diffe rent, Russia
also contends that, ultimately, both types of natural gas will be used by consumers "to heat their

1384 Russia's second written submission, para. 271.
1385 Russia's first written submission, para. 366.
1386 Russia's first written submission, para. 348; response to Panel question No. 109, para. 435; and
second written submission, para. 272.
1387 Russia's response to Panel question No. 109(a), para. 435.
1388 Russia's first written submission, para. 348.
1389 Russia's first written submission, paras. 348 and 366; and second written submission, para. 272.
1390 European Union's first written submission, paras. 360 and 437; and second written submission,
paras. 147–149.
1391 European Union's second written submission, para. 148 (referring to Appellate Body Report, US –
Lamb, paras. 77-96).
1392 European Union's second written submission, para. 149.
1393 European Union's second written submission, para. 149; and responses to Panel question
1394 European Union's second written submission, para. 149.
1395 European Union's second written submission, para. 149.
1396 Russia's panel request, fn 2 (stating that "'[n]atural gas' includes liquefied natural gas ('LNG'),
consistent with the provisions of the Directive."); and response to Panel question No. 109(e), paras. 443–444
(referring to Directive 2009/73/EC, (Exhibit EU-5), Articles 1(2), 2(1) and 2(7)).

homes, for example, or cook their food". 1397 Thus, for Russia, "in the eyes of the consumer", the
end use of both types of natural gas is exactly the same.1398
7.837. We consider that our assessment of likeness under Article I:1 of the GATT 1994 may be
informed by the analytical framework set out by the Appellate Body for a determination of likeness
under Article III:4 of the GATT 1994. 1399 We recall that the Appellate Body has found that a
determination of whether the products at issue are like for the purposes of Article III:4 of the
GATT 1994 involves an assessment, on a case -by-case basis, of the nature and extent of the
competitive relationship between and among these p roducts, taking into account all relevant
evidence, including the following criteria: (a) the properties, nature and quality of the products;
(b) the end-uses of the products; (c) consumers' tastes and habits in respect of the products; and
(d) the tariff classification of the products.1400
7.838. The Appellate Body has further explained that panels must examine all the relevant
evidence and determine whether that evidence, as a whole, indicates that the products in question
are like.1401 We follow this analytical fram ework in our assessment of whether LNG imported from
third countries and natura l gas imported from Russia are like products within the meaning of
Article I:1 of the GATT 1994.
7.839. While the parties disagree on w hether LNG and natural gas are like products on the basis
of the likeness criteria mentioned in the previous paragraph, we consider that the main point of
contention between the parties concerns the significance of the fact that LNG may be reconverted
into gas at a n LNG facility in the European Union for its subsequent transportation and supply via
pipelines. Therefore, we address this issue before turning to the analysis based on the four
likeness criteria mentioned in the previous paragraph.
7.840. We understand that, for Russia, the fact that LNG may be reco nverted into gas at a n LNG
facility means that LNG and natural gas are indistinguishable and therefore like1402, whereas the
European Union considers that LNG and natural gas are at different stages in production.1403
7.841. Based on the evidence on the record, we und erstand that natural gas may be converted
into LNG through the process of liquefaction, which facilitates its long -distance transportation by
seagoing vessels.1404
7.842. We also understand that LNG, in turn, may be reconverted back into gas (regasified) at a n
LNG facility to enable its transportation and supply via pipelines. 1405 The parties do not contest
that a certain amount of LNG imported into the European Union undergoes regasification for the
purposes of transporting and supplying regasified LNG via pipeli nes in the European Union.1406 The
parties also agree that a certain amount of LNG imported into the European Union is not regasified
for the purposes of its transportation and supply via pipelines in the European Union, and is
instead used in its liquid form as a transport fuel.1407 Thus, LNG imported into the European Union

1397 Russia's opening statement at the first meeting of the Panel, para. 50.
1398 Russia's opening statement at the first meeting of the Panel, para. 50.
1399 We also note that this approach is consistent with the observations made by the Panel in US –
Poultry (China). (Panel Report, US – Poultry (China), paras. 7.424-7.425).
1400 Appellate Body Report, EC – Asbestos, paras. 99 and 101-102.
1401 Appellate Body Report, EC – Asbestos, para. 103.
1402 See Russia's response to Panel question No. 109, paras. 432–442. We also note that, similarly,
Colombia is of the opinion that LNG is natural gas that is converted to liquid form for ease of storage or
transport, which does not "necessarily" imply that these products would not be able to compete in the same
market. (Colombia's third-party statement, para. 12)
1403 European Union's second written submission, para. 148.
1404 Russia's first written submission, para. 348; and European Union's first written submission,
para. 285 and 428. See also Gas Strategies, Industry Glossary (excerpts)
http://www.gasstrategies.com/industry-glossary (accessed 3 August 2017), (Gas Strategies industry glossary),
(Exhibit RUS-268) definition of "LNG (Liquefied Natural Gas)"; and UNECE glossary for transport statistics,
(Exhibit RUS-41), p. 101.
1405 Russia's first written submission, para. 348; and European Union's first written submission, para.
285. See also Gas Strategies industry glossary, (Exhibit RUS-268), definition of "LNG (Liquefied Natural Gas)".
1406 Russia's response to Panel question No. 109, paras. 439 and 442; and European Union's first written
submission, para. 429.
1407 European Union's second written submission, para. 149; responses to Panel question No. 109(c),
para. 282, and No. 188, para. 130; and Russia's response to Panel question No. 187, paras. 207–209. See also

may be either regasified and then transported and supplied via pipelines in the same way as
natural gas that was never liquefied and imported into the European Union as such, or it may be
used as a transport fuel without prior regasification.
7.843. We consider that the fact that a certain amount of imported LNG is reconverted into gas in
the European Union does not mean that LNG cannot be distinguished from natural gas. Contrary to
Russia's initial arguments, not all LNG imported into the European Union undergoes regasification
in order to be transported and supplied via pipelines. 1408 The fact that LNG can be used as a
transport fuel without prior regasification indicates that LNG is not simply a tem porary physical
state of natural gas that enables its transportation by seagoing vessels but can be considered a
separate product distinguishable from natural gas. This, in our view, is also confirmed by the HS,
which distinguishes between LNG and natural gas, classifying them under different
subheadings.1409 We thus disagree with Russia's position that LNG is indistinguishable from natural
gas and is, for this reason, like natural gas within the meaning of Article I:1 of the GATT 1994.
7.844. We also consider that the provisions of the Directive allegedly treating natural gas as
including LNG do not change our conclusion that LNG is distinct from natural gas in the context of
our likeness analysis. 1410 We recall that Russia's claim against the LNG measur e stems from the
regulation, under the Directive, of LNG system operators in comparison with TSOs, rather than
natural gas or LNG. When prescribing the rules for gas -related infrastructure and the operators of
such infrastructure, there may have been regul atory reasons for referring to natural gas as
including LNG. While we take the approach of the Directive into account, we do not consider it as
definitive for the purposes of our likeness analysis.
7.845. As clarified by the Appellate Body, the determination of likeness should be based on an
assessment of a competitive relationship between and among products "in the marketplace" rather

European Commission Memo "Clean Power for Transport – Frequently Asked Questions", (Memo/13/24)
(24 January 2013), (Exhibit RUS-195), pp. 3, 4, 9, 10 and 14. Describing the "[c]urrent situation" regarding
natural gas vehicles, the European Commission Memo noted that there were "38 LNG filling stations in the EU,
22 in United Kingdom, and the rest in Spain, Sweden, Estonia, the Netherlands, Poland and Belgium".
(European Commission Memo "Clean Power for Transport – Frequently Asked Questions", (Memo/13/24) (24
January 2013), (Exhibit RUS-195), pp. 3 and 10); with respect to refuelling stations for waterborne transport,
the Memo notes that "LNG infrastructure for fuelling vessels is at a very early stage, with only Norway and
Sweden having developed small-scale LNG terminals for bunkering purposes" (European Commission Memo
"Clean Power for Transport – Frequently Asked Questions", (Memo/13/24) (24 January 2013), (Exhibit RUS-
195), p. 9. We consider that these references to LNG filling and refuelling stations for road and waterborne
transport demonstrate the use of LNG as a transport fuel as of 24 January 2013. In addition, we note that the
Memo referred to a number of solutions aimed at expanding the use of LNG as a fuel for road and waterborne
transport in the future: for waterborne transport, the Commission proposed that LNG refuelling stations be
installed in all maritime and inland ports of the trans-European transport (TEN-T) core network by 2020 (2025
for inland ports) (European Commission Memo "Clean Power for Transport – Frequently Asked Questions",
(Memo/13/24) (24 January 2013), (Exhibit RUS-195), p. 9; for road transport, the Commission proposed that,
by 2020, along the roads of the Trans-European Transport Core Network refuelling stations are installed every
400 km (European Commission Memo "Clean Power for Transport – Frequently Asked Questions",
(Memo/13/24) (24 January 2013), (Exhibit RUS-195), p. 10).
1408 Despite initially alleging that all imported LNG is regasified in the European Union, Russia
acknowledges that LNG is used as a transport fuel in the European Union. In its response to Panel question
No. 187, Russia stated as follows: "[s]ome small amount of natural gas condensed in the form of LNG has been
used as fuel for ships". (Russia's response to Panel question No. 187, para. 207). Russia however emphasizes
the small amount of LNG thus used. (See Russia's responses to Panel question No. 109, paras. 435-436, and
No. 187, paras. 207-209; second written submission, para. 272; and comments on European Union's response
to Panel question No. 188, para. 155). In our view, regardless of what that amount may be, it shows that LNG
is used as such and is not just a temporary physical state of natural gas for the purposes of its transportation
by seagoing vessels.
1409 HS Chapter 27, (Exhibit EU-32).
1410 We note that Article 1(2) of the Directive provides as follows:
The rules established by this Directive for natural gas, including LNG , shall also apply in a non -
discriminatory way to biogas and gas from biomass or other types of gas in so far as such gases
can technically and safely be injected into, and transported through, the natural gas system.
(Directive 2009/73/EC, (Exhibit EU-5), Article 1(2)). (emphasis added)
Article 2(1) of the Directive, defining "natural gas undertaking", lists the functions of such
undertakings as including the supply of "natural gas, including LNG". In a similar vein, Article
2(7) of the Directive, defines "supply" as "the sale, including resale, of natural gas, including
LNG, to customers". (See Directive 2009/73/EC, (Exhibit EU-5), Articles 2(1) and 2(7)).

than the regulatory objectives of the measure. 1411 Therefore, the references in the Directive to
"natural gas, including LNG" do not change our conclusion that, for the purposes of our likeness
analysis, LNG is distinct from natural gas.
7.846. Having rejected Russia's arguments that LNG is indistinguishable from natural gas and is,
for this reason, like natural gas within the meaning of Article I:1 of the GATT 1994, we now turn to
the parties' arguments and evidence on whether LNG is like natural gas on the basis of the four
likeness criteria identified in paragraph 7.837 above.1412 We also address Russia's argument that
LNG and natural gas are like products within the meaning of Article I:1 of the GATT 1994 because
the Commission allegedly recognized that natural gas and LNG are in a direct competitive
relationship.
7.847. With respect to the properties, nature and quality of LNG and natural gas, we recall that, in
Russia's view, LNG and natural gas are "identical in terms of physical characteristics", while the
European Union submits that LNG and natural gas d o not share the same properties, nature and
quality.1413 We consider that the evidence on the record supports the European Union's position.
LNG is liquid while natural gas is gaseous. 1414 Thus, in terms of physical characteristics, LNG and
natural gas do not share the same properties, nature and quality.1415
7.848. With respect to the end-uses of LNG and natural gas, Russia submits that, ultimately, both
types of natural gas will be used by consumers for the same end -use, "to heat their homes, for
example, or cook their food".1416 The European Union disagrees with Russia, noting that LNG may
be used as a transport fuel. 1417 We understand Russia's position regarding the end -uses of LNG
and natural gas being the same as premised on the comparison of the end-uses of regasified LNG
with natural gas. 1418 We agree that, as far as regasified LNG is concerned, its end -uses are
identical to those of natural gas. However, we disagree that the same applies to LNG and natural
gas. Russia has not provided any evidence that LNG itself, without prior regasification, can be used
for domestic heat generation. In this sense, we see that the end-uses of LNG and natural gas may
differ.1419

1411 Appellate Body Report, US – Clove Cigarettes, paras. 111–120.
1412 We note that we asked Russia to confirm our understanding that Russia is not comparing natural
gas, which is being transported as such through regular pipelines, to natural gas, which is currently in its final
gaseous stage but has previously been transported as LNG (Panel question No. 109). In its response, Russia
indicated that our understanding was not "exactly correct", reiterating its position that "LNG is natural gas".
(Russia's response to Panel question No. 109, para. 432). Russia further indicated that "the like product
comparison should be between LNG, as imported, and all other natural gas". (Russia's response to Panel
question No. 109, para. 434).
1413 Russia's first written submission, paras. 348 and 366; and European Union's first written
submission, paras. 360 and 437; and second written submission, para. 149.
1414 This conclusion stems from the definition of the processes of liquefaction and regasification.
According to industry definitions, liquefaction "consists of chilling natural gas to the point where it becomes
liquid, at an average temperature of –160º C (–260º F)", while regasification "consists of returning LNG to its
regular gaseous phase at about 5º C using heat exchangers" (United Nations Economic Commission for Europe,
Study on Current Status and Perspectives for LNG in the UNECE Region (UN 2013), (Exhibit RUS-32), pp. 5-6;
and UNECE LNG Study, (Exhibit RUS-271), Chapter 2, p. 2. See also Gas Strategies industry glossary,
(Exhibit RUS-268), definition of "LNG (Liquefied Natural Gas)")
1415 We recall that the Appellate Body in EC – Asbestos observed as follows: "We see the first criterion,
'properties, nature and quality', as intended to cover the physical qualities and characteristics of the products."
(Appellate Body Report, EC – Asbestos, para. 110). (emphasis added)
1416 Russia's opening statement at the first meeting of the Panel, para. 50.
1417 European Union's second written submission, para. 149; and response to Panel question No. 109(c),
para. 282.
1418 This is confirmed by Russia's response to Panel question No. 109, where Russia states that "LNG
also serves the same end uses once it has been reconverted, as it inevitably must be". (Russia's response to
Panel question No. 109, para. 433).
1419 We also note, at the same time, that there is no support on the record for a proposition that natural
gas cannot be used as a transport fuel, which would allow us to conclude that being used as a transport fuel
distinguishes the end-use of LNG from the end-use of natural gas. In this regard, we note that the evidence
provided by Russia indicates the following uses of natural gas in the European Union: (i) residential and
commercial; (ii) industry; (iii) power plants; (iv) transport; (v) other uses. (Inland Sales of Natural Gas in the
European Union in 2014, http://www.eurogas.org/uploads/2016/flipbook/statistical-report-
2015/index.html#p=6 (accessed 3 August 2017), (Exhibit RUS-194)). In our view, the "transport" use of
natural gas may encompass the use of natural gas as a transport fuel. However, this evidence is inconclusive
because it does not distinguish between natural gas and LNG. Russia further indicates that gas consumed as a

7.849. With respect to consumer s' tastes and habits, we note that Russia alleges that LNG and
natural gas are perfectly substitutable in terms of consumer perceptions. 1420 The European Union
argues that LNG "meets different consumer preferences" from those of natural gas. 1421 The
European Union further alleges that consumers of LNG purchase this product in order to transport
it by ships or trucks and trade or store LNG. 1422 Neither party substantiated its arguments with
evidence.1423
7.850. Russia does not assert any arguments regarding the tariff classific ation of LNG and natural
gas, while the European Union argues that LNG and natural gas have a different tariff
classification. We consider that the European Union has established that, at the six -digit level, the
HS indeed classifies LNG and natural gas un der different subheadings – subheading 2711.11 and
2711.21, respectively.1424
7.851. Russia also submits that LNG and natural gas are like products within the meaning of
Article I:1 of the GATT 1994 because the Commission recognized that natural gas and LNG are in a
direct competitive relationship. 1425 According to Russia, in one of its decisions in competition
proceedings, the Commission recognized that "generally from the perspective of gas buyers there
is no distinction between gas which is transported by pipeline a nd gas which is transported as LNG
and regasified" and confirmed "that, in countries where import infrastructures for LNG are present,
LNG would constitute a direct competitive constraint to gas imported via pipelines".1426
7.852. We observe that, in the decision of the Commission referred to by Russia, the analysis of
the Commission concerned the determination of the relevant product market in the context of the
Commission's assessment of the proposed concentration. We also note that, in the context of that
assessment, the decision refers to "gas which is transported as LNG and regasified". 1427 Thus, the
Commission's statement about LNG and natural gas being indistinguishable from the perspective
of gas buyers should be understood as pertaining only to regasified LNG. We consider that t he
Commission's statement that, in countries where import infrastructure for LNG is present, LNG
would constitute a direct competitive constraint to gas imported via pipelines should also be read
in this light. We recall that, in response to a question by the Panel asking Russia to confirm our
understanding of its arguments, Russia did not indicate that it was arguing that, for the purposes
of the likeness analysis, the Panel should compare regasified LNG with natural gas. 1428 Therefore,
we do not consider that the decision of the Commission referred to by Russia supports its position
that LNG and natural gas are like products within the meaning of Article I:1 of the GATT 1994.

fuel for transport is consumed as compressed natural gas. (Russia's response to Panel question No. 187,
para. 209 (referring to European Commission Memo "Clean Power for Transport – Frequently Asked
Questions", Memo/13/24 (24 January 2013), (Exhibit RUS-195), p. 10)). On this basis, Russia alleges that
there is no difference between natural gas and LNG from the point of view of use. (Russia's response to Panel
question No. 187, para. 209). However, we do not consider that the identity of end-use between CNG and LNG
necessarily implies the identity of end-use between natural gas and LNG.
1420 Russia's first written submission, para. 366.
1421 European Union's response to Panel question No. 109, para. 280.
1422 European Union's second written submission, para. 149.
1423 Russia submits Commission Decision of 16 May 2012 on BP/ Chevron/ Eni/ Sonangol/ Total/ JV
notification pursuant to Article 4 of Council Regulation No. 139/2004, Case No COMP/M.6477, (Commission
decision on BP/ Chevron/ Eni/ Sonangol/ Total/ JV concentration), (Exhibit RUS-157), in support of its more
general proposition that LNG and natural gas are in a direct competitive relationship. We discuss this evidence
in paras. 7.851 through 7.852 below.
1424 HS Chapter 27, (Exhibit EU-32).
1425 Russia's response to Panel question No. 109(a), paras. 436-437.
1426 Russia's response to Panel question No. 109(a), para. 436.
1427 Commission decision on BP/ Chevron/ Eni/ Sonangol/ Total/ JV concentration), (Exhibit RUS-157),
para. 17.
1428 We asked Russia to confirm our understanding that Russia is not comparing natural gas, which is
being transported as such through regular pipelines, to natural gas, which is currently in its final gaseous stage
but has previously been transported as LNG (Panel question No. 109). In its response, Russia indicated that
our understanding was not "exactly correct", reiterating its position that "LNG is natural gas". (Russia's
response to Panel question No. 109, para. 432). Russia further indicated that "the like product comparison
should be between LNG, as imported, and all other natural gas". (Russia's response to Panel question No. 109,
para. 434). While we do not find it necessary to rule on this issue, we observe that, assuming regasified LNG
and natural gas are like products within the meaning of Article I:1 of the GATT 1994, there is no evidence on
the record that would show a discriminatory treatment of natural gas imported via pipelines as compared to
regasified imported LNG in the European Union. Both natural gas imported via pipelines and regasified
imported LNG may be transported and supplied via the same pipelines under identical legal regimes.

7.853. We recall that, as a complaining party in these proceedings, Russi a bears the burden of
making a prima facie case that the LNG measure is inconsistent with Article I:1 of the GATT
1994.1429 This includes a demonstration that the products at issue are like within the meaning of
Article I:1 of the GATT 1994.
7.854. In the course of our analysis above, we have rejected Russia's position that LNG is
indistinguishable from natura l gas and is, for this reason, like natural gas within the meaning of
Article I:1 of the GATT 1994. In terms of the likeness criteria, we have established that LNG and
natural gas do not share the same properties, nature and quality and, at the six -digit level, are
classified under different subheadings of the HS. Russia has, furthermore, not substantiated its
allegations that the end-uses and consumer preferences in respect of LNG and natural gas are the
same. We have also found that the decision of the Commission referred to by Russia does not
support its position that LNG is like natural gas within the meaning of Article I:1 of the GATT 1994.
Thus, having holistically assessed the arguments of the parties and evidence on the record, we are
of the view that Russia has not discharged its burden to establish that LNG and natural gas are like
products within the meaning of Article I:1 of the GATT 1994.
7.855. Therefore, we consider that Russia has not demonstrated that natural gas imported from
Russia and LNG imported from other countries are like products within the meaning of Article I:1
of the GATT 1994. In view of this finding, we do not consider it necessary to exami ne further the
consistency of the LNG measure with Article I:1 of the GATT 1994.
7.7.2.3 Conclusion
7.856. In view of the foregoing, we find that Russia has not demonstrated that the LNG measure
is inconsistent with Article I:1 of the GATT 1994.
7.8 The infrastructure exemption measure
7.8.1 Introduction
7.857. In the context of the broader category referred to by Russia as "the infrastructure
exemption measure", Russia advances claims under, first, Article X:3(a) of the GATT 1994, then,
Article I:1 of the GATT 1994 and Article II:1 of the GATS, and finally, under Article XI:1 of the
GATT 1994. The European Union rejects all of these claims and has raised no defences in response
to them. As mentioned in paragraph 2.41 above, we note that the precise nature and relevant
aspects of the infrastructure exemption measure differ for each of Russia's claims. Accordingly, we
clarify our understanding of the precise aspects of the measure challenged by Rus sia in our
findings on each of the claims below
7.858. We further note that the argumentation pertaining to, and evidentiary underpinnings for ,
Russia's claims overlap to a large extent. This is particularly the case in respect of aspects of
Russia's claims under Articles I:1 and X:3(a) of the GATT 1994 and Article II:1 of the GATS , which
involve various aspects of the infrastructure exemption provision in Article 36 the Directive and a
number of NRA and Commission decisions regarding individual infrastructure exe mption requests,
relating to: the OPAL pipeline 1430, the NEL pipeline 1431, the Gazelle pipeline 1432, the TAP

1429 The Appellate Body in EC – Hormones explained that, to meet its burden of proof, the complainant
must establish a prima facie case, i.e. the one that in the absence of effective refutation by the respondent
requires a panel, as a matter of law, to rule in favour of the complainant. (Appellate Body Report, EC –
 Hormones, para. 104). How much and what kind of evidence will be required to establish a prima facie case
will necessarily vary from measure to measure, provision to provision, and case to case.
1430 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82). As explained in the
Commission Decision, on 25 February 2009, BNetzA (the German NRA) issued two decisions on the exemption
of the OPAL and NEL pipelines. Both applicants (OPAL NEL Transport GmbH and E.ON Ruhrgas Nord Stream
Anbindungsgesellschaft mbH) were the planned network operators of the OPAL and NEL pipelines and applied
to the BnetzA in separate proceedings for the granting of an exemption for the OPAL and NEL pipelines. Hence,
the Commission notes, "BNetzA therefore issued two (essentially identical) decisions". (Commission decision on
the exemption of the OPAL pipeline, (Exhibit RUS-82), paras. 1-2). As further explained in the Commission
Decision, as a result of BNetzA granting the OPAL exemption, the capacities created via the OPAL were to be
exempt for a period of 22 years from third party access and tariff regulation. In addition, "[a]n exemption was
not granted for NEL. In response to the refusal to grant the exemption for NEL, neither of the applicants
appealed against the two decisions of the BNetzA." (Ibid. para. 4). See also BNetzA decision on the exemption

pipeline1433, the Nabucco pipeline 1434, the Poseidon pipeline 1435, the Dragon LNG facility 1436, the
South Hook LNG facility 1437, and the Gate Terminal LNG facility. 1438 In particular, in advancing its
claims under Article II:1 of the GATS and Article I:1 of the GATT 1994, Russia relies, to a
significant degree, on its arguments under Article X:3(a) of the GATT 1994 concerning the alleged
lack of a uniform, impartial and reasonable administration of Article 36 of the Directive.
7.859. In light of these considerations, and of the nature and content of the legal provisions in
question, w e considered it appropriate to begin our examination with Russia's claim under
Article X:3(a) of the GATT 1994, in order to determine whether Russia has demonstrated that the
European Union administered the infrastructure exemption measure in a manner contrary to that
provision. Next, we address Russia's claims under Articles I:1 of the GATT 1994 and II:1 of the
GATS. Finally, we address Russia's claim under Article XI:1 of the GATT 1994 , which challenges
two conditions contained in the 2009 OPAL infrastructure exemption decision.
7.8.2 Russia's claim under Article X:3(a) of the GATT 1994
7.8.2.1 Introduction
7.860. Following the legal standard under Article X:3(a) of the G ATT 1994, set out in
paragraphs 7.240 and 7.241 above, we are required to assess whether Russia has demonstrated
the following elements: (i) the infrastructure exemption measure is a law, regulation, judicial
decision or administrative ruling of general application; (ii) the infrastructure exemption measure
is of the kind described in Article X:1 of the GATT 1994; and (iii) the infrastructu re exemption
measure is not administered in a "uniform, impartial and reasonable manner".

of the OPAL and NEL pipelines, (Exhibit RUS-61). The infrastructure exemption decisions in OPAL and NEL are
referred to as separate decisions in our Report for purposes of clarity.
We note that, during the Panel process, the European Union indicated that:
[T]he Commission has agreed to revise its OPAL decision. On 28 October 2016, the Commission
adopted a decision agreeing, subject to additional conditions, to a revised exemption framework
for the OPAL pipeline. This decision was implemented by way of a settlement agreement between
Gazprom, the OPAL TSO OPAL Gastransport GmbH, Gazprom export, and the German NRA
Bundesnetzagentur. Both the Commission decision and the settlement agreement are currently
suspended due to pe nding appeal procedures launched by third parties before domestic courts.
Three appeals have been filed with the General Court of the European Union and one with a
German court. The suspension of the effects of the revised exemption framework has been
requested in all those cases. (European Union's comments on Russia's response to Panel
question No. 231, para. 155).
In light of this comment, the Panel asked the European Union to clarify whether the 2009 OPAL
infrastructure exemption decision (Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-
82), para. 89) remained in effect. The European Union confirmed that, as of 12 May 2017, the decision
"remains in effect". (European Union's responses to the Panel's Additional Questions of 10 May 2017, para. 3).
The Panel also asked Russia to clarify whether that decision remained the relevant legal instrument pertaining
to the OPAL pipeline for Russia's claims relating to the infrastructure exemption measure. Russia confirmed
that this was the case. (Russia's responses to the Panel's Additional Questions of 10 May 2017, p. 1).
Accordingly, the Panel's examination focused on the 2009 OPAL infrastructure exemption decision. See also
European Commission Press Release, "Gas markets: Commission reinforces market conditions in revised
exemption decision on OPAL pipeline" (28 October 2016), (Exhibit RUS-246).
1431 BNetzA decision on the exemption of the OPAL and NEL pipelines, (Exhibit RUS-61). See also
fn 1430.
1432 Commission decision on the exemption of the Gazelle pipeline I, (Exhibit RUS-81); and Commission
decision on the exemption of the Gazelle pipeline II, (Exhibit RUS-87).
1433 Commission decision on the exemption of the TAP pipeline, (Exhibit RUS-10).
1434 Commission decisions on the exemption of the Austrian, Bulgarian, and Romanian sections of the
Nabucco pipeline, (Exhibits RUS-83, RUS-84 and RUS-85).
1435 Commission decision on the exemption of the Poseidon pipeline, (Exhibit RUS-86).
1436 Final views of the UK NRA on the exemption of the Dragon LNG facility, (Exhibit RUS-66); and Letter
from the UK NRA regarding the Commission decision on the exemption of the Dragon LNG facility, (Exhibit
RUS-101).
1437 Final views of the UK NRA on the exemption of the South Hook LNG facility, (Exhibit RUS-68); and
Letter from the UK NRA regarding the Commission decision on the exemption of the South Hook LNG facility,
(Exhibit RUS-102).
1438 Commission's comments to the Gate Terminal exemption decision, (Exhibit EU-143).

7.861. The obligations of uniformity, impartiality and reasonableness are legally independent and
the WTO Members are obliged to comply with all three requirements. 1439 This me ans that a
violation of any one of the three obligations will lead to a violation of the obligations under
Article X:3(a).1440
7.862. Article X:3 of the GATT 1994 establishes certain minimum standards for transparency and
procedural fairness in the administration of trade regulations.1441 We recall the Appellate Body's
statement that, as allegations that the conduct of a WTO Member is biased or unreasonable are
serious under any circumstances, such allegations should not be brought lightly, or in a subsidiary
fashion.1442 The Appellate Body underlined that "[a] claim under Article X:3(a) of the GATT 1994
must be supported by solid evidence; the nature and the scope of the claim, and the evidence
adduced by the complainant in support of it, should reflect the gravity of the accusations inherent
in claims under Article X:3(a) of the GATT 1994".1443
7.863. Article X:1 of the GATT 1994 makes it clear that Article X does not deal with specific
transactions, but rather with rules "of general application".1444 Laws, regulations, judicial decisions
and admini strative rulings of general application described in Article X:1 of the GATT 1994 are
those that apply to a range of situations or cases, rather than being limited in their scope of
application.1445
7.864. It is well established that the obligations under Article X:3(a) apply to the administration of
the laws, regulations, decisions and rulings of the kind falling within the scope of Article X:1, but
not to such laws and regulations themselves.1446 To the extent that such laws and regulations are
discriminatory, they can be examined for their consistency with the relevant provisions of the
GATT 1994.1447
7.865. Furthermore, a government's act of administration subject to the provisions of
Article X:3(a) includes not only acts of administering the laws and regulations of the kind in
Article X:1, but also legal instruments that regulate the application or implementation of such laws
and regulations. 1448 Moreover, administrative processes leading to administrative decisions may
also be included in the scope of the term "administer" and hence Article X:3(a).

1439 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.866–7.868 (citing Panel Report, Argentina
– Hides and Leather, para. 11.86).
1440 Panel Report, Thailand – Cigarettes (Philippines), para. 7.867 (citing Panel Report, Dominican
Republic – Import and Sale of Cigarettes, para. 7.383).
1441 Appellate Body Report, US – Shrimp, paras. 182-183. The Appellate Body also underlined
that:
Inasmuch as there are due process requirements generally for measures that are otherwise
imposed in compliance with WTO oblig ations, it is only reasonable that rigorous compliance with
the fundamental requirements of due process should be required in the application and
administration of a measure. (Ibid. para. 182).
1442 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 217.
1443 Panel Report, Thailand – Cigarettes (Philippines), para. 7.874 (quoting Appellate Body Report,
US – Oil Country Tubular Goods Sunset Reviews, para. 217).
1444 Appellate Body Report, EC – Poultry, para. 111. See also Panel Report, US – Hot-Rolled Steel,
para. 7.268.
1445 Panel Report, EC – Selected Customs Matters, para. 7.116.
1446 Appellate Body Report, EC – Poultry, para. 115 (quoted in Appellate Body Report, EC – Bananas III,
para. 200). The panel in Argentina – Hides and Leather also stated that "Article X:3(a) refers specifically to the
method of application of measures identified in Article X:1." (Panel Report, Argentina – Hides and Leather,
para. 11.73). (emphasis added) That panel also stated that "[t]he relevant question is whether the substance
of such a measure is administrative in nature or, instead, involves substantive issues more properly dealt with
under other provisions of the GATT 1994." (Ibid., para. 11.70). See also Panel Report, US – Byrd Amendment,
para. 7.143.
1447 Appellate Body Report, EC – Bananas III, para. 200.
1448 Appellate Body Report, EC – Selected Customs Matters, para. 200. The Appellate Body stated:
"[u]nder Article X:3(a), a distinction must be made between the legal instrument being administered and the
legal instrument that regulates the application or implementation of that instrument. While the substantive
content of the legal instrument being administered is not challengeable under Article X:3(a), we see no reason
why a legal instrument that regulates the application or implementation of that instrument cannot be examined
under Article X:3(a) if it is alleged to lead to a lack of uniform, impartial, or reasonable administration of that
legal instrument". (emphasis added)

7.866. However, to the extent that a claim of violation under Article X:3(a) is based on an
administrative process, the complaina nt must demonstrate how and why certain features of the
administrative processes necessarily lead to a lack of uniform, impartial, or reasonable
administration of a legal instrument of the kind described in Article X:1.1449 In addition, while it is
not inconc eivable that a Member’s actions in a single instance might be evidence of lack of
uniform, impartial, and reasonable administration of its laws, regulations, decisions and rulings,
the actions in question would have to have a significant impact on the over all administration of the
law, and not simply on the outcome in the single case in question. 1450 We consider that, in
determining the proper scope of Article X:3(a), the relevant question is "whether the substance of
such a measure is administrative in nature or, instead, involves substantive issues more properly
dealt with under other provisions of the GATT 1994".1451
7.867. We also note that Article X:3(a) was not intended to be used to test the consistency of a
Member’s particular decisions or rulings with the Member’s own domestic law and practice.1452
7.868. Before us, Russia submits that the European Union's administration of the infrastructure
exemption measure has not been uniform, impartial or reasonable, as required by Article X:3(a).
Russia argues that the infrastructu re exemption measure is the specific measure at issue 1453 and
that it is the administration of the infrastructure exemption measure that is the subject of this
claim.1454 Russia asserts that the Directive (and its predecessor, the Second Energy Package
Directive) are "laws… of general application" within the mea ning of Article X:1 of the
GATT 1994.1455 It further submits that the measure is "affecting" or having an effect on, the sale,
distribution and transportation of natural gas within the meaning of Article X:1.1456
7.869. To establish the administration of the measure in violation of Article X:3(a), Russia
compares the Commission's infrastructure exemption decision regarding the OPAL pipeline to its
exemption decisions in the cases of the Gazelle, TAP, Nabucco and Pos eidon pipelines. Russia
considers that the evaluation by the Commission of the exemption application for the OPAL
pipeline, as compared to evaluation of the Gazelle, TAP, Nabucco and Poseidon pipelines, based on
the criteria in Article 36, constitutes the administration, application or putting into practical effect
of the infrastructure exemption measure. 1457 According to Russia, the Commission has
administered the five criteria in the Directive in a manner inconsistent with its own internal
guidance and decis ions.1458 In particular, Russia compares the Commission's competition analysis
and the conditions it imposed in each of these decisions; Russia also argues that the Commission
has failed to review its decisions despite a change in the circumstances on which they were based.
7.870. The European Union does not dispute that Article 36 of the Directive (as well as Article 22
of the S econd Energy Package Directive before it) is a measure of general application. 1459 In
addition, the European Union argues that Article 36 appli es exclusively upon request of the
undertaking seeking to benefit from an individual exemption decision, to which specific conditions
may be attached, taking account of the particular features of the major infrastructure project at
stake. For the European Union, individual exemption decisions, and any conditions attached to
them, are not measures of general application.1460

1449 Appellate Body Report, EC – Selected Customs Matters, paras. 224-226; and Panel Report, Thailand
– Cigarettes (Philippines), para. 7.873.
1450 Panel Report, US – Hot-Rolled Steel, para. 7.268. The panel also considered that it is unlikely that a
violation of Article X:3 would be found where actions in the single case in question were, themselves,
consistent with more specific obligations under other WTO Agreements.
1451 Panel Report, Thailand – Cigarettes (Philippines), para. 7.869 (quoting Panel Report, Argentina –
Hides and Leather, para. 11.70). (emphasis original)
1452 Panel Report, US – Stainless Steel (Korea), para. 6.50.
1453 Russia's first written submission, para. 535.
1454 Russia's second written submission, para. 399. For Russia, individual exemption decisions are
instances of application of the measure of general application.
1455 Russia's first written submission, para. 534.
1456 Russia's first written submission, para. 534.
1457 Russia's first written submission, paras. 539-672; response to Panel question No. 142, paras. 595-
597; and second written submission, paras. 399-404.
1458 Russia's first written submission, paras. 535-538.
1459 European Union's first written submission, para. 687; and second written submission, para. 283.
1460 European Union's first written submission, paras. 689 and 693; and second written submission,
para. 285.

7.871. The European Union asserts that Article X:1 is not applicable to the facts of this dispute
because it has not been proven that Article 36 of the Directive affects the sale, distribution and
transportation of natural gas within the meaning of that provision. 1461 According to the European
Union, it is incumbent on Russia to prove the effects on the sale, distribution and transportation of
natural gas, which cannot be presumed. 1462 The European Union considers that Russia has not
demonstrated what effects the measure will produce on the sale, distribution or transportation of
natural gas.1463 The European Union argues that Articl e 36 of the Directive may only affect the
sale, distribution and transportation of natural gas, if at all, as an indirect consequence of
encouraging the construction of new infrastructure or significant increases of capacity in existing
infrastructure.1464
7.872. The European Union submits that, in case Article 36 of the Directive is found to fall within
the scope of Article X:1 of the GATT 1994 "(quod non)", the claim of violation of Article X:3(a)
brought by Russia cannot succeed, as the European Union administers the infrastructure
exemption provision in a uniform, impartial and reasonable manner, and Russia has not proved
otherwise.1465
7.8.2.2 Analysis by the Panel
7.8.2.2.1 Introduction
7.873. As set out in paragraph 2.37 above, the infrastructure exemption provision in Article 36 of
the Directive (and Article 22 of its predecessor) lays out five criteria to evaluate applications for
infrastructure exemptions. In accordance with the legal standard set out in paragraphs 7.240
and 7.241 above, in our examination of Russia's claim of violation u nder Article X:3(a) of the
GATT 1994, we consider whether Russia has demonstrated that the infrastructure exemption
measure is (i) a law, regulation, judicial decision or administrative ruling of general application; (ii)
of the kind described in Article X:1 of the GATT 1994; and (iii) not administered in a "uniform,
impartial and reasonable manner".
7.8.2.2.2 Measure of general application
7.874. The parties do not disagree that Article 36 of the Directive is a measure of "general
application"1466, and we are similarly of the view that this measure falls within the types of
instruments covered by Articles X:3(a) and X:1 of the GATT 1994. 1467 However, in light of the
parties' arguments, we first clarify whether Russia's claim is directed at Article 36 of the Directive
itself, or rather at particular infrastructure exemption decisions issued pursuant to that provision.
7.875. Russia submits that it do es not challenge the individual exemption decisions or any
conditions attached to them per se under Article X:3(a), but rather that it challenges the
administration of the infrastructure exemption measure. 1468 Russia considers that individual
exemption decisi ons put into practical effect, or apply, the measure as contemplated in
Article X:3(a) and as interpreted by the Appellate Body in EC – Selected Customs Matters .1469
According to Russia, e ach decision by the Commission represents a separate application of the
same criteria and thus of the measure such that "[o]ver time, a series of decisions are issued,
each presumably building on prior decisions, and all of which are supposedly designed to ensure a
fair and even-handed outcome in each instance."1470
7.876. The Europea n Union submits that this claim focuses on two conditions attached to an
individual exemption decision (the OPAL decision) and that the comparison with other individual

1461 European Union's first written submission, para. 687; and second written submission, paras. 283-
284.
1462 European Union's first written submission, para. 693.
1463 European Union's first written submission, para. 690.
1464 European Union's first written submission, para. 691.
1465 European Union's first written submission, para. 694.
1466 Russia's first written submission, para. 534; and European Union's second written submission,
para. 283.
1467 See also, above para. 7.520.
1468 Russia's second written submission, para. 399.
1469 Russia's response to Panel question No. 138, paras. 576-579.
1470 Russia's response to Panel question No. 142, para. 595.

exemption decisions is intended to force a review by the Panel of the OPAL decision, ra ther than
serving as a demonstration of an unreasonable administration of Article 36 of the Directive.1471 The
European Union considers that individual decisions issued pursuant to the Article are clearly not
measures of general application within the meaning of Article X:1. 1472 It hence contends that, to
assess how the measure has been administered and applied, the universe of all relevant individual
decisions should be taken into consideration.1473
7.877. Past panels and the Appellate Body have distinguished between inst ruments that apply in
specific situations or to a specific company, and those that apply more broadly across a range of
situations or unidentified economic operators. In particular, the Appellate Body in EC – Poultry
upheld a panel finding that an import l icence issued to a specific company did not meet the "of
general application" criterion, noting that "licences issued to a specific company or applied to a
specific shipment cannot be considered to be a measure 'of general application' within the meaning
of Article X".1474
7.878. However, we also note the Appellate Body's caution in EC – Selected Customs Matters
that:
[I]t is important to distinguish between, on the one hand, the measures at issue and,
on the other hand, acts of administration that have been presente d as evidence to
substantiate the claim that the measures at issue are administered in a manner
inconsistent with Article X:3(a) of the GATT 1994.1475
7.879. Recalling the paramount importance of distinguishing between the measure at issue and
the acts of administra tion presented as evidence to substantiate a claim under Article X:3(a), we
note that Article 36 of the Directive applies broadly to economic operators that apply for an
infrastructure exemption from certain other generally applicable obligations under the Directive,
and that there is no disagreement between the parties that this provision of the Directive is a
measure of general application. We therefore consider that the measure of general application
here is Article 36 of the Directive. 1476 We understand th at the Commission's decisions regarding
the OPAL and other pipelines constitute the alleged acts of "administration" which have been
presented as evidence in order to substantiate Russia's claim under Article X:3(a). While accepting
the Commission's decisions as evidence, we retain the discretion to determine their "relevance and
probative value"1477 in our assessment of Russia's claim.
7.880. We are thus satisfied that Russia has identified Article 36 of the Directive as the relevant
measure of general application, and next turn to examine whether it affects the sale, distribution
or transportation or other use of imports within the meaning of Article X:1 of the GATT 1994.
7.8.2.2.3 Measure of the kind described in Article X:1 of the GATT 1994
7.881. Russia argues that Article 36 of the Directive affects the sale, distribution and/or
transportation of imports because the purpose of this provision is to exempt suppliers of natural

1471 European Union's second written submission, para. 282. The European Union states that the
comparison "is more of a prop to force a review by the Panel of the OPAL decision, than it is a demonstration of
an unreasonable administration of the exemption".
1472 European Union's response to Panel question No. 138, para. 364.
1473 European Union's response to Panel question No. 139, para. 365.
1474 Appellate Body Report, EC – Poultry, para. 113 (quoting Panel Report, EC – Poultry, para. 269).
(footnote omitted) See also Panel Report, US – Hot-Rolled Steel, para. 7.268:
While it is not inconceivable that a Member's actions in a single instance might be evidence of lack of
uniform, impartial, and reasonable administration of its laws, regulations, decisions and rulings, we
consider that the actions in question would have to have a significant impact on the overall
administration of the law, and not simply on the outcome in the single case in question.
1475 Appellate Body Report, EC – Selected Customs Matters, para. 188.
1476 We recall that, in EC – Selected Customs Matters, in the context of addressing a terms of reference
challenge, the Appellate Body clarified that "the measure at issue in this dispute is not the manner of
administration but, rather, the legal instruments identified in the first paragraph of the panel request, as
administered collectively or as a whole." (Appellate Body Report, EC – Selected Customs Matters, para. 187).
(emphasis original) Similarly, we consider that the administration we are called upon to examine under
Article X:3(a) is of this measure of general application.
1477 Appellate Body Report, EC – Selected Customs Matters, para. 188.

gas from the substantive requirements of the Directive. 1478 Russia submits that, because any
reasonable supplier of natural gas would evaluate their prospects for being granted an exemption
when deciding whether to undertake a new infrastructure project, this creates an incentive to
move forward with developing an infrastructure project.1479
7.882. In addition, Russia submits that, particularly in the course of its administration by the
Commission, the infrastructure exemption measure has an effect on the volume of gas that may
be imported free of the Directive’s requirements. Russia offers the capacity cap and gas rele ase
requirement imposed in the OPAL exemption decision as an example of how such administration
affects the sale, distribution, transportation or other use of natural gas. 1480 Russia submits that
less gas can be sold or transported over the OPAL pipeline than would otherwise be the case,
whereas the Commission imposed less restrictive conditions in the case of the Gazelle, TAP,
Nabucco and Poseidon pipelines, meaning the effect or detrimental impact on the sale and
transportation of gas via those pipelines is not as great as in the case of the OPAL pipeline.1481
7.883. The European Union submits that the purpose of Article 36 of the Directive is to incentivize
investment in major new infra structure and that it may only affect the sale, distribution and
transportation of natural gas, if at all, as an indirect consequence of fulfilling this purpose. 1482 It
considers that Russia has not explained the measure's effects on the sale, distribution and
transportation of natural gas.1483 It further submits that the measure does not create incentives for
gas of particular sources to be imported into or transported within the European Union. 1484
Specifically, regarding the OPAL exemption decision, the European Union submits that the decision
does not restrict the volume of gas that can be tr ansported on the pipeline, but rather that "[t]he
restrictions concern exclusively the supply of pipeline transport services on OPAL by Gazprom and
related companies."1485
7.884. Article X:1 of the GATT 1994 covers a broad range of measures. In light of the
argumentation of the parties, in this case, we focus on measures "affecting" the "sale, distribution,
transportation … or other use" of imports.
7.885. We recall that the Appellate Body in EC – Bananas III established that the ordinary
meaning of the word "affecting" implies a measure that has "an effect on", and that the word has a
broad scope which is not limited to the scope of terms such as "regulating" or "governing".1486
7.886. In addition, the panel in Argentina – Financial Services clarified that the word "affects", in
the context of Article III:4 of the GATT 1994, also covers measures which affect the conditions of
competition of the products in question on the domestic market, even if their main objective is not
to regulate the internal sale, offering for sale, purchase or use of the product.1487
7.887. Furthermore, in China – Publications and Audiovisual Products , when discussing the word
"affect" in the context of Article III:4, the panel included " measures which create incentives or
disincentives with respect to the sale, offer ing for sale, purchase, and use of an imported
product".1488

1478 Russia relies on the broad interpretation of the term "affecting" outlined in Appellate Body Report,
EC – Bananas III, para. 220. (Russia's response to Panel question No. 143, paras. 598-599; and second
written submission, paras. 392-393).
1479 Russia's second written submission, para. 393; and response to Panel question No. 224, para. 313.
1480 Russia's second written submission, para. 393.
1481 Russia's response to Panel question No. 143, paras. 598-599.
1482 European Union's first written submission, paras. 690-691.
1483 European Union's second written submission, paras. 283-284.
1484 European Union's response to Panel question No. 224, para. 290. The European Union elaborates
that it "does not disagree that, by creating incentives for the construction of new major infrastructure, the
infrastructure exemption measure also indirectly incentivizes natural gas imports, in general. Such incentives
are not linked or dependent on the origin of the gas that will be flown through the new interconnectors."
(European Union's comments on Russia's response to Panel question No. 224, para. 149).
1485 European Union's second written submission, para. 299.
1486 Appellate Body Report, EC – Bananas III, para. 220.
1487 Panel Report, Argentina – Financial Services, para. 7.1023.
1488 Panel Report, China – Publications and Audiovisual Products, para. 7.1450.

7.888. We observe that Article 36 of the Directive sets out provisions governing the exemption of
infrastructure, upon request and for a defined period of time, from other generally applicable
obligations under the Directive. 1489 We recall our findings, in the context of our examination of
Russia's claims against the unbundling measure in the Directive under Articles I:1 and III:4, that
the unbundling measure affects the internal sale, offering for sale, purc hase, transportation,
distribution or use of natural gas.1490
7.889. We see that Article 36 may exempt certain producers and suppliers from some or all of the
rules on unbundling and may further determine the particular legal framework applicable in
respect of certain infrastructure, including infrastructure designed to import and transport natural
gas in the European Union.
7.890. We understand that the infrastructure exemption and any related conditions are rules that
effectively "replace" otherwise applicable rules (su ch as unbundling or third party access ); they
become the binding legal regime pertaining to the infrastructure concerned as long as the relevant
infrastructure exemption decision remains operational.
7.891. Having established that the unbundling measure in the D irective is within the scope of
Articles I and III:4 of the GATT 1994 , we also consider that the infrastructure exemption provision
in Article 36 of the Directive affects the sale and transportation of natural gas within the meaning
of Article X:1 and hence Article X:3(a) of the GATT 1994.
7.892. We recall that, in response to Panel questioning concerning the scope of the term "affects"
in Articles X:1 and X:3(a) of the GATT 1994, both parties acknowledge that the measure creates
"incentives" for importation, as that term was used in China – Publications and Audiovisual
Products.1491 We note this shared view of the parties, and consider it supports our view that the
infrastructure exempt ion provision in the Directive affects , in particular, the sale and
transportation of imports of natural gas for the purposes of Article X:1 and hence Article X:3(a) of
the GATT 1994.
7.8.2.2.4 Administered in a manner that is not uniform, impartial and reasonable
7.8.2.2.4.1 Introduction
7.893. Russia submits that the evaluation by the Commission of each infrastructure exemption
application, based on the five criteria set out in Article 36 of the Directive, constitutes the
administration, application or putting into practical effect of the infrastructure exemption
measure.1492 Russia further submits that the substantive content of legal instruments that regulate
the application or implementation of laws, regulations, decisions, and administrative rulings of the
kind described in Article X:1 can be challenged under Article X:3(a). 1493 Russia relies on a
comparison of five infrastructure exemption decisions (OPAL, Gazelle, TAP, Nabucco and
Poseidon), asserting that the infrastructure exemption criteria are "vague" and grant the NRAs and
the Commission significant discretion in evaluating individual applications.1494
7.894. While maintaining that Russia's claim is outside the scope of Article X:3(a) 1495, the
European Union submits that uniformity in the administration of the infrastructure exemption
measure is ensured through the existence of a single set of criteria, namely those listed in
Article 36(1) of the Directive, detailed procedural rules for examination and decision -making by
the competent NRAs (set out in paragraphs 3 to 7 of that Article) and a review procedure by the
Commission (provided for in paragraphs 8 and 9 of th e Article), designed to ensure consistency at

1489 See, above paras. 2.36-2.41.
1490 See, above paras. 7.521-7.527 and 7.573.
1491 See, e.g. European Union's comments on Russia's response to Panel question No. 224, para. 149;
and Russia's response to Panel question No. 224, para. 313. In Russia's comments on the European Union's
response to Panel question No. 224, para. 228, Russia states: "Obviously, the measure creates incentives for
the construction of major gas infrastructure, as defined in Article 36, as the EU contends. In so doing,
however, as Russia has demonstrated, the measure necessarily also creates an incentive for the sale, offering
for sale, purchase and use of imported natural gas."
1492 Russia's response to Panel question No. 142, para. 595; and second written submission, para. 401.
1493 Russia's response to Panel question No. 142, para. 597.
1494 Russia's response to Panel question No. 142, para. 594.
1495 European Union's first written submission, para. 713.

an EU-wide level.1496 The European Union asserts that the OPAL exemption decision is "perfectly in
line with the criteria" in the Directive and Commission practice 1497, pointing out that Article 36
itself calls for a case-by-case assessment taking into account the factual circumstances of each
decision.1498
7.895. Japan asserts that Russia's argument focuses on the unreasonableness of the OPAL
infrastructure exemption decision, and whether the criteria in the Directive were mi sapplied and
ignored. According to Japan, Article X:3(a) of the GATT 1994 covers the general application of
rules affecting an unidentified number of economic operators, but it does not cover the specific
"application" of such regulations in each case. Furthermore, Japan relies on the panel's analysis in
US – Stainless Steel (Korea) to argue that a misapplication of a regulation in a single case does
not constitute a violation of Article X:3(a), unless there is evidence that the same misapplication is
arising or will arise in a widespread manner, to the extent it establishes or revises a principle or
criteria in future cases . Based on the panel report in US – Hot-Rolled Steel, Japan asserts that it
should be assessed whether the complainant has establishe d that the OPAL decision is not a
sporadic case of misapplication of the Directive but, instead, shows that such misapplication will
arise in a manner constituting non-uniform, partial or unreasonable "administration" of the laws
and regulations of "general application".1499
7.896. As we have already indicated, the Appellate Body has consistently held that a claim under
Article X:3(a) must not be directed against the substance of a law itself; rather, such a claim must
challenge its administration. 1500 We recall our vie w that t he relevant question in determining
whether a measure falls within the scope of Article X:3(a) is "whether the substance of such a
measure is administrative in nature or, instead, involves substantive issues more properly dealt
with under other pro visions of the GATT 1994".1501 We also recall that the term "administer"
means "putting into practical effect" or "applying" a legal instrument of the kind described in
Article X:1.1502
7.897. In this section, we first examine whether Russia's claim can be properly considered as one
against the administration (rather than the substance) of Article 36 in the Directive . If this is the
case, we will proceed to examine whether the administration of the measure satisfies the
requirements of Article X:3(a) of the GATT 1994.
7.8.2.2.4.2 Administered
7.898. We observe that, in its challenge under Article X:3(a), Russia compares the Commission's
OPAL decision to decisions on Gazelle, TAP, Nabucco and Poseidon and submits th at the measure
was not administered in a uniform, impartial and reasonable manner. We understand Russia to
allege four main types of discrepancies in relation to its comparison of the decisions:

1496 European Union's first written submission, para. 700-702; and opening statement at the first
meeting of the Panel, paras. 90-91. The European Union asserts that the "impartial and reasonable
administration of the measure … is further supported by an obligation to state reasons for individual decisions,
which are subject to judicial review in accordance with general rules. The competent jurisdictions may be either
the domestic courts of the Member States or the European Court of Justice, depending on who is the author of
the challenged final decision." (European Union's opening statement at the first meeting of the Panel, para.
91). The European Union further refers to Commission Staff Working Document on Article 22 of Directive
2003/55/EC Concerning Common Rules for the Internal Market in Natural Gas and Article 7 of Regulation (EC)
No. 1228/2003 on Conditions for Access to the Network for Cross-border Exchanges in Electricity – New
Infrastructure Exemptions, SEC(2009) 642 final (6 May 2009), (Commission Explanatory Note on New
Infrastructure Exemptions), (Exhibit RUS-27), as an interpretive note providing transparency and guidance to
increase predictability. (European Union's comments on Russia's response to Panel question No. 216,
para. 133).
1497 European Union's second written submission, paras. 287-288.
1498 European Union's first written submission, para. 697 (referring to Directive 2009/73/EC, (Exhibit
EU-5), Article 36(3)).
1499 Japan's third-party submission, paras. 43-48.
1500 Appellate Body Reports, EC – Bananas III, para. 200; and EC – Poultry, para. 115.
1501 Panel Report, Thailand – Cigarettes (Philippines), para. 7.869 (quoting Panel Report, Argentina –
Hides and Leather, para. 11.70).
1502 Panel Report, Thailand – Cigarettes (Philippines), para. 7.983.

1. differences in the Commission's interpretation of criteria i n the competition analysis and
the definition of the geographic market in the OPAL decision as compared to the Gazelle,
TAP, Nabucco and Poseidon decisions1503;

2. differences in the conditions imposed in the OPAL decision as compared to the Gazelle,
TAP, Nabucco and Poseidon decisions1504;

3. the Commission's alleged failure to review its OPAL decision once the Gazelle pipeline
had been completed1505; and

4. the Commission's alleged failure to review its TAP exemption based on subsequent
changes in, and acquisitions by, TAP's shareholders.1506

7.899. The discrepancies alleged by Russia pertain to elements of the reasoning contained in
particular decisions stemming from the considerations identified in the pertinent criteria in
Article 36 of the Directive, and the alleged failure to revisit or re -evaluate that reasoning whe n
material changes had allegedly occurred.
7.900. We once again recall the fundamental conceptual distinction between the administration of
a measure, and the substance of a measure, and the need to ascertain whether the substance of
the measure is administrative in nature or, instead, involves substantive issues more properly
dealt with under other provisions of the GATT 19941507 and the Appellate Body's view that " [t]he
WTO-consistency of … substantive content must be determined by reference to provisions of the
covered agreements other than Article X of the GATT 1994".1508
7.901. Having carefully reviewed Russia's claim and the related argumentation of the parties 1509,
we do not believe that Russia's claim can properly be consider ed as relating to the administration
of the infrastructure exemption measure within the meaning of Article X:3(a) of the GATT 1994.
7.902. The elements of the infrastructure exemption decisions identified in the parties'
argumentation express the implementation of the content of the criteria and determine t he
substantive legal regime imposed. Our consideration of Russia's arguments leads us to the
conclusion that such arguments pertain to the substantive content of the criteria guiding the grant
of the infrastructure exemption, which articulate a set of defined, systematic benchmarks guiding
the substantive assessment of the merits of an infrastructure exemption application.
7.903. To our mind, these are thus substantive, rather than administrative, in nature within the
meaning of Article X:3(a). We see that Russia's claim thus concerns the substantive aspects of the
criteria set out in Article 36 rather than how they are administered. As the conditions enshrined in
the infrastructure exemption criteria in the Directive, and the assessment that occurs thereunder,
are substantive rather than administrative in nature, we also consider that the Commission's
alleged failure to re-visit the situations in order to assess the existence and impact of any material
change in light of allegedly changed circumstances pursuant to these criteria is also substantive,
rather than administrative, in nature. Russia's claims pertaining to these elements therefore also
fall outside the scope of Article X:3(a) 1510 and accordingly, we find that Ru ssia has not
demonstrated a violation of Article X:3(a) of the GATT 1994.

1503 Russia's first written submission, paras. 560-573 (regarding OPAL), 574-579 (regarding Gazelle),
607-609 (regarding TAP), 649-654 (regarding Nabucco), and 663-668 (regarding Poseidon).
1504 Russia's first written submission, paras. 544-546 (comparing OPAL and Gazelle), 618-627
(comparing OPAL and TAP), 655-660 (comparing OPAL and Nabucco), and 668-671 (comparing OPAL and
Poseidon).
1505 Russia's first written submission, para. 583-593.
1506 Russia's first written submission, para. 610-617.
1507 Panel Reports, Argentina – Hides and Leather, para. 11.70 (emphasis added); and Thailand –
Cigarettes (Philippines), para. 7.869.
1508 Appellate Body Report, EC – Poultry, para. 115. See also Panel Report, US – Corrosion-Resistant
Steel Sunset Review, para. 7.293.
1509 See, below paras. 7.940-7.963.
1510 We find support for our approach in the findings of the panel in Thailand – Cigarettes (Philippines).
That panel was requested to consider whether the usage of a particular methodology for calculating the excise
tax on imported cigarettes constituted the "administration" of a measure. That panel concluded that the

7.904. Moreover, while the Appellate Body has clarified that panels may be required to examine
municipal law "in assessing its consistency with WTO law" 1511, this role does not, in our view,
include an assessment of a challenged measure's inconsistency with municipal, rather than WTO ,
law. We understand that, by asking us to compare the OPAL decision to the Commission's internal
guidance and its other decisions, certain of Russia's arguments in vite us to address the
consistency of the cited infrastructure exemption decisions with internal EU law and practice. We
do not believe our mandate properly encompasses a review of the consistency of decisions with EU
internal law or practice. In this rega rd, we recall that the panel in US – Hot-Rolled Steel opined
that it is not properly a panel's task to consider whether a Member has acted consistently with its
own domestic legislation. 1512 This was reiterated by the panel in US – Stainless Steel (Korea)
which found that:
[The WTO dispute settlement system] was not … intended to function as a mechanism
to test the consistency of a Member's particular decisions or rulings with the Member's
own domestic law and practice; th at is a function reserved for each Member's
domestic judicial system, and a function WTO panels would be particularly ill -suited to
perform.1513
7.905. Russia acknowledges these views but submits that we may consider this claim without
testing the European Union’s ad herence to its own domestic law and practice. 1514 Russia argues
that the internal guidance and decisions it cites here differ materially from the practice or policy at
issue in that case.1515
7.906. The European Union maintains that it has not departed from its domest ic law and from
Commission practice as it is explained in the Commission Explanatory Note on New Infrastructure
Exemptions but submits that, if the Panel were to consider Russia's arguments regarding the
Commission's alleged deviations from th at Note, it w ould be testing the European Union's
adherence to its own domestic law and practice. The European Union considers that the Panel is
not well equipped to fulfil that task, which should be left to the domestic courts of the European
Union.1516
7.907. We concur with th e view of these previous panels and consider that, by asking us to
compare the OPAL decision to the Commission's internal policy guidance and its other decisions,
Russia's submissions improperly invite us to consider whether the European Union has followed its
own laws and practice.
7.908. Accordingly, we find that Russia's claim under Article X:3(a) in respect of the alleged
administration of the infrastructure exemption provision in Article 36 of the Directive does not
properly fall within the scope of Article X:3(a) of the GATT 1994. We therefore do not further
examine the consistency of the cited infrastructure exemption decisions with the Article X:3(a)
requirements to administer the measure in a uniform, impartial and reasonable manner. We
address the substa ntive aspects of Russia's claims pertaining to certain aspects of the mentioned
infrastructure exemption decisions in our examination of Russia's claims under Article I:1 of the
GATT 1994, and we examine Russia's claim concerning the conditions contained i n the OPAL
decision under Article XI:1 of the GATT 1994 below.

challenged aspects of the legislation in question were substantive, rather than administrative, in nature within
the meaning of Article X:3(a). (Panel Report, Thailand – Cigarettes (Philippines), paras. 7.986-7.988). That
panel thus considered it unnecessary to continue its analysis under this provision to consider whether the
administration of the measure was uniform, impartial and reasonable.
1511 Appellate Body Report, US – Hot-Rolled Steel, para. 200. See also Appellate Body Reports, US –
1512 Panel Report, US – Hot-Rolled Steel, para. 7.267.
1513 Panel Report, US – Stainless Steel (Korea), para. 6.50. (footnote omitted)
1514 Russia's response to Panel question No. 227, para. 314.
1515 Russia's response to Panel question No. 227, para. 317. In particular, Russia asserts that the Panel
is not precluded from considering the Commission Explanatory Note on New Infrastructure Exemptions,
(Exhibit RUS-27).
1516 European Union's comments on Russia's response to Panel question No. 227, para. 150. See also
European Union's opening statement at the first meeting of the Panel, para. 93, where the European Union
stresses that "judicial review of an individual measure should be left for the municipal courts and is not the
task of a panel assessing a claim under Article X:3(a)."

7.8.2.3 Conclusion
7.909. For the reasons stated above, we find that Russia has not demonstrated that the European
Union has administered the infrastructure exemption measure in the Directive inconsistently w ith
Article X:3(a) of the GATT 1994.
7.8.3 Russia's claims under Article II:1 of the GATS and Article I:1 of the GATT 1994
7.8.3.1 Introduction
7.910. Russia has raised four claims under Article II:1 of the GATS and Article I:1 of the GATT
1994 in the context of the broader category referred to by Russia as "the infrastructure exemption
measure", one under Article II:1 of the GATS1517 and three under Article I:1 of the GATT 1994.1518
At the outset, we note that there has been some ambiguity, throughout these proceedings, about
the exact nature and content of the measure challenged by Russia under these claims.
7.911. Throughout its submissions, Russia has focused its argumentation under Article II:1 of the
GATS and Article I:1 of the GATT 1994 on the "manner in which the EU applied or implemented"
Article 36 of the Directive, by comparing and contrasting different specific infrastructure exemption
decisions taken by the Commission and the relevant NRAs.
7.912. More particularly, Russia argues : (a) that the Commission and the relevant NRAs
interpreted certain requirements for being eligible to receive an infrastructure exemption
differently in respect of one infrastructure exemption decision involving a Russian pipeline
transport service supplier and imported Russian natural gas, on the one hand, and two
infrastructure exemption decisions involving pipeline transport service suppliers and imported
natural gas from other non -EU countries, on the other hand 1519; (b) that the Commission and the
relevant NRAs interpreted certain criteria differently and imposed different conditions as regards
one infrastructure exemption granted in respect of a Russian pipeline transport service supplier
and imported Russian natu ral gas, on the one hand, and a number of infrastructure exemptions
granted in respect of pipeline transport service suppliers and imported natural gas from other non -
EU countries, on the other hand1520; and (c) that the Commission and the relevant NRAs applied or
implemented Article 36 differently in respect of two infrastructure exemption decisions involving
Russian pipeline transport service suppliers and imported Russian natura l gas, on the one hand,
and infrastructure exemption decisions concerning LNG facilities, on the other hand.1521
7.913. In response to questions by the Panel, Russia explained that it is not challenging Article 36
of the Directive per se, nor the specific instances of application of this provision in the different

1517 Russia's first written submission, paras. 721-731; and second written submission, paras. 426-431.
1518 Russia's first written submission, paras. 680-701; and second written submission, paras. 412-417
(Russia's first claim under Article I:1 of the GATT 1994); Russia's first written submission, paras. 702-715; and
second written submission, paras. 418-423 (Russia's second claim under Article I:1 of the GATT 1994); and
Russia's first written submission, paras. 716-720; and second written submission, paras. 424-425 (Russia's
third claim under Article I:1 of the GATT 1994).
1519 Russia's first written submission, paras. 680-701; and second written submission, paras. 412-417
(Russia's first claim under Article I:1 of the GATT 1994, comparing the NEL infrastructure exemption decision
with the Gazelle and TAP infrastructure exemption decisions); and first written submission, paras. 729-731;
and second written submission, paras. 426-431 (Russia's claim under Article II:1 of the GATS, comparing the
NEL and OPAL infrastructure exemption decisions with the Gazelle, TAP, Nabucco, Dragon and South Hook
infrastructure exemption decisions).
1520 Russia's first written submission, paras. 702-715; and second written submission, paras. 418-423
(Russia's second claim under Article I:1 of the GATT 1994, comparing the OPAL infrastructure exemption
decision with the Gazelle, TAP, Nabucco and Poseidon infrastructure exemption decisions); and first written
submission, paras. 729-731; and second written submission, paras. 426-431 (Russia's claim under Article II:1
of the GATS, comparing the NEL and OPAL infrastructure exemption decisions with the Gazelle, TAP, Nabucco,
Dragon and South Hook infrastructure exemption decisions).
1521 Russia's first written submission, paras. 716-720; and second written submission, paras. 424-425
(Russia's third claim under Article I:1 of the GATT 1994, comparing the NEL and OPAL infrastructure exemption
decisions with the Dragon and South Hook infrastructure exemptions decisions); and first written submission,
paras. 729-731; and second written submission, paras. 426-431 (Russia's claim under Article II:1 of the GATS,
comparing the NEL and OPAL infrastructure exemption decisions with the Gazelle, TAP, Nabucco, Dragon and
South Hook infrastructure exemption decisions).

infrastructure exemption decisions referred to by Russia. 1522 Instead, Russia is challenging the
alleged "inconsistent" 1523 or "discriminatory" 1524 "manner in which the EU applied or
implemented"1525 Article 36 of the Directive. 1526 We understand that by using the terms
"inconsistent" or "discri minatory", Russia refers to alleged differences or lack of coherence in the
interpretation of eligibility requirements and in the interpretation of certain criteria and imposition
of conditions referred to in letters (a), (b) and (c) in the immediately preceding paragraph. Russia
also confirmed that the challenged measure is the same for Russia's claims under Article II:1 of
the GATS and Article I:1 of the GATT 1994.1527
7.914. In this regard, we note that "[i]n principle, any act or omission attributable to a WTO
Member can be a measure of that Member for purposes of dispute settlement proceedings."1528 We
further note that the European Union does not appear to take issue with Russia challenging this
type of measure1529, although it disputes the merits of Russia's contention that the European Union
applied or implemented Article 36 of the Directive in an "inconsistent" or "discriminatory" manner.
We also see no reason to preclude Russia from challenging the alleged "inconsistent" or
"discriminatory" manner in which the European Union applied or implemented Article 36 of the
Directive. At the same time, we believe that it is for Russia to demonstrate the existence of this
measure.1530 In other words, as Russia's claims under Article II:1 of the GATS and Article I:1 of
the GATT 1994 are predicated on the notion that the European Union applied or implemented
Article 36 of the Directive in an "inconsistent" or "discriminatory" manner, we believe that it is for
Russia to demonstrate that the European Union di d in fact apply or implement Article 36 of the
Directive in this manner, as a basis for its claims.
7.915. Accordingly, we begin by addressing the threshold issue of whether Russia has
demonstrated the existence of the alleged measure, which is, according to Russ ia, that the
European Union applied or implemented Article 36 of the Directive in an "inconsistent" or
"discriminatory" manner.

1522 Russia's responses to Panel question No. 47(a), paras. 223-225, and No. 217(a), para. 283.
1523 Russia's responses to Panel question No. 5, para. 47, and No. 47(a), para. 224.
1524 Russia's first written submission, paras. 730-731.
1525 Russia's responses to Panel question No. 5, paras. 47-49, and No. 47(a), paras. 224-225.
1526 Russia's response to Panel question No. 217(a), para. 283.
1527 Russia's response to Panel question No. 217(b), para. 284.
1528 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 81.
1529 We note that the European Union, in response to a question by the Panel following the first meeting,
states that:
[I]t would only be possible to assess the consistency of the individual decisions with the MFN
obligation by taking into account the universe of relevant individual similar decisions ("like"
decisions) and examining if pipeline transport services and service s uppliers of any other WTO
Members have indeed received more favourable treatment than that accorded to Russian
services and services suppliers.

It is entirely inappropriate and inadequate to "pick and choose" two individual decisions from a
universe of re levant similar decisions and base a discrimination claim in WTO law on this
comparison. (European Union's response to Panel question No. 47, paras. 125-126).
We recognize and echo the concerns raised by the European Union regarding the approach of "pick[ing]
and choos[ing]" individual decisions for purposes of advancing discrimination claims under the MFN or national
treatment obligations in the GATS or the GATT 1994. More particularly, we agree with the European Union that
this approach may not in all circumstances "allow an unbiased assessment". (Ibid. para. 127). At the same
time, we note that the European Union does not pursue this issue further in its subsequent submissions. We
further note that the European Union has only pointed to additional infrastructure exemption decisions
concerning LNG facilities and LNG storage, and has not pointed to any infrastructure exemption decisions
regarding pipelines in addition to those referred to, and relied on, by Russia in its argumentation.
(Ibid. paras. 127-128). Such additional infrastructure exemption decisions concerning LNG facilities and LNG
storage appear to concern only the third aspect of the alleged "inconsistent" or "discriminatory" manner in
which the European Union applied or implemented Article 36 of the Directive, namely that the Commission and
the relevant NRAs allegedly applied different requirements and imposed different conditions in respect of two
infrastructure exemption decisions involving Russian pipeline transport service suppliers and imported Russian
natural gas, on the one hand, and infrastructure exemption decisions concerning LNG facilities, on the other
hand. In order to address the European Union's concerns and to ensure "an unbiased assessment", our
assessment of this aspect takes into account the existence of additional infrastructure exemption decisions
concerning LNG facilities and LNG storage.
1530 We note that similar approaches have been taken in previous disputes. (See, e.g. Appellate Body
Reports, Argentina – Import Measures, para. 5.108; and Panel Report, Russia – Tariff Treatment, paras. 7.283-
7.294).

7.916. We wish to emphasize that th e assessment of whether Russia has demonstrated the
existence of the challenged measure does not concern the issue of whether the application or
implementation of Article 36 of the Directive is WTO inconsistent or discriminatory in a manner
that would violate Articles II:1 of the GATS or Article I:1 of the GATT 1994. Rather, we are
examining solely whet her Russia has demonstrated the existence of the challenged measure,
which Russia itself characterizes as the alleged "inconsistent"1531 or "discriminatory"1532 "manner in
which the EU applied or implemented"1533 Article 36 of the Directive.1534
7.917. Since Russia has confirmed that the challenged measure is the same for Russia's claims
under Article II:1 of the GATS and Article I:1 of the GATT 1994 1535, we will conduct a single
assessment of whether Russia has demonstrated the existence of the measure challenged under
both of these provisions, the alleged "inconsistent" or "discriminatory" manner in which the
European Union implemented or applied Article 36 of the Directive.
7.918. Should we find that this measure exists, we will examine Russia's claims under Article II:1
of the GAT S and Article I:1 of the GATT 1994 separately, following the approach set out at the
outset of our Report. More particularly, should we find that the European Union applied or
implemented Article 36 of the Directive in an "inconsistent" or "discriminatory" manner, our
assessment of Russia's claim under Article II:1 of the GATS will focus on how the "inconsistent" or
"discriminatory" implementation or application of Article 36 of the Directive affects the supply of
pipeline transport services and service suppliers, whereas our assessment of Russia's claims under
Article I:1 of the GATT 1994 will focus on how it affects trade in natural gas.
7.8.3.2 Whether the European Union applied or implemented Article 36 of the Directive
in an "inconsistent" or "discriminatory" manner
7.919. As already indicated above, Russia focuses on three different aspects, when arguing that
the European Union applied or implemented Article 36 of the Directive in an "inconsistent" or
"discriminatory" manner, namely (a) that the Commission and the re levant NRAs interpreted
certain requirements for being eligible to receive an infrastructure exemption differently in respect
of one infrastructure exemption decision involving a Russian pipeline transport service supplier and
imported Russian natural gas, on the one hand, and two infrastructure exemption decisions
involving pipeline transport service suppliers and imported natural gas from other non -EU
countries, on the other hand 1536; (b) that the Commission and the relevant NRAs interpreted
certain criteria differently and imposed different conditions as regards one infrastructure
exemption granted in respect of a Russian pipeline transport service supplier and imported Russian
natural gas, on the one hand, and a number of infrastructure exemptions granted i n respect of
pipeline transport service suppliers and imported natural gas from other non -EU countries, on the
other hand1537; and (c) that the Commission and the relevant NRAs applied or implemented Article
36 differently in respect of two infrastructure exe mption decisions involving Russian pipeline
transport service suppliers and imported Russian natural gas, on the one hand, and infrastructure
exemption decisions concerning LNG facilities, on the other hand.1538

1531 Russia's responses to Panel question No. 5, para. 47, and No. 47(a), para. 224.
1532 Russia's first written submission, paras. 730-731.
1533 Russia's responses to Panel question No. 5, paras. 47-49, and No. 47(a), paras. 224-225.
1534 Russia's response to Panel question No. 217(a), para. 283.
1535 Russia's response to Panel question No. 217(b), para. 284.
1536 Russia's first written submission, paras. 680-701; and second written submission, paras. 412-417
(Russia's first claim under Article I:1 of the GATT 1994, comparing the NEL infrastructure exemption decision
with the Gazelle and TAP infrastructure exemption decisions); and first written submission, paras. 729-731;
and second written submission, paras. 426-431 (Russia's claim under Article II:1 of the GATS, comparing the
NEL and OPAL infrastructure exemption decisions with the Gazelle, TAP, Nabucco, Dragon and South Hook
infrastructure exemption decisions).
1537 Russia's first written submission, paras. 702-715; and second written submission, paras. 418-423
(Russia's second claim under Article I:1 of the GATT 1994, comparing the OPAL infrastructure exemption
decision with the Gazelle, TAP, Nabucco and Poseidon infrastructure exemption decisions); and first written
submission, paras. 729-731; and second written submission, paras. 426-431 (Russia's claim under Article II:1
of the GATS, comparing the NEL and OPAL infrastructure exemption decisions with the Gazelle, TAP, Nabucco,
Dragon and South Hook infrastructure exemption decisions).
1538 Russia's first written submission, paras. 716-720; and second written submission, paras. 424-425
(Russia's third claim under Article I:1 of the GATT 1994, comparing the NEL and OPAL infrastructure exemption
decisions with the Dragon and South Hook infrastructure exemptions decisions); and first written submission,

7.920. For its three claims under Article I:1 of the GATT 1994, Russia focuses on each of the three
aspects described in the immediately preceding paragraph , respectively1539, whereas it focuses on
all three aspects for its single claim under Article II:1 of the GATS.1540
7.921. As mentioned above, Russia has confirmed t hat it is challenging all three aspects as a
single overarching measure and that the challenged measure is the same for Russia's claims under
Article II:1 of the GATS and Article I:1 of the GATT 1994. 1541 For the purposes of examining the
existence of the overarching measure, we address each of these three aspects, in turn, below.
7.922. Before turning to our assessment of these aspects, however, we wish to emphasize that
this assessment will be tailored to Russia's challenge and the nature of the challenged measure.
More particularly, we will examine and compare the various infrastructure exemption decisions
cited by Russia with a view to determining whether the Commission and the relevant NRAs
interpreted requirements differently or imposed different conditions in a way that supports Russia's
contention that Article 36 was applied or implemented in an "inconsistent" or "discriminatory"
manner.
7.923. We will not consider, outside the confines of this comparative assessment, the issue of how
to interpret the various eligibility requirements or how to apply the various criteria and conditions
under Article 36 of the Directive, nor will we review the consistency of the individual infrastructure
exemption decisions, pointed to by Russia, with EU law, generally, or Article 36 of the Directive,
more specifically. As we have already observed1542, we do not believe that such an approach would
comport with the functions of panels under Article 11 of the DSU. More particularly, while the
Appellate Body has clarified that panels may be required to examine municipal law "in assessing its
consistency with WTO law" 1543, we agree with prior panels that the task of WTO panels is not to
determine whether a Member has acted consistently with its own domestic legislation. Nor do we
believe that Russia's challenge or the nature of the challenged measure warrants such an
approach.
(a) Interpretation of certain requirements for eligible types of infrastructure
7.924. We begin with the first aspect, the alleged "inconsistent" or "discriminatory" interpretation
of certain requirements for being eligible to receive an infrastructure exemption under Article 36 of
the Directive. In this regard, we recall that this provision allows infrastructure exemptions to be
granted only for certain types of infrastructure. More particularly, to be eligible for an
infrastructure exemption, the infrastructure must be considered "[m]ajor new gas infrastructure,
i.e. interconnectors, LNG and storage facilities" within the meaning of Article 36(1) of the Directive
or "significant increases of capacity in existing infrastructure and [] modifications of such
infrastructure which enable the development of new sources of gas supply" within the meaning of
Article 36(2) of the Directive.
7.925. In its argumentation on this , Russia contrasts the infrastructure exemption decision
concerning the NEL pipeline with those concerning the Gazelle and TAP pipelines.1544 In the former,

paras. 729-731; and second written submission, paras. 426-431 (Russia's claim under Article II:1 of the GATS,
comparing the NEL and OPAL infrastructure exemption decisions with the Gazelle, TAP, Nabucco, Dragon and
South Hook infrastructure exemption decisions).
1539 Russia's first written submission, paras. 680-701; and second written submission, paras. 412-417
(Russia's first claim under Article I:1 of the GATT 1994); Russia's first written submission, paras. 702-715; and
second written submission, paras. 418-423 (Russia's second claim under Article I:1 of the GATT 1994); and
Russia's first written submission, paras. 716-720; and second written submission, paras. 424-425 (Russia's
third claim under Article I:1 of the GATT 1994).
1540 Russia's first written submission, paras. 721-731; and second written submission, paras. 426-431.
We note that Russia, despite focusing on all three aspects for its single claim under Article II:1 of the GATS,
does not refer to one of the individual infrastructure exemption decisions relied on by Russia for its second
claim under Article I:1 of the GATT 1994 concerning the second aspect listed in paragraph 7.919, namely the
Poseidon infrastructure exemption decision. We do not, however, believe that this alters the nature of the
underlying measure challenged by Russia nor our assessment of whether this measure exists.
1541 Russia's response to Panel question No. 217(b), para. 284.
1542 See, above para. 7.904.
1543 Appellate Body Report, US – Hot-Rolled Steel, para. 200. See also Appellate Body Reports, US –
1544 Russia's first written submission, paras. 680-701 and 729-731; and second written submission,
paras. 412-417 and 427.

the NEL pipeline was not considered eligible for, and hence denied, an infrastructure exemption by
virtue of not being considered an interconnector within the meaning of Article 36(1) of the
Directive.1545 In the two latter, the Gazelle and TAP pipelines were considered eligibl e for, and
eventually granted, infrastructure exemptions by virtue of being considered major new
interconnectors within the meaning of Article 36(1) of the Directive.1546
7.926. Russia's main point of criticism pertains to the Commission's and the relevant NRAs'
interpretation of the term "interconnectors", which is defined in the Directive as "a transmission
line which crosses or spans a border between Member States for the sole purpose of connecting
the national transmission systems of those Member States". 1547 Based on this definition, the
Commission and the relevant NRAs have considered the definition of an interconnector as involving
two cumulative requirements: (i) that the transmission line "crosses or spans a border between
Member States"; and (ii) that the trans mission line has the "sole purpose of connecting the
national transmission systems of those Member States".1548
7.927. Russia argues that the Commission implicitly accepted the German NRA 's "narrow"
interpretation of the definition of an interconnector in relation to the first of these requirements, by
not reviewing the conclusion that the NEL pipeline does not "cross[] or span[] a border between
Member States", based on the fact that this pipeline "begins and ends in Germany". 1549 In Russia's
view, the Commission "expa nded" this definition when reviewing the Czech NRA's decision to
exempt the Gazelle pipeline by considering that this pipeline "cross es or spans a border between
Member States" as it connects to the German transmission system, despite the fact that this
pipeline connects to the German transmission system by using 20 km of existing pipeline "located
entirely in the Czech Republic". 1550 Similarly, Russia argues that the Commission "continued to
expand" the definition of an interconnector by finding that the TAP pipeline "crosses or spans a
border between Member States" regardless of the fact that a non-EU member State was crossed in
between the two EU member States.1551
7.928. We note that the German NRA's denial of the NEL infrastructure exemption appears to be
based on the fact that this pipeline is located only within Germany and does not directly connect to
the transmission system of any other EU member State. More particularly, in its decision, the
German NRA stated that:
[I]t is necessary for the pipeline itself to cr oss or span a national border in order to
create the connection between transmission systems of the Member States. This is
already missing in the case of the NEL, which begins at the Greifswald landfall station
(NEL east) and ends at the Achim valve statio n (NEL west), i.e. on German territory
over 100 km from the German-Dutch border.1552
7.929. As acknowledged by Russia, the NEL pipeline does not itself cross or span a border
between EU member States. Instead, Russia points to the fact that the NEL pipeline "connects with
the existing German transmission system, which then connects to the transmission system s of the
Netherlands and Belgium."1553
7.930. The Commission's conclusion that the Gazelle pipeline "crosses or spans a border between
Member States", on the other hand, appears to be based on the fact that the Gazelle pipeline itself
"crosses a border between Member States, namely the Czech/German border at the Waidhaus

1545 See BNetzA decision on the exemption of the OPAL and NEL pipelines, (Exhibit RUS-61), p. 77.
1546 See Commission decision on the exemption of the Gazelle pipeline II, (Exhibit RUS-87), pp. 2 and
12-13; and Commission decision on the exemption of the TAP pipeline, (Exhibit RUS-10), pp. 2, 8-9 and 55-62.
1547 Directive 2009/73/EC, (Exhibit EU-5), Article 2(17).
1548 See, e.g. BNetzA decision on the exemption of the OPAL and NEL pipelines, (Exhibit RUS-61), p. 20.
1549 Russia's first written submission, paras. 681-682, 684, 723 and 729 (referring to BNetzA decision on
the exemption of the OPAL and NEL pipelines, (Exhibit RUS-61), pp. 20-22).
1550 Russia's first written submission, paras. 687-688 and 723 (referring to Commission decision on the
exemption of the Gazelle pipeline I, (Exhibit RUS-81), paras. 19-21; and Commission decision on the
exemption of the Gazelle pipeline II, (Exhibit RUS-87)).
1551 Russia's first written submission, paras. 694-697 and 723 (referring to Commission decision on the
exemption of the TAP pipeline, (Exhibit RUS-10), paras. 55-56).
1552 BNetzA decision on the exemption of the OPAL and NEL pipelines, (Exhibit RUS-61), p. 21.
1553 Russia's first written submission, para. 680. See also Russia's first written submission, para. 692.

border station where it is connected to the German transmission system" .1554 Russia does not
appear to suggest otherwise, but instead points to the fact that "'Gazelle uses 20 km of an existing
pipeline' located entirely in the Czech Republic" and criticizes the Commission for addressing this
only in the context of considering whether the Gazelle pipeline is "n ew" and not in the context of
considering whether it is an interconnector. 1555 As pointed to by Russia itself, however, these 20
km of an existing pipeline are "located entirely in the Czech Republic". For this reason, we do not
see the usage of these existin g 20 km of pipeline as altering the fact that the Gazelle pipeline,
unlike the NEL pipeline, crosses or spans a border between EU member States. In light of this
factual difference, we therefore do not agree with Russia's position that the Commission's
conclusion that the Gazelle pipeline fulfilled the first requirement for being an interconnector,
whereas the NEL pipeline did not, can be viewed as demonstrating that the Commission applied or
implemented Article 36 in an "inconsistent" or "discriminatory" manner.
7.931. Similarly, we note that the Commission's conclusion that the TAP pipeline "crosses or
spans a border between Member States" appears to be based, as pointed out by the European
Union1556, on the fact that this pipeline is located within the territories of both Italy and Greece.1557
Russia argues that the Commission "continued to expand its interpretation of the definition of
'interconnector'" and "acted contrary to BNetzA's decision regarding NEL" by concluding that "the
concept of 'interconnectors' must be understood as comprising, inter alia, gas pipelines which span
the borders of (at least) two EU Member States, regardless as to whether the territory of an non -
EU Member State is crossed in between."1558
7.932. We recall that our examination is not directed at det ermining how to interpret the various
requirements under Article 36 of the Directive consistently with EU law, including whether the
requirement to "cross[] or span[] a border between Member States" should be interpreted to cover
pipelines that span the bo rders of two EU member States by crossing a non -EU member State in
between. Instead, we focus on Russia's assertion that the Commission and the relevant NRAs
interpreted this requirement in an "inconsistent" or "discriminatory" manner in the infrastructure
exemption decisions pointed to by Russia. In light of the factual differences between the NEL and
TAP pipelines, and in particular the fact that the NEL pipeline is located solely within a single EU
member State, Germany, whereas the TAP pipeline is located within and connects two EU member
States, Italy and Greece, we do not agree with Russia's position that the Commission's conclusion
that the latter fulfilled the first requirement for being an interconnector, whereas the for mer did
not, can be viewed as demonstrating that the Commission applied or implemented Article 36 in an
"inconsistent" or "discriminatory" manner.
7.933. Russia also asserts certain arguments pertaining to the second requirement under the
definition of an interconnector, namely that such have the "sole purpose of connecting the national
transmission systems of [] Member States" and to the requirement under Article 36(1) of the
Directive that the infrastructure be "new". More particularly, Russia faults the Commis sion for
finding that the Gazelle pipeline was "new" infrastructure despite the fact that it uses 20 km of an
existing pipeline1559, and for finding that its sole purpose was to connect the national transmission
systems of Germany and the Czech Republic witho ut considering its earlier finding that "the
'purpose' of Gazelle is to continue OPAL 'as part of the wider Nord Stream project which aims at
transporting Russian gas to Europe via the Baltic Sea.'" 1560 Similarly, Russia faults the Commission
for "brush[ing] aside" the requirement regarding the sole purpose of the infrastructure being to

1554 Commission decision on the exemption of the Gazelle pipeline I, (Exhibit RUS-81), p. 6.
1555 Russia's first written submission, para. 688 (quoting Commission decision on the exemption of the
Gazelle pipeline I, (Exhibit RUS-81), p. 6).
1556 European Union's first written submission, para. 730. See also European Union's second written
submission, para. 312.
1557 Commission decision on the exemption of the TAP pipeline, (Exhibit RUS-10), para. 14.
1558 Russia's first written submission, paras. 694-696 (quoting Commission decision on the exemption of
the TAP pipeline, (Exhibit RUS-10), para. 55).
1559 Russia's first written submission, paras. 690-691 and 723 (quoting Commission decision on the
exemption of the Gazelle pipeline I, (Exhibit RUS-81), paras. 24-25).
1560 Russia's first written submission, paras. 689 and 723 (quoting Commission decision on the
exemption of the Gazelle pipeline I, (Exhibit RUS-81), para. 19).

connect the national transmission systems of EU member States in the TAP infrastructure
exemption decision.1561
7.934. As explained above, our examination pertains to the issue of whet her Russia has
demonstrated that the European Union applied or implemented Article 36 in an "inconsistent" or
"discriminatory" manner. In our view, Russia's arguments concerning the requirement s that a
pipeline have "the sole purpose of connecting the nati onal transmission systems of [] Member
States" and be "new" are inapposite in this regard. More particularly, since the NEL pipeline was
found not to comply with the requirement to "cross[] or span[] a border between Member States",
the requirement that th e NEL pipeline have the "sole purpose of connecting the national
transmission systems of [] Member States" and the requirement that the NEL pipeline be "new"
infrastructure were never interpreted or applied in the NEL infrastructure exemption decision. We
therefore have no point of comparison for determining whether the Commission and the relevant
NRAs interpreted or applied th ese requirements differently in the NEL infrastructure exemption
decision, on the one hand, and the Gazelle and TAP infrastructure e xemption decisions, on the
other hand, in a way that would support Russia's contention that the European Union applied or
implemented Article 36 of the Directive in an "inconsistent" or "discriminatory" manner.
7.935. Russia appears to criticize the German NRA and the Commission for not examining the
purpose of the NEL pipeline, arguing that "[h]ad either BNetzA or the Commission conducted this
analysis, as was required, they would likely also have reached the same affirmative finding
regarding NEL as they did for Gazelle."1562 More generally, Russia appears to fault the German NRA
and the Commission for not examining "any of the additional factors in relation to NEL", including
the requirement that this pipeline have "the sole purpose of connecting the national tran smission
systems of [] Member States" and the requirement to be "new" under Article 36(1) of the
Directive.1563 It is, however, undisputed that the requirements to "cross[] or span[] a border
between Member States", to have "the sole purpose of connecting the national transmission
systems of those Member States", and to be "new", are cumulative. 1564 For this reason, it is
unclear to us why Russia suggests that the German NRA and the Commission would be required to
consider the latter two requirements in respect o f the NEL pipeline, having already found that this
pipeline did not fulfil the first.
7.936. In other words, the Commission and the relevant NRAs decided to consider the latter two
requirements in the Gazelle and TAP infrastructure exemption decisions, having fo und that these
pipelines met the first requirement. The Commission and the German NRA, on the other hand, did
not consider those latter two requirements in the NEL inf rastructure exemption decision, having
found that this pipeline did not meet the first re quirement to begin with. In our view, this does not
support Russia's contention that the European Union applied or implemented Article 36 in an
"inconsistent" or "discriminatory" manner. It simply stems from the fact that the three
requirements, as acknowledged by Russia1565, are cumulative.
7.937. Russia also submits that the German NRA and the Commission failed to consider whether
the NEL pipeline was a "significant increase[] of capacity in existing infrastructure" or a
"modification[] of such infrastructure which enable[s] the development of new sources of gas
supply" under Article 36(2) of the Directive as an "alternative exemption basis", having found that
the NEL pipeline was not "[m]ajor new gas infrastructure, i.e. interconnectors, LNG and storage
facilities" within the meaning of Article 36(1).1566
7.938. When examining the German NRA 's decision concerning the NEL pipeline, it appears that
the applicants themselves requested an exemption for the NEL pipeline as being "[m]ajor new gas
infrastructure" under the provision of the German national implementing law equivalent to
Article 36(1) of the Directive, rather than requesting an exemption for the NEL pipeline as being a
"significant increase[] of capacity in existing infrastructure" or a "modification[] of such
infrastructure which enable[s] the development of new sources of gas supply" und er the provision

1561 Russia's first written submission, paras. 697 and 723 (referring to Commission decision on the
exemption of the TAP pipeline, (Exhibit RUS-10), para. 56).
1562 Russia's first written submission, para. 689.
1563 Russia's first written submission, para. 692.
1564 Russia's first written submission, para. 692.
1565 Russia's first written submission, para. 692.
1566 Russia's first written submission, paras. 683-684.

equivalent to Article 36(2) of the Directive.1567 This was unlike the "capacity expansions in existing
transport systems of Wingas Transport GmbH & Co. Kg", which were "not the subject of the
application".1568 For this reason, we have difficulti es understanding Russia's criticism of the
German NRA and the Commission for not examining this "alternative exemption basis".
7.939. In light of the considerations above , we do not believe that Russia has demonstrated that
the Commission and the relevant NRAs i nterpreted or applied the eligibility requirements under
Article 36 of the Directive for granting an infrastructure exemption in a way that demonstrates its
contention that the European Union applied or implemented Article 36 in an "inconsistent" or
"discriminatory" manner.
(b) Interpretation of criteria and imposition of conditions
7.940. We turn to the second aspect, that is Russia's arguments that the Commission and the
relevant NRAs interpreted the criteria set out in Article 36(1) of the Directive differentl y and
imposed different conditions as regards one infrastructure exemption granted in respect of a
Russian pipeline transport service supplier and imported Russian natural gas , on the one hand,
and a number of infrastructure exemptions granted in respect o f pipeline transport service
suppliers and imported natural gas from other non -EU countries, on the other hand . Russia offers
a detailed comparison of the interpretation by the relevant NRAs and the Commission of certain
criteria in the infrastructure exem ption provision relating to the competition analysis, as well as of
the conditions imposed in the OPAL infrastructure exemption decision , with the corresponding
elements in the Gazelle, TAP, Nabucco and Poseidon infrastructure exemption decisions. We first
examine Russia's arguments on the interpretation of criteria, and then turn to Russia's arguments
on the conditions imposed in the various decisions cited by Russia. In examining Russia's
arguments, we will look at whether Russia has demonstrated the existence of the challenged
measure, that is, that the European Union applied or implemented Article 36 in an "inconsistent"
or "discriminatory" manner, as a basis for its claims.
Interpretation of criteria
7.941. Article 36( 1) of the Directive sets out five cumulative criteria for obtaining an
infrastructure exemption.1569 Russia focuses its argumentation on only two of these, namely that
(a) the investment must enhance competition in gas supply and enhance security of supply; a nd
(e) the exemption must not be detrimental to competition or the effective functioning of the
internal market in natural gas, or the efficient functioning of the regulated system to which the
infrastructure is connected.1570
7.942. We recall and underline that ou r examination is not directed at determining how to
interpret the criteria in Article 36 of the Directive consistently with EU law, including the specific
parameters of any assessment taking place under the competition -related paragraphs thereof with
respect to relevant markets and competitive impacts of infrastructure in respect of which an
exemption has been requested. Rather, we focus on Russia's assertion that the Commission and
the relevant NRAs interpreted these criteria in an "inconsistent" or "discriminatory" manner in the
infrastructure exemption decisions pointed to by Russia.
7.943. We observe that the Commission's OPAL decision includes an assessment of competitive
impacts based on nationally defined geographic markets, not only in the Czech Republic 1571, but

1567 BNetzA decision on the exemption of the OPAL and NEL pipelines, (Exhibit RUS-61), p. 5.
1568 BNetzA decision on the exemption of the OPAL and NEL pipelines, (Exhibit RUS-61), p. 5.
1569 See, above para. 2.37.
1570 Directive 2009/73/EC, (Exhibit EU-5), Articles 36(1)(a) and 36(1)(e).
1571 We note that the Commission disagreed with BNetzA's assessment of competitive impact in the
Czech market. See Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), paras. 41-
44, where the Commission observes that the BNetzA concludes that as a whole the OPAL project will contribute
to an enhancement of competition in gas supply, noting that "[t]he basis for the evaluation by the BNetzA is an
analysis of the anticipated effects of the OPAL project on competition on the gas sales markets in the Czech
Republic and in Germany, and on the market (which is demarcated at least Europe-wide) for the supply of
supra-regional wholesale companies with gas ('producer market')." (footnotes and emphasis omitted) The
Commission also observes that "[t]he BNetzA comes to the conclusion that the OPAL at least 'as a whole' (i.e.
in consideration of the imposed ancillary provisions) contributes to the enhancement of competition in gas
supply. It bases this assumption on the fact that the OPAL or the ancillary provisions linked to the exemption

also in Germany (regarding which the Commission accepts the analysis of BNetzA, the German
NRA).1572 In reaching its decision that OPAL posed risks for competition, the Commission
considered that
[I]t is probable that no volumes relevant for competition from OPAL will remain in the
Czech Republic. However, the Commission believes that it is at least possible that a
certain amount of the gas transported via the OPAL will remain there. This kind of
scenario, in which Gazprom would deliver even more gas to t he Czech market than it
currently does, would strengthen Gazprom' s dominant position on the producer
market and therefore lead to a deterioration in competition. If the gas were to be
supplied to RWE Transgas, this would also strengthen the market -dominating position
of RWE Transgas on the downstream wholesale market.1573
7.944. Turning to the Commission's Gazelle decision, Russia asserts that the Commission
examined both the "upstream producer market" and the "wholesale and retail markets" and
implicitly identified the relevant geographic market as being EU -wide and that, having examined
not only the Czech market but also the markets of "Germany and other countries", the
Commission found that Gazprom has a dominant position on the Czech upstream producer market.
Russia further submits that the Commission appeared to base its decision entirely on the
conclusion that Gazprom supplies the "majority of the Czech gas consumption." 1574 Russia notes
that the Commission nevertheless determined that "the construction of Gazelle w ill not strengthen
Gazprom's market position on this market" and concluded that "Gazelle will therefore positively
affect the competitive situation on the Czech gas markets, without strengthening the position of
dominant players on these markets."1575 We understand that the allegedly inappropriate "EU-wide"

will lead to enhanced competitive conditions on the Czech gas sales market." The Commission further observes
that "[i]n relation to the German gas sales markets and the producer market, the BNetzA comes to the
conclusion that OPAL’s effects on these markets are 'neutral'. Consequently the BNetzA does not assume that
the OPAL pipeline will have positive effects on competition in gas supply in Germany." (footnotes and emphasis
omitted). The Commission then states its own opinion that "the BNetzA statements in relation to the alleged
enhancement of competition in the Czech gas sales market are not convincing. In actual fact, the Commission
is concerned that the OPAL may even have negative effects on competition in the Czech Republic." The
Commission then proceeds to analyse effects on competition in the Czech Republic, including lack of positive
effects on competition and possible negative effects on competition (in paras. 45-74), concluding (in paras. 78-
79) that:
It must be determined that, according to the information available to the Commission, it should
not be expected that there will be an enhancement of competition on the gas markets in
question. The Commission also does not have any reliable indications of positive competitive
effects from the OPAL in other Member States. The BNetzA also did not present any such positive
effects. In addition, there are risks for competition from the OPAL in the Czech producer market.
Due to the lack of enhancement and the possible deterioration of competition on the relevant
markets, the requirements for granting an exemption as per Article 22(1) a) and e) of Directive
2003/54/EC are not present. (emphasis original)
1572 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), paras. 75-77
(contained in a section entitled "3. Effects on competition in Germany"):

The Commission shares the assessment of the BNetzA that the OPAL project will not enhance
competition on the German gas markets.

The Commission also agrees with the BNetzA finding that the OPAL project will not lead to
negative effects on competition in the German gas markets.

As the present exemption relates exclusively to the cross-border transport capacities of the OPAL
to the Czech Republic, the Commission believes that it is primarily the Czech gas market which is
relevant for the analysis of competition.

1573 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 71. The
Commission further surmised that "[t]he additional access option created for Gazprom to Nord Stream gas
could also weaken potential competitors on the producer market" (para. 72).
1574 Russia's first written submission, para. 576 (citing Commission decision on the exemption of the
Gazelle pipeline I, (Exhibit RUS-81), para. 31).
1575 Russia's first written submission, para. 576 (citing Commission decision on the exemption of the
Gazelle pipeline I, (Exhibit RUS-81), paras. 31-33 and 35). In its Gazelle decision, the Commission observed
that Gazelle would start at the Czech/German border point Brandov, cross the northwest of the Czech Republic
and end at the Czech/German border at Waidhaus, noting that gas quantities taken up by Gazelle would "be
directly shipped to Waidhaus and can only be exited in Waidhaus". (para. 9) The Commission emphasized that
"[t]he gas volumes on Gazelle will be transported to Germany and other markets … and are not intended to

approach that Russia points to appears to be the Commission's consideration of nationally defined
geographic markets other than the Czech Republic (the German market and the national markets
of other countr ies). The Commission's consideration of such other national markets in its Gazelle
analysis appears to be based on the particular situation and route of the Gazelle pipeline, which it
considers has the effect of de-congesting the Czech transmission system.1576
7.945. We further understand Russia to argue, in essence, that the Commission should have
considered OPAL and Gazelle as a single pipeline and that, hence, any differences in the facts
taken into consideration in the two decisions constitute evidence of discrim inatory treatment.1577
We observe that the possibility existed that gas transported through OPAL could remain in the
Czech market, although, as noted above, the Commission opined that it was probable that no
volumes relevant for competition from OPAL would re main there. As Russia itself
acknowledges1578, the Commission recognized the interlinkages between OPAL and Gazelle,
observing inter alia that "[w]hile the three projects Nord Stream, OPAL and Gazelle are sponsored
by different companies, they depend on one another, as both OPAL and Gazelle transport further
the Russian gas delivered through Nord Stream."1579 The Commission thus took account of existing
plans to link OPAL to Gazelle, but the Gazelle pipeline was not yet constructed at the time of the
2009 OPAL decision (its construction was completed in 2013). The applications for exemptions for
the two pipelines were made separately.1580 Since Gazelle's completion, we understand that Russia
and the European Union have discussed, on several occasions, the modification of the OPAL
conditions.1581 However, these conditions remain in place.1582
7.946. We observe that, in its TAP exemption decision, the Commission conducted analyses of the
relevant geographic market and of the impact on competition in the Greek market 1583 and on
competition in the Italian market separately. 1584 The Commission had similarly distinguished both
markets as separate geographic markets in other parts of its decision. 1585 For Russia, this
"contradicted its approach to OPAL and Gazelle as well as the European Union's stated competition
policy" and "[t]he Commission's approach to TAP suggests that the Greek and Italian gas markets

serve the Czech market, except for emergency situations. From a competition point of view, the Gazelle
pipeline is thus rather a substitute for the 'Brotherhood' pipeline, which is currently used for transports to the
German border, than an additional source for gas imports to Czech markets" (para. 32). (footnotes and
emphasis omitted).
1576 Commission decision on the exemption of the Gazelle pipeline I, (Exhibit RUS-81), para. 29.
1577 We note that, in its Gazelle decision, the Commission stated that exemptions "may notably have a
detrimental effect on competition if a similar infrastructure project is planned in parallel to the project for which
an exemption is requested and the exemption for this project risks jeopardizing the commercial viability of the
other project" and concluded that "[s]ince no alternative projects to Gazelle exist in the present case, the
exemption for the Gazelle project is unlikely to be detrimental to competition." (Commission decision on the
exemption of the Gazelle pipeline I, (Exhibit RUS-81), para. 63). (footnotes omitted)
1578 Russia's first written submission, para. 574.
1579 Commission decision on the exemption of the Gazelle pipeline I, (Exhibit RUS-81), para. 10.
1580 Russia's first written submission, para. 574, refers to the "18 months separating the Commission's
two exemption decisions".
1581 For example, Russia notes, Gazprom formally requested the German NRA to reconsider its second
OPAL decision adopting the Commission's decision and the conditions. See Russia's first written submission,
paras. 583 and 706 (citing [***], (Exhibit RUS-91) (BCI); and [***], (Exhibit RUS-92) (BCI)). Russia submits
that a settlement was agreed upon with the German NRA but was not finalized as a binding agreement because
the Commission did not give its approval. See Russia's first written submission, para. 706 (citing [***],
(Exhibit RUS-94) (BCI)).
1582 See, above fn 1430.
1583 Commission decision on the exemption of the TAP pipeline, (Exhibit RUS-10), paras. 99-123. It
reads:
Currently, competition in the Greek gas markets can only be characterised as n ascent. Greece
has no domestic gas production. All gas consumed in Greece is imported. The incumbent gas
supplier in Greece's wholesale and retail gas markets is DEPA.

At least three market levels are currently dominated by the incumbent player (DEPA) in Greece:
 Gas imports (including both pipeline and LNG imports);
 Wholesale supply;
 Retail supply (including supplies to individual households and industries).
(Ibid. paras. 99-100). (footnote omitted)

1584 Commission decision on the exemption of the TAP pipeline, (Exhibit RUS-10), paras. 124-139.
1585 Commission decision on the exemption of the TAP pipeline, (Exhibit RUS-10), see e.g. paras. 66-77
and 84-93.

operate independentl y, while its other findings suggest the opposite ".1586 The basis for Russia's
argument about the inappropriateness of the Commission's findings that the Greek and Italian
markets operated independently is unclear to us, given that, before the construction of TAP, there
was no direct interconnection between the gas systems of these countries . This differs from the
factual situation surrounding the German and Czech markets in the OPAL decision.
7.947. Russia argues, in addition, that the Commission excluded Albania en tirely from its
competition assessment, even though it is directly crossed by TAP. 1587 In this connection, we
acknowledge the European Union's arguments1588 that the Commission did not review the Albanian
NRA's conclusions in detail because, firstly, Albania is not a member of the European Union and
hence the Commission did not have the requisite competence to do so and, secondly, before
completion and entry into operation of the TAP pipeline, Albania did not have a gas system or
market, and thus the impact of th e infrastructure investment and of its exemption on competition
could not be assessed in the same manner as when markets already exist.1589
7.948. We see that the Commission's approach to Nabucco was based on the effects of the
exemption in nationally defined relevant geographic markets, similar to its approach to OPAL, with
the difference that the Nabucco pipeline crosses four countries while OPAL crosses two (the OPAL
pipeline crosses Germany and ends in the Czech Republic whereas the Nabucco pipeline was
planned to stretch from Turkey via Romania, Bulgaria and Hungary to Austria.) The Commission
analysed the impact on competition in each affected market and concluded that the requested
exemption did not enhance competition, and further conditions were therefore con templated
(summarized below at para graph 7.954).1590 As for the particular markets analy sed, we
acknowledge the European Union's view that the product markets to be analysed in a decision
depend on the concrete market situation for a given project, offering the example that "[where]
local distributors and industrial consumers are exclusively supplied by one incumbent, but subject
to different conditions, this can requ ire a separate analysis, as was the case of Nabucco in
Bulgaria".1591 While the Commission does appear to have conducted a relatively more detailed

1586 Russia's first written submission, para. 608.
1587 Russia's first written submission, para. 609. Russia submits that Albania joined Greece and Italy in
the Joint Opinion but that the Commission noted only that the Secretariat of the Energy Community had found
that TAP enhances competition in Albania, on the basis of a relevant geographical market delineated on the
basis of national boundaries (citing Final Joint Opinion of the Energy Regulators on TAP AG's Exemption
Application, (Exhibit RUS-97), para. 31).
1588 European Union's response to Panel question No. 226, para. 298.
1589 We recall that Russia notes that the list of TAP's shareholders has changed significantly since the
Commission's TAP decision was issued and that two of the current shareholders in TAP - SOCAR and Snam -
acquired other TSOs in the same markets after the exemption was issued, thus potentially modifying the basis
for the Commission's competition analysis. In this connection, Russia states that "[a]t the time of its decision in
May 2013, the Commission identified TAP AG's shareholders as Statoil ASA (Norway) (42.5%), Axpo AG
(Switzerland) (42.5%) and E.On Ruhrgas AG (Germany) (15%). The shareholders later changed dramatically
and now consist of: BP (UK) (20%), AzTAP (subsidiary of SOCAR) (20%), Snam S.p.A. (Italy) (20%), Fluxys
(Belgium) (19%), Enagás (Spain) (16%) and Axpo (5%)." (Russia's first written submission, para. 595).
(footnotes omitted) Russia asserts that the Commission should have monitored the exemption decision in order
to verify whether the assumptions underlying the decision prove to be correct, as required by text of the
decision and the Commission's internal guidance. (Russia's first written submission, paras. 610-617 and 703
(citing Commission Explanatory Note on New Infrastructure Exemptions, (Exhibit RUS-27); and Commission
decision on the exemption of the TAP pipeline, (Exhibit RUS-10), p. 61)). See also Russia's comments on
European Union's response to Panel question No. 226, para. 236. The European Union offers reasons for why
the circumstances did not trigger a re-assessment of the decision, including that the alleged ownership
changes did not take place to the extent alleged; the situation of TSO Snam being distinct from that of a VIU
acquiring major shareholdings in transmission systems; the monitoring of exemption decisions falling within
the purview of NRAs and the Commission not being aware of a failure by the relevant NRA to assess the effects
of ownership changes. (European Union's response to Panel question No. 229, paras. 302-303; No. 230, para.
304; and No. 233, para. 305). We do not consider it necessary to address this issue in order to properly
address Russia's claim. In respect of the allegedly material changes in circumstances concerning TAP pointed
to by Russia, we underline the factual and geographic particularities pertaining to each infrastructure
exemption and recall that it is not our task here to conduct or re-conduct the Commission's own competition
analysis, nor to measure the European Union's (or EU member States') compliance with its/their own internal
law and practice.
1590 Commission decision on the exemption of the Austrian section of the Nabucco pipeline, (Exhibit
RUS-83), paras. 31-40; Commission decision on the exemption of the Bulgarian section of the Nabucco
pipeline, (Exhibit RUS-84), paras. 33-43; and Commission decision on the exemption of the Romanian section
of the Nabucco pipeline, (Exhibit RUS-85), paras. 38-52.
1591 European Union's response to Panel question No. 226, para. 300.

analysis of Nabucco's impacts on the upstream wholesale market, the downstream wholesale
market, the market for supply to local distributors and the retail market for industrial consumers,
we acknowledge the European Union's explanation that the more detailed analysis could operate
as a more stringent standard to qualify for an exemption.1592
7.949. We see that the Commissio n's approach in its Poseidon decision was based on the effects
of the exemption in nationally defined relevant geographic markets (Italy and Greece). 1593 It
accepted the assessments of the Italian and Greek NRAs regarding the generally positive effects
on competition, but considered that the positive effects on competition and security of supply were
not fully proportional to the extent of the exemption granted (and hence attached additional
conditions, discussed below at paragraph 7.954).1594
7.950. We have examined the elements of the infrastructure exemption decisions pointed to by
Russia on the basis of the parties' argumentation. We are not persuaded that the Commission took
such divergent approaches to its competition analysis in the OPAL and Gazelle, TAP, Nabucco and
Poseidon infrastructure exemption decisions in a manner that would amount to an "inconsistent" or
"discriminatory" application of the infrastructure exemption measure in Article 36 of the Directive
for the purposes of our analysis of whether the alleged measure exists as a basis for Russia's
claims. We consider that the differences identified by Russia in the competition analysis in the
OPAL and Gazelle, TAP, Na bucco and Poseidon infrastructure exemption decisions stem from the
Commission's assessment of the specific circumstances, distinct geographical situations and
competitive impacts of these pipelines and are not evidence of an "inconsistent" or
"discriminatory" application of Article 36 for the purposes of our assessment of the existence of the
measure as a basis for Russia's claims here.
Imposition of conditions
7.951. With respect to the conditions imposed in connection with the granting of infrastructure
exemptions, Article 36(6) of the Directive states that:
An exemption may cover all or part of the capacity of the new infrastructure, or of the
existing infrastructure with significantly increased capacity.
In deciding to grant an exemption, consideration shall be given, on a case -by-case
basis, to the need to impose conditions regarding the duration of the exemption and
non-discriminatory access to the infrastructure. When deciding on those conditions,
account shall, in particular, be taken of the additional cap acity to be built or the
modification of existing capacity, the time horizon of the project and national
circumstances.1595

1592 European Union's response to Panel question No. 226, para. 299.
1593 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), pp. 10-18 (analysing
effects on the Czech market); and p. 19 (analysing effects on the German market); and Commission decision
on the exemption of the Poseidon pipeline, (Exhibit RUS-86). The Commission refers throughout to separate
competition analyses of the Poseidon pipeline carried out by the Greek and Italian NRAs. See, e.g. p. 5: "[T]he
Greek and Italian authorities consider that the project will not have a detrimental effect on the functioning of
the internal gas market or the efficient functioning of the regulated system to which the infrastructure is
connected."
1594 Commission Decision on the Exemption of the Poseidon pipeline, (Exhibit RUS-86), p. 6.
1595 Directive 2009/73/EC, (Exhibit EU-5), Article 36(6). Article 36(6) includes two further paragraphs:

Before granting an exemption, the regulatory authority shall decide upon the rules and mechanisms for
management and allocation of capacity. The rules shall require that all potential users of the
infrastructure are invited to indicate their interest in contracting capacity before capacity allocation in
the new infrastructure, including for own use, takes place. The regulatory authority shall require
congestion management rules to include the obligation to offer unused capacity on the market, and
shall require users of the infrastructure to be entitled to trade their contracted capacities on the
secondary market. In its assessment of the criteria referred to in points (a), (b) and (e) of paragraph 1,
the regulatory authority shall take into account the results of that capacity allocation procedure.

The exemption decision, including any conditions referred to in the second subparagraph of this
paragraph, shall be duly reasoned and published.

7.952. Russia's submissions compare the conditions imposed on the OPAL pipeline, on the one
hand, with conditions imposed on each of the Gazelle, TAP, Nabucco and Poseidon pipelines, on
the other hand, alleging that the OPAL conditions are more restrictive than t he conditions imposed
in the other exemption decisions.
7.953. Regarding the conditions attached to the respective exemptions, the European Union
submits that the conditions imposed on the OPAL pipeline are not more restrictive than those
imposed on the other pipelines.1596 The European Union's characterization of conditions attached to
exemptions generally is that they "are determined taking account of the size of the relevant
market, the expected evolution of gas demand and of the market shares of competitors" and that
"the level of a capacity cap or gas release requirement is established to ensure that with the
access to the relevant infrastructure (in the case of capacity cap), or to a gas supply (in the case
of gas release program), competing undertakings will b e able to exercise a competitive constraint
on the dominant undertaking."1597 The European Union asserts that the imposition of capacity caps
and gas release requirements generally is in line with previous Commission practice as well as the
Commission Explanatory Note on New Infrastructure Exemptions . In particular, the European
Union argues that capacity caps imposed on undertakings holding a dominant position on the
relevant gas markets are standard conditions appended to such exemptions. The European Union
also cites the conditions attached to the Nabucco and TAP exemptions to argue that capacity caps
and gas and capacity release programs are not unusual conditions for infrastructure
exemptions.1598

We see that "partial" exemptions may include "[l]imiting the exemption to part of the infrastructure, i.e.
less than 100% of the capacity. In this case, part of the capacity would fall under regulated TPA and the
project promoters would be exempted from the TPA rules only for the other part of the capacity." (Commission
Explanatory Note on New Infrastructure Exemptions, (Exhibit RUS-27), para. 18.1). We note that, among the
possible conditions that may be imposed in connection with an infrastructure exemption, the same document
enumerates: "[a] limitation of the maximum percentage of capacity that can be allocated to an undertaking
with significant market power in the relevant market(s). This condition can be combined with the requirement
to release the capacity share or corresponding gas volumes exceeding the defined maximum percentage."
(para. 39.2).
1596 European Union's first written submission, paras. 708-712; and second written submission, paras.
288-293.
1597 European Union's response to Panel question No. 234, para. 310; and Commission Explanatory Note
on New Infrastructure Exemptions, (Exhibit RUS-27), para. 39.
1598 European Union's second written submission, paras. 289-292.

7.954. We summarize the main conditions imposed in the exemption decisions referred to by
Russia in the table below:
OPAL1599 Gazelle1600 TAP1601 Nabucco1602 Poseidon1603
Market dominating
companies (e.g.
Gazprom), are not
allowed to book more
than 50% of the exit
capacity of the
pipeline at the Czech
border.

The capacity cap may
be exceeded if the
company (or
companies) offers a
gas volume of 3 billion
cubic meters per
annum (m3/a) to the
market on the OPAL
(i.e. a "gas release
program"), along with
a corresponding
capacity release
program. The
programs must be
approved by the
German NRA.
The TSO is to
enable sufficient bi-
directional capacity
on Gazelle to
safeguard the
security of supply of
the Czech market in
emergencies.

At the new border
point of Brandov,
regulated virtual
reverse flow shall
apply from the exit
point of Gazelle into
OPAL and from the
exit point of OPAL
into Gazelle.

Market dominating
undertakings are not
allowed to reserve
more than 50% of the
capacity on the TAP
exit point in the
country.

In case a lack of
interest by other
parties causes
capacity to remain
idle, a derogation from
the capacity cap
(regulated by the
NRA) is possible - in
the form of a gas and
capacity release
requirement.

Changes in
shareholders are to be
notified to the NRA.

Market dominating
undertakings are not
allowed to book more
than 50% of the total
capacity at the exit
points in the section of
the Nabucco pipeline in
the country.

In case a lack of interest
by other parties causes
capacity to remain idle, a
derogation from the
capacity cap (regulated
by the NRA) is possible –
in the form of a gas and
capacity release
requirement. A formula
to calculate gas volume
to be offered to the
market is also
recommended.

Changes in shareholders
are to be notified to the
NRA.
No gas shipper
through the Poseidon
Pipeline will be
authorized to contract
more than 80% of the
exempted
transportation
capacity.

The applicant TSO is
to make available to
third parties
incremental
transportation capacity
to meet the effective
demand. The
minimum capacity to
be made available in
this procedure shall
not be less than 0.8
bcm/year, making full
use where possible of
all the technical
capacity reasonably
available.

7.955. We focus on Russia's assertion that the Commission and the relevant NRAs imposed
conditions on exemptions granted in connection with such criteria in an "inconsistent" or
"discriminatory" manner in the infrastructure exemption decisions pointed to by Russia.
7.956. We note that (unlike in the OPAL decision) no capacity cap or gas release programme was
imposed in the Gazelle decision1604, although part of that pipeline's capacity, i.e. above 30 bcm,

1599 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 89. The cap
also applies to cumulative bookings by companies belonging to the same market dominating corporate group
(e.g. Gazprom and Wingas), or market-dominating companies or groups between which there are long-term
and significant gas supply agreements (e.g. RWE Transgas and Gazprom).
1600 Commission decision on the exemption of the Gazelle pipeline I, (Exhibit RUS-81), pp. 15-16. The
exemption must also be conditional upon the treatment of the border point of Brandov as one common
entry/exit point with the existing exit/entry point of Hora Svate Kateřiny for the purpose of trading gas from
the Czech Republic to Germany and from Germany to the Czech Republic, so that access from the Czech virtual
hub (i.e. its entry/exit system) to the German exit point of OPAL and the German virtual hub, and vice versa
from Germany to the Czech Republic, is possible.
1601 Commission decision on the exemption of the TAP pipeline, (Exhibit RUS-10), pp. 55-62. The
decision also recommends that, in the event that two or more undertakings together hold a market share of at
least 80% and each of these undertakings have a market share of more than 20% in any relevant product
market for the supply of gas in that country, or on the upstream market of supplying gas for that country, the
relevant NRA will have the right to impose a capacity cap on these undertakings on the TAP exit point in the
country. Undertakings belonging to the same group of companies shall be considered together.
1602 Commission decisions on the exemption of the Austrian, Bulgarian, and Romanian sections of the
Nabucco pipeline, (Exhibit RUS-83), pp.14-15; (Exhibit RUS-84), pp. 18-20; and (Exhibit RUS-85), pp. 20-21.
The decisions also recommend that, for the calculation of the capacity cap, undertakings belonging to the same
group shall be considered together. With respect to dominant market players in Romania, the Commission
recommended two additional conditions: a) In the event of collective dominance on the upstream wholesale
market the competent national authority should have the right to limit the capacity share of any of the
collectively dominant undertakings. The competent national authority should set a capacity cap in such a way
that non-dominant undertakings are enabled to compete effectively with the jointly dominant undertakings,
and b) Nabucco International shall inform ANRE in good time of the result of the open season procedures.
ANRE should then, within a reasonable and specified period of time express its preliminary or final opposition
to the submitted capacity allocation if one or more undertakings holding a dominant position exceed(s) the
single dominance or the collective dominance capacity cap.
1603 Commission decision on the exemption of the Poseidon pipeline, (Exhibit RUS-86), pp. 6-7.
1604 Russia's first written submission, paras. 544-546 (citing Commission decision on the exemption of
the Gazelle pipeline I, (Exhibit RUS-81), p. 15).

was not exempted and thus fully regulated. 1605 The Commission considered the two pipelines to
end in different national markets: while the physical end -point of Gazelle is in Germany, OPAL
ends in the Czech Republic. 1606 As Russia itself notes, the Commission re quired that the
exemption's term be reduced from 23 to 22 years (the same as for OPAL), along with several
other minor conditions.1607
7.957. We note that the proportional gas release programs that the Commission imposed in each
of its Nabucco decisions required tha t undertakings exceeding the capacity cap be required to
release a percentage of their annual gas volume to the market. Russia contrasts this with the
"arbitrary" 3 bcm/year required in the case of OPAL if it books capacity in excess of the 50%
cap.1608 Furthermore, Russia notes that the Nabucco gas release program mes were each based on
the "share of booked capacity" of the dominant undertaking involved. 1609 Russia argues that the
Commission effectively imposed a capacity cap on Gazprom in its Nabucco exemption d ecision
pertaining to Bulgaria, despite Gazprom not being affiliated with Bulgargaz and being considered
dominant in a different segment of the market. Russia considers that by treating Bulgargaz and
Gazprom jointly for purposes of this capacity cap, the C ommission created a situation in which
Gazprom – a third party – could be completely precluded from acquiring any Nabucco capacity in
Bulgaria.1610 We note that the Commission established that the requested exemption would have a
detrimental impact on competition in the relevant market unless a capacity cap would apply.
7.958. We note that TAP received an exemption from third -party access for 50% of its capacity.
The usage of TAP capacities by gas undertakings with a market share above 40% is limited to 50%
of exit capacities both in Greece and in Italy. Russia asserts"[t]he authorities may thus choose to
impose a capacity cap, make it lower than 50%, impose it on the "two or more undertakings
together," impose it on each individually, or impose no cap at all. There are no rules." We
nevertheless acknowledge the European Union's argument that, because not all undertakings with
a 40% market share are dominant, but undertakings with less than 40% are very unlikely to be
dominant, the capacity cap imposed on the TAP pipeline could be regarded as stricter than the one
imposed on OPAL and that the additional possibility of applying a capacity cap to two undertakings
reaching a combined share of 80% would tend to reinforce the operation of the capacity cap. 1611
We take note tha t in case a lack of interest by other parties caused capacity to remain idle, a
derogation from the capacity cap (regulated by the NRA) is possible - in the form of a gas and
capacity release requirement.
7.959. We take note of the European Union's argument that such programmes were not used in
the case of TAP 1612 because the pipeline is still under construction and Nabucco 1613 because that
pipeline project was abandoned while, in the case of OPAL, the decision not to use the gas and
capacity release programs rests entirely with Gazprom.
7.960. We note that in its Poseidon decision, the Commission imposed an 80% exit capacity cap
and no gas release requirement 1614, and added conditions to those that had been imposed by the
Italian and Greek regulatory authorities, namely to make available to third parties incremental
transportation capacity.1615 We do not disagree with Russia's assertion that, notwithstanding that
the exemption granted in 2007 to Poseidon has expired 1616, the decision could nonetheless have
had a "detrimental impact to the equality of competitive opportunities between Russian and other

1605 European Union's first written submission, para. 708 (citing Commission decision on the exemption
of the Gazelle pipeline I, (Exhibit RUS-81), para. 16).
1606 European Union's first written submission, para. 708 (citing Commission decision on the exemption
of the Gazelle pipeline I, (Exhibit RUS-81), para. 40; and Commission decision on the exemption of the OPAL
pipeline, (Exhibit RUS-82), paras. 45-48).
1607 Russia's first written submission, para. 546 (citing Commission decision on the exemption of the
Gazelle pipeline I, (Exhibit RUS-81), p. 15).
1608 Russia's first written submission, paras. 659, 712; and second written submission, para. 421.
1609 Russia's first written submission, paras. 656, 712; and second written submission, para. 421.
1610 Russia's first written submission, para. 661; and second written submission, para. 421.
1611 European Union's first written submission, para. 711.
1612 European Union's response to Panel question No. 130, para. 333; and No. 136, para. 358.
1613 European Union's response to Panel question No. 130, para. 333; and No. 136, para. 358.
1614 Russia's first written submission, paras. 664-672, 713 (citing Commission decision on the exemption
of the Poseidon pipeline, (Exhibit RUS-86), pp. 2-3).
1615 European Union's first written submission, para. 732; and Commission decision on the exemption of
the Poseidon pipeline, (Exhibit RUS-86), p. 6.
1616 European Union's first written submission, para. 732.

third-country gas in the EU market result[ing] from the differential treatment." 1617 It would,
however, remain for Russia to demonstrate that this was the case.
7.961. We focus on Russia's assertion that the Commission and the relevant NRAs imposed
conditions on exemptions granted in connection with such criteria in an "inconsistent" or
"discriminatory" manner in the infrastructure exemption decisions pointed to by Russia. We are not
persuaded that t he Commission took such divergent approaches to its imposition of conditions in
the OPAL and Gazelle, TAP, Nabucco and Poseidon infrastructure exemption decisions in a manner
that would amount to an "inconsistent" or "discriminatory" application of the inf rastructure
exemption measure in Article 36 of the Directive for the purposes of our analysis of whether the
alleged measure exists as a basis for Russia's claims here.
7.962. To our mind, the mere fact that there are differences in the conditions attached to th e
various infrastructure exemption decisions, including in terms of numerical thresholds for capacity
caps and gas release programmes does not necessarily lead to the existence of inconsistency or
discrimination where factual differences exist between the relevant situations. We consider that
the differences identified by Russia in the conditions imposed in each of the individual situations
concerned do stem from the Commission's assessment of the specific circumstances, distinct
geographical situations and competitive impacts of the different pipelines concerned.
7.963. For these reasons, we do not believe that Russia has demonstrated that the Commission
and the relevant NRAs interpreted or applied the criteria under Article 36 of the Directive for
granting an in frastructure exemption in a way that demonstrates the existence of the challenged
measure, that is, its contention that the European Union applied or implemented Article 36 in an
"inconsistent" or "discriminatory" manner.
(c) Application or implementation of Article 36 in respect of LNG facilities
7.964. With respect to the third aspect, the alleged "inconsistent" or "discriminatory" application
or implementation of Article 36 in respect of LNG facilities, we begin by recalling that the types of
infrastructure that are eligible for an infrastructure exemption include "[m]ajor new gas
infrastructure, i.e. interconnectors, LNG and stora ge facilities" within the meaning of Article 36(1)
of the Directive. Eligible types of infrastructure therefore include not only major new
"interconnectors", addressed in paragraphs 7.924 through 7.939 above, but also major new "LNG
and storage facilities".1618
7.965. In its argumentation regarding the third aspect, Russia contrasts t he infrastructure
exemption decisions concerning the NEL and OPAL pipelines with those concerning the Dragon and
South Hook LNG facilities. 1619 In the NEL infrastructure exemption decision , the NEL pipeline was
not considered eligible for, and hence denied, a n infrastructure exemption by virtue of not being
considered an interconnector within the meaning of Article 36(1) of the Directive. 1620 In the OPAL
infrastructure exemption decision, the OPAL pipeline was granted an infrastructure exemption from
the third-party access and tariff regulation requirements by virtue of being considered a major new
interconnector within the meaning of Article 36(1) of the Directive but a 50% capacity cap and a
3 billion m 3/year gas release programme were imposed as conditions on this infrastructure
exemption.1621 In the Dragon and South Hook infrastructure exemption decisions , both were
granted infrastructure exemptions from the third -party access and tariff regulation requirements
by virtue of being considered major new LNG faciliti es within the meaning of Article 36(1) of the
Directive and no conditions were imposed on these exemptions.1622

1617 Russia's second written submission, para. 420.
1618 Directive 2009/73/EC, (Exhibit EU-5), Article 36(1).
1619 Russia's first written submission, paras. 716-720 and 729-731; and second written submission,
paras. 424-425 and 429.
1620 See BNetzA decision on the exemption of the OPAL and NEL pipelines, (Exhibit RUS-61), p. 77.
1621 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), paras. 88-90.
1622 Final views of the UK NRA on the exemption of the Dragon LNG facility, (Exhibit RUS-66), pp. 1-2
and 13; Letter from the UK NRA regarding the Commission decision on the exemption of the Dragon LNG
facility, (Exhibit RUS-101), pp. 1-2; Final views of the UK NRA on the exemption of the South Hook LNG
facility, (Exhibit RUS-68), pp. 1-2 and 21; and Letter from the UK NRA regarding the Commission decision on
the exemption of the South Hook LNG facility, (Exhibit RUS-102), pp. 1-2.

7.966. Generally, Russia's arguments concerning the third aspect are brief. More particularly,
Russia faults the United Kingdom's NRA for imposing "no re quirement similar to that for
'interconnectors'", for "assum[ing] that the infrastructure that both Dragon and South Hook
proposed to construct qualified as LNG facilities, without even examining the Article 2(11)
definition", and for not imposing "any con ditions restricting the TPA exemption for either LNG
facility".1623
7.967. Regarding the lack of "requirement similar to that for 'interconnectors'", Russia suggests
that this criticism is directed more generally at Article 36 of the Directive rather than the speci fic
infrastructure exemptions for the Dragon and South Hook LNG facilities. Russia thus submits that
"[i]ndeed, the infrastructure exemption measure is designed to treat LNG facilities differently than
new pipelines, which must satisfy the interconnector d efinition."1624 In this regard, we recall that
an LNG facility is defined in Article 2(11) of the Directive as:
[A] terminal which is used for the liquefaction of natural gas or the importation,
offloading, and re -gasification of LNG, and includes ancillary s ervices and temporary
storage necessary for the re -gasification process and subsequent delivery to the
transmission system, but does not include any part of LNG terminals used for
storage[.]
7.968. Bearing in mind this definition, it is not clear to us why the Co mmission and the relevant
NRAs, in Russia's view, should consider the requirements for being an "interconnector" when
assessing whether a particular infrastructure qualifies as an "LNG facility". Indeed, if one were to
follow the approach Russia appears to be suggesting, the Commission and the relevant NRAs
would presumably also be required to consider the requirements for being an "LNG facility" when
assessing whether a particular infrastructure qualifies as an "interconnector".
7.969. Generally, we do not believ e it is sufficient for Russia to simply point to the fact that the
definitions of an "interconnector" and an "LNG facility" involve different requirements , in order to
demonstrate that the European Union applied or implemented Article 36 of the Directive i n an
"inconsistent" or "discriminatory" manner. Similarly, we note that Russia does not elaborate any
further on its arguments that the United Kingdom's NRA "assumed that the infrastructure that both
Dragon and South Hook proposed to construct qualified as LNG facilities, without even examining
the Article 2(11) definition" and did not impose "any conditions restricting the TPA exemption for
either LNG facility"1625, nor does Russia provide any explanation of how these arguments relates to
its contention that the European Union applied or implemented Article 36 in an "inconsistent" or
"discriminatory" manner.
7.970. For this reason, we do not believe that Russia has demonstrated that European Union
applied or implemented Article 36 in an "inconsistent" or "discriminatory" manner in respect of
infrastructure exemption decisions for LNG facilities. This conclusion is not altered by the fact that,
as pointed out by the European Union 1626, more infrastructure exemptions have been issued
concerning LNG facilities and storage, than those explicitly relied on by Russia.
7.8.3.3 Conclusion
7.971. On the basis of our findings above, we conclude that Russia has not demonstrated that the
European Union applied or implemented Article 36 in an "inconsistent" or "discriminatory" manner.
As we explain ed in paragraphs 7.913 through 7.917 above, the alleged "inconsistent" or
"discriminatory" application or implementation of Article 36 constitutes the measure challenged by
Russia for both its claim under Article II:1 of the GAT S and its claim s under Article I:1 of the
GATT 1994 and it is therefore necessary for Russia to demonstrate the existence of this alleged
"inconsistent" or "discriminatory" application or implementation of Article 36 as a basis for its
claims. Having found that Russia has not made such a demonstration, we do not believe it is
necessary for us to consider whether the "non -existent" measure, namely the alleged
"inconsistent" or "discriminatory" manner in which the European Union applied or implemented

1623 Russia's first written submission, para. 719.
1624 Russia's first written submission, para. 720.
1625 Russia's first written submission, para. 719.
1626 European Union's response to Panel question No. 47, para. 128.

Article 36 of the Directive, has resulted in violations of Article II:1 of the GATS or Article I:1 of the
GATT 1994, or both.
7.8.4 Russia's claim under Article XI:1 of the GATT 1994
7.8.4.1 Introduction
7.972. The legal standard under Article XI:1 of the GATT 1994, as set out in par agraphs 7.242
and 7.243 above, requires us to conduct a two-step analysis of whether a challenged measure (a)
falls within the scope of the phrase "quotas, import or export licences or other measures "
(emphasis added) and ( b) constitutes a prohibition or restriction on the importation or on the
exportation or sale for export of any product.
7.973. In determining whether a measure falls within the scope of Article XI:1 of the GATT 1994,
the panel in Brazil – Retreaded Tyres considered that a panel must examine the "nature" of the
measure.1627 In Argentina – Import Measures, the panel considered that what is relevant when
examining a measure under Article XI:1 of the GATT 1994 is whether a measure prohibits or
restricts trade, rather than the means by which such prohibition or restriction is made effective.1628
The Appellate Bod y in Argentina – Import Measures explained that the words "made effective
through" suggest that the scope of Article XI:1 covers measures through which a prohibition or
restriction is produced or becomes operative. 1629 Some panels have focused on whether a gi ven
measure prohibits or restricts trade, rather than examining the means by which such prohibition or
restriction would be made effective. 1630 It is well established that the residual terms "or other
measures" in Article XI suggest a broad coverage.1631
7.974. The App ellate Body has noted that the use of the word "quantitative" in the title of
Article XI of the GATT 1994 informs the interpretation of the words "restriction" and "prohibition"
in Article XI:1, suggesting that the coverage of Article XI includes those pro hibitions and
restrictions that limit the quantity or amount of a product being imported. 1632 According to the
Appellate Body, this provision
[D]oes not cover simply any restriction or prohibition. Rather, Article XI:1 refers to
prohibitions or restrictions "on the importation … or on the exportation or sale for
export". Thus, in our view, not every condition or burden placed on importation or
exportation will be inconsistent with Article XI, but only those that are limiting, that is,
those that limit the importation or exportation of products.1633
7.975. When examining whether a measure constitutes a restriction, the focus has thus been on
whether a measure is a limitation (i.e. something that has a limiting effect) 1634 on importation and
limits the competitive opportuni ties available to import s.1635 Panels have thus noted factors such
as the existence of uncertainties affecting importation1636, whether the measures affect investment

1627 Panel Report, Brazil – Retreaded Tyres, para. 7.372.
1628 Panel Reports, Argentina – Import Measures, para. 6.363.
1629 Appellate Body Reports, Argentina – Import Measures, para. 5.218.
1630 See e.g. Panel Reports, Argentina – Import Measures, para. 6.363.
1631 Appellate Body Reports, Argentina – Import Measures, para. 5.219. Nevertheless, as observed by
the Appellate Body, the scope of application of Article XI:1 of the GATT 1994 is not unfettered. Article XI:1
itself explicitly excludes "duties, taxes and other charges" from its scope of application. Article XI:2 of the
GATT 1994 further restricts the scope of application of Article XI:1 by providing that the provisions of
Article XI:1 shall not extend to the areas listed in Article XI:2.
1632 Appellate Body Reports, Argentina – Import Measures, para. 5.217 (citing Appellate Body Reports,
China – Raw Materials, para. 320).
1633 Appellate Body Reports, Argentina – Import Measures, para. 5.217.
1634 Appellate Body Reports, Argentina – Import Measures, para. 5.217 (citing Appellate Body Reports,
China – Raw Materials, para. 319 (in turn quoting Shorter Oxford English Dictionary, 6th ed., W.R. Trumble, A.
Stevenson (eds.) (Oxford University Press, 2007), Vol. II, p. 2553).
1635 Panel Reports, Argentina – Import Measures, paras. 6.254 and 6.264 (citing Panel Report, Argentina
– Hides and Leather, para. 11.20, which stated that "Article XI:1, like Articles I, II and III of the GATT 1994,
protects competitive opportunities of imported products, not trade flows"; and Panel Report, Colombia – Ports
of Entry, para. 7.252).
1636 Panel Report, Colombia – Ports of Entry, para. 7.240. In that case, the uncertainties in question
included access to one seaport for extended periods of time and the likely increased costs that would arise for
importers operating under the constraints of the port restrictions. That panel observed that:

plans, restrict market access for imports or make importation prohibitively costly or unpredict able
or whether they constitute disincentives affecting importation. 1637 The fact that a measure is not
administered at the border does not necessarily alter its nature as a restriction on importation
within the meaning of Article X1:1 of the GATT 1994.1638
7.976. Under Article XI:1 of the GATT 1994, Russia challenges a specific instance of application of
the infrastructure exemption measure in the Directive. In particular, as summarized at
paragraph 7.954 above, Russia challenges the capacity cap and gas release programme contained
in the 2009 OPAL infrastructure exemption decision, asserting that these two "additional restrictive
conditions" imposed by the Commission (over and above those imposed by the German NRA
BNetzA) result in a de facto quantitative restriction on the volume of imported Russian gas, in
violation of Article XI:1 of the GATT 1994.1639
7.977. According to Russia, the two challenged OPAL conditions do not limit the volume of gas
that Gazprom may import through a direct ban, which would permit quantifying the effects of the
measure. Rather, Russia asserts that the restrictions limit the volume of gas on a de facto basis,
as shown by their design, architecture, and rev ealing structure. In Russia's view, this limits
Gazprom’s ability and incentive to import Nord Stream gas for OPAL transport, which has the same
effect as banning a certain volume of imports directly.1640
7.978. The European Union asserts that the two challenged con ditions in the Commission's OPAL
decision do not impose any restrictions on the importation of natural gas from Russia. According to
the European Union, there is no direct or indirect limiting effect on imports arriving from

[A] number of GATT and WTO panels have recognized the applicability of Article XI:1 to
measures which create uncertainties and affect investment plans, restrict market access for
imports or make importation prohibitively costly, all of which have implications on the
competitive situation of an importer. Moreover, it appears that findings in each of these cases
were based on the design of the measure and its potential to adversely affect importation, as
opposed to a standalone analysis of the actual impact of the measure on trade flows.

1637 For example, the panel in Brazil – Retreaded Tyres found a violation of Article XI:1 where fines did
not impose a per se restriction on importation, but acted as an absolute disincentive to importation by
penalizing it and making it "prohibitively costly" (Panel Report, Brazil – Retreaded Tyres, para. 7.370).
1638 Panel Report, Brazil – Retreaded Tyres, para. 7.372. See also Panel Report, India – Autos, paras.
7.254-7.263.The panel stated that "it is the nature of the measure as a restriction in relation to importation
which is the key factor to consider in determining whether a measure may properly fall within the scope of
Article XI:1" and considered that the phrase "restrictions … on … importation" does not necessarily limit the
scope of Article XI:1 to border measures. (Ibid., paras. 7.261-7.262) (emphasis original) The panel in EC –
Seal Products noted: "The guidance provided in previous disputes regarding its scope suggests that Article XI:1
does not apply to internal regulations affecting imported products that also apply to the like domestic products;
instead, according to the Ad Note to Article III of the GATT 1994, these are dealt with under Article III." (Panel
Reports, EC – Seal Products, fn 1007). The Ad Note to Article III of the GATT 1994 reads as follows:
Any internal tax or other internal charge, or any law, regulation or requirement of the kind
referred to in paragraph 1 which applies to an imported product and to the like domestic product
and is collected or enforced in the case of the imported product at the time or point of
importation, is nevertheless to be regarded as an internal tax or other internal charge, or a law,
regulation or requirement of the kind referred to in paragraph 1, and is accordingly subject to the
provisions of Article III.

See, e.g. Panel Report, India – Autos, para. 7.220 (quoting GATT Panel Report, Canada – FIRA,
para. 5.14, which stated that "the General Agreement distinguishes between measures affecting the
'importation' of products, which are regulated in Article XI:1, and those affecting 'imported products', which
are dealt with in Article III. If Article XI:1 were interpreted broadly to cover also internal requirements,
Article III would be partly superfluous.").
1639 Russia requests the Panel to find a violation of Article XI:1 of the GATT 1994, because the OPAL
exemption decision, pursuant to the infrastructure exemption measure in Article 36 of the Directive (and its
predecessor, Article 22 of the Second Energy Package Directive), institutes two quantitative restrictions on the
importation of natural gas from Russia. ("Requests for Findings", Russia's first written submission, para. 810;
and second written submission, para. 487). In Russia's response to Panel question No. 5, para. 51, Russia
asserts that the OPAL exemption decision, pursuant to the infrastructure exemption measure, restricts the
import of natural gas from Russia, "as applied", in violation of Article XI:1 of the GATT 1994. In Russia's
response to Panel question No. 133, paras. 555-556, Russia underlines that it challenges the European Union's
decision to impose the capacity cap and gas release programme on OPAL as quantitative restrictions, arguing
that both conditions have the effect of limiting the quantity or volume of gas that Gazprom may import via
Nord Stream for transport on OPAL.
1640 Russia's response to Panel question No. 134(a), para. 560.

Russia.1641 The European Union submits that the "contested condition imposing a capacity cap only
restricts the supply of pipeline transmission services by those undertakings found to be dominant
on the Czech gas markets. It does not restrict the quantities or volume of gas that may be
imported from Russia."1642
7.979. According to the European Union, the "confusing attempts of Russia"1643 to explain how the
conditions imposed on Gazprom and related companies translate into restrictions of imports of
Russian gas again assume, incorrectly, that Russian gas can only be imported into the EU market
by Gazprom. 1644 The European Union asserts that the capacity cap does not affect all Russian
undertakings, only those which are dominant on the relevant Czech markets. There are Russian
undertakings other than Gazpr om active in the market for natural gas in Russia. The transport of
natural gas of Russian origin by Russian undertakings that do not hold a dominant position on the
Czech market, such as Rosneft or Novatek, is not limited in any way by the conditions atta ched to
the OPAL exemption or any other provision of EU law. It is rather Russian law that limits their
activities in the European Union, since Russian law grants Gazprom an export monopoly for gas via
pipelines, thus limiting competitive opportunities for both Russian and foreign companies. 1645
According to the European Union, the origin of the gas is irrelevant for the purpose of applying the
50% cap on the booking of OPAL capacities by undertakings dominant in the Czech gas
markets.1646
7.8.4.2 Analysis by the Panel
7.980. Russia's claim under Article XI:1 of the GATT 1994 requires us to consider whether the
capacity cap and gas release programme contained in the Commission's 2009 OPAL infrastructure
exemption decision 1647 constitute "prohibitions or restrictions" other than du ties, taxes or other
charges made effective through quotas, import or export licences or "other measures" that are
"instituted or maintained" by the European Union on the importation of Russian gas within the
meaning of Article XI:1 of the GATT 1994.
7.981. It is well established that the scope of Article XI:1 (and, in particular, the scope of the
residual basket of "other measures") is broad, and that it encompasses measures of a de facto
nature. There is no disagreement between the parties that Article XI:1 may apply to the contents
of a single decision.1648 Accordingly, based on this and the broad scope of the residual category of
"other measures" falling within the ambit of Article XI:1, we consider that we are permitted to
examine the challenged OPAL conditions under Article XI:1 of the GATT 1994. Therefore, in
accordance with the legal standard under Article XI:1 of the GATT 1994 articulated above1649, we
will assess whether Russia has demonstrated that the challenged conditions in the OPAL
infrastructure exemption decision constitute restrictions (i.e. limitations, something that has a
limiting effect) on the importation of Russian natural gas into the European Union.
7.982. We understand that this analysis must be carried out on a case -by-case basis, taking into
account the import formality or requirement at issue and the relevant facts of the case. 1650
Moreover, for the purposes of Article XI:1 of the GATT 1994, the limitation on importation need
not be demonstrated by quantifying the effects of the measure at issue; rather , such limiting
effects can be demonstrated through the design, architecture, and revealing structure of the
measure at issue considered in its relevant context. 1651 Mindful of these considerations, we
proceed with our analysis.

1641 European Union's response to Panel question No. 133, paras. 342-347.
1642 European Union's second written submission, para. 345.
1643 European Union's first written submission, para. 766.
1644 European Union's first written submission, para. 766.
1645 European Union's first written submission, para. 767.
1646 European Union's second written submission, para. 346.
1647 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 89.
1648 European Union's response to Panel question No. 131, paras. 335-336; and Russia's response to
Panel question No. 131, paras. 541-544.
1649 See, above paras. 7.242-7.243.
1650 Appellate Body Reports, Argentina – Import Measures, para. 5.245.
1651 Appellate Body Reports, Argentina – Import Measures, para. 5.217. See also Panel Report, Colombia
– Ports of Entry, para. 7.252.

7.983. Turning first to the two OPAL conditions challenged by Russia 1652, we recall that the first
challenged condition in the OPAL infrastructure exemption decision is the 50% capacity cap. It is
imposed as a condition for exempting the OPAL pipeline from otherwise generally applicable
obligations (third -party access and regulated tariffs). Thus, we understand that, due to the
infrastructure exemption granted in respect of the OPAL pipeline, allocation by OPAL's system
operator (Opal Gastransport GmbH ("OGT")) of capacities on the route from Gr eifswald to Brandov
is not subject to the generally applicable requirements. OGT would thus, in principle, be able to
choose which entities obtain acce ss to the exempted capacities. However, the capacity cap limits
OGT in allocating, in any given year, mor e than 50% of capacities in the pipeline to "dominant
undertakings on one of the Czech gas markets"1653, which include Gazprom and RWE Transgas1654,
unless the second challenged condition in the OPAL infrastructure ex emption decision is fulfilled.
This second co ndition permits Gazprom (and related companies) to exceed the capacity cap
provided that it fulfils the gas release programme requirements of freeing 3 bcm in an open,
transparent and non -discriminatory process and the capacity release programme requiremen t is
satisfied (i.e. OGT (or the undertakings concerned) provide the corresponding transport capacity
on the OPAL pipeline ). BNetzA must approve both the gas release program me and the capacity
release programme.1655 It is an undisputed fact that the second OPAL condition (release of 3 bcm)
has never been used, and the capacity cap threshold in the first condition has never been
surpassed.1656
7.984. We first recall that the challenged conditions in the OPAL decision are conditions placed on
an exemption (i.e. the infrastructure exemption from certain otherwise generally applicable
requirements (e.g. third party access and regulated tariffs)). 1657 We note the European Union's
contention that an infrastructure exemption must be regarded as an "advantage" for VIUs owning
or operating a pipeline, since the exemption allows them to freely allocate capacities on the
pipeline.1658 The European Union asserts:
Pursuant to an exemption, vertically integrated undertakings may charge
discriminatory transmission tariffs to competitors on the gas markets seeking to use
or access the infrastructure. They may also exclude altogether the use of the
infrastructure by other gas undertakings. The competent regulatory authorities do not
grant such an advantage unless its beneficiary has specifically requested it and the
criteria necessary for an exemption are met.1659
7.985. The European Union posits that the capacity cap challenged by Russia "has a very limited
scope".1660 The European Union asserts that since the exemption granted to the OPAL p ipeline is
an "adv antage" that benefits its joint -owner, Gazprom, this implies that, contrary to Russia’s
contention, the conditions restricting the scope of that advantage do not constitute, in themselves,
a restriction on imports within the meaning of Ar ticle XI:1 of the GATT 1994. 1661 For the European
Union, Article XI:1 forbids measures that restrict imports of foreign products, not measures that

1652 See also, above para. 7.954 for a summary of conditions imposed on infrastructure exemptions.
1653 European Union's response to Panel question No. 129(a), para. 313; and Commission decision on
the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 89.
1654 As noted above, the bookings of the undertakings concerned are counted together for this purpose.
(Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 89(a)).
1655 European Union's response to Panel question No. 129(a), para. 315; and Commission decision on
the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 89.
1656 Russia's response to Panel question No. 130, paras. 535-540; and European Union's response to
Panel question No. 130, paras. 331-334.
1657 See, above para. 7.954 for a summary of conditions imposed on infrastructure exemptions. In this
case, the OPAL exemption is partial (including by being subject to the two challenged conditions).
1658 European Union's response to Panel question No. 135, para. 350.
1659 European Union's response to Panel question No. 135, para. 350.
1660 European Union's second written submission, para. 343. The European Union states that "the 50%
capacity cap only concerns a very small part of the activities of the vertically integrated undertaking Gazprom"
and underlines "the very limited scope of the capacity cap". (European Union's response to Panel question
No. 129(b), paras. 316-317).
1661 See e.g. Russia's response to Panel question No. 220, paras. 299-304. In the context of its
challenge to the infrastructure exemption measure, we note that Russia has alleged that the infrastructure
exemption constitutes a benefit or "advantage", as it may exempt an undertaking partially or fully from the
unbundling, third-party access and regulated tariff requirements in the Directive. (Russia's responses to Panel

allow imports from other sources, in addition to those of a particular Member, and foster
competition on the market of the importing Member.1662
7.986. We recall that the OPAL conditions were imposed in connection with the infrastructure
exemption granted in respect of the OPAL pipeline, pursuant to a process initiated by an
application submitted in respect of the OPAL pipe line under the Directive's infrastructure
exemption provision. The conditions imposed are binding as long as the decision remains
operational.1663 However, nothing legally prevents a request for modification and/or termination of
the infrastructure exemption decision (or any of the conditions co ntained therein), or seeking an
alternative legal/regulatory arrangement under the Directive. 1664 As we have already
mentioned1665, we understand that the infrastructure exemption and any related conditions are
rules that eff ectively "replace" otherwise applic able rules (such as unbundling): they become the
binding legal regime pertaining to the infrastructure concerned as long as the relevant
infrastructure exemption decision remains operational. It is precisely the legal reg ime in respect of
the OPAL pipeline imposed pursuant to the OPAL infrastructure exemption decision which we
examine here. We underline that we are basing our assessment on the design, architecture and
revealing structure of the measure, and do not find it necessary or constructive to characterize the
measure as constituting (or not constituting) a condition on an "advantage" for the purposes of
conducting our examination under Article XI:1 of the GATT 1994.1666
7.987. We next observe that there is no question that th e challenged OPAL conditions are
"quantitative" in nature: they consist of percentages (50%) and numerical conditions (3 bcm /yr).
We note, however, the European Union's assertion that the OPAL exemption decision does not
restrict the importation of a produ ct – natural gas – from Russia and thus has no "limiting
effect"1667 for the purposes of Article XI:1 of the GATT 1994. According to the European Union, the
OPAL decision:
[O]nly restricts the exit capacity that Gazprom may book on OPAL as a supplier of
pipeline transmission services, thereby allowing other undertakings to access that
pipeline. The restriction is imposed on the capacities that Gazprom and RWE Transgas
may together book on OPAL as transport service providers, not on the importation of
Russian gas.1668
7.988. Thus, while the challenged OPAL conditions may unquestionably be "quantitative" in
nature, we nonetheless still need to consider whether quantitative conditions addressing the
capacity allocation available to certain companies in respect of cert ain infrastructure for the
transport of natural gas may constitute a quantitative restriction having a limiting effect on
imports of a product – here, natural gas - within the meaning of Article XI:1 of the GATT 1994.
7.989. We understand that the conditions plac e quantitative restrictions on pipeline transport
capacities that Gazprom and RWE Transgas may together book on the OPAL pipeline a s transport
service providers. To our minds, transport capacity allocated to a given company is the "flip -side"
of the volume (i.e. quantity) of natural gas that may be transported u sing this allocated
capacity.1669 We therefore consider that conditions on the allocation of pipeline transport capacity
may, in principle, have an effect on the volume (i.e. quantity) of natural gas th at may be

1662 European Union's second written submission, paras. 350-351.
1663 We recall that the OPAL exemption remains valid for a period of 22 years from the commissioning of
the pipeline, which took place in 2011. (See BNetzA decision on the exemption of the OPAL and NEL pipelines,
(Exhibit RUS-61), p. 76; and Russia's first written submission, para. 540).
1664 See, e.g. European Union's first written submission, para. 688. Indeed, we understand that Russia
and the European Union have, on various occasions, discussed options for modifying the OPAL conditions.
(See, e.g. above fns 1430 and 1581).
1665 See, above paras. 7.881-7.892. .
1666 We disagree with the proposition that conditions attached to a measure that can arguably be
characterized as an "advantage" would thereby, for that reason alone, be excluded from the scope of Article
XI:1 of the GATT 1994. As we have already mentioned, we see Article XI:1 as focusing on the issue of whether
a particular measure restricts imports rather than the means by which such restriction is brought about.
1667 European Union's response to Panel question No. 131, para. 336; and No. 133, paras. 341-349.
1668 European Union's response to Panel question No. 131, para. 336.
1669 Indeed, the challenged OPAL conditions themselves reinforce our view: the second condition
requires the release of 3 bcm of natural gas. This must be accompanied by the availability of the transport
capacity corresponding to this volume (quantity) of natural gas. (Commission decision on the exemption of the
OPAL pipeline, (Exhibit RUS-82), para. 89(b)).

transported by a given company transporting gas from a particular origin through a given
infrastructure.
7.990. We thus proceed with our examination to discern whether the challenged OPAL conditions
have a limiting effect on the importation of natural gas of Russian origin into the European Union.
7.991. As we have already observed, Russia has acknowledged that the two challenged conditions
do not constitute a "direct ban", but rather limit Gazprom’s ability and incentive to import Nord
Stream gas for OPAL tr ansport, which Russia alleges has the same effect as banning a certain
volume of imports directly. 1670 The European Union counters that the measure affects pipeline
transmission services and does not limit directly or indirectly 1671 the quantities or volume of g as
that may be imported from Russia.1672 The European Union also asserts that the conditions pertain
only to the conditions surrounding a company's (Gazprom's) natural gas transported through a
particular pipeline and do not limit the total amount of EU natural gas imports from Russia.1673
7.992. It is well established that the disciplines of Article XI:1 extend to restrictions of a de facto
nature.1674 Thus, even where a measure does not provide for an outright ban on importation, it
may have the effect of prohibiting or limiting the importation of the product concerned, in violation
of Article XI:1. 1675 We are nevertheless cognizant that not every measure affecting the
opportunities for entering the market would be covered by Article XI of the GATT 1994, but only
those measu res that constitute a prohibition or restriction on the importation of products, i.e.
those measures which affect the opportunities for importation itself.1676
7.993. We see that the Nord Stream pipeline connects to both OPAL1677 and NEL1678 at Greifswald,
in Germany, for delivery of Russian gas. 1679,1680 Both of these pipelines transport gas imported

1670 Russia's response to Panel question No. 134, para. 560.
1671 European Union's responses to Panel question No. 129(a), para. 313, No. 132, paras. 337-338, and
No. 133, paras. 342-343.
1672 European Union's response to Panel question No. 129(c), paras. 324-330.
1673 European Union's response to Panel question No. 129(c), paras. 324-330.
1674 Panel Report, Argentina – Hides and Leather, para. 11.17 (referring to GATT Panel Report, Japan –
Semi-Conductors, paras. 105–109; and Appellate Body Report, EC – Bananas III, paras. 232–234 (in turn
citing GATT Panel Reports, EEC – Imports of Beef; Spain – Unroasted Coffee; and Japan – SPF Dimension
Lumber)).
1675 Panel Report, Brazil – Retreaded Tyres, para. 7.15.
1676 Panel Reports, Argentina – Import Measures, para. 6.458 (referring to Panel Report, Dominican
Republic – Import and Sale of Cigarettes, para. 7.261).
1677 The Commission Decision on the exemption of the OPAL pipeline indicates the following:
According to the findings of the BNetzA, the OPAL is planned as follows: "The OPAL is intended to
be 470 km long and have a diameter of 1,420 mm and a maximum operating press ure of 100
bar. In terms of capacity, it is divided into two sections; OPAL north and OPAL south. The OPAL
north starts on the premises of the Greifswald/Lubmin compressor station and ends at the
planned [Gross Koeris] compressor station to the south of Be rlin. The OPAL south is intended to
start in [Gross Koeris] and run to the border between the Federal Republic of Germany and the
Czech Republic. The capacity of the OPAL north is intended to be 36.5 billion m3/a. In [Gross
Koeris] it is planned that there will be an exit point with a bookable output capacity of 4.5 billion
m3/a. There, the pipeline will be continued via the OPAL south with a capacity of 32 billion m3/a
in the direction of the Czech Republic. Beyond the German/Czech border it is intended th at a
bookable output point for transport customers will be constructed near to the Czech municipality
of Brandov. There, it is planned that there will be a network coupling with the transmission
system operated by RWE Transgas Net s.r.o. (hereinafter 'RWE Transgas Net') or its new pipeline
project called Gazelle." (Commission decision on the exemption of the OPAL pipeline, (Exhibit
RUS-82), para. 13). (emphasis and footnotes omitted)
1678 The Commission Decision on the exemption of the OPAL pipeline indicates the following:
According to the findings of the BNetzA, the NEL is planned as follows: "As a second onshore
connection line, the NEL is intended to allow for the transport of another part of the gas volumes
which arrive in the Federal Republic of Germany via the Nord Stream. The NEL is intended to run
from the exit point of the Nord Stream in Greifswald/Lubmin with a length of approximately 440
km along the Baltic Sea coast in the direction of Hamburg and via Heidenau and Achim onwards
towards Rehden in Lower Saxony. The re, it is intended that there will be a connection to the
transmission system of Wingas Transport GmbH & Co. KG and E.ON Gastransport GmbH
(formerly E.ON Gastransport AG & Co. KG). The NEL is intended to be ready for operation in
2012. In Greifswald/Lubmin, a total of 21.8 billion m3/a can be fed from the Nord Stream into
the NEL." (Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS -82), para.
14). (emphasis and footnotes omitted)).

from Russia via Nord Stream to separate parts of the European Union. The OPAL pipeline continues
southward through Germany and crosses the Czech border at Brandov and then con nects to the
Gazelle pipeline. The remainder and majority of the OPAL pipeline gas is transited via Gazelle
across the northern portion of the Czech Republic and exits back into Germany at Waidhaus.1681
7.994. Once imported at the point of entry, the onward transporta tion of natural gas throughout
the European Union could be considered as no longer constituting "importation". Hence, a
condition focusing on the exit capacity of the OPAL pipeline at Brandov on flows from the
Greifswald entry point might be considered as an internal EU regulatory measure, rather than one
relating to importation from Russia via Nord Stream to the Greifswald entry point. However, we
note the nature of pipelines and natural gas transmission and the essential function of
transmission pipeline infrastructure in the transport of natural gas. We recall Russia's observation
that, "[o]nce gas enters a pipeline, its movement, direction and potential for release either into the
market or another pipeline are all strictly controlled". 1682 We further note that, in order to be
"imported" into the European Union, natural gas transported by pipeline from various origins
enters the European Union through a limited number of fixed entry points. We consider that due to
the fixed nature of pipeline infrastructure and the necessity for natural gas transported by pipeline
to flow along predetermined paths and to be imported through a limited number of fixed entry
points, an arrangement conditioning access to the transport c apacity of such fixed infrastructure
with a demonstrable and sufficiently direct link to an entry point for that product into the market
of the importing Member may have an effect on the importation of the product in question.
7.995. We see that the two challenge d OPAL conditions limit the transport capacities that
Gazprom (and related companies) may together book on the OP AL pipeline in any given year. We
recall that the OPAL decision described the capacity cap as an annual 50% cap on the "exit
capacity" of OPAL at the Czech border. 1683 However, "[t]he exemption applies exclusively to
connection capacities " on OPAL, which BNetzA, the German NRA, defined as "entry and exit
capacities subject to allocation restrictions, which are only offered in bundled form. "1684 We
understand that the exit conditions imposed at Brandov may have an effect on the entry conditions
at Greifswald (and, consequently, on the interconnection with the Nord S tream pipeline at

1679 A predetermined volume of gas is released in Germany at Gross Koeris. This gas is not subject to
the infrastructure exemption. Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82),
para. 13 states: "In [Gross Koeris], it is planned that there will be an exit point with a bookable output capacity
of 4.5 [bcm/year]."
1680 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82) states: "It is intended
that the OPAL will start in Greifswald, northern Germany. It is planned that it will be an onshore continuation of
the Nord Stream gas pipeline, which is also planned and will directly connect Russia and the European Union
via the Baltic Sea. In the south, it is intended that the OPAL will connect to the planned 'Gazelle' gas pipeline
near Brandov in the Czech Republic. From there, it is intended that the Gazelle will run onwards towards
Germany (Waidhaus)." (Ibid. para. 10). (emphasis added) It adds that the OPAL, Gazelle and Nord Stream
"projects depend on each other in that the OPAL and Gazelle projects will accept the gas volumes supplied by
the Nord Stream and are intended to then transport southwards through Germany and through the Czech
Republic." (Ibid. para. 12); that "[t]he OPAL connects directly to the Nord Stream Baltic Sea pipeline, which
will bring natural gas from Russia to the EU." (Ibid., para. 27); that "[t]he gas volumes from the Nord Stream
require the construction of new pipelines onshore for transmission in Germany, but also to other Member
States. The existing pipelines are not sufficient to accept the gas volumes from the Nord Stream." (Ibid., para.
28); and that "[a]s the OPAL will be fed exclusively from the Nord Stream, technical, political or economic risks
of Nord Stream have a direct effect on OPAL." (Ibid. para. 33).
1681 See, e.g. Russia's responses to Panel question No. 221, para. 305, and No. 222, para. 309.
1682 Russia's response to Panel question No. 222, para. 308. Russia explains: "That is, once the gas
enters a pipeline, it flows unimpeded, as directed, and may not be released for transit through another pipeline
or for consumption unless and until an affirmative decision is reached to permit that release."
1683 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 89(a).
1684 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 5 (quoting
BNetzA Decision on the Exemption of OPAL and NEL, para. 1(a)). The exemption granted to OPAL by BNetzA in
its initial decision from the third-party access and tariff regulation requirements "applies exclusively for
connection capacities on the OPAL with entry in German state territory and exit in Brandov." BNetzA defined
the term "connection capacities" for purposes of the exemption "to mean entry and exit capacities subject to
allocation restrictions, which are only offered in bundled form." According to BNetzA: "If the level of the
offered/booked entry capacity differs from the level of the offered/booked exit capacity, then in this respect the
exemption as a whole shall only extend to the lower of the two values (hereinafter: 'exempt capacities')".
(Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 5 (quoting BNetzA
decision on the exemption of the OPAL and NEL pipelines, (Exhibit RUS-61), para. 1(a))). The Commission’s
decision and the additional conditions it imposed did not alter this aspect of BNetzA’s decision or the OPAL
infrastructure exemption. (See Russia's response to Panel question No. 129(a), para. 533.)

Greifswald). Thus, the OPAL capacity cap condition effectively limits Ga zprom from booking more
than 50% of the "connection" or "bundled" or "exempt capacities", both to transport gas on OPAL
from Greifswald, the entry point in Germany for Nord Stream gas imported from Russia, to
Brandov at the Czech border, and to release tha t gas at Brandov for further transport on Gazelle
(unless the second challenged OPAL condition is fulfilled).
7.996. Given the particular facts and circumstances before us in the context of transporting
natural gas from Russia onward within the European Union, w e consider that the conditions
imposed at the Brandov exit point have a demonstrable and sufficiently direct link to the entry
point linking Nord Stream/OPAL at Greifswald to be considered as having an effect on the
importation of natural gas from R ussia i nto the European Union. Therefore, the fact that the
challenged OPAL conditions are not administered directly at the border does not, in our view, alter
their nature as relating to importation, nor their potential to have a limiting effect on importation
of Russian natural gas into the European Union within the meaning of Article XI:1 of the GATT
1994.1685
7.997. We recall that, in response to Panel questioning, Russia clarified that "100% of the natural
gas transported through Nord Stream is of Russian origin. Likewise, 100% of the natural gas
transported (a) through OPAL from Greifswald to Brandov and (b) released at Brandov for further
transport on Gazelle is of Russian origin." 1686 We observe that Gazprom (and RWE Transgas) are
the only entities subject to the 50% ca pacity cap; that Gazprom is currently the only importer of
natural gas from Russia via the Nord Stream pipeline to the European Union; that Gazprom was
and has remained the exclusive user of the OPAL pipeline capacity; that others have not, in fact,
sought to use the remaining vacant capacity in the OPAL pipeline 1687; and that the natural gas
flown through the Nord Stream and OPAL pipelines is exclusively of Russian origin. Thus, in the
particular circumstances before us, Gazprom's gas flown through OPAL is Ru ssian gas. We take
note that only half of the capacity of the OPAL pipeline is utilized. This means that the OPAL
pipeline is currently transporting half of the amount of (Russian) gas that it has the capacity to
transport.
7.998. We recall the European Union's a ssertion that Russian law grants Gazprom an export
monopoly for natural gas via pipelines. The European Union asserts that this limits competitive
opportunities for both Russian and foreign companies. 1688 Russia calls this a "red herring". 1689
According to Russi a, Russian law and its treatment of Gazprom in Russia has nothing to do with
this claim or the standard under which the Panel should interpret Article XI. 1690 The Panel notes
that Russia also does not contest the existence of Gazprom's export monopoly on natu ral gas.1691
The record thus supports a finding in the context of this dispute that Gazprom enjoys an exclusive
export monopoly of natural gas from Russia. 1692 In this connection, the Panel recalls that
Article XI:1 deals with the elimination of quantitative restrictions on imports and concurs with
Russia that, in general, and in the particular facts and circumstances of this dispute, an exporting
WTO Member's domestic law is not the focus of an analysis of a claim of violation of Article XI:1 by
an importing Member. The Panel underlines that it is assessing Russia's challenge against this EU
measure in light of the European Union's obligati ons contained in Article XI:1. As our analysis
targets the particular OPAL conditions imposed by the European Union in thi s case, we do not find
it necessary or fruitful to examine any alleged aspect of Russia's domestic law in order to resolve
this claim.

1685 See, e.g. Panel Report, Brazil – Retreaded Tyres, paras. 7.372-7.373. See also, above fn 1638.
1686 Russia's response to Panel question No. 221, para. 305.
1687 In its response to Panel question No. 223 concerning whether anyone had sought to use the
remaining 50% capacity in the OPAL pipeline, Russia stated: "Russia is aware of a single third-party, European
gas trading company having used a portion of the remaining 50% capacity on OPAL. This company purchased
gas via auction for delivery at the Greifswald entry point for transit of the gas through the OPAL pipeline to the
Czech Republic. This company purchased only a very small amount of gas, 60 MWh/h, which amounts to only
0.4% of the remaining 50% OPAL transit capacity." (Russia's response to Panel question No. 223, para. 312).
We consider that this supports the view that, in the prevailing circumstances, there were no other companies
competing for this capacity or seeking to transport their natural gas through this pipeline.
1688 European Union's first written submission, para. 767.
1689 Russia's response to Panel question No. 132(a), para. 546.
1690 Russia's response to Panel question No. 132(a), paras. 546-549.
1691 Russia's response to Panel question No. 29, para. 145.
1692 Russia's response to Panel question No. 29, para. 145; and European Union's responses to Panel
question No. 29, para. 62, and No. 132, para. 340. Both parties refer to Article 3 of Federal Law No. 117-FZ of
July 18, 2006.

7.999. We see that the challenged conditions affect the ability of Gazprom (and related
companies) to access transport capacity on the OPAL pipeline. We recognize that other
opportunities exist for the onward transportation of natural gas of Russian origin from Greifswald
(e.g. via NEL). We further recognize that neither party disputes that other opportunities exist for
natural gas of Russian origin to enter the European Union.1693 Moreover, other possibilities exist for
natural gas from Russia to be imported into the European Union using the remaining 50%
capacities of OPAL. 1694 Thus, additional capacity on the OPAL pipeline could become available,
thereby allowing additional quantities of natural gas to flow through the pipeline in a given period,
and these additional quantities could include imports of Russian natural gas. In this connection, we
observe that the challenged OPAL conditio ns permit the remaining OPAL capacities to be booked
by other (non-Gazprom-related) Russian undertakings or by satisfaction of the gas (and capacity)
release programme requirements.1695 These options could result in the increase of the volumes of
Russian natural gas imported into the European Union via the Nord Stream and OPAL pipelines.
Nevertheless, we concur with Russia that Article XI: 1 does not require a demonstration that all of
a certain type of goods imported by one Member from another are restricted o r limited to support
a finding of violation. 1696 Rather, as we have already stated, Article XI:1 prohibits a Member from
limiting competitive opportunities for importation from another Member.
7.1000. We consider that the challenged OPAL conditions effectively impos e a limitation on the
competitive opportunities for natural gas of Russian origin that may be imported (by Gazprom)
into the European Union on the Nord Stream pipeline at the pipeline’s termination point at
Greifswald, Germany, to be transpor ted through th e OPAL pipeline. The restrictive effects of the
numerical limitation in the 50% capacity cap are reinforced by the requirements of the gas (a nd
capacity) release programme. These requirements – which would require Gazprom, as an importer
of natural gas of Russian origin, to release the transport of 3 bcm/yr of natural gas over the OPAL
pipeline -- have never been triggered. We consider that the existence of, and requirements
imposed by, this condition effectively operate so as to discourage certain importer s of Russian
natural gas, i.e. Gazprom and related companies, from exceeding the 50% capacity cap. We
therefore see the consequence of the operation of the two challenged OPAL conditions as
disincentivizing importation of Russian natural gas flown through the Nord Stream pipeline and,
thereafter, the OPAL pipeline. In light of our analysis above and the particular facts and
circumstances before us, we thus concur with Russia 1697 that the challenged OPAL conditions have
a limiting effect on the competitive oppo rtunities for importation of Russian gas into the European
Union.1698

1693 The European Union imports gas from Russia through several pipelines. Part of the gas imported via
Nord Stream is transported over OPAL. The remainder is transported over the NEL interconnector across the
north of Germany to other EU Member States. Other pipelines include Brotherhood, which travels from Russia
across Ukraine and Slovakia into the Czech Republic, from which gas is also directed via connecting pipelines to
other Member States. Likewise, Gazprom imports gas through the Yamal pipeline through Belarus into the
Baltic States and across Poland into Germany and onward. (See, e.g. Russia's response to Panel question No.
134(c), para. 563.) The Panel observes that Russian natural gas imported via other pipelines goes to other EU
destinations and cannot be substituted for natural gas that could have been transported through the additional
capacity on the OPAL pipeline.
1694 For example, the possibility exists that Russian gas may be imported via Nord Stream for transport
over OPAL by undertakings unrelated to Gazprom (i.e. that do not hold a "dominant position on the Czech
market" (such as Rosneft or Novatek)). See, e.g. European Union's second written submission, paras. 344-
345. See also European Union's second written submission, para. 344, stating that
[t]hese possibilities include the sale by Gazprom of Russian gas already at Greifswald or on the
Gaspool virtual trading point, allowing the gas to be transported onwards by the client. If
Gazprom supplies the pipeline transmission services on OPAL itself, volumes of gas exceeding
the 50% allowed capacities must be intended for the exit point near Berlin, at [Gross Koeris], or
they must be sold on the Czech market in a regulated and non -discriminatory manner,
implementing the 3bcm gas release program provided for in the second condition imposed by the
Commission.
1695 Commission decision on the exemption of the OPAL pipeline, (Exhibit RUS-82), para. 89(b); Russia's
first written submission, paras. 744-745; and response to Panel question No. 134(a), para. 559.
1696 Russia's responses to Panel question No. 134(c), paras. 564-566, and No. 132(a), para. 549.
1697 Russia's response to Panel question No. 134(a), para. 560.
1698 We find guidance for our approach in Panel Report, Colombia – Ports of Entry, para. 7.240. We do
not mean to suggest that each and every capacity cap or gas (and capacity) release programme would
necessarily violate Article XI:1 of the GATT 1994. We once again underline that our finding is limited to the
particular facts and circumstances of this case in light of the parties' argumentation and evidence.

7.1001. We are not persuaded by the European Union's contention that Russia's "insistence" on
the link between the use of the OPAL pipeline by Gazprom and the importation of Russian gas
proceeding from Nord Stream is "fundamentally flawed". 1699 We note the European Union's
statement that the capacity cap "does not restrict , and is not intended to restrict, the importation
of Russian gas exceeding the allowed 50% of OPAL's capacities, provided that the gas is not
transported by Gazprom or to the Brandov exit point giving access to the Czech market". 1700 We
understand this as an acknowledgement, by the European Union itself, that the challenged OPAL
conditions restrict, that is, have a limiting effect on, n atural gas transported by Gazprom or to the
Brandov exit point (or both). 1701 We see this as further support for our view that the challenged
OPAL conditions restrict market access for importers of Russian natural gas, thereby limiting
competitive opportunities for importation of Russian natural gas in contravention of Article XI:1 of
the GATT 1994.
7.1002. Given the particular facts and circumstances of this case, and the particularities of natural
gas pipeline transport, we consider that the design, architecture and revealing structure of the two
challenged OPAL conditions restrict market access for EU imports of natural gas from Russia and
limit competitive opportunities for the importation of Russian natural gas into the European Union.
We therefore find that they have a limiting effect on the importation of natural gas from Russia
within the meaning of Article XI:1 of the GATT 1994.
7.8.4.3 Conclusion
7.1003. For the reasons stated above, we find that Russia has demonstrated that the two
challenged OPAL conditions (that is, the 50% capacity cap and 3 bcm/yr gas release programme)
are inconsistent with Article XI:1 of the GATT 1994.
7.9 The upstream pipeline networks measure
7.9.1 Introduction
7.1004. As determined above in section 2.2.6, the upstream pipeline networks measure stems
from the provisions of the Directive defining upstream pipeline networks and setting out their legal
regime. In contrast to TSOs, the operators o f upstream pipeline networks are not subject to the
rules of the Directive on unbundling and tariff regulation. The operators of upstream pipeline
networks are also not subject to the rules on third -party access under Article 32 of the Directive,
but are instead subject to the provisions of Article 34 of the Directive, entitled "Access to upstream
pipeline networks".1702
7.1005. Russia challenges the upstream pipeline networks measure under Articles I:1 and III:4 of
the GATT 1994, advancing one claim under Article II I:4 and two claims under Article I:1. First,
Russia advances its claims under Article s I:1 and III:4 based on the comparison of the general
legal regime s applicable to the operators of upstream pipeline networks and TSOs under the
Directive. Then, Russia submits a separate claim under Article I:1 focused on the comparison of
the general legal regime of the operators of upstream pipeline networks under the Directive w ith
the specific legal regime applicable to the operators of the NEL and OPAL pipelines pursuant to the
exemption decisions under Article 36 of the Directive.

1699 European Union's second written submission, para. 342.
1700 European Union's second written submission, para. 343. See also European Union's response to
Panel question No. 129(b), paras. 316-330.
1701 In this context, we also note the European Union's statement that:
It cannot, therefore, be excluded that, in the absence of the conditions attached by the
Commission to the OPAL exemption, Gazprom and related companies would have decided to
release additional quantities of gas into the Czech market, where they already held a dominant
position, instead of transporting the gas further on Gazelle back into Germany. (European
Union's comments on Russia's response to Panel question No. 222, para. 148.)

We see this statement, and in particular, the reference to "additional quantities of gas" that might have
flown through OPAL from Russia as a further implicit acknowledgement by the European Union that the OPAL
conditions restrict market access and have a limiting effect on the competitive opportunities of imports of
natural gas from Russia.
1702 See, above paras. 2.43 and 2.44.

7.1006. In our assessment of Russia's claims, we follow the same order. F irst, we address
Russia's claim s under Article s I:1 and III:4 of the GATT 1994 based on the comparison of the
general lega l regimes of the operators of upstream pipeline networks and TSOs under the
Directive. Then we turn to examine Russia's additional claim under Article I:1 of the GATT 1994
focused on the comparison of the general legal regime of the operators of upstream p ipeline
networks under the Directive with the specific legal regime applicable to the operators of the NEL
and OPAL pipelines pursuant to the exemption decisions under Article 36 of the Directive.
7.9.2 Russia's claim under Article I:1 of the GATT 1994
7.9.2.1 Introduction
7.1007. Russia argues that, due to the non -application of the unbundling obligation, tariff
regulation rules and Article 32 of the Directive to the operators of upstream pipeline networks,
imported natural gas originating in third countries and transported vi a upstream pipelines is
granted an advantage within the meaning of Article I:1 of the GATT that is not accorded to natural
gas originating in Russia and transported via transmission pipelines. 1703 In Russia's view, this
"differential treatment" of the operators of upstream pipelines and TSOs modifies the conditions of
competition to the detriment of Russian natural gas , in viola tion of Article I:1 of the
GATT 1994.1704
7.1008. The European Union submits that Russia has not explained how a competitive advantage
is grante d to natural gas transported through upstream pipelines, and of what this advantage
constitutes.1705 In the European Union's view, upstream pipeline networks are different in nature
from transmission pipelines and therefore a different legal regime of the ope rators of upstream
pipeline networks does not modify the conditions of competition to the detriment of Russian
natural gas transported through transmission pipelines within the meaning of Article I:1 of the
GATT 1994.1706
7.9.2.2 Analysis by the Panel
7.1009. In light of th e legal standard under Article I:1 of the GATT 1994, as set out in
paragraphs 7.236 and 7.237 above, our analysis below will focus on whether Russia has
established the following elements: (a) that the upstream pipeline networks measure falls with in
the scope of Article I:1; (b ) that the relevant imported products are like products; (c) that the
upstream pipeline networks measure confers an "advantage, favour, privilege, or immunity" on a
product originating in the territory of any country; and (d ) that the advantage so accorded is not
extended "immediately" and "unconditionally" to like Russian products.
7.9.2.2.1 Scope of Article I:1 of the GATT 1994
7.1010. According to Russia, the upstream pipeline networks measure affects the internal sale of
the imported natural gas in the European Union within the meaning of Article III:4 of the GATT
1994 and therefore falls within the scope of Article I:1 of the GATT 1994. 1707 The European Union
does not contest Russia's arguments.
7.1011. As observed by the Appellate Body, Article I:1 of the GATT 1994 "incorporates all mat ters
referred to in paragraphs 2 and 4 of Article III". 1708 Thus, in light of Russia's arguments, we need
to determine whether the upstream pipeline networks measure falls within the scope of the
"matters" referred to in Article III:4 of the GATT 1994 in order to determine whether it falls within
the scope of Article I:1 of the GATT 1994. For a measure to fall within the scope of Article III:4 of
the GATT 1994, such a measure must constitute a law, regulation or requirement "affecting" the

1703 Russia's first written submission, paras. 402 and 411; and second written submission, paras. 294-
296.
1704 Russia's first written submission, para. 411.
1705 European Union's first written submission, para. 457.
1706 European Union's first written submission, paras. 450–454; and second written submission,
para. 182.
1707 Russia's first written submission, para. 382; and response to Panel question No. 113, para. 468.
1708 Appellate Body Reports, EC – Seal Products, para. 5.80.

"internal sale, offering for sale, purchase, transportation, distribut ion or use" of imported natural
gas.1709
7.1012. We note that the parties do not disagree that the Directive constitutes a law, regulation
or requirement within the meaning of Article III:4 of the GATT 1994. In our view, the Directive is
undeniably a law, regulation or req uirement within the meaning of this provision. However, a s
clarified by the Appellate Body, it is "not any 'laws, regulations and requirements' which are
covered by Article III:4, but only those which "' affect' the specific transactions, activities and use s
mentioned in that provision".1710 According to the Appellate Body, "the word 'affecting' operates as
a link between identified types of government action ('laws, regulations and requirements') and
specific transactions, activities and uses relating to the p roducts in the marketplace ('internal sale,
offering for sale, purchase, transportation, distribution or use')".1711
7.1013. Russia argues that the non -application of the unbundling obligation, tariff regulation
requirements and Article 32 of the Directive to the op erators of upstream pipeline networks
"lowers the costs and increases the profit margin on natural gas supplied through these
pipelines".1712 Therefore, in Russia's view, "the measure must be viewed as affecting the sale of
natural gas".1713
7.1014. We recall that, as set out above, the upstream pipeline networks measure lays out a legal
regime for the operators of upstream pipeline networks, which regulates the relationship that
producers and suppliers of natural gas may have with those operators. We understand that
upstream pipeline networks are used to transport natural gas from a gas production project to a
processing plant, terminal or final coastal landing terminal. 1714 Thus, we believe that this measure
affects the internal transportation of natural gas.
7.1015. Therefore, we consider that the upstream pipeline networks measure affects the internal
transportation of imported natural gas in the European Union and consequently falls within the
scope of the "matters" referred to in Article III:4 of the GATT 1994. On this basis, we find that the
upstream pipeline networks measure falls within the scope of Article I:1 of the GATT 1994.
7.9.2.2.2 Like products
7.1016. In Russia's view, natural gas transported via upstream pipelines is identical to natural gas
transported via transmission pipelines. Therefore, Russia considers that natural gas originating in
third countries and transported via upstream pipelines is like natural gas originating in Russia and
transported via transmission pipelines within the meaning of Article I:1 of the GATT 1994. We
note, however, that Ukraine, in its third -party submission, argues that natural gas transported via
upstream pipelines is "raw" gas, which is not like natural gas transported through transmission
pipelines.1715 The European Union agrees with Ukraine's position.1716
7.1017. We observe that "raw" or "unprocessed" gas is natural gas that has not undergone any
processing upon its extraction. 1717 "Processed" gas, on the other hand, is natural gas that has
undergone necessary processing after its extraction in order to produce ga s suitable for

1709 Panel Report, Argentina – Financial Services, para. 7.1015.
1710 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 208. (emphasis original)
1711 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 208.
1712 Russia's response to Panel question No. 113, para. 468.
1713 Russia's response to Panel question No. 113, para. 468.
1714 Directive 2009/73/EC, (Exhibit EU-5), Article 2(2).
1715 Ukraine's third-party submission, paras. 39–43.
1716 In response to a question by the Panel, the European Union stated that it agrees with Ukraine that
"Russia has not demonstrated that 'raw gas' is 'like' natural gas transported through regular pipeline
networks". (European Union's response to Panel question No. 107, para. 278). The European Union further
indicated that it considers that upstream pipelines do not carry processed gas. (European Union's response to
1717 US Department of Transportation, Pipeline & Hazardous Materials Safety Administration,
"Stakeholder Communications: Natural Gas Processing Plants"
https://primis.phmsa.dot.gov/comm/FactSheets/FSNaturalGasProcessingPlants.htm
(accessed 23 March 2017), (Exhibit EU-166); and NaturalGas.org, Processing Natural Gas
http://naturalgas.org/naturalgas/processingng/ (accessed 11 May 2017), (Exhibit RUS-260), p. 1.

transmission and subsequent delivery to the final consumer. 1718 Neither Ukraine nor the European
Union provides any evidence that pipelines that meet the definition of "upstream pipeline network"
in the Directive transport only unprocessed gas. The European Union asserts that upstream
pipelines are used to convey natural gas from an oil or gas production project to a processing plant
or terminal or final coastal landing terminal, and if the pipeline conveys gas from the production
project to a f inal coastal landing terminal, processing would take place once this terminal is
reached.1719 Russia, on the other hand, contends that pipelines that meet the definition of
"upstream pipeline network" in the Directive include those that convey processed gas from a
processing plant to a "terminal or final coastal landing terminal". 1720 The parties do not disagree
that transmission pipelines transport processed natural gas.
7.1018. The Directive defines "upstream pipeline network" as follows:
'[U]pstream pipeline network' means any pipeline or network of pipelines operated
and/or constructed as part of an oil o r gas production project, or used to convey
natural gas from one or more such projects to a processing plant or terminal or final
coastal landing terminal[.]1721
7.1019. Based on this definition, we understand that an "upstream pipeline network" covers any
of the fol lowing pipelines or networks of pipelines: (a ) operated and/or constructed as part of an
oil or gas production project; (b ) used to convey natural gas from one or more oil or natural gas
production projects to a processing plant; (c ) used to convey natural gas from one or more oil or
natural gas production projects to a terminal; (d) used to convey natural gas from one or more oil
or natural gas production projects to a final coastal landing terminal.1722 We consider that pipelines
operated and/or constructed as part of an oil or gas production project, as well as those used to
convey natural gas from one or more such projects to a processing plant will transport
unprocessed gas. The processing of such gas will take place at a processing plant. We are,
however, unconvinced by the European Union's explanation that pipelines used to convey natural
gas from one or more oil or gas production projects to a terminal or final coastal landing terminal
will transport unprocessed gas.
7.1020. As noted above, the European Union a rgues that the processing of gas transported by
pipelines running from one or more oil or gas production projects to a terminal or final coastal
landing terminal will take place once the terminal or final coastal landing terminal is reached. We
disagree. The processing of gas can take place only at a specialized processing facility referred to
in the Directive as a "processing plant". Aside from referring to a "processing plant", the Directive
also refers to "terminal" and "final coastal landing terminal". We consider that if a "terminal", "final
coastal landing terminal" and "processing plant" had the same meaning , the Directive would have
referred only to pipelines used to convey gas to a "processing plant", and not to pipelines "used to
convey natural gas … to a processing plant or terminal or final coastal landing terminal". 1723 We

1718 US Department of Transportation, Pipeline & Hazardous Materials Safety Administration,
"Stakeholder Communications: Natural Gas Processing Plants"
https://primis.phmsa.dot.gov/comm/FactSheets/FSNaturalGasProcessingPlants.htm (accessed
23 March 2017), (Exhibit EU-166); and NaturalGas.org, Processing Natural Gas
http://naturalgas.org/naturalgas/processingng/ (accessed 11 May 2017), (Exhibit RUS-260), pp. 1-2.
1719 European Union's response to Panel question No. 108(c), para. 279.
1720 Russia's responses to Panel question No. 107, para. 426, and No. 108, paras. 429-431.
1721 Directive 2009/73/EC, (Exhibit EU-5), Article 2(2).
1722 Directive 2009/73/EC, (Exhibit EU-5), Article 2(2).
1723 One of the documents cited by Russia in response to Panel question No. 10 reflects the following
understanding of a "processing plant", "terminal" and "final coastal landing terminal" in Article 2(2) of the
Directive:
The definition in Article 2.2 was designed to meet a number of circumstances. The reference to
"processing plant" was intended to allow Article 23 to apply to pipelines or pipeline networks
which carry largely unprocessed gas from a production project (field) to a facil ity at which the
gas is processed to sales quality (broadly speaking, the main practice offshore in United
Kingdom). "Terminal" in Article 2.2 was intended to allow Article 23 to apply to pipelines, or
pipeline networks, which carry gas which has been proc essed to sales quality but which has not
previously entered a transmission or distribution system (largely the Norwegian approach).
"Final coastal landing terminal" was intended to allow Article 23 to apply to pipelines, or pipelines
networks, which carry processed gas, which has not previously entered a transmission or
distribution system but may have passed through a "terminal", to a facility in another country
from which the gas enters that country’s transmission or distribution system (also largely the

also note that the evidence on the record indicates that, in respect of natural gas transported from
an oil or gas production project to a terminal or final coastal landing termin al, processing can take
place at a processing plant located between an oil or gas production project and a terminal. 1724
This means that parts of upstream pipeline networks running from an oil or gas production project
to a terminal or final coastal landing terminal will transport processed natural gas.
7.1021. Therefore, we conclude that the definition of "upstream pipeline network" in the Directive
covers pipelines that transport processed natural gas . In light of this conclusion, we do not
consider it necessary to determine whether processed and unprocessed gas are like products
within the meaning of Article I:1 of the GATT 1994. Instead, we turn to consider whether
processed natural gas transported via upstream pipeline networks is like processed natural gas
transported via transmission pipelines.
7.1022. The parties agree that processed natural gas transported via upstream pipelines and
natural gas transported via transmission pipelines are like product s within the meaning of
Article I:1 of the GATT 1994.1725 We also recall that, in the context of the unbundling measure, we
have found that imported Russian natural gas and imported natural gas from other countries are
like products within the meaning of Article I:1 of the GATT 1994. 1726 We consider that processed
natural gas transported via upstream pipelines is identical in all respects to natural gas transported
via transmission pipelines. Therefore, we find that imported natural gas of Russian origin
transported via transmission pipelines and imported natural ga s originating in any other third
country transported via upstream pipelines are like products within the meaning of Article I:1 of
the GATT 1994.
7.9.2.2.3 An advantage, favour, privilege or immunity
7.1023. Russia argues that, as a consequence of the definition of "upstream pipeline network" in
the Directive, a number of operators of upstream pipelines transporting imported natural gas
originating in third countries are "exempted" from the unbundling obligation, tariff regulation rules
and Article 32 of the Directiv e.1727 In Russia's view, due to this "exemption", imported natural gas

Norwegian approach but potentially relevant to the United Kingdom/Belgium interconnector). In
the United Kingdom we tend to use the term "terminal" to encompass all of the above – this is
reflected in the proposals at Section 3.8 below. (Russia's respons e to Panel question No. 10,
para. 91 (referring to the UK Department for Trade and Industry, Consultation Document,
Implementation of those provisions of Directive 98/30/EC of the European Parliament and of the
Council of 22 June 1998 concerning the common rules for the internal market in natural gas
which relate to access to upstream pipeline networks (March 2000), (Exhibit RUS -184), para.
3.6))
The European Union observes that none of the "Reports" that Russia cites in its response to Panel
question No. 10 is an EU document, but rather a UK source. (European Union's second written submission,
para. 170 and fn 195). The document quoted above appears to be indeed a UK source. Nevertheless, we find
the explanations provided in this document instructive. We also note that the European Union has not
challenged the accuracy or credibility of information contained in this document.
1724 We note the "Europipe II" pipeline carries natural gas from an onshore processing plant in Norway
(Kårstø) to an interconnection point in Germany (Dornum) across the North Sea. The processing plant in
Norway (Kårstø) is connected to gas production sites in the North Sea. The "Norpipe" and "Europipe I"
pipelines are also connected to the onshore processing plants in Norway (Kårstø and Kollsnes) before
transporting gas from the production sites in the North Sea to the interconnection points in Germany (Emden
and Dornum, respectively). We therefore understand that the "Europipe II" pipeline transports processed gas,
and that similarly, the "Norpipe" and "Europipe I" pipelines may also transport processed gas. (Norway
Pipelines Map, (Exhibit RUS-196); Gassco AS, the Norwegian Ministry of Petroleum and Energy, List of gas
pipelines on the Norwegian continental shelf, (Exhibit RUS-197); Gassco, Europipe II,
https://www.gassco.no/en/our-activities/pipelines-and-platforms/europipe-II/ (accessed 25 February 2017),
(Exhibit RUS-204); and Gassco, Kollsnes Gas Processing Plant, (Exhibit RUS-266)).
1725 Russia's first written submission, paras. 345-349; and responses to Panel question No. 107, paras.
426-427, and No. 108, paras. 430 – 431. See also European Union's first written submission, para. 359; and
response to Panel question No. 110(a), para. 285. Regarding the likeness of gas in the context of the upstream
pipeline networks measure, the European Union considers that consumers will not differentiate between
"gaseous" natural gas based on the infrastructure by which it has been processed or transported. In the
European Union's view, the competitive relationship is not affected by the infrastructure. (European Union's
response to Panel question No. 120, para. 301)
1726 See, above para. 7.577.
1727 Russia's first written submission, paras. 403–410; responses to Panel question No. 114(c),
paras. 483–484, and No. 191, paras. 214-215; and second written submission, paras. 288–296. In particular,
Russia indicates that such pipelines transport gas of Norwegian origin. Russia also notes other pipelines, that,

originating in third countries and transported through upstream pipelines is granted an advantage
within the meaning of Article I:1 of the GATT 1994.1728
7.1024. The European Union argues that the no n-application of the unbundling obligation, tariff
regulation rules and Article 32 of the Directive to the operators of upstream pipelines does not
amount to an "exemption". 1729 According to the European Union, the definition of "upstream
pipeline network" is based on objective characteristics. 1730 The European Union further submits
that the different legal regime of upstream pipeline networks as compared to transmission systems
reflects the economic, technical and operational characteristics of such networks.1731 The European
Union also argues that Russia assumes that the non -application of the unbundling requirement to
upstream pipeline networks automatically implies that gas from owners of such upstream networks
has a competitive advantage that is not extended to Russian gas.1732 The European Union submits,
however, that Russia does not explain how such competitive advantage is granted, and of what
this advantage actually constitutes.1733
7.1025. We recall that previous panels considered that a measure grants an advantage within the
meaning of Article I:1 of the GATT 1994 when such a measure creates "more favourable
competitive opportunities" to products of a particular origin.1734
7.1026. We understand Russia to derive its claim against the upstream pipeline networks measure
under Article I:1 of the GATT 1994 from the legal regime of the operators of upstream pipelines in
comparison to TSOs. Accordingly, we consider that, in order to establish that the upstream
pipeline networks measure grants an advantage to natural gas of a particular or igin within the
meaning of Article I:1 of the GATT 1994, Russia needs to demonstrate that this legal regime
creates "more favourable competitive opportunities" to natural gas of a particular origin.
7.1027. We further understand that, in Russia's view, the legal regime of the operators of
upstream pipeline networks based on the non -application of the unbundling obligation, tariff
regulation rules and Article 32 of the Directive allows a VIU to exercise control over the operators
of such pipelines, refuse third -party access and minimize its costs when transporting natural gas
via these pipelines. 1735 Thus, Russia's arguments imply that a VIU transporting natural gas via
upstream pipelines whose operators it controls would be in a better position than a VIU
transporting natural gas via transmission pipelines whose operators it does not control. In Russia's
view, this means that natural gas produced and transported by the former VIU would thus receive
an advantage within the meaning of Article I:1 of the GATT 1994 in comp arison to natural gas
produced and transported by the latter VIU. 1736 We thus understand Russia to argue that the

in its view, are similarly "exempted" and transporting gas of Algerian and Libyan origin (Russia's response to
Panel question No. 191, paras. 213-215).
1728 Russia's first written submission, para. 411; response to Panel question No. 114(c), paras. 483-484
and No. 191, paras. 213-215; and second written submission, para. 296.
1729 European Union's response to Panel question No. 1, paras. 2, 6 and 9; and second written
submission, para. 142.
1730 European Union's first written submission, para. 448. See also European Union's second written
submission, paras. 170 – 173.
1731 European Union's first written submission, paras. 450-453; and second written submission,
paras. 157-167 and 173.
1732 European Union's first written submission, para. 456.
1733 European Union's first written submission, para. 457.
1734 Panel Reports, EC – Bananas III (Guatemala and Honduras), para. 7.239; and Colombia – Ports of
Entry, para. 7.346. The panel in EC – Seal Products considered that the advantage granted by the EU Seal
Regime was in the form of market access (Panel Reports, EC – Seal Products, para. 7.596).
1735 Russia's response to Panel question No. 114(c), paras. 483 – 484; and second written submission,
paras. 291 and 294.
1736 Russia's second written submission, para. 296. Russia initially argued that an "advantage" is
granted to gas of Norwegian origin. Thus, in its response to a question by the Panel regarding the "advantage"
that gas transported via upstream pipeline networks receives, Russia states as follows:
As a result of these exemptions, the entire Norwegian export pipeline network is operated by a
single state-owned company, Gassco. Additionally, because its upstream pipeline network, by
definition, is exempt from the unbundling, TPA and tariff regulation requirements under the
Directive, the Norwegian-origin gas supplied and placed on the EU market by Gassco is accorded
an advantage. Gassco is not required to divest ownership of its transmission pipelines running
from the processing facilities in the North Sea or TSO under the OU model, or even to engage an
ISO or establish a separate subsidiary in the form of an ITO. Gassco is also not required to grant
third-party access to its pipelines. (Russia's response to Panel question No. 114(c), para. 484).

differences in the legal regime of the operators of upstream pi peline networks and TSOs create
more favourable conditions for the transportation of natural gas via upstream pipeline networks
than via transmission pipelines.
7.1028. In our view, more favourable conditions for the transportation of products can be
considered a competitive advantage. We recall, however, that the "advantage" referred to in
Article I:1 of the GATT 1994 is an advantage granted to "any product originating in or destined for
any other country". 1737 Therefore, in order to establish that the upstream pipeline networks
measure grants an advantage within the meaning of Article I:1 of the GATT 1994, Russia needs to
demonstrate that allegedly more favourable conditions for the transportation of natural gas via
upstream pipelines than via transmission pipelines result in more favourable competitive
opportunities to natural gas of a particular origin.
7.1029. In light of Russia's arguments, we will conduct a two -pronged assessment of whether the
upstream pipeline networks measure grants an advantage to natural gas of a particular origin
within the meaning of Article I:1 of the GATT 1994. Under the first prong, we will examine whether
Russia has demonstrated that the legal regime of upstream pipeline networks creates more
favourable conditions for the transportation of natural gas via upstream pipelines than via
transmission pipelines. Should we conclu de that this is the case, under the second prong, we will
assess whether Russia has demonstrated that more favourable conditions for the transportation of
natural gas via upstream pipelines than via transmission pipelines results in more favourable
competitive opportunities to natural gas of any particular origin.
7.9.2.2.3.1 More favourable conditions for the transportation of natural gas
7.1030. We begin our assessment by noting that there is no disagreement between the parties
that the unbundling obligation of the Directi ve does not apply to the operators of upstream
pipeline networks. 1738 Furthermore, the European Union does not contest that tariff regulation
rules and Article 32 of the Directive do not apply to the operators of upstream pipeline networks.
Similarly, the parties do not disagree that Article 34 of the Directive, entitled "Access to upstream
pipeline networks" is applicable to the operators of upstream pipeline networks. 1739 However, the
parties draw different conclusions as to the content of the obligation contai ned in Article 34 of the
Directive, as further discussed below.
7.1031. Russia argues that, being "exempted" from "the unbundling, TPA and tariff regulation
requirements" allows a VIU controlling the operator of a n upstream pipeline network to "develop
its export pipeline network and control the supply and placement of its gas on the EU market as it
deems appropriate". 1740 In Russia's view, this reduces the costs of such a VIU in transporting
natural gas via upstream pipeline networks. 1741 Russia also argues that the "UPN exemption"
provides greater certainty to investor s in pipelines and allows them to plan and implement the
investment based on the possibility to equally invest and have long -term planning in natural gas

Likewise, in its second written submission, Russia makes the following allegations:
Today, the entire Norwegian export pipeline network is operated by a single state -owned
company, Gassco, which is free to develop its export pipeline network and control the supply and
placement of its gas on the EU market as it deems appropriate. Gassco and its Norwegian gas
export pipelines are exempt from the unbundling, TPA and tariff regulation requirements.
Russian gas export pipelines are identical in terms of their purpose to the Norwegian gas export
pipelines. They transport identical gas and are both operated by VIUs. (Russia's second written
submission, para. 294)
In its response to Panel question No. 191, however, Russia indicated that pipelines transporting gas of
Algerian and Libyan origin are, in its view, similarly "exempted" from the unbundling, third-party access and
tariff regulation requirements. (Russia's response to Panel question No. 191, para. 213). We thus understand
Russia to imply that, as a consequence, gas of Algerian and Libyan origin would also be granted an advantage.
(Russia's response to Panel question No. 191, para. 215)
1737 Article I:1 of the GATT 1994.
1738 Russia's first written submission, para. 406; and second written submission, para. 282. See also
European Union's first written submission, para. 452.
1739 Russia's first written submission, para. 408; and second written submission, para. 284. See also
European Union's first written submission, para. 451; and second written submission, para. 159.
1740 Russia's second written submission, para. 294
1741 Russia's second written submission, para. 291; and opening statement at the second meeting of the
Panel, para. 134.

production, while "the status of a transmission pipeline, with its unbundling and TPA requirements,
does not provide such a certainty". 1742 On this basis, Russia concludes that natural gas carried
through an upstream pipeline network has a "clear -cut" competitive advantage over natural gas
carried through a transmission pipeline.1743
7.1032. We understand that, for Russia, the possibility that a VIU may control the operator of an
upstream pipeline network creates more favourable conditions for the transportation of natural gas
via upstream pipelines than via transmission pipelines. Russia asserts that, being "exempted" from
"the unbundling, TPA and tariff regulation requirements" allows a VIU controlling the operator of
an upstream pipeline network to "develop its export pipeline network and contr ol the supply and
placement of its gas on the EU market as it deems appropriate". 1744 However, Russia does not
explain how this transforms into more favourable conditions for the transportation of natural gas
via upstream pipelines than via transmission pipelines.
7.1033. Russia further contends that the "UPN exemption" provides greater certainty to the
investor in pipelines and allows them to plan and implement the investment based on the
possibility to equally invest and have long -term planning in terms of producti on of natural gas.1745
It is unclear to us, and Russia has not explained, how issues related to investment decisions in
connection with natural gas pipelines are relevant for our assessment of Russia's claim under the
GATT 1994.
7.1034. Thus, we consider that Russia has not demonstrated that a control by a VIU of the
operator of an upstream pipeline network results in more favourable conditions for the
transportation of natural gas via upstream pipelines than via transmission pipelines.1746
7.1035. Russia also argues that, not being subject to the third -party access rules of Article 32 of
the Directive, the operators of upstream pipeline networks are not obliged to grant access to these
pipelines to all interested parties. 1747 We thus understand that, in Russia's view, the non -
application of the third -party access rules of Article 32 of the Directive to the operators of
upstream pipeline networks creates more favourable conditions for the transportation of natural
gas via upstream pipelines than via transmission pipelines, whose op erators (TSOs) are subject to
Article 32 of the Directive.
7.1036. We observe that the European Union contests Russia's arguments that the operators of
upstream pipeline networks are not obliged to grant third -party access, pointing to the fact that
Article 34 of the Directive, entitled "Access to upstream pipeline networks", requires such
access.1748 As already noted, the parties disagree on the content of the obligation contained in
Article 34 of the Directive.
7.1037. Russia argues that Article 34 of the Directive "sets out a vague, non -mandatory regime;
it grants Member States discretion to oversee implementation; and is clearly designed to favor
upstream pipeline network operators and developers". 1749 Russia considers that, in particular, the
"matters" listed in Article 34(2) of the Directive that may be taken into account in providing access
to upstream pipeline networks make the obligation contained in Article 34 of the Directive "vague"
and "meaningless".1750 Russia also states that the European Union confirmed that Article 34 of the
Directive has never been utilized.1751 The European Union, however, contends that all EU member
States have implemented Article 34 of the Directive in their national law. 1752 The European Union

1742 Russia's opening statement at the second meeting of the Panel, para. 146.
1743 Russia's opening statement at the second meeting of the Panel, para. 146.
1744 Russia's second written submission, para. 294
1745 Russia's opening statement at the second meeting of the Panel, para. 146.
1746 We note that Russia has not provided any specific argumentation on the non-application of the rules
on tariff regulation to the operators of upstream pipeline networks. We therefore do not address this issue
further.
1747 Russia's response to Panel question No. 114(c), para. 484.
1748 European Union's first written submission, para. 451; and second written submission, para. 159.
1749 Russia's first written submission, para. 408;
1750 Russia's second written submission, para. 286; and response to Panel question No. 201(c),
para. 236.
1751 Russia's opening statement at the second meeting of the Panel, para. 133.
1752 European Union's response to Panel question No. 201, para. 157.

has also indicated that five disputes were notified in th e United Kingdom for access to upstream
pipelines and one decision on effective access was adopted in Denmark.1753
7.1038. Article 34 of the Directive , entitled "Access to upstream pipeline networks", provides, in
relevant part, as follows:
1. Member States shall tak e the necessary measures to ensure that natural gas
undertakings and eligible customers, wherever they are located, are able to obtain
access to upstream pipeline networks, including facilities supplying technical services
incidental to such access, in acc ordance with this Article, except for the parts of such
networks and facilities which are used for local production operations at the site of a
field where the gas is produced. The measures shall be notified to the Commission in
accordance with the provisions of Article 54.
2. The access referred to in paragraph 1 shall be provided in a manner determined by
the Member State in accordance with the relevant legal instruments. Member States
shall apply the objectives of fair and open access, achieving a compet itive market in
natural gas and avoiding any abuse of a dominant position, taking into account
security and regularity of supplies, capacity which is or can reasonably be made
available, and environmental protection. The following matters may be taken into
account:
(a) the need to refuse access where there is an incompatibility of technical
specifications which cannot reasonably be overcome;

(b) the need to avoid difficulties which cannot reasonably be overcome and could
prejudice the efficient, current and planned future production of hydrocarbons,
including that from fields of marginal economic viability;

(c) the need to respect the duly substantiated reasonable needs of the owner or
operator of the upstream pipeline network for the transport and processing of gas
and the interests of all other users of the upstream pipeline network or relevant
processing or handling facilities who may be affected; and

(d) the need to apply their laws and administrative procedures, in conformity with
Community law, for the grant o f authorisation for production or upstream
development.
3. Member States shall ensure that they have in place dispute -settlement
arrangements, including an authority independent of the parties with access to all
relevant information, to enable disputes rel ating to access to upstream pipeline
networks to be settled expeditiously, taking into account the criteria in paragraph 2
and the number of parties which may be involved in negotiating access to such
networks.1754
7.1039. We observe that the content of Article 34 of the Directive is different from the content of
Article 32 of the Directive. 1755 However, in our view, this does not mean that Article 34 of the
Directive contains absolutely no obligation of third-party access to upstream pipeline networks. We
note, in parti cular, that Article 34(1) of the Directive requires member States to "take the
necessary measures to ensure that natural gas undertakings and eligible customers, wherever
they are located, are able to obtain access to upstream pipeline networks". 1756 Russia argues that
the obligation in Article 34 of the Directive is "vague" and "meaningless". 1757 However, aside from

1753 European Union's response to Panel question No. 201, para. 158.
1754 Directive 2009/73/EC, (Exhibit EU-5), Article 34.
1755 Article 32 of the Directive, entitled "Third-party access", requires EU member States to "ensure the
implementation of a system of third party access to the transmission and distribution system, and LNG facilities
based on published tariffs, applicable to all eligible customers, including supply undertakings, and applied
objectively and without discrimination between system users". (Directive 2009/73/EC, (Exhibit EU-5), Article
32(1)).
1756 Directive 2009/73/EC, (Exhibit EU-5), Article 34(1).
1757 Russia's second written submission, para. 286; and response to Panel question No. 201(c),
para. 236.

referring to the text of Article 34 of the Directive, Russia has not submitted any evidence that this
obligation is ineffective.
7.1040. Based on the scrut iny of the text of Article 34 of the Directive, in light of the arguments
of the parties and evidence on the record, we consider that Article 34 of the Directive provides an
obligation of third -party access to upstream pipeline networks. Therefore, we reje ct Russia's
arguments that the operators of upstream pipeline networks are not obliged to grant access to
other parties interested in using these pipelines. Thus, contrary to Russia's arguments, the
operators of upstream pipelines are not "exempted" from t hird-party access rules and,
consequently, cannot use the non-application of Article 32 of the Directive to transport natural gas
on more favourable conditions than TSOs.
7.1041. Russia also alleges, "based on legislative history and other EU documentation, that the
Norwegian government and natural gas industry lobbied for and obtained this EU exemption
expressly to reduce the costs of transporting Norwegian -origin gas, thus granting that gas a
competitive advantage within the meaning of GATT Article I:1". 1758 Russia further alleges that the
"EU included the UPN measure to avoid '[t]he resulting increases in costs and loss of efficiency
[which] would put Norway at an unfair disadvantage compared with other non-EEA producers'".1759
In support of these allegations, Russia quotes from the Seventh Report of the Select Committee on
European Communities of the UK House of Lords on the Amended Proposal for a European
Parliament and Council Directive concerning common rules for the internal market in natural gas
(UK House of Lords Report).1760

1758 Russia's second written submission, para. 291. See also Russia's response to Panel question No. 10,
paras. 93-94.
1759 Russia's second written submission, para. 294. See also Russia's response to Panel question No. 10,
paras. 93-94.
1760 UK House of Lords, Select Committee on European Communities, Seventh Report on the Amended
Proposal for a European Parliament and Council Directive concerning common rules for the internal market in
natural gas (18 November 1997)
https://publications.parliament.uk/pa/ld199798/ldselect/ldeucom/035vii/ec0701.htm (accessed
15 September 2017), (UK House of Lords Report), (Exhibit RUS-116). Russia quotes the following parts of the
UK House of Lords Report:

45. Norway, although not an EU Member State, was obliged by its membership of the EEA
Agreement to implement any Community legislation involving the single market which was
adopted by the EEA Joint Committee. As a result, Norway was likely to be significantly affected
by the Directive, despite having no direct influence in the negotiations. The Norwegian Ministry of
Petroleum and Energy said that gas had been a success story in Europe and had the potential to
provide a larger share of future energy needs, with benefits for the environment and security of
supply, but the investments that were necessary to secure the future development of gas would
be jeopardised by the uncertainty that the draft Directive would introduce. Some amendments
were needed to secure a long -term regulatory regime and to guarantee the contracts that were
needed (pp 97-8).

APPLICATION TO UPSTREAM PRODUCTION AND COMPETITION IN GAS SUPPLY

46. One of Norway's key concerns as a major European gas producer was with the scope of
application of the Directive, which it proposed should be limited to "the outlet flange of the
ultimate landing terminal", thus excluding offshore production-related pipelines[13]. Without
such a change, which was supported by the oil industry and was consistent with existing EC
and Norwegian legislation, Norway believed its existing integrated production system would
have to be split up under different regulatory regimes. The resulting increases in costs and
loss of efficiency would put Norway at an unfair disadvantage compared with other non-EEA
producers (p 97, QQ 277, 292-5).

…

ASPECTS OF THE DIRECTIVE STILL UNDER NEGOTIATION

…

Application of the Directive to upstream transmission pipelines

106. We sympathise with the arguments of the Norwegian Government and gas producers
about the possible impact of the Directive on upstream activities, principally access to

7.1042. After a careful review of the UK House of Lords Report referred to by Russia, we do not
consider that it supports Russia's position that the upstream pipeline networks measure grants an
advantage to Norwegian natural gas within the meaning of A rticle I:1 of the GATT 1994. The
paragraphs of the UK House of Lords Report referred to by Russia, reflecting the discussions held
in the UK House of Lords, do not in any way connect the definition of upstream pipeline networks
in the Directive with the al leged efforts of the Norwegian government and natural gas industry to
obtain an "exemption" in order to "reduce the costs of transporting Norwegian -origin gas".1761 The
fact that the House of Lords "sympathise[d] with the arguments of the Norwegian Government and
gas producers about the possible impact of the Directive on upstream activities" 1762 does not in
and of itself establish such a connection. Even assuming that the discussions reflected in the parts
of the UK House of Lords Report referred to by Russia so mehow pointed to the intent of the
European Union to favour natural gas of Norwegian origin, it would not release Russia from its
burden to demonstrate how the alleged advantage is granted to natural gas of Norwegian origin
within the meaning of Article I:1 of the GATT 1994. Merely showing the discriminatory intent of the
regulator would be insufficient to establish a violation of Article I:1 of the GATT 1994.
7.1043. In view of the analysis conducted above, we consider that Russia has not demonstrated
that the leg al regime of the operators of upstream pipeline networks creates more favourable
conditions for the transportation of natural gas via upstream pipelines than via transmission
pipelines. This means that Russia cannot demonstrate that the upstream pipeline n etworks
measure grants an advantage to natural gas of any particular origin transported via upstream
pipelines within the meaning of Article I:1 of the GATT 1994. It is thus unnecessary for us to
proceed to the second prong of our analysis identified above in paragraph 7.1029.
7.9.2.3 Conclusion
7.1044. In view of the foregoing, we find that Russia has not established that the upstream
pipeline networks measure grants an advantage to natural gas of any particular origin, and
consequently, failed to demonstrate that this measure is inconsiste nt with Article I:1 of the
GATT 1994.
7.9.3 Russia's claim under Article III:4 of the GATT 1994
7.1045. In the context of its claim under Article III:4 of the GATT 1994, Russia argues that the
upstream pip eline network measure modifies the conditions of competition to the detriment of
Russian natural gas in comparison to domestic natural gas because the legal regime of the
operators of upstream pipeline networks creates more favourable conditions for the tr ansportation
of domestic natural gas via these networks than for the transportation of Russian natural gas via
transmission pipelines. 1763 Therefore, the issue of whether the legal regime of the operators of
upstream pipeline networks creates more favourable conditions for the transportation of natural
gas via upstream pipelines than via transmission pipelines is a central premise for Russia's claim
under Article III:4 of the GATT 1994. In advancing its claim under Article III:4, Russia does not
provide any arguments in addition to those submitted in the context of its claim under Article I:1
in order to demonstrate that the legal regime of the operators of upstream pipeline networks
creates more favourable conditions for the transportation of natural gas via u pstream pipelines
than via transmission pipelines.1764

transmission pipelines in the North Sea. In most cases, however, pipelines are natural
monopolies and the cost of transporting gas onshore represents a significant part of the final
price paid by the consumer. As a result of the refinement of the definition of transmission in
the 6 October text (see paragraph 21 above) it is now clear that, in the North Sea, only
transmission pipelines will be subject to the terms of the Directive. The Committee welcomes
this clarification. (UK House of Lords Report, (Exhibit RUS-116), paras. 45, 46 and 106).

1761 Russia's second written submission, para. 291.
1762 UK House of Lords Report, (Exhibit RUS-116), para. 106.
1763 Russia's first written submission, paras. 412–414; and second written submission, paras. 297–298.
1764 We note that Russia explicitly relies on the arguments developed in the context of its claim under
Article I:1 of the GATT 1994. Russia states that "[t]he same explanation as set forth in the preceding section
with regard to upstream pipeline networks and third-country gas applies equally to domestic-origin gas
produced in the European Union that is transported and sold on the EU market through what the Directive

7.1046. In the course of our assessment of Russia's claim under Article I:1, we have found that
Russia has not demonstrated that the legal regime of the operators of upstream pipeline networks
creates more favou rable conditions for the transportation of natural gas via upstream pipelines
than via transmission pipelines. 1765 We are aware of distinctions between Article I:1 and Article
III:4 of the GATT 1994, which are two separate legal provisions. However, given tha t both of
Russia's claims are premised on Russia's contention that the legal regime of the operators of
upstream pipeline networks creates more favourable conditions for the transportation of natural
gas via upstream pipelines than via transmission pipelin es, our conclusion that Russia has not
proved this contention in the context of its claim under Article I:1 also leads us to consider that
Russia has not proved this contention for the purposes of its claim under Article III:4. Without
proving this content ion, Russia cannot establish that the upstream pipeline networks measure
accords to Russian natural gas transported via transmission pipelines treatment less favourable
than that accorded to domestic natural gas transported via upstream pipelines, in breac h of Article
III:4 of the GATT 1994.1766
7.1047. Therefore, in light of how Russia has developed its discr imination claims under the
GATT 1994 against the upstream pipeline networks measure, we conclude that Russia has not
demonstrated that this measure is inconsistent with Article III:4 of the GATT 1994.
7.9.4 Russia's additional claim against the upstream pipeline networks measure
7.1048. In addition to its claims against the upstream pipeline networks measure focused on the
differences in the general legal regime of the operato rs of upstream pipeline networks and TSOs
under the Directive, 1767 Russia submits a claim focused on the comparison of the general legal
regime of the operators of upstream pipeline networks under the Directive with the specific legal
regime of the operators of the NEL and OPAL pipelines pursuant to the exemption decisions under
Article 36 of the Directive.
7.1049. In advancing this claim, Russia argues that, while the operators of upstream pipeline
networks are "automatically exempted" from the rules on unbundling, third-party access and tariff
regulation rules under the Directive, the Commission denied the exemptions from the third -party
access and tariff regulation rules to the operator of the NEL pipeline and attached conditions to the
granting of such exemptions to the operator of the OPAL pipeline. 1768 According to Russia, as a
result, imported natural gas originating in third countries and transported through upstream
pipelines is granted an advantage within the meaning of Article I:1 of the GATT 1994 that is not
accorded to natural gas originating in Russia and transported through the OPAL and NEL
pipelines.1769 Russia thus submits that "this separate claim demonstrates yet another violation by
the EU of its obligations under Article I:1 of the GATT 1994".1770
7.1050. We recall that we have already found that Russia's failure to demonstrate that the
differences in the general legal regime of upstream pipeline networks and TSOs under the
Directive create more favourable conditions for the transportation of natural gas via upstream
pipelines than via transmission pipelines. 1771 On this basis, we ha ve concluded above in
paragraph 7.1044 that Russia has not established that the upstream pipeline networks measure
grants an advantage to imported natural gas of any particular origi n within the meaning of
Article I:1 of the GATT 1994. These findings also inform our assessment below.
7.1051. We understand that, in the context of the present claim, R ussia argues that the
advantage allegedly granted to natural gas transported through upstream pipelines stems from the
fact that the operators of upstream pipeline networks are not subject to the unbundling obligation,
tariff regulation rules and the third -party access rules of Article 32 of the Directive, while the

defines as upstream pipeline networks" (Russia's first written submission, para. 412; and second written
submission, para. 297).
1765 See above para. 7.1044.
1766 Taking into account our findings above in paragraphs 7.536 and 7.1015, the upstream pipeline
measure falls within the scope of Article III:4 of the GATT 1994, and domestic natural gas and Russian natural
gas are like products within the meaning of Article III:4 of the GATT 1994.
1767 See above paras. 7.1007 and 7.1045.
1768 Russia's first written submission, para. 734; and second written submission, para. 432.
1769 Russia's first written submission, para. 736; and second written submission, para. 432.
1770 Russia's second written submission, para. 433.
1771 See above para. 7.1043.

operator of the NEL pipeline was denied an exemption from the tariff regulation rules and Article
32 of the Directive. We note that the NEL pipeline is a transmission pipeline. Therefore, not be ing
granted an exemption under Article 36 of the Directive, the operator of this pipeline is subject to
the general rules of the Directive applicable to TSOs. We have already found that the differences in
the general legal regime of the Directive applicable to the operators of upstream pipeline networks
and TSOs do not result in granting an advantage within the mea ning of Article I:1 of the
GATT 1994 to imported natural gas of any origin transported through upstream pipelines. 1772 In
light of this finding, the denial of the mentioned exemption to the operator of the NEL pipeline,
which results in the application of the general rules of the Directive to the operator of this
transmission pipeline, cannot lead to granting an advantage to imported natural gas of any origin
within the meaning of Article I:1 of the GATT 1994.
7.1052. As for the OPAL pipeline operator, we recall that the exemption from the tariff regulation
rules and third-party access rules of Article 32 of the Directive was granted to the operator of this
pipeline subject to a 50% capacity cap and 3 bcm/year gas release programme.1773 We understand
Russia to argue that, because the operators of upstream pipelines are "automatically exempted"
from the rules on unbundling, third -party access and tariff regulation rules under the Directive,
while the exemption granted to the operator of the OPAL pipeline is subject to these conditions,
imported natural gas transported through the former pipelines is granted an advantage within the
meaning of Article I:1 of the GATT 1994.1774
7.1053. There are certain similarities and differences in the legal regime of the operators of
upstream pipelines under the general rules of the Directive, on the one hand, and the legal regime
of the operator of the OPAL pipeline under the exemption decis ion under Article 36 of the
Directive, on the other. First, the operators of both types of infrastructure are not subject to the
tariff regulation rules and third -party access rules of Article 32 of the Directive. However, under
the general rules of the Di rective, the operators of upstream pipeline networks are required to
provide third -party access in accordance with Article 34 of the Directive, 1775 while no such
obligation applies to the operator of the OPAL pipeline. Second, the operators of upstream pipeli ne
networks are not subject to the unbundling obligation of the Directive, while this obligation applies
to the operator of the OPAL pipeline. 1776 Third, the operator of the OPAL pipeline is subject to a
50% capacity cap and 3 bcm/year gas release programme, while no such requirements apply to
the operators of upstream pipeline networks.
7.1054. We note, however, that Russia offers no explanation as to how the application of the
separate, and somewhat different, legal regimes to the operators of upstream pipeline net works
and the operator of the OPAL pipeline grants an advantage within the meaning of Article I:1 of the
GATT 1994 to imported natural gas of any origin. It is well established that Article I:1 of the GATT
1994 protects the equality of competitive opportunities of products 1777, rather than the operators
of the infrastructure used to transport such products. Thus, in order to establish a prima facie case
of a violation of this provision, a complainant needs to demonstrate that the challenged measure
modifies the conditions of competition to the detriment of imported products of any origin. The
differences in the regulatory treatment of the operators of the infrastructure used to transport
these products, in and of themselves, would not be sufficient to establish a violation of Article I:1
of the GATT 1994. While Russia has pointed to the differences in the legal regimes applicable to
the operators of upstream pipeline networks and the operator of the OPAL pipeline, it has not
demonstrated how these differences affect the conditions of competition of imported natural gas of
Russian or any other origin. Therefore, we consider that Russia has failed to make a prima facie
case of a violation of Article I:1 of the GATT 1994.
7.1055. In view of the foregoing, we conclu de that Russia's separate claim against the upstream
pipeline networks measure based on the comparison of the general legal regime of the operators
of upstream pipeline networks under the Directive with the specific legal regime of the operators of
the NEL and OPAL pipelines pursuant to the infrastructure exemption decisions under Article 36 of

1772 See above para. 7.1043.
1773 See above para. 7.983.
1774 Russia's first written submission, paras. 734 and 736.
1775 See above para. 7.1040.
1776 See above para. 7.983.
1777 Appellate Body Reports, EC – Seal Products, paras. 5.82 and 5.87.

the Directive does not demonstrate a violation by the European U nion of Article I:1 of the
GATT 1994.
7.10 The third-country certification measure
7.10.1 The third-country certification measure in the Directive
7.10.1.1 Introduction
7.1056. Russia challenges the third -country certification measure in the Directive, described in
paragraph 2.46 above, under Article II:1 of the GATS. In its written submissions, Russia has
developed both a claim of de jure violation1778 and a claim of de facto violation1779 against the
third-country certification measure in the Directive. The European Union rejects both claims and
has, alternatively, raised defences under Articles V 1780 and XIV(a)1781 of the GATS in respect of
Russia's claim of de jure violation, but not in respect of Russia's claim of de facto violation.
7.1057. In our Preliminary Ruling of 10 November 2016, we found that Russia's claim of de jure
violation under Article II:1 of the GATS, as developed in its first written submission, falls outside
our terms of reference, but that the claim of de jure violation presented in Russia's panel request
falls within our terms of reference.1782
7.1058. In its second written submission, Russia has developed a claim of de jure violation based
on that presented in its panel request, claiming th at the alleged less favourable treatment of
Russian pipeline transport services and service suppliers in comparison with like pipeline transport
services and service suppliers of EU member States violates the MFN obligation in Article II:1 of
the GATS as "each such Member State is also a Member of the WTO".1783
7.1059. Following the second meeting of the Panel, however, Russia has explained that it asserts
this claim of de jure violation on an alternative basis and that it would not be necessary for the
Panel to addr ess this claim if it were to agree with Russia that the unbundling measure in the
Directive should be assessed on an EU-wide basis.1784
7.1060. In this regard, we recall that we have found, in section 7.5.1.2 above, that the WTO
consistency of the unbundling measure in the Directive should be assessed throughout the EU
territory rather than within each individual EU member State. We further recall that a complaining
party has "the prerogative to narrow or abandon its claims, and thereby reduce the scope of its
disagreement and dispute, at any stage of a proceeding". 1785 In light of this, we do not consider it
necessary or appropriate to address Russia's claim of de jure violation under Article II:1 of the
GATS against the third -country certification measure in the Directive. It is therefore also not
necessary for us to address the defences raised by the European Union under Articles V and XIV(a)
of the GATS in respect of this claim.
7.1061. We therefore proceed to consider solely Russia's claim of de facto violation under
Article II:1 of the GATS against the third -country certification measure in the Directive. In this
regard, we recall that, in section 7.2.2.3.3 above, we have found certain aspects of Russia's claim,
as developed in its written submissions, to fall outside our terms of reference. Accordingly, we do
not address these below but instead focus our assessment on the claim that falls within our terms
of reference, namely the alleged de facto less favourable treatment of Russian pipeline transport
services and service suppliers stemming from the Commission, when reviewing and providing
opinions on draft certification decisions by NRAs, requiring a security of energy supply assessment

1778 Russia's first written submission, paras. 446-454; and second written submission, paras. 326-330.
1779 Russia's first written submission, paras. 455-500; and second written submission, paras. 331-356.
1780 European Union's responses to Panel question No. 153, para. 27, and No. 205(a), paras. 172-188.
1781 European Union's response to Panel question No. 153, para. 28.
1782 Preliminary Ruling (conclusions) of 10 November 2016, para. 2.2. See also section 7.2.2.2.4 above
wherein reasons in support of this conclusion are provided.
1783 Russia's second written submission, paras. 326-330.
1784 Russia's response to Panel question No. 202(b), paras. 237 and 247.
1785 Appellate Body Report, US – Countervailing Measures (China), para. 4.19 (referring to Appellate

for certifications concerning Russian pipeline transport service suppliers but not for certifications
concerning pipeline transport service suppliers of any other non-EU country.
7.1062. We also wish to clarify that although Russia seeks to demonstrate its claim of de facto
violation under Article II: 1 of the GATS by "contrasting" different individual Commission opinions
concerning third-country certification1786, Russia has repeatedly explained that it is challenging the
third-country certification measure in Article 11 of the Directive per se or "as such".1787
7.10.1.2 Analysis by the Panel of Russia's claim under Article II:1 of the GATS
7.1063. In accordance with the legal standard for Article II:1 of the GATS, set out in
paragraphs 7.226 and 7.227 above, our assessment below will focus on whether Russia has made
a prima facie case that: (a) the third-country certification measure in the D irective falls within the
scope of the GATS; (b) the relevant services and service suppliers are like; and (c) the third -
country certification measure in the Directive accords less favourable treatment to Russian
services and service suppliers than that ac corded to the like services and service suppliers of any
other country.
7.1064. We address these requirements, in turn, below.
7.10.1.2.1 Scope of the GATS
7.1065. As explained above, Article I:1 of the GATS sets out the scope of this Agreement as
applying to "measures by Members af fecting trade in services", which requires Russia to
demonstrate: (a) that "there is 'trade in services' in the sense of Article I:2"; and (b) that the
third-country certification measure in the Directive "'affects' such trade in services within the
meaning of Article I:1".1788
7.1066. Russia has identified pipeline transport services as the relevant services 1789 and mode 3
or commercial presence, within the meaning of Article I:2(c) of the GATS, as the relevant mode of
supply.1790 In this regard, we recall that we have already found, in paragraph 7.407 above, that
such pipeline transport services can be and are supplied through commercial presence in the EU
territory and hence that there can be and is trade in pipeline transport services.
7.1067. Turning to whether the third-country certification measure in the Directive affects trade in
pipeline transport services, we note that this measure imposes requirements for the certification of
TSOs where "certification is requested by a transmission syste m owner or a transmission system
operator which is controlled by a person or persons from a third country or third countries". 1791 As
explained in paragraphs 7.433 and 7.441 through 7.446 above, persons from non -EU countries
supply pipeline transport services through the commercial presence of TSOs in the EU territory. As
the third -country certification measure sets out the requirements for TSOs to be certified and
hence permitted to supply pipeline transport services in the EU territory, i t therefore affects trade
in such pipeline transport services.
7.1068. In light of this, we conclude that the third -country certification measure in the Directive
falls within the scope of the GATS.

1786 Russia's first written submission, para. 459.
1787 Russia's comments on the European Union's comments on Russia's response to Panel question
Nos. 5 and 17, para. 51; and second written submission, para. 331. We further note that, although Russia's
approach of "contrasting" individual opinions by the Commission resembles the approach taken by Russia in
respect of its claims under Article II:1 of the GATS and Article I:1 of the GATT 1994 against the so-called
infrastructure exemption measure, the nature of the challenged measure differs for these claims as Russia has
specified that it is not challenging the infrastructure exemption measure in Article 36 per se but rather the
alleged "inconsistent" or "discriminatory" "manner in which the EU applied or implemented" Article 36 of the
Directive. (Russia's first written submission, paras. 730-731; and responses to Panel question No. 5, para.
1788 Appellate Body Report, Canada – Autos, para. 155.
1789 Russia's first written submission, para. 443.
1790 Russia's response to Panel question No. 56, para. 285.
1791 Directive 2009/73/EC, (Exhibit EU-5), Article 11(1).

7.10.1.2.2 Like services and service suppliers
7.1069. As explained in paragraphs 7.226 and 7.227 above, the MFN obligation in Article II:1 of
the GATS applies only with respect to services and service suppliers that are like and we therefore
turn to the issue of whether Russia has made a prima facie case that the relevant services and
service suppliers are like within the meaning of Article II:1 of the GATS.
7.1070. Russia sta tes that "for purposes of analyz ing the de facto third-country certification
measure claim set out below in Section XV.C.2 under Article II:1 of the GATS, domestic and third -
country pipeline transport services and service suppliers, including LNG services and service
suppliers, are in a competitive rela tionship with each other and thus satisfy the 'likeness'
requirements on this basis". 1792 As with certain other claims by Russia, it is therefore not clear
whether the relevant services and service suppliers, for purposes of Russia's claim under Article
II:1 of the GATS against the third -country certification measure in the Directive, include both
pipeline transport services and service suppliers as well as LNG services and service suppliers. We
therefore consider it helpful to determine the scope of the liken ess enquiry to be conducted for
Russia's claim against the third -country certification measure in the Directive under Article II:1 of
the GATS, before turning to the actual assessment of likeness.
7.1071. We recall that Russia's claim pertains to the alleged less favourable treatment of Russian
pipeline transport services and service suppliers stemming from the Commission requiring a
security of energy supply assessment for certifications concerning Russian pipeline transport
service suppliers but not for certifica tions concerning pipeline transport service suppliers of any
other non-EU country. It is undisputed that the rules on certification apply with respect to TSOs
only, be that those in Article 10 of the Directive or those in Article 11 in relation to third co untries.
Neither of the parties suggests that these rules apply with respect to operators of LNG facilities.
Furthermore, we note that Russia, with the exception of the above -mentioned brief reference to
LNG services and service suppliers in the context of its arguments concerning likeness 1793, does
not rely on any example or argumentation with respect to LNG services or service suppliers in
arguing that the third -country certification measure in the Directive accords less favourable
treatment in violation of Article II:1 of the GATS.
7.1072. For these reasons, we find that pipeline transport services and service suppliers are the
only relevant ones for Russia's claim against the third -country certification measure in the
Directive under Article II:1 of the GATS. It is therefore not necessary or relevant for us to
consider, in the context of this claim, whether pipeline transport services and service suppliers are
like LNG services and service suppliers.
7.1073. Having determined that the scope of our likeness enquiry should be limited to pipeline
transport services and service suppliers, we proceed to consider the actual assessment of likeness.
As mentioned above, Russia's claim under Article II:1 of the GATS against the third -country
certification measure in the Directive pert ains to the alleged less favourable treatment of Russian
pipeline transport services and service suppliers stemming from the Commission requiring a
security of energy supply assessment for certifications concerning Russian pipeline transport
service suppli ers but not for certifications concerning pipeline transport service suppliers of any
other non -EU country. We have already concluded that pipeline transport services and service
suppliers are like regardless of their origin in the context of Russia's clai m under Article II:1 of the
GATS against the unbundling measure in the Directive. 1794 We see nothing on the record of these
proceedings that would suggest that this analysis would differ in the context of Russia's claim
under Article II:1 of the GATS against the third-country certification measure and the parties do
not argue otherwise.1795

1792 Russia's first written submission, para. 445.
1793 Russia's first written submission, para. 445.
1794 See above paras. 7.421-7.422.
1795 Russia's first written submission, para. 445. The European Union does not explicitly address likeness
in the context of Russia's claim against the third-country certification measure in the Directive under
Article II:1 of the GATS, but states more generally that it "does not dispute that Russian and other third
country suppliers of pipeline transport services are 'like' suppliers" in the context of Russia's claim against the
unbundling measure in the Directive under this provision. (European Union's first written submission,
para. 282).

7.1074. In light of the above, we hence conclude that the relevant services and service suppliers
are like within the meaning of Article II:1 of the GATS. Having made this finding of likeness, we
proceed to assess whether Russia has demonstrated that the third-country certification measure in
the Directive accords less favourable treatment to Russian pipeline transport services and service
suppliers than that accorded to pipeline trans port services and service suppliers of any other non -
EU country.
7.10.1.2.3 Less favourable treatment
7.1075. Russia argues that the third -country certification measure in the Directive accords de
facto less favourable treatment to Russian pipeline transport services and ser vice suppliers than
that accorded to the like pipeline transport services and service suppliers of any other non -EU
country due to the "double standard" 1796 or "differential treatment accorded by the Commission
and the Member States in implementing the third -country certification measure ".1797 More
specifically, and as explained above, this claim concerns the alleged less favourable treatment of
Russian pipeline transport services and service suppliers stemming from the Commission requiring
a security of energy supply assessment for certifications concerning Russian pipeline transport
service suppliers, but not for certifications concerning pipeline transport service suppliers of any
other non -EU country. Russia seeks to demonstrate thi s alleged "double standard" or de facto
discrimination:
[B]y contrasting each of the five instances in which other third -country certification
requests have been granted, while the Commission repeatedly directed the Polish NRA
to reassess the security of supply issue regarding the IS O request of Gaz-System and
Yamal.1798
7.1076. More particularly, Russia "contrast[s]" the certification of Gaz -System as the ISO of the
Yamal pipeline in Poland with those of jordgas as the ITO of the Norddeutsche Erdgas Transversale
Pipeline System (NETRA pipeline) in Germany, TAP AG as the " ad hoc ITO" of the TAP pipeline in
Greece and Italy , NABUCCO Gas Pipeline International GmbH ( NIC) as the TSO of the Nabucco
pipeline in Austria, TIGF as the TSO of the TIGF network in France, and DESFA as the ITO of the
Greek transmission system in Greece.1799
7.1077. The European Union rejects Russia's claim of de facto violation by criticizing each of the
examples relied on by Russia. More particularly, the European Union argues that the example of
Gaz-System being subject to a security of energy supply assessment under the third -country
certification measure in Article 11 of the Directive does not involve a Russian pipeline transport
service supplier1800, that Russia's argumentation concerning jordgas and NIC not being subject to a
security of energy supply assessment is "misguided because it overlooks" the fact that the third -
country certification measure in Article 11 of the Directive was not "applicable" when these
requested certification1801, and that Russia's argumentation concerning TAP A G not being subject
to a security of energy supply assessment is "manifestly unfounded" as "[t]he situation at issue in
TAP was very different from that considered in Gaz-System".1802
7.1078. As explained above in section 7.2.2.3.3, the European Union has raised a terms of
reference objection concerning the examples of TIGF and DESFA as these concern the content or
strictness of the Commission's security of energy supply assessments1803, and submits that the

1796 Russia's second written submission, para. 342.
1797 Russia's first written submission, para. 459.
1798 Russia's first written submission, para. 459.
1799 Russia's first written submission, paras. 457 and 460-500.
1800 European Union's first written submission, paras. 582-584; and second written submission,
paras. 232-234.
1801 European Union's first written submission, paras. 597-598 (concerning jordgas) and 605-606
(concerning NIC).
1802 European Union's first written submission, paras. 602-603.
1803 European Union's first written submission, paras. 578-581; and second written submission,
paras. 229-231.

difference in the content or strictness of the security of energy supply assessments is, in any
event, explained by the "fundamentally different factual situations".1804
7.1079. We begin our assessment of the alleged less favourab le treatment challenged by Russia
by recalling that the third-country certification measure in the Directive requires the relevant NRAs
to adopt a draft decision concerning certification of TSOs when such certification is requested by a
transmission system owner or a TSO, which is "controlled by a person or persons from a third
country or third countries", and to notify the Commission of this draft decision. 1805 The relevant
NRA can request an opinion from the Commission concerning, among others, whether certi fication
"will not put at risk the security of energy supply". 1806 If the Commission does not provide an
opinion, it is "deemed not to raise objections to the decision of the regulatory authority" but if the
Commission does provide an opinion, the relevant NR A is required to "take utmost account of the
Commission's opinion" in adopting its final decision.1807
7.1080. As explained above, Russia's claim of de facto violation under Article II:1 of the GATS is
based on "contrasting" the Commission opinion regarding certification of Gaz-System with "each of
the five instances in which other third-country certification requests have been granted".1808
7.1081. In this regard, we reiterate our concerns regarding Russia's approach of seeking to
demonstrate the WTO consistency of an underlyin g measure by only pointing to examples of its
application.1809 As explained above, Russia is required to demonstrate, on the basis of "the totality
of facts and circumstances" 1810, that "the design, structure, and expected operation" 1811 of the
third-country certification measure in Article 11 of in the Directive are such that the conditions of
competition are modified to the detriment of the group of Russian pipeline transport services and

1804 European Union's first written submission, paras. 608-612 (concerning TIGF) and 613-616
(concerning DESFA).
1805 Directive 2009/73/EC, (Exhibit EU-5), Articles 11(3) and 11(4).
1806 Directive 2009/73/EC, (Exhibit EU-5), Article 11(5).
1807 Directive 2009/73/EC, (Exhibit EU-5), Articles 11(6) and 11(8). We note that Russia is of the view
that "the Commission retains authority under the Directive and more generally to restrict" EU member States
from granting certification when the Commission has "reach[ed] a contrary decision", whereas the European
Union argues that the relevant NRAs are not legally bound by opinions by the Commission but only required to
"take utmost account" of such. (Russia's first written submission, para. 458; and European Union's first written
submission, para. 587). In support of its position, Russia refers to the European Commission's Fact Sheet on
Intergovernmental Agreements on Energy, which provides that:
The whole idea of an obligatory ex -ante assessment of by the Commission is to avoid the
situation where Member States sign agreements which are not compatible with EU law. Firstly,
the revised IGA Decision would ensure cooperation between the Commission and the Member
State by initiating a dialogue on potential non -compliance with EU law. Secondly, under the new
Decision Member States will not be able to sign an IGA before the Commission has issued its
opinion. When signing, ratifying or agreeing an IGA, the Member States will have to take utmost
account of the Commission's opinion. Should a Member State decide to sign an IGA that would
be incompatible with EU law, the Commission would have the possibility to laun ch infringement
procedures. (Russia's response to Panel question No. 20, para. 118 (quoting European
Commission Fact Sheet, Intergovernmental agreements in energy (16 February 2016), (Exhibit
RUS-122), p. 2). (emphasis added by Russia)
We agree with the European Union that there is no basis in the Directive for us to conclude that the
opinions of the Commission are legally binding on NRAs and that this conclusion is not altered by Russia's
reference to the Commission's Fact Sheet on Intergovernmental Agreement and the possibility, mentioned
herein, of the Commission launching infringement procedures in case an EU member State signs an
intergovernmental agreement incompatible with EU law. (European Union's second written submission,
paras. 236-238). At the same time, we do not agree with the European Union that "only [the final certification
decisions issued by the NRAs] are capable of affecting the legal status of the applicant TSOs under the
Directive and hence their competitive opportunities". (European Union's first written submission, para. 588). As
acknowledged by the European Union, the relevant NRAs are required to "take utmost account" of the
Commission opinions and such opinions could therefore potentially impact the final decisions of the relevant
NRAs and hence the competitive opportunities of pipeline transport service suppliers. It is this impact of the
Commission opinions that we take into account when assessing Russia's claim under Article II:1 of the GATS
against the third-country certification measure in the Directive.
1808 Russia's first written submission, para. 459.
1809 See, above paras. 7.486-7.492.
1810 Appellate Body Reports, US – COOL, para. 269 (quoting Appellate Body Report, US – Clove
Cigarettes, para. 206).
1811 Appellate Body Reports, US – COOL, para. 269 (quoting Appellate Body Report, Thailand –
Cigarettes (Philippines), para. 130).

service suppliers in comparison with the group of pipeline transport service s and service suppliers
from any other non -EU country.1812 Although examples o f specific instances of application could
serve as relevant evidence in this regard, it would be for Russia, as the complaining party, to
expound that these serve to demonstrate tha t the third-country certification measure in Article 11
of the Directive is, as such, of a discriminatory nature. Below we assess whether Russia has done
so.
7.1082. We begin by examining the one example provided by Russia to demonstrate alleged less
favourable tr eatment of a Russian pipeline transport service s upplier, namely the Commission
opinions concerning certification of Gaz-System as the ISO of the Yamal pipeline.1813 Russia argues
that the Polish NRA, in its first draft decision, did not consider that the own er of Yamal,
Europolgaz, was controlled by persons from a non -EU country within the meaning of the Directive
and therefore did not conduct a security of energy supply assessment under the third -country
certification measure, following which the Commission opined that a security of energy supply
assessment was required as a person from a non -EU country, Gazprom, had joint control over
Europolgaz.1814 Following a second draft decision by the Polish NRA , in which it determined that
the effects of Gazprom's joint control over Europolgaz did not "translate into control over the
network", the Commission opined that a "true risk assessment" under Artic le 11 had not been
carried out and that this assessment needed to be extended.1815, 1816

1812 See, above paras. 7.486-7.492.
1813 We note that Russia, after the first meeting of the Panel, has pointed to a "second situation" or
example to demonstrate less favourable treatment of Russian pipeline transport services and service suppliers
under the third-country certification measure in the Directive, namely that of Lietuvos dujos in Lithuania. We
recall that this is also one of the examples relied upon by Russia when challenging the unbundling measure in
the Directive under Article II:1 of the GATS. (See, above fn 884). As explained in this regard, Lietuvos dujos
operated the transmission system in Lithuania prior to the implementation of the unbundling measure, after
which its transmission assets were incorporated in the TSO Amber Grid. Gazprom then sold its shares in Amber
Grid. In the context of its claim against the third-country certification measure under Article II:1 of the GATS,
Russia argues that Lietuvos dujos was "denied an opportunity to apply for certification" by virtue of having
been found not to comply with the rules on ownership unbundling in Lithuania. (Russia's second written
submission, para. 339. See also Russia's response to Panel question No. 73, para. 324). We begin by recalling
that we expressed doubts, in paragraphs 7.497 through 7.501 above, as to whether this example involves a
Russian pipeline transport service supplier. We further note the European Union's position that it "is at a loss to
understand the new issue raised by Russia" and that the third-country certification measure in Article 11 of the
Directive "is different from the unbundling requirements and applies to all entities within the scope of the
provision, irrespective of the unbundling model." (European Union's second written submission, paras. 248-
249). We too have difficulties understanding the relevance of this situation or example for Russia's claim
against the third-country certification measure in the Directive. As Russia itself acknowledges, Lietuvos dujos
did not apply for certification under the third-country certification measure in Article 11 or the rules on
domestic certification in Article 10 since its transmission assets were incorporated in the TSO Amber Grid and
Gazprom hereafter sold its shares in Amber Grid pursuant to the OU model. The fact that Lietuvos dujos was
"prevent[ed] … from applying for certification under one of the unbundling models" appears entirely irrelevant
for the assessment of whether the third-country certification measure led to de facto less favourable treatment
of Russian pipeline transport services and service suppliers. More particularly, assuming that Lietuvos dujos
had complied with the rules under the OU model in Lithuania, there does not appear to be any reason to
believe that this entity would have received different treatment than TSOs owned or controlled by persons from
other non-EU countries when seeking certification.
1814 Russia's first written submission, paras. 461-462.
1815 Commission Opinion of 19 March 2015 pursuant to Article 3(1) of Regulation (EC) No. 715/2009 and
Article 10(6) and 11(6) of Directive 2009/73/EC – Poland – Certification of Gaz-System as the operator of the
Polish section of Yamal-Europe Pipeline, (Commission opinion on the certification of Gaz-System II), (Exhibit
RUS-73), p. 5.
1816 We note that the European Union submits that "Russia's argument is based, to a large extent, on
the assumption that the Commission 'has still not issued a final opinion' on the certification of Gaz-System", an
assumption that the European Union points out to be mistaken since the Polish NRA has issued a final decision
granting certification following the two opinions provided by the Commission. (European Union's first written
submission, paras. 589-594 (quoting Russia's first written submission, para. 479)). Russia does not dispute
that Gaz-System has been certified as the ISO of the Yamal pipeline under the third-country certification
measure in Article 11 of the Directive, but argues that this "is not the issue" and that "[t]he issue concerns the
differential treatment provided by the Commission in considering the Gaz-System application". (Russia's
second written submission, para. 339). Seeing as Russia's claim under Article II:1 of the GATS against the
third-country certification measure pertains to the alleged less favourable treatment of Russian pipeline
transport services and service suppliers stemming from the Commission requiring a security of energy supply
assessment for certifications concerning Russian pipeline transport service suppliers but not for certifications
concerning pipeline transport service suppliers of any other non-EU country, we do not consider the fact that

7.1083. The European Union argues that this one example relied on by Russia does not involve a
Russian pipeline transport service supplier at all. 1817 We recall that this example involves the
certification request for Gaz-System as the operator, also known as the ISO, of the Yamal pipeline
under the I SO model.1818 We further recall that under the ISO model, a VIU continues to own,
directly or indirectly, the transmission system but the ISO is required to be separate from the VIU
by complying with the rules on ownership unbundling. 1819 In the case of the Yama l pipeline, Gaz-
System serves as the ISO and Europolgaz as the owner of this transmission system. Both parties
agree that the ISO Gaz -System is wholly -owned by the Polish Government and cannot be
considered a Russian pipeline transport service supplier nor a commercial presence through which
Russian pipeline transport services are supplied within the meaning of the GATS.1820 Russia instead
submits that the Russian VIU Gazprom "supplies pipeline transport services through Europolgaz, a
commercial presence in th e EU, based on Gazprom's joint ownership and control of
Europolgaz".1821
7.1084. We have already addressed the issue of whether the owner of a transmission system can
be considered to supply pipeline transport services under the ISO model in general, when the
owner d oes not operate the transmission system under this particular unbundling model. In
paragraphs 7.460 through 7.466 above, we found that Article XXVIII(b) of the GATS defines the
"supply of a service" as including "the production, distribution, marketing, sale and delivery of a
service" and that Russia has not demonstrated, gen erally, that the owner of the transmission
system produces, distributes, markets, sells or delivers pipeline transport services under the ISO
model. We consider this finding to be relevant also for the specific issue of whether the Russian
VIU Gazprom can be considered to supply pipeline transport services through the transmission
system owner Europolgaz. At the same time, we note that Russia has submitted certain additional
arguments concerning the specific issue of whether the Russian VIU Gazprom can be considered to
supply pipeline transport services through the transmission system owner Europolgaz, and we
proceed to address these.
7.1085. First, Russia points out that "the EU as a whole is the relevant market for assessing
Russia's MFN claims " and that the Euro pean Union has acknowledged that the Russian VIU
Gazprom supplies pipeline transport services through certain other TSOs in the EU territory,
namely NEL GT, OPAL GT and GASCADE.1822 On the basis of this, Russia appears to conclude that
"Gazprom thus supplies pipeline transport services through Europolgaz, a commercial presence in
the EU". 1823 While Russia is correct in stating that it is undisputed among the parties that the
Russian VIU Gazprom supplies pipeline transport services through the commercial presence of
these three TSOs1824, we cannot agree that this, in and of itself , would suffice to demonstrate that
Gazprom also does so through the transmission system owner Europolgaz.
7.1086. Second, Russia points to the fact that the Commission required Gaz -System to undergo
third-country certification pursuant to Article 11 of the Directive due to Gazprom's "joint ownership
and control" over Europolgaz .1825 We understand Russia to suggest that this indicates that the
Commission considered that Gazprom supplies pipeline transport services through the commercial
presence of Europolgaz. However, Article 11 of the Directive explicitly calls for third -country
certification "[w]here certification is requested by a transmission system owner or a transmission
system operator whi ch is controlled by a person or persons from a third country or third
countries".1826 We therefore do not consider the application of Article 11 decisive or relevant for

Gaz-System was ultimately certified, after having undergone a security of energy supply assessment,
detrimental to Russia's claim.
1817 European Union's first written submission, paras. 582-584; and second written submission,
paras. 232-234.
1818 Russia's first written submission, paras. 460-463; and second written submission, paras. 333-339.
1819 Directive 2009/73/EC, (Exhibit EU-5), Article 14(2)(a).
1820 Russia's response to Panel question No. 52, para. 268; and second written submission, para. 333;
and European Union's first written submission, paras. 582-583.
1821 Russia's response to Panel question No. 52, para. 268.
1822 Russia's second written submission, para. 336.
1823 Russia's second written submission, para. 338.
1824 Russia's response to Panel question No. 52, para. 265; and second written submission, para. 336;
and European Union's first written submission, paras. 338-341; and response to Panel question No. 52,
para. 143.
1825 Russia's second written submission, paras. 334 and 338; and response to Panel question
No. 204(a), para. 249.
1826 Directive 2009/73/EC, (Exhibit EU-5), Article 11(1). (emphasis added)

the assessment of whether Gazprom can be considered to supply pipeline transport services
through Europolgaz.
7.1087. Third, Russia argues that:
Europolgaz supplies services under historical long -term gas transmission contracts
pursuant to relevant provisions of the intergovernmental agreement between Russia
and Poland of 1993 (as amended in 2010) and the respective operatorship agreement
between Europolgaz and Gaz-System.1827
7.1088. While Russia [***].1828 Russia points to several statements by the Polish NRA that do
indeed suggest that Europolgaz supplies pipeline transport services, in particular that:
[***].1829
7.1089. We find it curious for the Polish NRA to make such statements while, at the same time,
having certified Gaz -System as the ISO under the ISO model: a model which, as explained in
paragraphs 2.13 through 2.19 above, requires the ISO, rather than the owner of the transmission
system, to operate the transmission system 1830 and to provide access for third parties to the
transmission system.1831 Indeed, this model requires the ISO to be separate from the owner by
complying with the rules under the OU model 1832 and Article 14(4) of the Directive explicitly states
that "[t]he transmi ssion system owner shall not be responsible for granting and managing third -
party access".
7.1090. At the same time, we note the European Union's explanation that the "unrelated matter",
which the Polish NRA addressed in the correspondence referred to by Russia, concerned "certain
historical transmission contracts" 1833, which we understand to be those between Europolgaz, on
the one hand, and JSC "PGNiG" and OOO "Gazprom export", on the other hand. Russia does not
elaborate on what the "unrelated matter" relates to, a nd we consider the European Union's
explanation reasonable in light of the conclusion reached by the Polish NRA that "Europolgaz shall
submit to ACER a request for [the] contracts [concluded with JSC 'PGNiG' and OOO 'Gazprom
export']".
7.1091. We agree with the European Union that the Polish NRA's statements "must be understood
within [the] limited context" of these historical contracts 1834 and in this regard note the European
Union's arguments that "Europolgaz remains formally responsible for the execution of certai n
historical transmission contracts, but only until their expiration"1835 and that:
Europolgaz's responsibility for the execution of those historical contracts does not
involve any activities with regard to the operation of the pipeline. Europolgaz remains
formally a party to those historical contracts from a legal point of view and is
therefore legally responsible for their execution. But Europolgaz does not "execute"
them in the sense of undertaking by itself any action with a view to transmitting the
gas since, as stated above, Gaz -System is the entity solely responsible for operation
of flows on the pipeline. Europolgaz's responsibility only means that if one of the
historical contracts was not properly executed as a result of the TSO's (i.e. Gaz -
System's) actions, the gas supplier could lodge a claim against Europolgaz.1836

1827 Russia's response to Panel question No. 204(a), para. 249.
1828 Russia's response to Panel question No. 204(a), para. 250.
1829 Russia's response to Panel question No. 204(a), para. 250. We note that Russia has provided [***]
in Exhibit RUS-206 (BCI), which is in Polish with no translation. Russia has provided translations only of the
sections quoted in its response to Panel question No. 204(a). The European Union does not appear to take
issue with the translation provided by Russia.
1830 Directive 2009/73/EC, (Exhibit EU-5), Articles 13(1)(a) and 14(2)(b).
1831 Directive 2009/73/EC, (Exhibit EU-5), Article 14(4).
1832 Directive 2009/73/EC, (Exhibit EU-5), Article 14(2)(a).
1833 European Union's comments on Russia's response to Panel question No. 204(a), para. 124.
1834 European Union's comments on Russia's response to Panel question No. 204(a), para. 125.
1835 European Union's comments on Russia's response to Panel question No. 204(a), para. 124.
1836 European Union's comments on Russia's response to Panel question No. 204(a), para. 124.

7.1092. Indeed, at times, Russia appears to echo the European Union's position that "Gaz-System
is the entity solely responsible" for the operation of the Yamal pipeline, stating that Gaz -System
"pursuant to the Directive's ISO provisions, is required to operate Yamal in a manner completely
separate from the influence of Europolgaz".1837
7.1093. We further note that the European Union, in support of this position, provides a section of
the 2010 amendment to th e 1993 Intergovernmental Agreement between Poland and Russia,
referred to by Russia, which states that:
[T]he functions of the operator on the Polish section of the Gas Transit Pipeline
System Yamal – Europe are realised by Gas Transmission Operator Gaz -System S.A.
in accordance with the Agreement of entrusting operator responsibilities.1838
7.1094. Insofar as Gaz -System is the entity "solely responsible for the operation of all flows on
Yamal" and that Europolgaz' responsibilities pursuant to the historical transmiss ion contracts with
JSC "PGNiG" and OOO "Gazprom export" consist solely of a legal responsibility in case Gaz -System
does not supply the required pipeline transport services, we would agree with the European Union
that Europolgaz' role in these historical c ontracts do not entail that it supplies pipeline transport
services within the meaning of the GATS.
7.1095. Bearing in mind the fact that Russia, as the complaining party, bears the burden of
making a prima facie case and that Russia has only provided excerpts fr om correspondence by the
Polish NRA on the "unrelated matter" of certain historical contracts, which appear to contradict this
NRA's own certification decision as well as the excerpt from the 1993 Intergovernmental
Agreement between Poland and Russia provi ded by the European Union and indeed statements
made by Russia itself in the current proceedings, we do not believe that Russia has carried its
burden of demonstrating the Europolgaz supplies pipeline transport services, nor that the Russian
VIU Gazprom su pplies pipeline transport services through the commercial presence of
Europolgaz.1839
7.1096. Given that the one example provided by Russia to demonstrate the alleged less
favourable treatment of Russian pipeline transport services and service suppliers does not appe ar
to involve a Russian pipeline transport service supplier at all, we have difficulties seeing how
Russia could be considered to have made a prima facie case of violation under Article II:1 of the
GATS. More specific ally, the assessment under Article II:1 is an inherently comparative one,
requiring the complaining party to demonstrate that its services and service suppliers are accorded
less favourable treatment in comparison with that accorded to the like services and service
suppliers of any other countr y. In our view, the absence of any evidence relating to Russian

1837 Russia's first written submission, para. 465.
1838 European Union's comments on Russia's response to Panel question No. 204(a), para. 121.
1839 Even assuming that Russia had demonstrated that Europolgaz supplies pipeline transport services,
we recall that it would also be required to demonstrate that the Russian VIU Gazprom owns or controls
Europolgaz within the meaning of Articles XXVIII(n)(i) or (ii) of the GATS in order to prove that Gazprom
supplies pipeline transport services through the commercial presence of Europolgaz and hence the existence of
a Russian pipeline transport service supplier. In this regard, we note Russia's statement that:
[A]s the European Commission found in its decision concerning the application for certification of
Gaz-System as ISO, Europolgaz … is a joint venture between Gazprom and PGNiG, the state -
owned Polish gas incumbent, each of which owns 48% of Europolgaz, with Polish Gas -Trading
S.A. holding a 4% interest. … Gazprom thus supplies pipeline transport services through
Europolgaz, a commercial presence in the EU, based on Gazprom's joint ownership and control of
Europolgaz. (Russia's response to Panel question No. 52, para. 268 (referring to Commission
Opinion of 9 September 2014 pursuant to Article 3(1) of Regulation (EC) No 715/2009 and
Article 10(6) and 11(6) of Directive 2009/73/EC – Poland - Certification of Gaz -System as the
operator of the Polish section of the Yamal -Europe Pipeline, C(2014) 6463, (Commission opinion
on the certification of Gaz -System I), (Exhibit RUS -59)). See also Ru ssia's first written
submission, para. 460).
As Gazprom does not own "more than 50 per cent of the equity interest" in Europolgaz, it does not own
Europolgaz within the meaning of Article XXVIII(n)(i) of the GATS and we do not believe it is sufficient for
Russia to point to the Commission's finding of "joint control" within the meaning of the Directive in order to
demonstrate control within the meaning of Articles XXVIII(n)(ii) of the GATS. In particular, and as explained
above in paragraphs 7.455 and 7.456, the concepts of control in the Directive and in the GATS, respectively,
do not necessarily coincide as the latter refers to the "power to name a majority of [] directors or otherwise to
legally direct [] actions" whereas the former covers the possibility to "block certain major decisions".

pipeline transport services and service suppliers, in and of itself, means that Russia has not made
a prima facie case of violation under Article II:1 of the GATS. Nevertheless, we consider it useful to
provide certain considerations below regarding the m ain arguments of the parties on the
Commission opinions, which Russia "contrasts" with the Commission opinion on the certification of
Gaz-System.
7.1097. Even assuming that the Russian VIU Gazprom can be considered to supply pipeline
transport services through the commercial presence of Europolgaz, and hence that the certification
under Article 11 of Gaz -System involves a Russian pipeline transport service supplier, we do not
believe that Russia has de monstrated de facto discrimination against Russian pipeline transport
services and service suppliers b y "contrasting" the Commission opinion concerning certification of
Gaz-System with "each of the five instances in which other third -country certification requests
have been granted".1840 In this regard, we recall that Russia "contrast[s]" the certification of Gaz -
System as the ISO of the Yamal pipeline in Poland with those of jordgas as the ITO of the NETRA
pipeline in Germany, TAP AG as the " ad hoc ITO" of the TAP pipeline in Greece and Italy, NIC as
the TSO of the Nabucco pipeline in Austria, TIGF as the TSO of the TIGF network in France, and
DESFA as the ITO of the Greek transmission system in Greece.1841, 1842
7.1098. With respect to the certifications of jordgas and NIC, Russia faults the Commission for not
requiring the relevant NRAs to conduct a security of energy supply assessment under Article 11 of
the Directive in relation to thes e – contrary to the Commission opinion concerning the certification
of Gaz-System as the ISO for the Yamal pipeline. 1843 However, as acknowledged by Russia, the
third-country certification measure in the Directive did not enter into force until 3 March 2013 and
therefore had not entered into force when jordgas or NIC applied for certification.1844
7.1099. Russia argues that "[a]s with jordgas, it is also irrelevant that NIC's certification was
granted before 3 March 2013, the stated effective date of the [third -country certification measure
in the Directive]". 1845 We cannot agree with this position. Most legal instruments have a date of
entry into force and the mere existence of a regulatory distinction or difference in treatment prior
to and following the entry into force of a measure does not, in our view, suffice to demonstrate a
violation of non-discrimination provisions such as Article II:1 of the GATS.

1840 Russia's first written submission, para. 459.
1841 Russia's first written submission, paras. 457 and 460-500.
1842 We note that, in order to demonstrate that these five examples involve pipeline transport service
suppliers from other non-EU countries, Russia would be required to demonstrate that persons from non-EU
countries own or control these five TSOs within the meaning of Articles XXVIII(n)(i) or (ii) of the GATS. Both
parties agree that the Norwegian VIU Statoil owns and controls jordgas within the meaning of the GATS and
that the Singaporean juridical person GIC Private Limited controls TIGF within the meaning of the GATS.
(Russia's response to Panel question No. 52, para. 267; and European Union's response to Panel question
No. 52, para. 143). Furthermore, provided that the Azerbaijani VIU SOCAR's pending acquisition of 66% of the
shareholdings in DESFA is completed, both parties agree that SOCAR owns and controls DESFA within the
meaning of the GATS. (Russia's response to Panel question No. 52, para. 266; and European Union's response
to Panel question No. 52, para. 144). No such agreement exists with respect to TAP AG or NIC. Instead, Russia
points to the minority shareholdings of non-EU juridical persons in these TSOs and on this basis suggests that
each of these supplies pipeline transport services by owning and controlling the commercial presence of TAP
AG or NIC. (Russia's response to Panel question No. 52, paras. 266-267). In our view, these references to
minority shareholdings do not suffice to demonstrate ownership or control within the meaning of the GATS.
1843 Russia's first written submission, paras. 464-468 (concerning jordgas) and 480-481 (concerning
NIC). For the ITO jordgas, Russia argues that "the more favourable treatment accorded jordgas went beyond
just exempting it from Article 11", pointing to "the current 'Beneficial Use Agreement' between jordgas and the
other TSOs for NETRA" under which "'jordgas is entitled to operate and commercially exploit' some undisclosed
percentage of the capacities of NETRA." Russia submits that "jordgas receives additional commercial benefits
and competitive advantages by being able to jointly operate NETRA in this manner" and that "jordgas may
develop and invest in the NETRA transmission system, manage capacity, and otherwise exploit NETRA's
commercial potential as it sees fit, without any possibility of jordgas's rights or those of Statoil being restricted
or suspended as a result". (Russia's first written submission, para. 467). Russia, however, provides no
explanation of how these alleged "additional commercial benefits and competitive advantages" relate to the
third-country certification measure in the Directive or Russia's claim under Article II:1 of the GATS against this
measure, and we therefore do not consider these arguments further in our assessment of this measure and
claim.
1844 Russia's second written submission, para. 342. See also Directive 2009/73/EC, (Exhibit EU-5),
Article 54(1).
1845 Russia's first written submission, para. 481.

7.1100. Russia also argues that the date of entry into force of the third -country certification
measure in the Directive const itutes a "double standard at work"1846 and that the European Union
"selected this date knowing that companies such as jordgas and NIC … would submit applications
before 3 March 2013 and thereby automatically be exempted from the EU's discriminatory security
of supply analysis".1847 Russia appears to suggest that it is for the European Union t o explain "why
3 March [2013] was chosen for application of Article 11, rather than 3 March [2011], the date of
application for the remainder of the Directive". 1848 We again recall that it is for R ussia, as the
complaining party, to make a prima facie case that the third -country certification measure in the
Directive violates Article II:1 of the GATS. We further note the European Union's argument that:
[A]s of the date of adoption of the Directive on 13 July 2009, the EU authorities could
not have possibly an ticipated which TSOs would file applications before and after
3 March 2013. Nor could they possibly have anticipated the origin of the persons that
would control each TSO at the time where it chooses to file for certification.1849
7.1101. Russia has provided no evid ence that would suggest otherwise. Indeed, and as pointed
out by the European Union, both parties agree that the Russian VIU Gazprom supplies pipeline
transport services through the commercial prese nce of the TSOs GASCADE and NEL GT1850, which
both applied for certification prior to 3 March 2013 and were therefore not subject to a security of
energy supply assessment under Article 11 of the Directive but rather subject to the rules in
Article 10, similarly to jordgas and NIC.1851 We find this evidence difficult to reconcile with Russia's
contention that the timing of the entry into force of Article 11 should somehow be viewed as
resulting in de facto discrimination against Russian pipeline transport services and service
suppliers.
7.1102. Turning to the certification of TAP AG, it is undisputed that, unlike the certification of Gaz-
System, this entity did not undergo third -country certification pursuant to Article 11 and thus was
not subject to a security of energy supply assessment regardless of this provision having ente red
into force when certification was requested.
7.1103. Generally, Russia faults the Commission for having provided "no analysis" nor "cite [d]
any evidence" in support of its agreement with the Greek and Italian NRAs' conclusion that "none
of TAP AG's shareholde rs enjoy either sole or joint control over TAP AG" and hence that third -
country certification was not required. 1852 In this regard, the European Union argues that Russia
"disregards the Commission's proper role in the certification process", which is not "to re-do ex
novo the NRA's analysis" and that the Commission must "substantiate properly" any objections to
the NRA's analysis but is not required "to motivate in detail" where it agrees with an element of
the NRA's analysis.1853 We agree with the European Union that the mere fact that the Commission
did not provide its own analysis, but rather agreed with that of the relevant NRAs, in and of itself,
does not suffice to demonstrate a violation under Article II:1 of the GATS.
7.1104. Russia also points, more specifically, to the Commission having "overlooked" the fact that
TAP AG was registered in a non -EU country, Switzerland 1854, in response to which the European
Union points out that the "relevant criterion for determining the applicability of Article 11 of
Directive 2009/73/EC is whether the TSO or the transmission system is controlled by a person or
persons of a third country or third countries, rather than the country of incorporation of the

1846 Russia's second written submission, para. 342.
1847 Russia's response to Panel question No. 73, para. 323.
1848 Russia's second written submission, para. 346.
1849 European Union's second written submission, para. 243.
1850 Russia's response to Panel question No. 52, para. 265; and second written submission, para. 336;
and European Union's first written submission, paras. 338-341; and response to Panel question No. 52,
para. 143.
1851 European Union's first written submission, para. 599; and second written submission, para. 245.
1852 Russia's first written submission, para. 472 (quoting Commission Opinion of 28 January 2016
pursuant to Article 3(1) of Regulation (EC) No. 715/2009 and Article 10(6) of Directive 2009/73/EC – Italy -
Greece - Certification of TAP AG, C(2016) 538 final, (Exhibit RUS-57), p. 7).
1853 European Union's first written submission, para. 601.
1854 Russia's first written submission, para. 473.

TSO."1855 We see nothing in the text of Article 11, nor in the remainder of the rec ords of this
proceeding, to suggest otherwise.
Lastly, Russia points to the Commission having stated, in its opinion concerning the
certification of Gaz-System, that "[f]or the question of joint control it suffices that the
parties can jointly exercise decisive influence over the joint venture, which is the case
for Europolgaz" and faults the Commission for not reaching the same conclusion for
TAP AG where the Azerbaijani entity AzTAP and the two EU entities BP and Snam each
held 20%.1856 Russia appears to interpret the Commission's statement as defining the
concept of joint control in the Directive to cover all situations where a foreign
shareholder and a domestic shareholder or shareholders, together, can exercise
decisive influence. We note, however, that a more complete reading of the
Commission's reasoning in its opinion concerning certification of Gaz -System provides
that:
"Joint control exists where two or more undertakings or persons have the possibility of
exercising decisive influence over another undertaking. Decisive influence in this sense
normally means the power to block actions which determine the strategic commercial
behaviour of an undertaking. Joint control is characterized by the possibility of a
deadlock situation resulting from the power of two or more parent companies to reject
proposed strategic decisions. Parties are required to cooperate to reach a common
understanding in determining the commercial policy of their joint venture.
…
For the question of joint control it suffices that the parties can jointly exercise decisive
influence over the joint venture, which is the case for Europolgaz. Moreover, there are
clear indications that Gazprom's veto possibilities go beyond the protection of its
financial interests. For instance, in case Gazprom is absent in the General Meeting, in
the Supervisory Board or in the Management Board, no decision at all can be taken by
these bodies. ERO itself concludes that " it should be noted that all significant
decisions related to the company's operations as well as its current activity rules shall
be, in fact, agreed upon with the company's partners, including Gazprom".1857
7.1105. A more complete reading of the Commission's reasoning concerning the certification of
Gaz-System therefore suggests that the finding of joint control over Europolgaz by a foreign
person, Gazprom, was based on cooperation by Gazprom being a prerequisite for the operation of
Europolgaz, and on the ability of Gazprom to block strategic decisions.
7.1106. In contrast, the European Union points out that the "situation at issue in TAP was very
different from that co nsidered in Gaz-System", since a foreign person, AzTAP, held "only" 20% of
the shares in the TAP AG and there was "no indication" that AzTAP had the power to "block the
adoption of any strategic decisions by TAP [AG]".1858
7.1107. Russia does not dispute the existence of these differing circumstances. 1859 We recall that
it does not fall within the tasks of panels to consider whether a responding party has acted
consistently with its own domestic legislation. 1860 Hence, we do not consider it appropriate for us
to determine how the concept of sole or joint control should properl y be interpreted or applied
under EU law, nor to assess whether or not the Commission and the relevant NRAs interpreted and
applied the concept of sole or joint control consistently with EU law. Rather, we assess whether
Russia has demonstrated that the de sign, structure and expected operation of the third -country
certification measure is de facto discriminatory b y "contrasting" the Commission opinion

1855 European Union's first written submission, para. 603.
1856 Russia's first written submission, paras. 473-474; and second written submission, para. 350
(quoting the Commission opinion on the certification of Gaz-System I, (Exhibit RUS-59), p. 9).
1857 Commission opinion on the certification of Gaz-System I, (Exhibit RUS-59), p. 9. (emphasis added
by the Commission)
1858 European Union's first written submission, para. 602.
1859 Russia's second written submission, para. 350, stating "[o]f course, the Europolgaz circumstances
were not present in the case of TAP AG. Plenty of other circumstances were present, however".
1860 See Panel Reports, US – Hot-Rolled Steel, para. 7.267; and US – Stainless Steel (Korea),
para. 6.50.

concerning certification of Gaz -System with that concerning certification of TAP AG. 1861 Given the
differences pointed to by the European Union, and acknowledged by Russia, we do not consider
this to be the case.
7.1108. With respect to the last two examples, TIGF and DESFA, Russia does not dispute that
these underwent third-country certification under Article 11 of the Directive and were subject to a
security of energy supply assessment in this regard. 1862 Instead Russia focuses its argumentation
on the content of and process for conducting the security of energy supply assessments in respect
of DESFA and TIGF, and compares this to the content of and process for conducting the security of
energy supply assessment in respect of Gaz-System.1863
7.1109. As we have found above in section 7.2.2.3.3, our terms of reference concerning Russia's
claim under Article II:1 of the GATS against the third-country certification measure in the Directive
include only the claim presented in Russia's panel request, namely t he alleged violation of
Article II:1 stemming from the Commission requiring a security of energy supply assessment for
certifications concerning Russian pipeline transport service suppliers but not for certifications
concerning pipel ine transport service suppliers of any other non -EU country, rather than the
substance of such security of energy supply assessments.
7.1110. The examples of TIGF and DESFA, in our view, provide no support for the contention that
the third-country certification measure results in a de facto violation of Article II:1 of the GATS by
virtue of the Commission requiring a security of supply assessment for certifications concerning
Russian pipeline transport service suppliers but not for certifications concerning pipeli ne transport
service suppliers of any other non -EU country. On the contrary, these examples appear to
demonstrate that pipeline transport service suppliers from other origins than Russian are subject
to third-country certification under Article 11 of the Directive, including a security of energy supply
assessment, where certification is requested by a transmission system owner or a TSO that is
"controlled by a person or persons from a third country or third countries" within the meaning of
the Directive, fo llowing entry into force of the third -country certification measure in the Directive
on 3 March 2013.
7.1111. Having considered the various examples relied on by Russia, we do not believe that these
demonstrate that the third-country certification measure in the Directive results in Russian pipeline
transport services and service suppliers being accorded de facto less favourable treatment than
that accorded to the like pipeline transport services and service suppliers of any other non -EU
country.1864

1861 We note that Russia has also raised certain arguments in which it appears to "contrast" the
Commission opinion concerning certification of TAP AG with its opinion concerning certification of DESFA, rather
than its opinion concerning certification of Gaz-System. (See, e.g. Russia's first written submission,
paras. 476-478; and second written submission, paras. 352-354). We note that Russia does not suggest that
the example of DESFA involves a Russian pipeline transport service supplier. Indeed in other parts of its
submission, Russia "contrasts" the Commission opinion concerning DESFA with its opinion concerning
certification of Gaz-System, suggesting that the former, like the certification of TAP AG, is an example of the
alleged more favourable treatment of pipeline transport services and service suppliers from any other non-EU
country. (Russia's first written submission, paras. 490-500). In light of this, it is unclear to us how the
"contrasting" of the Commission opinion concerning certification of TAP AG with its opinion concerning
certification of DESFA would serve to demonstrate de facto discrimination against Russian pipeline transport
services and service suppliers, and we do not address these arguments further.
1862 Russia's first written submission, paras. 482 (concerning TIGF) and 491 (concerning DESFA).
1863 Russia's first written submission, paras. 482-489 (concerning the ITO TIGF) and 490-500
(concerning the TSO DESFA).
1864 We note that Russia has also submitted certain arguments concerning the objective of the third-
country certification measure in the Directive. More particularly, Russia argues that "[i]t is no accident that
throughout the adoption and implementation of the [Third Energy Package], Article 11 of the Directive has
commonly been referred to as the 'Gazprom Clause'" and that "the EU's sole objective was to enact what it
now concedes is a discriminatory certification measure that could be selectively applied to prevent Gazprom
from acquiring too many EU transmission assets". (Russia's second written submission, para. 343; and opening
statement at the second meeting of the Panel, para. 164). In this regard, we recall that "the Appellate Body
and prior panels have, on several occasions, cautioned against undue reliance on the intent of a government
behind a measure to determine the WTO-consistency of that measure" and have found that "the intent, stated
or otherwise, of the legislators is not conclusive" although "objectively reviewable expressions of a
government's policy objectives" may constitute relevant evidence. (Appellate Body Report, EC and certain
member States – Large Civil Aircraft, para. 1050 (citing Appellate Body Reports, Japan – Alcoholic Beverages

7.10.1.3 Conclusion
7.1112. Having considered the various arguments and evidence provided by Russia, and for the
reasons explained in paragraphs 7.1075 through 7.1111 above, we conclude that Russia has not
demonstrated that the third -country certification measure in the Directive accords less favourable
treatment to Russian pipeline transport services and se rvice suppliers in comparison with that
accorded to pipeline transport services and servic e suppliers of any other non -EU country. Hence,
we find that Russia has failed to make a prima facie case of violation under Article II:1 of the GATS
with respect to the third-country certification measure in the Directive.
7.10.2 The third -country certification measure in the national implementing laws of
Croatia, Hungary and Lithuania
7.10.2.1 Introduction
7.1113. The third -country certification measure implemented in the national laws of C roatia,
Hungary and Lithuania is described above in section 2.2.7.2. Russia contends that this measure is
inconsistent with Article XVII of the GATS. Aside from raising terms of reference objections with
respect to certain of the provisions in the national laws of Hungary and Lithuania challenged by
Russia, the European Union submits that the third -country certification measure implemented in
the national laws of Croatia, Hungary and Lithuania is justified under Article XIV(a) of the
GATS.1865 In our analysis below, we first determine whether this measure is inconsistent with
Article XVII of the GATS and then proceed, as appropriate, to an examination of the European
Union's defense.
7.1114. As discussed above in section 7.2.2.3.2, the European Union has raised terms of
reference objections with respect to Sections 123(5) and 123(6) o f Hungary's Gas Act and
Articles 20(5) and 29(4)(3) of Lithuania's Law on Natural Gas. We have concluded that
Articles 20(5) and 29(4)(3) of Lithuania's Law on Natural Gas fall outside, while Sections 123(5)
and 123(6) of Hungary's Gas Act within, our term s of reference.1866 Therefore, below we examine
the consistency with Article XVII of the GATS of the following provisions of the national laws
implementing the third -country certification measure: (i) Article 24 of Croatia's Gas Market Act;
(ii) Section 128/A of Hungary's Gas Act; (iii) Sections 123(5) and 123(6) of Hungary's Gas Act;
(iv) and Article 29 of Lithuania's Law on Natural Gas.1867
7.1115. The third -country certification measure challenged by Russia under Article XVII of the
GATS consists of the national laws of Croatia, Hungary and Lithuania implementing Article 11 of

II, p. 27, DSR 1996:1, 97, at p. 119; US – Offset Act (Byrd Amendment), para. 259; and Panel Report, Japan
– DRAMs (Korea), para. 7.104)). (emphasis original) In support of its arguments concerning the "objective" of
the third-country certification measure in the Directive, Russia has referred to a press release, namely "EU
Parliament, 3rd Energy Package gets final approval from MEPs" at
http://www.europarl.europa.eu/sides/getDoc.do?language=en&type=IM-
PRESS&reference=20080616FCS31737. (Russia's opening statement at the first meeting of the Panel, para.
68). The European Union argues that this press release describes "the personal views expressed by one MEP
(Mr. La Russa), who acted as a rapporteur for the Industry Committee" and that the reference to Gazprom
was:
[P]robably because at the time Gazprom had more shareholdings in EU gas underta kings than
other third country entities and because, as mentioned in the press release, Russia/Gazprom was
the most vocal opponent to the envisaged provision while the proposal was still being debated by
the European Parliament. (European Union's second written submission, paras. 259-260).
Russia does not dispute the European Union's characterization of this press release but instead submits
that it is for the European Union to offer evidence or argue that "the press release was inaccurate" or that "it
had a different objective in enacting the third-country certification measure[]". In this regard, we again recall
that Russia bears the burden of making a prima facie case of violation under Article II:1 of the GATS. We do
not believe that Russia, by referring to a press release quoting a Member of the European Parliament, has
provided "objectively reviewable expressions" of the European Union's policy objectives behind the third-
country certification measure in the Directive being to discriminate against Russian pipeline transport services
or service suppliers. Hence, this evidence does not suffice to make a prima facie case of violation under Article
II:1 of the GATS.
1865 As discussed further below, the European Union argues that Sections 123(5) and 123(6) of
Hungary's Gas Act are not inconsistent with Article XVII of the GATS.
1866 See above section 7.2.2.3.2.4.
1867 Our references to Article 29 of Lithuania's Law on Natural Gas are to be understood as excluding
Article 29(4)(3), which we found to fall outside our terms of reference. See above section 7.2.2.3.2.4.

the Directive. The national implementing laws are legally separate and distinct from each other, as
well as from the Directive. However, the parties have developed a significant part of their
arguments mainly on the basis of Article 11 of the Directive, without clearly distinguishing between
the national implementing laws at issue. Therefore, we provide a single, joint analysis of Russia's
claim and the European Union's defen ce for all three nati onal implementing laws at issue, except
Sections 123(5) and 123(6) of Hungary's Gas Act, which will be addressed separately, as
explained further below in paragraphs XX. We emphasize, however, that Article 11 of the Directive
is not a measure at issue under this claim.
7.10.2.2 Russia's claim under Article XVII of the GATS
7.10.2.2.1 Introduction
7.1116. Russia claims that Article 24 of Croatia's Gas Market Act, Sections 123(5), 123(6) and
128/A of Hungary's Gas Act, and Article 29 of Lithuania's Law on Natural Gas apply only to
transmission system owners or TSOs controlled by persons from third countries, and,
consequently, provide to third -country pipeline transport services and service suppliers treatment
less favourable than that accorded to like domestic pipeline transport services and service
suppliers, contrary to Article XVII of the GATS .1868 The European Union does not contest that
Article 24 of Croatia's Gas Market Act, Section 128/A of Hungary's Gas Act and Article 29 of
Lithuania's Law on Natural Gas provide less favourable tre atment to like services and service
suppliers of third countries within the meaning of Article XVII of the GATS but argues that any
inconsistency with Article XVII is justified under Article XIV(a) of the GATS. 1869 The European
Union, however, submits that Se ctions 123(5) and 123(6) of Hungary's Gas Act are not
inconsistent with Article XVII of the GATS but, as explained below, does not raise a defence under
Article XIV(a) of the GATS in respect of these provisions.1870
7.10.2.2.2 Analysis by the Panel
7.1117. We note that the Eu ropean Union concedes that Article 24 of Croatia's Gas Market Act,
Section 128/A of Hungary's Gas Act and Article 29 of Lithuania's Law on Natural Gas are
inconsistent with Article XVII of the GATS but argues that they are justified under Article XIV(a) of
the GATS.1871 However, the European Union argues that Sections 123(5) and 123(6) of Hungary's
Gas Act are not inconsistent with Article XVII of the GATS, while not raising any defense in the
event we find otherwise.1872
7.1118. In light of this particular way the European Union structured its arguments, we separately
examine the consistency of Article 24 of Croatia's Gas Market Act, Section 128/A of Hungary's Gas
Act and Article 29 of Lithuania's Law on Natural Gas with Article XVII of the GATS and the
consistency of Sections 123(5) and 123(6) of Hungary's Gas Act with Article XVII of the GATS.
7.1119. In accordance with the legal standard for Article XVII of the GATS, set out in
paragraphs 7.234 and 7.235 above, our analysis will focus on whether Russia has d emonstrated
the following elements : (a) Croatia, Hunga ry, and Lithuania have assumed national treatment
commitments in the relevant secto r(s) and mode(s) of supply in their GATS Schedules; (b) the
third-country certification measure affects the supply of services in the relevant sector(s) and
mode(s); (c) the relevant services and service suppliers are like; and ( d) the third -country
certification measure fails to accord to services and service suppliers of any other Member
treatment no less favourable than that accorded by the Member concerned to its own like services
and service suppliers.

1868 Russia's first written submission, paras. 426–438.
1869 European Union's response to Panel question No. 95, para. 233. See also European Union's first
written submission, paras. 476 and 550.
1870 European Union's first written submission, para. 552.
1871 European Union's first written submission, paras. 476 and 550. See also European Union's response
1872 European Union's response to Panel question No. 151, para. 18.

7.10.2.2.2.1 Article 24 of Croatia's Gas Market Act, Section 1 28/A of Hungary's Gas Act
and Article 29 of Lithuania's Law on Natural Gas
7.1120. Russia submits that Croatia, Hungary and Lithuania made national treatment
commitments in their GATS Schedules with respect to pipeline transport services for mode 3, and
that the third-country certification measure affects the supply of these services by foreign
suppliers by directly regulating the terms on which those services may be supplied in the European
Union, including in Croatia, Hungary and Lithuania. 1873 According to Russia, the relevant services
and service suppliers are presumed to be like and the third -country certification measure
implemented in Article 24 of Croatia's Gas Market Act, Section 128/A of Hungary's Gas Act and
Article 29 of Lithuania's Law on Natural Gas fail s to accord to services and service suppliers of
other Members treatment no less favourable than that accorded to like domestic services and
service suppliers.1874
7.1121. In response to a question by the Panel asking the European Union to clarify whether it
agrees with Russia that the third -country certification measure is inconsistent with Article XVII of
the GATS, the European Union replied as follows:
The SoS certification requirement provided for in Article 11 of the Directive does not
apply to the certification of TSOs if neither the TSO nor the owner of the transmission
system are controlled by a person or persons of a third country or countries.
Therefore, the European Union does not contest that the SoS certification requirement
provides different and "less f avourable treatment" (within the specific meaning of
Article XVII GATS) to like service suppliers and services of other Members.1875
7.1122. As we have determined above, Croatia, Hungary and Lithuania undertook national
treatment commitments in their respective GATS Schedules with respect to sector 11.G, "Pipeline
Transport [Services]", for mode 3. 1876 Russia has also indicated that the relevant mode of supply
for its GATS claims is mode 3 (commercial presence).1877 The third-country certification measure in
the national im plementing laws of Croatia, Hungary and Lithuania concerns the certification of
TSOs.1878
7.1123. As explained above, we consider that TSOs supply pipeline transport services in the
European Union and that natural or juridical persons from non -EU countries can and d o supply
pipeline transport services through the commercial presence of such TSOs. 1879 Hence, in our view,
the measure at issue has "an effect on" 1880 the supply of pipeline transport services within the
meaning of Article XVII of the GATS. Thus, we consider tha t Russia has established the first two
elements of the legal standard under Article XVII of the GATS.
7.1124. In determining whether the measure in question does not accord to services and service
suppliers of other Members treatment no less favourable than that accorded to like domestic
services and service suppliers, we note that only TSOs may supply pipeline transport services in
the European Union. Accordingly, any person seeking to supply pipeline transport services in the
European Union via mode 3 will need to establish, or acquire ownership or control over, a TSO.
7.1125. The third-country certification measure implemented in Article 24 of Croatia's Gas Market
Act, Section 128/A of Hungary's Gas Act and Article 29 of Lithuania's Law on Natural Gas provides
rules and procedure s for the certification of TSOs, where the TSO or the transmi ssion system
owner is controlled, or is in the process of being controlled, by a person or persons from a third
country or third countries. 1881 Under this measure, the NRA responsible for the certification of a

1873 Russia's first written submission, para. 418-419.
1874 Russia's first written submission, paras. 415, 420–421 and 423–441; and response to Panel
question No. 56, para. 285.
1875 European Union's response to Panel question No. 95, para. 233.
1876 See above para. 7.371.
1877 Russia's response to Panel question No. 56, para. 285.
1878 See above section 2.2.7.2.
1879 See above paras. 7.263 and 7.407.
1880 Appellate Body Report, EC – Bananas III, para. 220.
1881 Third-country certification must be conducted in two situations: (i) when certification is requested
by a transmission system owner or a TSO which is controlled by a person or persons from a third country or
third countries; and (ii) when the regulatory authority has acquired knowledge of any circumstances that would

TSO is required to assess whether granting certi fication will not put at risk the security of energy
supply.1882 The NRA shall refuse certification if it has not been demonstrated to the NRA that
granting certification will not put at risk the security of energy supply.1883 Thus, when third-country
certification is requested, a third-country person that controls – or is in the process of acquiring
control over – a TSO or a transmission system owner, will be subject to a security of energy supply
assessment.
7.1126. The third-country certification measure implemented in Article 24 of Croatia's Gas Market
Act, Section 128/A of Hungary's Gas Act and Article 29 of Lithuania's Law on Natural Gas applies
with respect to the certification of all TSOs controlled by third -country persons, and hence with
respect to all third-country pipeline transport service suppliers supplying their services through the
commercial presence of TSOs. In contrast, certification of TSOs controlled by domestic EU persons
is generally governed by the rules implementing Article 10 of the Directive, w hich does not require
a security of energy supply assessment to be conducted.1884
7.1127. We recall that, in the context of the public body measure in the national implementing
laws of Croatia, Hungary and Lithuania, we have concluded that domestic suppliers of pipe line
transport services and pipeline transport service suppliers of other Members established as TSOs in
Croatia, Hungary and Lithuania are like service suppliers within the meaning of Article XVII of the
GATS.1885 Guided by this finding, we consider that dom estic and third -country pipeline transport
service suppliers are like service suppliers within the meaning of Article XVII of the GATS also in
the context of the third-country certification measure in the national implementing laws of Croatia,
Hungary and Lithuania.
7.1128. As follows from o ur analysis conducted above, the requirement of security of energy
supply assessment is an additional condition imposed on all third-country pipeline transport service
suppliers before they are allowed to supply pipeline transp ort services through the commercial
presence of TSOs. Domestic service suppliers are generally not subject to the same requirement.
Therefore, we consider that the measure in question places an additional burden on third -country
service suppliers and thus modifies the conditions of competition in favour of domestic service
suppliers compared to like service suppliers of other Members.
7.1129. Furthermore, as we have already observed, the European Union does not contest that the
requirement of a security of energy supply assessment provides different and less favourable
treatment to like services and service suppliers of other Members within the specific meaning of
Article XVII GATS. 1886 Therefore, taking into account the European Union's position, we find that
the thi rd-country certification measure implemented in Article 24 of Croatia's Gas Market Act,

result in a person or persons from a third country or third countries acquiring control of the transmission
system owner or the TSO. (Croatia's Gas Market Act, (Exhibit RUS-45), Article 24(2); Hungary's Gas Act,
(Exhibits EU-155/RUS-47), Section 128/A(1); and Lithuania's Law on Natural Gas, (Exhibit RUS-136rev),
Article 29(1) (implementing Directive 2009/73/EC, (Exhibit EU-5), Articles 11(1) and 11(2)).
1882 Croatia's Gas Market Act, (Exhibit RUS-45), Article 24(4); Hungary's Gas Act, (Exhibits EU-
155/RUS-47), Section 128/A(4)(b); and Lithuania's Law on Natural Gas, (Exhibit RUS-136rev), Article 29(4)(2)
(implementing Directive 2009/73/EC, (Exhibit EU-5), Article 11(3)).
1883 Croatia's Gas Market Act, (Exhibit RUS-45), Article 24(4); Hungary's Gas Act, (Exhibits EU-
155/RUS-47), Section 128/A(4)(b); and Lithuania's Law on Natural Gas, (Exhibit RUS-136rev),
Article 29(4)(2).
1884 We note that third-country certification is required not only where the TSO is controlled by a third-
country person or persons, but also where the transmission system owner is controlled by a third-country
person or persons. As explained above in paragraph 2.13, the owner and operator of the transmission system
are two separate entities under the so-called ISO model, which is applicable only in EU member States that
have chosen to implement this model in addition to the OU model and only in respect of transmission systems
that belonged to a VIU on 3 September 2009. Under this particular model, it is therefore possible that a TSO
controlled by a domestic person or persons would be subject to third-country certification insofar as the owner
of the transmission system is controlled by a third-country person or persons. Indeed, we addressed this
situation with respect to the domestic controlled TSO Gaz-System and the third-country controlled
transmission system owner Europolgaz above in section 7.10.1.2.3. The fact that domestic controlled TSOs are
subject to third-country certification in these limited circumstances does, however, not alter our finding above
that all TSOs controlled by third-country persons are subject to third-country certification, whereas TSOs
controlled by domestic persons, generally, are not.
1885 See above para. 7.743.
1886 See above para. 7.1121.

Section 128/A of Hungary's Gas Act and Article 29 of Lithuania's Law on Natural Gas 1887 is
inconsistent with Article XVII of the GATS.
7.10.2.2.2.2 Sections 123(5) and 123(6) of Hungary's Gas Act
7.1130. Russia argues that Sections 123(5) and 123(6) of Hungary's Gas Act are inconsistent with
Article XVII of the GATS for the same reasons as Section 128/A of Hungary's Gas Act. 1888 The
European Union, on the other hand, submits that Sections 123(5) and 123(6) are not inconsistent
with Article XVII of the GATS. 1889 According to the European Union, Section 123(6) does not apply
only to the foreign investments described in Section 123(5) of Hungary's Gas Act, but also applies
to the transactions described in Section 123(2), which covers both domestic and foreign
investments.1890
7.1131. In paragraph 7.179, we have found that Sections 123(5) and 123(6) of Hungary's Gas
Act constitute a "version" of the third -country certification measure implemented in Hungary. We
have concluded that the third -country certification measure implemented in Section 128/A of
Hungary's Gas Act, as well as in Article 24 of Croatia's Gas Market Act an d Article 29 of Lithuania's
Law on Natural Gas, is inconsistent with Article XVII of the GATS. 1891 In our view, being an
implemented "version" of the same measure, the third-country certification measure contained in
Sections 123(5) and 123(6) of Hungary's Ga s Act is necessarily inconsistent with Article XVII of
the GATS on the basis of the same grounds.
7.1132. We are also of the opinion that it is irrelevant that Section 123(6) of Hungary's Gas Act
also applies to transactions described in Section 123(2) of Hungary's Gas Act.1892 Section 123(6) of
Hungary's Gas Act establishes a range of grounds allowing the Office to refuse, or make
conditional, its approval for various types of transactions described in Sections 122(1), 123(2) and
123(5) of Hungary's Gas Act. 1893 While it is true that neither Section 122(1) nor Section 123(2) of
Hungary's Gas Act distinguishes, on its face, between domestic and third-country persons involved
in such transactions, Section 123(5), in contrast, explicitly describes only transactions involving
third-country persons. The European Union has not contested that the approval of the transactions
described in Section 123(5) may be refused or made conditional on the basis that such
transactions pose a potential threat to the security of natural gas supply.1894
7.1133. As we have determined in paragraphs 7.170 and 7.173 above, Sections 123(5) and
123(6) result in the application of the requirement of security of energy supply assessment to
third-country persons in the process of acquiring control over a TSO. In the same manner as the
requirement provided for in Section 128/A of Hungary's Gas Act, this requirement places an
additional burden on third -country suppliers, and is thus incompatible with Hungary's national
treatment obligation under Article XVII of the GATS. Therefore, and for the reasons laid out above,
the third-country certification measure implemented in Sections 123(5) and 123(6) of Hungary's
Gas Act is inconsistent with Article XVII of the GATS.

1887 Our finding of inconsistency does not concern Article 29(4)(3) of Lithuania's Law on Natural Gas,
which we found to be outside our terms of reference. See above section 7.2.2.3.2.4.
1888 Russia's first written submission, para. 432.
1889 European Union's first written submission, para. 552.
1890 European Union's first written submission, para. 552.
1891 See above paras. 7.1128. -7.1129. .
1892 European Union's first written submission, para. 552.
1893 Section 122(1) of Hungary's Gas Act sets out the following transactions: "[t]he demerger (division,
separation) of any authorized operator under the Civil Code, their merger with another company (merger by
the formation of a new company or merger by acquisition), winding up without succession, or reduction of the
initial capital or equity capital by at least one-quarter". Section 123(2) of Hungary's Gas Act concerns the
acquisition of control of more than 25, 50 or 75 per cent of the voting rights in a natural gas company, and the
exercise of the rights associated therewith. Aside from these transactions posing a potential threat to the
security of natural gas supply, the grounds that allow the Office to refuse, or make conditional, its approval
include the existence of a potential threat to inter alia the following interests: public safety; the enforcement of
compliance with energy policy objectives; discharge of activities subject to authorization under Hungary's Gas
Act or the regulations for determining the price of transmission, storage and distribution services, and
universal services, and the regulations for determining the quality of such services. (Hungary's Gas Act,
(Exhibits EU-155/RUS-47), Sections 122(1), 123(2), and 123(6)).
1894 European Union's response to Panel question No. 150, paras. 12–17.

7.10.2.2.3 Conclusion
7.1134. In view of the foregoing, we find that the third -country certification measure
implemented in Article 24 of Croatia's Gas Market Act, Sections 123(5) and 123(6) and 128/A of
Hungary's Gas Act and Article 29 of Lithuania's Law on Natural Gas is inconsistent with Article XVII
of the GATS. 1895 We recall that, in response to a question by the Panel, the European Uni on
confirmed that it is not invoking Article XIV(a) of the GATS in the event we find Sections 123(5)
and 123(6) to be inconsistent with Article XVII of the GATS. 1896 Thus, we will examine the
European Union's defence under Article XIV(a) of the GATS with resp ect to the third -country
certification measure implemented only in Article 24 of Croatia's Gas Market Act, Section 128/A of
Hungary's Gas Act and Article 29 of Lithuania's Law on Natural Gas.
7.10.2.3 The European Union's defence under Article XIV(a) of the GATS
7.10.2.3.1 Introduction
7.1135. As explained above, the European Union raises a defence under Article XIV(a) of the
GATS in response to Russia's claim under Article XVII of the GATS against the third -country
certification measure implemented in the national laws of Croatia, Hungary, and Lithuania, arguing
that this measure is necessary to ensure the European Union's security of energy supply and
hence to maintain public order.
7.1136. At the outset, we recall that the European Union has r aised its defence under
Article XIV(a) solely i n respect of Russia's claims against the third -country certification measure
implemented in Article 24 of Croatia's Gas Market Act, Section 128/A of Hungary's Gas Act, and
Article 29 of Lithuania's Law on Natural Gas, and not in respect of Sections 123(5) and 123(6) of
Hungary's Gas Act, which Russia has also challenged under Article XVII of the GATS. While we
have made findings of inconsistency with Article XVII of the GATS for the third-country certification
measure implemented in Sections 123(5) and 123(6) of Hungary's Gas Act in addition to the third-
country certification measure implemented in Article 24 of Croatia's Gas Market Act, Section 128/A
of Hungary's Gas Act, and Article 29 of Lithuania's Law on Natural Gas, our findings on the defense
raised by the European Union under Article XIV(a) of the GATS therefore concern only the latter.
7.1137. We further note that, although the national implem enting laws of Croatia, Hungary and
Lithuania are legally separate and distinct from each other as well as from the Directive, both
parties have developed a single line of argumentation for the European Union's defense under
Article XIV(a) of the GATS, mainly on the basis of Article 11 of the Directive without clearly
distinguishing between the different national implem enting laws at issue. As explained in
paragraph 7.1115 above, the parties followed a similar approach when addressing the underlying
claim by Russia under Article XVII of the GATS and both agree that Article 24 of Croatia's Gas
Market Act, Section 128/A of Hungary's Gas Act, and Article 29 of Lithuania's Law on Natural Gas
all implement the substance of the third-country certification measure in the Directive. In light of
this, we too provide a single, joint analysis of the European Union's defen ce for all three national
implementing laws.
7.10.2.3.2 Analysis by the Panel
7.1138. In accordance with the legal standard for Article XIV(a) of the GATS, set out in
paragraphs 7.228 through 7.231 above, our analysis will focus on whether the European Union has
made a prima facie case that: (i) the third -country certification measure implemented in the
national laws of Croatia, Hungary and Lithuania is prov isionally justified under paragraph (a) of
Article XIV of the GATS; and (ii) the third -country certification measure implemented in the
national laws of Croatia, Hungary and Lithuania satisfies the requirements of the chapeau of
Article XIV of the GATS.
7.1139. Below, we address these elements in turn.

1895 Except Article 29(4)(3) of Lithuania's Law on Natural Gas, which we found to fall outside our terms
of reference. See above section 7.2.2.3.2.4.
1896 European Union's response to Panel question No. 151, para. 18.

7.10.2.3.2.1 Provisional justification under Article XIV(a) of the GATS
7.1140. An assessment of whether a challenged measure is provis ionally justified under
Article XIV(a) of the GATS involves examining whether it is: (1) "designed" to protect public
morals or to maintain public order; and (2) "necessary" to protect public morals or to maintain
public order.1897
7.1141. As explained above, the European Union focuses its defence of the third -country
certification measure implemented in the na tional laws of Croatia, Hungary and Lithuania on the
ground that it is necessary to maintain public order. Below, we therefore consider whether the
European Union has demonstrated that third -country certification measure is (1) designed to
maintain public order and (2) necessary to maintain public orde r within the meaning of
Article XIV(a) of the GATS.
7.10.2.3.2.1.1 Designed to maintain public order
7.1142. When considering whether the third -country certification measure implemented in the
national laws of Croatia, Hungary and Lithuania is designed to maintain public order, we begin by
assessing, first, whether the stated policy objective of ensuring the European Union's security of
energy supply falls within the scope of those meant to "maintain public order" within the meaning
of Article XIV(a) of the GATS and, second, whether the third -country certification measure is
designed to ensure the European Union's security of energy supply.1898
7.1143. With respect to the first of these issues, the European Union follows the standar d in
footnote 5 to Article XIV(a) of the GATS, arguing that security of energy supply is a "fundamental
interest[] of society" 1899 and that foreign control of TSOs 1900 may in some circumstances pose a
"genuine and sufficiently serious threat" to this interest.1901
7.1144. The Appellate Body has found that the definition of public order "include[s] the standard
in footnote 5" and has clarified that panels are not required "to make a separate, explicit
determination that the standard of footnote 5 ha[s] been met". 1902 In the dispute before us, both
parties have structured their arguments based on the standard in footnote 5. Therefore, while we
agree that an explicit examination under this standard may not be necessary in all circumstances,
we find it appropriate to follow this st ructure in our assessment below. Hence, we begin by
considering whether the European Union has demonstrated that security of energy supply is a
fundamental interest of society and turn, as appropriate, to consider whether it has demonstrated
that foreign control of TSOs poses a genuine and sufficiently serious threat to this interest.

1897 Appellate Body Report, US – Gambling, para. 292. See also Appellate Body Report, Colombia –
Textiles, para. 5.67 concerning the corresponding provision in Article XX(a) of the GATT 1994.
1898 For a similar approach, see Panel Report, Colombia – Textiles, para. 7.331.
1899 European Union's first written submission, paras. 480-506.
1900 The European Union generally argues that foreign control of both TSOs and transmission system
owners poses a genuine and sufficiently serious threat to its security of energy supply. (See, e.g. European
Union's first written submission, paras. 480 and 507-509; and second written submission, paras. 189 and 197-
198). In this regard, we recall that our finding of violation under Article XVII of the GATS in respect of the
third-country certification measure is based on the less favourable treatment accorded to third-country pipeline
transport services and service suppliers, in accordance with the scope and subject matter of the GATS. As
explained in paragraphs 7.440 through 7.446 and 7.460 through 7.466 above, TSOs supply pipeline transport
services in the European Union and natural or juridical persons from third countries can and do supply pipeline
transport services through the commercial presence of such TSOs, whereas the owners of transmission
systems do not supply pipeline transport services. As was the case for our underlying finding of violation under
Article XVII of the GATS, we believe that our assessment of the European Union's defence under Article XIV(a)
of the GATS should focus on pipeline transport services and service suppliers, and we therefore do not address
foreign control of transmission system owners further. This approach is also confirmed by the fact that certain
arguments by the European Union under its defence appear to relate solely to foreign controlled TSOs and not
foreign controlled transmission system owners. (See, e.g. European Union's first written submission,
paras. 512-513; and response to Panel question No. 209, paras. 205-206).
1901 European Union's first written submission, paras. 507-526.
1902 Appellate Body Report, US – Gambling, para. 298.

Security of energy supply as a fundamental interest of society
7.1145. The European Union argues that security of energy supply is a fundamental interest of
society, pointing to energ y being "one of the most basic necessities of modern societies" 1903 and
disruptions in supply potentially having "severe social, economic and, ultimately, political
consequences".1904 The European Union points out that the fundamental nature of security of
energy supply is reflected in its laws and policies, referring to Article 194 of the Treaty on the
Functioning of the European Union (TFEU), to various strategies covered by the Commission's
Communication on a European Energy Security Strategy, and to other pie ces of EU legislation,
including the Directive which forms the underlying basis of the third -country certification
measure.1905
7.1146. Russia does not dispute that security of energy supply is a fundamental interest of
society, but submits that "neither the Directi ve nor any other EU authority on the record identifies
a clear and consistent definition of security of supply". 1906 In Russia's view, this was "deliberate"
and meant to "maximize [the European Union's] discretion to define security of supply in the
manner mo st advantageous to its overall objectives, to include reducing reliance on Russian
pipeline transport services and natural gas imports".1907
7.1147. We note that Russia, at times, appears to direct its criticism at the Directive or other EU
legal sources for not containing a definition of the term security of energy supply 1908 and, at other
times, appears to be criticizing the European Union more generally for failing to provide a clear
definition of security of energy supply when advancing its defence under Article XIV( a) of the
GATS.1909 With respect to the lack of a definition of security of energy supply in the Directive or
other EU legal sources, we see no basis for considering that footnote 5 covers only fundamental
interests which are defined in the challenged measure or elsewhere in the legislation of the
responding party.
7.1148. Turning to the definition of security of energy supply employed by the European Union
when advancing its defence, we note that Russia agrees that "the scope of a 'fundamental interest'
may vary, at least to some degree, from Member to Member given the difference in values
between societies", but submits that this variation in scope is not limitless and that the "term must
have some continuity in meaning from Member to Member". 1910 More particularly, Russia submits
that:
[A] "fundamental interest" must be considered an interest which lies at the core of a
society and which that society constantly strives to achieve and maintain. As such, it
will be "specific" and easily identified by other parties.1911
7.1149. We a gree with Russia that a certain minimum level of clarity is required in order to
assess, in a meaningful manner, whether a stated interest can be considered a fundamental
interest of society within the meaning of footnote 5. Furthermore, as the responding party bears
the burden of making a prima facie case when advancing a defence, we also agree that it is for the
European Union to provide sufficient clarity concerning the meaning of the concept of security of
energy supply.
7.1150. Having said this, we do not believe that the European Union has defined or employed the
concept of security of energy supply in a manner that is problematically unclear or inconsistent

1903 European Union's first written submission, para. 481.
1904 European Union's first written submission, para. 485.
1905 European Union's first written submission, paras. 490-501 (referring to Article 194 of the TFEU;
Communication from the Commission to the European Parliament and the Council, European Energy Security
Strategy, COM(2014) 330 final, (28 May 2014), (Exhibit RUS-5); Regulation (EU) No. 994/2010, (Exhibit EU-
73), Articles 1, 3(1), 5(1), 6, 8, 9(3), and 10; Directive 2009/73/EC, (Exhibit EU-5), Articles 2(4) and 13 and
Recitals (1), (6), (8), and (22); and TEN-E Regulation, (Exhibit EU-4), Recital (1)).
1906 Russia's opening statement at the second meeting of the Panel, para. 153. See also Russia's
opening statement at the first meeting of the Panel, para. 59; and second written submission, para. 305.
1907 Russia's opening statement at the second meeting of the Panel, para. 153.
1908 Russia's opening statement at the first meeting of the Panel, para. 59.
1909 Russia's second written submission, para. 305.
1910 Russia's second written submission, para. 304.
1911 Russia's second written submission, para. 304.

during these proceedings. More particularly, when explaining this concept, the European Union has
pointed to the International Energy Agency defining energy security as "the uninterrupted
availability of energy sources at an affordable price"1912 and the UNECE defining it as:
[T]he availability of usable energy supplies, at the point of final consumption, at
economic price levels and in sufficient quantities and timeliness, so that, given due
regard to encouraging energy efficiency, the economic and social development of a
country is not materially constrained.1913
7.1151. The European Union also explains that security of energy supply has a short -term and a
long-term dimension: The former focuses on "the ability to respond promptly to sudden changes
within the supply -demand balance" 1914 caused by, e.g. "infrastructure breakdown, natural
disasters, social unrest, political action or terrorism". 1915 The latter focuses on the need for
"adequate investments in the production and distribution of energy and efficient energy
markets"1916 and the need to overcome obstac les related to the "traditional fragmentation of the
EU market" for natural gas and the "relatively limited number of foreign sources of supply".1917
7.1152. Even if the concept of security of energy supply and the European Union's definition or
explanation of it involve some ambiguities, we do not consid er this detrimental to the European
Union's defence under Article XIV(a) of the GATS. While we do not disagree with Russia that a
fundamental interest is one that "lies at the core of a society and which that society constantly
strives to achieve and maintain", we are not convinced that such a fundamental interest of society
will hereby necessarily be "'specific' and easily identified".1918
7.1153. In this regard, we agree with the panel in US – Gambling, that "the term 'public morals'
denotes standards of right and wrong conduct maintained by or on behalf of a community or
nation"1919 and "the content of these concepts for Members can vary in time and space, depending
upon a range of factors, including prevailing social, cultural, ethical and religious values." 1920 It
was on the basis of this standard that the Appellate Body rejected the argument "that, for the
purposes of an analysis under Article XX(a), a panel is required to identify the exact content of the
public morals standard at issue." 1921 We believe a similar approac h is warranted for the purposes
of our analysis of the public order standard under Article XIV(a) of the GATS and footnote 5
hereto. Therefore, while we reiterate our view that a certain minimum level of clarity is required in
order to meaningfully assess whether a stated interest can be considered fundamental, we do not
believe that the required level of clarity should be overly demanding. In our view, the explanations
and definitions of security of energy supply provided by the European Union in these pro ceedings
provide the level of clarity required to assess its defence in a meaningful manner.
7.1154. Having found that the European Union has defined or explained the concept of security of
energy supply with sufficient clarity, we recall that the European Union e xplains the fundamental
nature of security of energy supply by pointing to disruptions of energy supply potentially having
"severe social, economic and, ultimately, political consequences". 1922 Russia does not appear to

1912 European Union's first written submission, para. 482 (quoting International Energy Agency, Energy
supply security: Emergency Response of IEA Countries 2014 (OECD/IEA 2014), (Exhibit EU-70), p. 13).
1913 European Union's first written submission, para. 482 (quoting United Nations Economic Commission
for Europe, Emerging Global Energy Security Risks, No. 36 (2007), pp. 8-9, (Exhibit EU-71), p. 8).
1914 European Union's first written submission, para. 483.
1915 European Union's first written submission, para. 487.
1916 European Union's first written submission, para. 483.
1917 European Union's first written submission, paras. 488-489.
1918 Russia's second written submission, para. 304.
1921 Appellate Body Reports, EC – Seal Products, para. 5.199.
1922 European Union's first written submission, para. 485. As examples of social consequences, the
European Union argues that disruptions may "prevent the heating of households and public spaces" and as a
result "disrupt the provision of essential social services, such as healthcare, childcare, education and other
welfare activities, as well as many other basic public services, such as transportation, police or the
administration of justice" which, in turn, "may endanger the health, life, security and, more generally, the well-
being of the European citizens, in particular in the event of prolonged disruptions during the winter months".
(Ibid.) As examples of economic consequences, the European Union argues that disruptions "may require the
interruption of important industrial processes, cause irreparable damage to certain industrial installations, in
particular in case of sudden interruptions, and, more generally, have a serious impact on the overall economy".

dispute these potential effects of disr uptions of energy supply, nor their gravity. We further recall
that the European Union seeks to demonstrate the importance placed on security of energy supply
in the EU society by pointing to it being reflected in its laws and policies.1923 Again, Russia does not
dispute the existence of these laws or policies, nor the fact that the EU society places a great
importance on its security of energy supply. In light of this, we consider that the European Union
has demonstrated that security of energy supply is a fu ndamental interest of society within the
meaning of footnote 5.
7.1155. Furthermore, we are of the view that Russia's argument that the European Union is
deliberately seeking to "maximize its discretion to define security of supply in the manner most
advantageous to its overall objectives, to include reducing reliance on Russian pipeline transport
services and natural gas imports" does not so much pertain to the issue of whether security of
energy supply is a fundamental interest of society but rather to the relati onship between the third-
country certification measure and this stated objective. We believe that these arguments are more
appropriately addressed in other parts of the analysis under Article XIV(a), namely when assessing
whether the third -country certification measure is designed and necessary to ensure security of
energy supply, as well as in the analysis under the chapeau of Article XIV.1924
7.1156. Hence, we conclude that security of energy supply is a fundamental interest of society
within the meaning of footnote 5 to Article XIV(a) of the GATS, and we proceed to assess whether
the European Union has demonstrated that foreign control of TSOs poses a genuine and
sufficiently serious threat to this interest.
Foreign control of TSOs as a genuine and sufficiently seri ous threat to the
European Union's security of energy supply
7.1157. At the outset, we wish to point out that the standard for determining whether a threat is
"genuine and sufficiently serious" has not been explicitly addressed in previous disputes. In light of
this, we consider it useful to begin with some general considerations regarding the interpretation
of these terms, following the principles of treaty interpretation in Article 31 of the Vienna
Convention.
7.1158. Both parties appear to agree that the term "genuine" and the term "sufficiently serious"
should be given distinct meanings. More particularly, both parties agree that the term "genuine"
speaks to the "degree of likelihood" of a threat materializing 1925 and that the term "sufficiently

(Ibid.) The European Union then goes on to argue that "[t]hese social and economic effects may in turn lead to
unrest and disturbances affecting the maintenance of law and order. (Ibid.) We note that Japan considers
security of energy supply a "means or tool to achieve various higher policy objectives … but not the
fundamental interest of society in and of itself". (Japan's third-party statement, para. 8). Russia echoed
Japan's position in its second written submission but subsequently abandoned this distinction, indicating that it
does not consider it relevant in the context of the European Union's defence of the third-country certification
measure under Article XIV(a) of the GATS. (Russia's second written submission, para. 305; and response to
Panel question No. 206, para. 256). In our view, the relevant inquiry under Article XIV(a) of the GATS and
footnote 5 hereto is whether a stated interest can be considered a fundamental interest in society, regardless
of whether it has reached this standing due to its role or relationship with other fundamental interests. We
therefore do not believe that a separate inquiry into the relationship between the stated interest and other
fundamental interests is called for. Indeed, and as pointed out by the European Union, most interests of
society could be characterized as a means to achieve basic social and economic interests and panels in
previous disputes have accepted this. (European Union's second written submission, para. 196 (referring to
Panel Report, US – Gambling, para. 6.469, in which the panel accepted the prevention of criminal activity as a
fundamental interest even though this could also be regarded as a means to protect the life, health, security
and well-being of citizens)).
1923 European Union's first written submission, paras. 490-501. More specifically, and in addition to its
reference to Article 194 of the TFEU and to the Commission's Communication on a European Energy Security
Strategy, the European Union refers to Regulation (EU) No. 994/2010, (Exhibit EU-73), Articles 1, 3(1), 5(1),
6, 8, 9(3), and 10; Directive 2009/73/EC, (Exhibit EU-5), Articles 2(4) and 13 and Recitals (1), (6), (8), and
(22); and TEN-E Regulation, (Exhibit EU-4), Recital (1).
1924 See paras. 7.1203-7.1208, 7.1213-7.1224 and 7.1241-7.1253 below.
1925 European Union's response to Panel question No. 207, para. 192; and Russia's response to Panel
question No. 207(a), para. 261.

serious" speaks to the "potential consequences"1926 or the "potential gravity of the effects" 1927 of a
threat materializing.
7.1159. We too believe it is important to give meaning to the fact that the drafters of the GATS
included two separate terms to qualify the type of threat cove red by the s tandard in footnote 5.
Hence, we consider that only threats that are both genuine and sufficiently serious are covered by
footnote 5, and we consider that the inclusion of both of these terms suggests that they must each
be given their own, distinct meaning.
7.1160. We begin by noting that the term "threat" is defined in the Shorter Oxford English
Dictionary as "an indication of the approach of something unwelcome or undesirable; a person or
thing regarded as a likely cause of harm".1928
7.1161. With respect to the meaning of a "sufficiently serious" threat, we note that the term
"sufficiently" is defined in the Shorter Oxford English Dictionary as "in a sufficient manner;
adequately, satisfactory, enough" 1929, whereas the term "serious" is defined a s "[i]mportant,
grave; having (potentially) important, esp. undesired, consequences; giving cause for concern; of
significant degree or amount; worthy of consideration".1930
7.1162. We further note that the latter term has been used in other covered agreements as
referring to the effects or the impact of a measure or an event occurring. For instance, Article 6.3
of the SCM Agreement lists a number of effects of subsidies that would constitute "serious
prejudice to the interests of another Member" and Article 4.1(a) of the Agreement on Safeguards
defines "serious injury" as "a significant overall impairment in the position of a domestic industry".
7.1163. When the term "sufficiently serious" is used to qualify a threat, which is , as mentioned
above, defined as "an indication of the approach of something unwelcome or undesirable; a person
or thing regarded as a likely cause of harm" 1931, we therefore agree with the parties that it should
be understood as referring to the potential consequences or the potential gravity of the effects of a
threat materializing. In other words, for a threat to be considered sufficiently serious within the
meaning of footnote 5, the potential consequences or effects on the fundamental interest of
society must be of a certain magnitude or gravity.
7.1164. As for the meaning of a "genuine" threat, we note that th e term "genuine" is not used
elsewhere in the covered agreements, but is defined in the Shorter Oxford English Dictionary as
"[h]aving the character claimed for it; real, true, not counterfeit". 1932 When this term is used to
qualify a threat, which is , as mentioned above, defined as "an indication of the approach o f
something unwelcome or undesirable; a person or thing regarded as a likely cause of harm" 1933,
we therefore agree with the parties that it relates t o the degree of likelihood of the threat
materializing. This conclusion is furthermore supported by the abovementioned consideration that
the term "genuine" should be given a distinct meaning from that of the term "sufficiently serious".
7.1165. Having determined that the examination of whether a threat is genuine relates to the
likelihood of it materializing, we note that, while the term "genuine" is not used elsewhere in the
covered agreements, other terms have been used to qualify the likelihood of a threat or an event
occurring. More particularly, Article XII:2(a) of the GATT 1994 refers to "the imminent threat of …
a serious decline in [] monetary reserves", Article 3.7 of the Agreement on Implementation of
Article VI of the General Agreement on Tariffs and Tr ade 1994 specifies that for a "threat of

1926 Russia's response to Panel question No. 207(b), para. 264.
1927 European Union's response to Panel question No. 207, para. 191.
1928 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 3248.
1929 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 3097.
1930 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 2762.
1931 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 3248.
1932 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 1, p. 1094.
1933 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 3248.

material injury" to exist, "[t]he change in circumstances which would create a situation in which
the dumping would cause injury must be clearly foreseen and imminent" and "the totality of the
factors considered mus t lead to the conclusion that further dumped exports are imminent and
that, unless protective action is taken, material injury would occur", and Article 4.1(b) of the
Agreement on Safeguards defines a "threat of serious injury" as a "serious injury that is clearly
imminent".
7.1166. In our view, the fact that footnote 5 uses the term "genuine" rather than terms such as
"imminent" or "clearly imminent", and does not provide a definition or specification similar to those
listed above, suggests that a lesser degree of likelihood is required under footnote 5.
7.1167. While we agree with Russia that it is not sufficient for a responding party to rely on "mere
conjecture" or "speculation" 1934, we therefore cannot agree with Russia that the standard for
determining whether a threat is ge nuine requires "at a minimum, circumstantial evidence that,
unless the measure is adopted or enforced, there is a significant degree of likelihood that the
threat in question will materialize".1935
7.1168. If the drafters of the GATS had intended to cover only threats where "there is a
significant degree of likelihood that the threat in question will materialize" "unless the measure is
adopted or enforced", language to this effect should have been included. Indeed, and as
mentioned above, such language is inclu ded elsewhere in the covered agreements. Its absence in
footnote 5, in our view, suggests that the standard under this provision is closer to that suggested
by the European Union, namely , whether the occurrence of the threatened event is "a real, true
and authentic possibility" rather than "an imaginary or very remote risk invoked in order to escape
the obligations imposed by the GATS ".1936 This is confirmed by the abovementioned ordinary
meaning of the term "genuine" being "[h]aving the character claimed for it; real, true, not
counterfeit". We do not believe that a threat can be considered not to have the character claimed
for it, or not to be real or true, simply because it does not have a significant degree of likelihood of
materializing.
7.1169. Having set out the se considerations regarding the distinct meaning of the terms
"genuine" and "sufficiently serious", respectively, we note the European Union's argument that
these terms "provide context for the interpretation of each other" and that "the degree of
likelihood necessary to regard a threat as 'genuine' must take into account the seriousness of the
threat."1937 We agree that it may not always be appropriate to conduct the analyses of whether a
threat is genuine and sufficiently serious, respectively, in complete i solation from one another.
Depending on the particularities of the situation, a more holistic approach may be warranted and
in these circumstances the seriousness of a threat may impact the assessment of whether it is
genuine, and vice versa.
7.1170. Turning to whether the European Union has demonstrated the existence of a genuine and
sufficiently serious threat to its security of energy supply, we note that the European Union argues
that foreign control of TSOs poses a genuine and sufficiently serious threat to th e European
Union's security of energy supply due to "the interaction of a number of circumstances".1938
7.1171. More particularly, the European Union has pointed to the following "circumstances": (a)
that foreign governments, in some circumstances, have "important ec onomic and/or political
interests which conflict with the EU's own interest in ensuring SoS within the European Union" and,
thus, incentives to undermine the European Union's security of energy supply 1939; (b) that foreign
controlled TSOs can effectively undermine the European Union's security of energy supply either
by failing to comply with legal obligations imposed under EU law or by acting in a manner that is
not in their own commercial interest 1940; and (c) that foreign governments have the means to
require or induce foreign controlled TSOs to undermine the European Union's security of energy

1934 Russia's response to Panel question No. 207(a), para. 261.
1935 Russia's response to Panel question No. 207(a), para. 261.
1936 European Union's response to Panel question No. 207, para. 190.
1937 European Union's response to Panel question No. 207, para. 192.
1938 European Union's response to Panel question No. 209, para. 203.
1939 European Union's first written submission, para. 511. See also European Union's second written
submission, para. 197; and response to Panel question No. 209, paras. 213-219.
1940 European Union's first written submission, paras. 512-513. See also European Union's second
written submission, para. 197; and response to Panel question No. 209, paras. 205-206.

supply.1941 The European Union also argues that the threat of foreign control over TSOs is
"compounded"1942 or "may be further aggravated" 1943 by two other circumstances: (d) that it may
be more difficult for the EU authorities to "detect and investigate" violations of obligations under
EU law in relation to foreign controlled TSOs 1944; and (e) that it may be more difficult for EU
authorities to effectively enforce sanctions in r esponse to violations of obligations under EU law in
relation to foreign controlled TSOs.1945
7.1172. We understand from the European Union's responses to questi ons by the Panel that the
above-mentioned circumstances primarily relate to the issue of whether foreign c ontrol of TSOs
poses a genuine risk to the European Union' s security of energy supply. 1946 We also understand
the European Union to argue that the threat to its security of energy supply will materialize when
circumstances (a), (b), and (c) are all present si multaneously.1947 In other words, the European
Union's rationale appears to be that if a foreign government has an incentive to undermine the
European Union's security of energy supply as well as the means to require or induce foreign
controlled TSOs to do so, there is a genuine threat within the meaning of footnote 5. The European
Union, on the other hand, explains that circumstances (d) and (e) are "aggravating factors, rather
than indispensable elements for the existence of the threat".1948
7.1173. In light of this, we find it useful to begin by considering the validity of each of the three
"indispensable" circumstances, before turning to address the degree of likelihood of these
circumstances – compounded by the "aggravating factors" – simultaneously occurring, and i n
particular whether this degree of likelihood renders the threat of foreign control over TSOs a
genuine one, within the meaning of footnote 5.
7.1174. With respect to the first "circumstance", that foreign governments may have incentives to
undermine the European Union's security of energy supply, the European Union has pointed to a
number of more specific situations where this would, in the European Union's view, be the case: (i)
where a foreign government "may be interested in maximizing its exports of gas to th e European
Union at the expense of any other domestic or foreign sources of supply, contrary to the EU's
interest in diversifying its sources of supply and promoting competition"; (ii) where a foreign
government may be interested in ensuring its own securi ty of energy supply at the expense of the
European Union's, in particular in case of "parallel shortage"; (iii) where a foreign government is
seeking to "gain leverage vis-à-vis the European Union or the EU Member States in commercial or
political negotiat ions"; or (iv) where a foreign government seeks to "punish behaviour by the
European Union, by a certain EU Member State or by a certain operator which that third -country
government regards as a threat to its political interests". 1949 The European Union has f urthermore
pointed to historical examples, namely the 1973 oil embargo by the Organization of Arab
Petroleum Exporting Countries and the interruption of Russian natural gas supplies to Ukraine in
2006 and 2009, as illustrations of "how a country's economic or political interests may enter into
conflict with another country's interest in ensuring its SoS and lead the former country to take
measures that have the effect of undermining the latter's SoS." 1950 Russia does not appear to
dispute that foreign governme nts may have conflicting interests that would give them cause to
seek to undermine the European Union's security of energy supply. In fact, Russia states that:

1941 European Union's first written submission, paras. 514-519. See also European Union's second
written submission, para. 197; and response to Panel question No. 209, paras. 207-210.
1942 European Union's first written submission, para. 520; and second written submission, para. 198.
1943 European Union's response to Panel question No. 209, para. 211.
1944 European Union's first written submission, paras. 521-524. See also European Union's second
written submission, para. 198; and response to Panel question No. 210, paras. 223-225.
1945 European Union's first written submission, paras. 525-526. See also European Union's second
written submission, para. 198; and response to Panel question No. 210, paras. 226-230.
1946 European Union's response to Panel question No. 207, para. 193.
1947 European Union's response to Panel question No. 207, para. 193.
1948 European Union's response to Panel question No. 210, para. 222.
1949 European Union's first written submission, para. 511.
1950 European Union's response to Panel question No. 212, para. 240. See also European Union's second
written submission, paras. 204-206.

The concept of foreign governments acting in the best interest of their citizens is a
bedrock pr inciple of how governments function; it cannot and should not be
considered a threat to the EU's security of supply.1951
7.1175. We agree with both parties that any government will act in accordance with its national
interests and that this is indeed "a bedrock princ iple of how governments function". While we wish
to emphasize that we are not suggesting that the right of foreign governments to "act[] in the best
interest of their citizens", in and of itself, should be considered a threat to the European Union's
security of energy supply, we agree with the European Union that it is not mere conjecture or
speculation for it to suggest that a foreign government may have incentives to undermine the
European Union's security of energy supply when their interests conflict, i ncluding in the specific
situations listed by the European Union.
7.1176. With respect to the second "circumstance", that foreign controlled TSOs can effectively
undermine the European Union's security of energy supply, the European Union argues that TSOs
"play a critical role" in ensuring the European Union's security of energy supply and that foreign
controlled TSOs can undermine it either by failing to comply with the obligations imposed under EU
law or by failing to act in accordance with "their own commercial interests, contrary to the
reasonable expectation on which the market -based mechanisms provided for in the Third Energy
Package are premised."1952
7.1177. The European Union points to the following more specific ways in which foreign controlled
TSOs can undermine it s security of energy supply by failing to comply with obligations imposed
under EU law: (i) discontinuing the transmission of natural gas in extreme periods of cold or
neglecting network maintenance for extended periods contrary to Articles 2(4) and 13(a) of the
Directive; (ii) failing to provide third -party access on a non -discriminatory basis and favouring
affiliated producers or suppliers contrary to Article 32 of the Directive; (iii) failing to plan
investments or not implementing mandatory network inve stments and thereby preventing
competing sources of natural gas from reaching the EU market contrary to Articles 14(5)(b) and
14(5)(d), 17(1)(d) and 17(2)(f), and 22(2) and 22(7) of the Directive; (iv) disclosing confidential
information to foreign governments contrary to Article 16 of the Directive, thereby providing them
with "undue advantages in contractual negotiations"; and (v) refusing non-discriminatory access to
necessary information for network users, preventing the optimal use of available infrastructure and
thereby "reducing the quantity of available gas in regions with scarcity or ensuring economic
advantages for certain producers or suppliers" contrary to Article 16(3) of the Directive and "a
number of detailed obligations on transparency in Regulation (EC) No 715/2009".1953
7.1178. Furthermore, the European Union points to the following more specific ways in which
foreign controlled TSOs can undermine its security of energy supply by failing to act in accordance
with their own commercial interests: (i) no t implementing "economically rational" network
investments that would allow competing sources of natural gas to reach the EU market; (ii)
scheduling maintenance works in periods of high demand; and (iii) underinvesting in the networks,
increasing the risks of technical failure, accidents and interruptions.1954
7.1179. We note that Russia does not dispute the role of TSOs for the European Union's security
of energy supply, nor the existence of obligations imposed on TSOs under EU law. Rather, Russia
appears to argue that there is no threat to the European Union's security of energy supply
stemming from foreign controlled TSOs engaging in the actions listed by the European Union
exactly because these are "already prohibited" under EU law.1955
7.1180. We have difficulties underst anding the relevance of this argument. As pointed out by the
European Union, its position is that foreign controlled TSOs can effectively undermine the
European Union's security of energy supply by not complying with the obligations imposed on
them under E U law – or by failing to act in accordance with their own commercial interests. The
existence of obligations under EU law that prohibit the types of actions referred to by the European
Union therefore does not appear to invalidate the European Union's posi tion. Russia also argues

1951 Russia's second written submission, para. 307.
1952 European Union's response to Panel question No. 209, paras. 205-206.
1953 European Union's first written submission, para. 512.
1954 European Union's first written submission, para. 512.
1955 Russia's second written submission, para. 308.

that the actions by TSOs referred to by the European Union are "entirely hypothetical". 1956 In this
regard, we recall that we are, at this point, only addressing the validity of the European Union's
second "circumstance", that foreign controlled TSOs can effectively undermine the European
Union's security of energy supply by not complying with the obligations imposed under EU law or
by failing to act in accordance with their own commercial interests. We address Russia's
arguments concerning whether it is "entirely hypothetical" that foreign controlled TSOs will actually
do so, when considering the degree of likelihood of all three "circumstances" occurring
simultaneously.
7.1181. Given that TSOs are responsible for operating the transmission s ystems through which
natural gas is supplied, granting access to such systems, and investing in them, we agree with the
European Union that it is a reasonable inference, rather than mere conjecture or speculation, to
suggest that foreign controlled TSOs ca n effectively undermine the European Union's security of
energy supply.
7.1182. With respect to the third "circumstance", that foreign governments have the means to
require or induce foreign controlled TSOs to undermine the European Union's security of energy
supply, the European Union points to two scenarios:
7.1183. First, the European Union argues that where the foreign government itself controls a TSO,
the foreign government can require or induce it to undermine the European Union's security of
energy supply "by exercising its ownership rights and/or other rights which give it control over the
management of the TSO".1957
7.1184. Second, the European Union argues that a foreign government can require or induce
TSOs controlled by foreign private persons to undermine the European Union's security of energy
supply by imposing legal obligations "that make it impossible or more difficult for them to comply
with the obligations imposed under EU law with a view to ensuring SoS" 1958 or by "offering to
grant, or threatening to withdraw, cert ain benefits in respect of their activities in their home third
country" where the foreign private persons "conduct similar or related economic activities in their
country of origin".1959 As an example, the European Union has pointed to Decree of the Presiden t
of the Russian Federation No. 1285 of 11 September 2012 on Measures to protect the interests of
the Russian Federation when Russian legal entities engage in foreign economic activity.1960
7.1185. Russia disputes that foreign governments have the means to require o r induce foreign
controlled TSOs to undermine the European Union's security of energy supply, but does not
elaborate on this position.1961
7.1186. In our view, it would indeed appear that a foreign government can require or induce TSOs
to undermine the European Unio n's security of energy supply when that foreign government itself
controls the TSOs.
7.1187. With respect to TSOs that are controlled by foreign private persons, we agree with the
European Union that such foreign private persons are subject to legal obligations i mposed under
their originating jurisdiction and could be subject to inducement in the form of offers to grant or
threats to withdraw benefits. Where foreign private persons are subject to legal obligations or
inducements by foreign governments, which conflict with obligations imposed under EU law or with
its commercial interests in the European Union, the result will ultimately depend on that foreign
private person and the weight or importance of its interests in its country of origin and in the
European Union, respectively. While we see no reason to assume that foreign controlled TSOs will
always comply with the legal obligations or inducements imposed by foreign governments, rather
than the legal obligations under EU law or their own commercial interests in the European Union, it

1956 Russia's second written submission, para. 308.
1957 European Union's first written submission, para. 515.
1958 European Union's first written submission, para. 517.
1959 European Union's first written submission, para. 518.
1960 European Union's second written submission, fn 255; and response to Panel question No. 209,
para. 209 (referring to Resolution of the Government of the Russian Federation No. 1017 of 5 October 2012 on
measures implementing Decree of the President of the Russian Federation No. 1285 of 11 September 2012,
(Exhibit EU-131)).
1961 Russia's opening statement at the second meeting of the Panel, para. 158.

does not appear to be mere conjecture or speculation to suggest that foreign controlled TSOs may
comply with the legal obligations or inducements imposed by foreign governments , at least in
some situations.
7.1188. Having found that the three "indispensable" circumstances referred to by the European
Union are not, in and of themselves, mere conjecture or speculation but rather reasonable
inferences, we turn to consider whether the degree of likelihood of these three circumstances –
compounded by the two additional, "aggravating" circumstances pointed to by the European Union
– simultaneously occurring, and in particular whether this degree of likelihood renders the threat
of foreign control over TSOs a genuine one, within the meaning of footnote 5.
7.1189. In this regard, we note Russia's argument that the threat of foreign governments
undermining the European Union's security of energy supply through foreign controlled TSOs is
"entirely hypothetical". More specially, Russia submits that this has " not occurred to date, and will
not occur in the future".1962 The European Union does not dispute that the alleged threat posed by
foreign control over TSOs has not yet materialized, but instead faults Russia for suggesting that
"only evidence of actual disruptions of supply could be relevant".1963
7.1190. We agree with the European Union that evidence of a threat already having materialized
is not a prerequisite for demonstrating that this threat is genuine, i.e. has the character of a threat
and is real and true. As ac knowledged by Russia itself, "a threat, by its very nature, is something
that has not yet occurred or materialized".1964
7.1191. At the same time, we recall that the alleged threat cannot be entirely hypothetical in
nature and that mere conjecture or speculation does not suffice. In our view, however, the
European Union does not merely engage in conjecture or speculation. Rather, we recall that it has
pointed to a number of actual situations where a foreign government will have incentives to
undermine the European Union's security of energy supply and will have the means to do so either
by controlling a TSO itself or by being in a po sition to require or induce foreign private persons
that, in turn, control a TSO to do so.
7.1192. While we consider the "aggravating" circumstances pointed to by the European Union,
namely the fact that it may be more difficult to investigate, detect and enforce legal obligations
under EU law in respect of foreign controlled TSOs, of less importance, we agree with the
European that these are reasonably inferred from the fact that the EU authorities' investigative
powers are limited to the EU territory 1965 and the fa ct that sanctions typically take the form of
fines, which may be less effective where a person has limited assets within the EU territory.1966
7.1193. We also agree that these obstacles to the investigation, detection, and enforcement of EU
legal obligations in resp ect of foreign controlled TSOs may serve to aggravate the likelihood of
foreign governments seeking to induce or require foreign controlled TSOs to undermine the
European Union's security of energy supply.
7.1194. Bearing this in mind, we believe that the Europea n Union has made a prima facie case
that there is a real and true possibility, rather than a merely hypothetical one, of foreign
governments requiring or inducing foreign controlled TSOs to undermine the European Union's
security of energy supply. Hence, the European Union has, in our view, demonstrated that foreign
control over TSOs poses a genuine risk to its security of energy supply.
7.1195. As we have found that foreign control of TSOs poses a genuine threat to the European
Union's security of energy supply, we turn to the issue of whether this threat can also be
considered a sufficiently serious one. In this regard, we recall our finding that this issue relates to
the potential consequences or the potential gravity of the effects of a threat materializing. In other
words, for the threat of foreign control of TSOs to be considered sufficiently serious within the

1962 Russia's second written submission, para. 308.
1963 European Union's second written submission, para. 201.
1964 Russia's response to Panel question No. 207(a), para. 260.
1965 European Union's first written submission, paras. 521-524; and response to Panel question No. 210,
paras. 223-225.
1966 European Union's first written submission, paras. 525-526; and response to Panel question No. 210,
paras. 226-230.

meaning of footnote 5, the potential consequences or effects on the European Union's security of
energy supply must be of a certain magnitude or gravity.
7.1196. The European Union argues that foreign control of TSOs poses a sufficiently serious threat
to the European Union's security of energy supply, pointing to the arguments made in the context
of claiming that security of energy supply is a fundamental interest of society.1967
7.1197. We recall that the European Union has explained that disruptions of supply may have
"severe social, economic and, ultimately, political consequences". 1968 As examples of social
consequences, the European Union has explained that disruptions may "prevent the heating of
households and public spaces" and as a result "disrupt the provision of essential social services,
such as healthcare, childcare, education and other welfare activities as well as many other basic
public services, such as transportation, police or the administration of justice" which, in turn, "may
endanger the health, life, security and, more generally, the well -being of the European citizens, in
particular in the event of prolonged disruptions during the winter months". 1969 As exa mples of
economic consequences, the European Union argues that disruptions "may require the interruption
of important industrial processes, cause irreparable damage to certain industrial installations, in
particular in case of sudden interruptions, and, mo re generally, have a serious impact on the
overall economy".1970 The European Union then goes on to argue that "[t]hese social and economic
effects may in turn lead to unrest and disturbances affecting the maintenance of law and order.1971
7.1198. Russia does not dispu te the severity of the effects disruptions of supply may have on
society and we too consider this relevant. In this regard, we also take into account the fact that
natural gas, according t o the European Union, "plays an essential an d ever-growing role in t he
energy balance of many countries, including the European Union, making gas security a key
element in energy security".1972 Presumably, disruptions in the supply of natural gas will therefore
lead to similar disruptions in the overall energy balance.
7.1199. We further note the European Union's explanation of the "specific characteristics of the
gas sector", namely that "[n]atural gas is far less fungible than oil, particularly with regard to
transporting the fuel to end users" and that "downstream gas transport is always performed by
fixed infrastructure". 1973 This, in turn, means that "[i]f any part of a major gas transmission
pipeline is destroyed, supply downstream is typically stopped until the damage can be repaired or
the pipeline replaced; alternative arrangements by road are not an option."1974 Since natural gas is
transported by TSOs through infrastructure, which is fixed and, at any given time, of finite
quantity, it can reasonably be inferred that there will be a significant impact on the supply of
natural gas, and hence energy, if a foreign government requires or induces even a single or a few
TSOs to violate their obligations under EU law or to act contrary to their commercial interests.
7.1200. Although Russia, as explained, does not dispute the severity of the effe cts disruptions of
energy supply may have on society, it argues that "the potential consequences of foreign control
of TSOs are mitigated by the existing regulatory framework in the European Union." 1975 This
appears to be a reiteration of the position that the legal obligations imposed on TSOs under EU law
entail that foreign control of TSOs does not constitute a threat against the European Union's
security of energy supply.

1967 European Union's response to Panel question No. 207, para. 194 (referring to European Union's first
written submission, para. 485).
1968 European Union's first written submission, para. 485.
1969 European Union's first written submission, para. 485.
1970 European Union's first written submission, para. 485.
1971 European Union's first written submission, para. 485.
1972 European Union's first written submission, para. 484. More particularly, the European Union submits
that "[t]he share of gas in the total primary energy supply (TPES) of the European Union has increased from
18 % in 1990 to 23 % in 2013" and that "the share of gas in the power generation mix rose from 8.6 % in
1990 to 16.6 % in 2013, with around 48 % of incremental power generation coming from natural gas". (Ibid.)
1973 European Union's first written submission, para. 486 (quoting International Energy Agency, Energy
supply security: Emergency Response of IEA Countries 2014 (OECD/IEA 2014), (Exhibit EU-70), pp. 53-54).
1974 European Union's first written submission, para. 486 (quoting International Energy Agency, Energy
supply security: Emergency Response of IEA Countries 2014 (OECD/IEA 2014), (Exhibit EU-70), pp. 53-54).
1975 Russia's response to Panel question No. 207(c), para. 270.

7.1201. We have addressed this argument already in the context of considering whether foreign
control of TSOs constitutes a genuine threat to the European Union's security of energy supply. We
reiterate the position that the existence of obligations on TSOs under EU law does not mitigate the
gravity of the effects on the European Union's security of energy supply caused by foreign
governments requiring or inducing foreign controlled TSOs to violate the obligations imposed on
them under EU law – or to fail to act in accordance with their own commercial interests.
7.1202. We therefore conclude that foreign control of TSOs poses a genuine and sufficiently
serious threat to a fundamental interest of the EU society, namely its security of energy supply,
and proceed to assess whether the European Union has demonstrated that the third -country
certification measure is designed to maintain public order by being designed to address this threat
against the European Union's security of energy supply.
Whether t he third -country certification measure is designed to ensure the
European Union's security of energy supply
7.1203. When considering whether the European Union has demonstrated that the third -country
certification measure implemented in the na tional laws of Croatia, Hungary and Lithuania is
designed to address the threat against the European Union's security of energy supp ly posed by
foreign control over TSOs, we recall that the Appellate Body has found, in the context of
Article XX(a) of the GATT 1994, that the analysis of a challenged measure's design is only a
threshold examination, which is not "a particularly demanding step".1976 We consider these
findings relevant for our assessment under Article XIV(a) of the GATS as well.1977
7.1204. We therefore follow the approach set out by the Appellate Body and focus our assessment
on whether the European Union has demonstrated that the thir d-country certification measure is
not "incapable" of addressing the threats posed by foreign control over TSOs to the European
Union's security of energy supply, and hence maintaining public orde r within the meaning of
Article XIV(a) of the GATS.1978
7.1205. In this regard, we note the European Union's argument that:
[B]y its own express terms, the SoS requirement included in Article 11 of the Gas
Directive is specifically aimed at ensuring the security of gas supply in the European
Union by addressing the threats to SoS posed by foreign controlled TSOs.1979
7.1206. The European Union furthermore refers to its arguments on the contribution of the third -
country certification measure to the objective of ensuring security of energy supply, made in the
context of arguing that this measure is necessary to maintain public order.1980
7.1207. While the assessment of a measure's contribution in this context is a more demanding
one than the assessment of whether the measure is designed to maintain public order, we see no
problem in assessing the latter on the basis of argumentation and evidence provided in the context
of the former. 1981 We recall the European Union's explanation of the design, structure and

1976 Appellate Body Report, Colombia – Textiles, paras. 5.68 and 5.70.
1977 In the context of Article XIV(c) of the GATS, the Appellate Body has similarly considered the
assessment of the design of a challenged measure an "initial examination" and the assessment of a challenged
measure's necessity a "more in-depth, holistic analysis". (Appellate Body Report, Argentina – Financial
Services, paras. 6.203-6.204).
1978 Appellate Body Reports, Argentina – Financial Services, para. 6.203; and Colombia – Textiles,
para. 5.68.
1979 European Union's response to Panel question No. 213, para. 243.
1980 European Union's response to Panel question No. 213, para. 246 (referring to European Union's first
written submission, paras. 507-529; and second written submission, paras. 197-204).
1981 See Appellate Body Report, Argentina – Financial Services, para. 6.205, in which the Appellate Body
referred to these two elements as "conceptually distinct, yet related, aspects of the overall inquiry to be
undertaken" in the context of Article XIV(c) of the GATS and stated that:
We do not see the content of these two el ements of the analysis as entirely separate. Nor do we
see the structure of each analysis as one that must follow a rigid path. Rather, the analyses of
these two elements may overlap in the sense that some considerations may be relevant to both
elements of the Article XIV(c) defence. The way in which a panel organizes its examination of
these elements in scrutinizing a defence in any given dispute will be influenced by the measures

expected operation of the third -country certification measure, namely that it involves a "scre ening
mechanism which allows the competent authorities to detect and assess in advance the potential
risks to SoS " and, where warranted, allows the authorities to "deny access to the transmission
market" to TSOs that would pose a risk, "thereby preventing the risks to SoS from
materialising".1982 We further note that Russia does not dispute that the third -country certification
measure "may, in the abstract, not be incapable of contributing to ensuring SoS" 1983 and we too
believe that the above mentioned explanation of t his measure's design, structure and expected
operation demonstrates that it is not incapable of ensuring the European Union's security of
energy supply by addressing the threat posed by foreign control over TSOs.
7.1208. As we have found that the third-country certification measure is not incapable of ensuring
the European Union's security of energy supply by addressing the threat posed by foreign control
over TSOs, we conclude that it is designed to maintain public orde r within the meaning of
Article XIV(a) of the GATS. We therefore proceed to assess whether the European Union has
demonstrated that this measure is necessary to maintain public orde r within the meaning of
Article XIV(a) of the GATS by being necessary to address the threat to the European Union 's
security of energy supply posed by foreign control over TSOs.
7.10.2.3.2.1.2 Necessary to maintain public order
7.1209. The Appellate Body has clarified that the assessment of whether a challenged measure is
necessary to maintain public order within the meaning of Article XIV(a) of the GATS involves a
process of weighing and balancing a series of factors including : (i) "the 'relative importance' of the
interests or values furthered by the challenged measure" 1984; (ii) "the contribution of the measure
to the realization of the ends pursued by it" 1985; and (iii) "the restrictive impact of the measure on
international commerce".1986 Furthermore, panels must then compare the challenged measure with
reasonably available alternative measures, which achieve the same level of pro tection while being
less trade restrictive.1987
7.1210. Below, we consider each of the three factors listed above as well as the alternative
measures proposed by Russia, and then turn to provide an overall assessment, weighing and
balancing all of these elements.
Relative importance of the objective of security of energy supply
7.1211. With respect to the relative importance of the objective of security of energy supply, we
note that the Appellate Body has clarified, in the context of Article XX(d) of the GATT 1994, that:
[A]ssessing a measure claimed to be necessary to secure compliance of a WTO -
consistent law or regulation may, in appropriate cases, take into account the relative
importance of the common interests or values that the law or regulation to be
enforced is int ended to protect. The more vital or important those common interests
or values are, the easier it would be to accept as "necessary" a measure designed as
an enforcement instrument.1988
7.1212. The European Union refers to its arguments concerning security of energy supply being a
fundamental interest of society within the m eaning of footnote 5 to Article XIV(a) of the GATS1989,
whereas Russia does not address this factor. We recall our finding in paragraphs 7.1145 through
7.1156 above that security of energy supply is a fundamental interest of society. In our view, this

and laws or regulations at issue, as well as by the way in which the parties present their
respective arguments. (Ibid.)
1982 European Union's first written submission, para. 529.
1983 Russia's comments on the European Union's response to Panel question No. 213, para. 211.
1984 Appellate Body Report, US – Gambling, para. 306 (quoting Appellate Body Report, Korea – Various
Measures on Beef, para. 162).
1985 Appellate Body Report, US – Gambling, para. 306.
1986 Appellate Body Report, US – Gambling, para. 306.
1987 Appellate Body Report, US – Gambling, paras. 307-308.
1988 Appellate Body Report, Korea – Various Measures on Beef, para. 162. See also Panel Reports, EC –
Seal Products, para. 7.632; and Appellate Body Reports, EC – Seal Products, para. 5.203.
1989 European Union's first written submission, para. 527.

finding suggests that this objective is of fundamental importance to the European Union also for
the purposes of our necessity analysis.
Contribution to the objective of security of energy supply
7.1213. Turning to the third -country certification measure's contri bution to the objective of
security of energy supply, we note the European Union's argument that this measure forms " part
of a comprehensive policy consisting of a multiplicity of interacting measures" and that it is
therefore difficult to "isolate and qua ntify its effects". 1990 For this reason the European Union
suggests that a "qualitative analysis" would be best suited to assess the contribution of the third -
country certification measure.1991
7.1214. The European Union argues that the "design and expected operation" of the measure is
"manifestly apt to make a material contribution" to the objective of ensuring security of energy
supply.1992 More particularly, the European Union points out that the third -country certification
measure sets out a "screening mechanism which allows the competent authorities to detect and
assess in advance the potential risks" and, where warranted, allows the authorities to "deny access
to the transmission market" to TSOs that would pose a risk, "thereby preventing the risks to SoS
from materialising".1993
7.1215. Russia does not appear to question the underlying design of the third-country certification
measure, and we agree with the European Union that a measure which explicitly requires the
relevant authorities to assess potential threats to the Europe an Union's security of energy supply
and to deny access to the market unless it has been determined that no such threat exists,
appears to be "manifestly apt to make a material contribution" to the objective of security of
energy supply.
7.1216. At the same time, we note that Russia argues that the third -country certification "do[es]
not actually ensure that TSOs take action to ensure the security of supply of energy beyond those
they are already required to take."1994 This appears to be a reiteration of its position that the third-
country certification measure is redundant since other EU laws and regulations already impose
obligations on TSOs that prohibit actions, which could threaten the European Union's security of
energy supply.1995
7.1217. We are not convinced that the mer e existence of other measures addressing the same or
similar threats to the European Union's security of energy supply entails that the third -country
certification measure is redundant or does not contribute to this objective. As explained by the
Appellate Body, concerns or challenges may arise that require Members to implement "a
comprehensive policy comprising a multiplicity of interacting measures".1996
7.1218. The European Union explicitly refers to the third -country certification measure forming
part of such a c omprehensive policy.1997 As pointed out by the European Union, the third -country
certification measure has an ex ante effect, namely, to detect and address in advance the risk that
TSOs controlled by foreign persons may not comply with the various substantive requirements
imposed on TSOs under EU law.1998
7.1219. We therefore agree with the European Union that the third-country certification measure
interacts with other provisions, such as those banning the types of behaviour referred to by the
European Union, by allowing the relevant authorities to detect TSOs which may not to comply with
such provisions due to foreign control, and prevent such TSOs from gaining access to the market.

1990 European Union's first written submission, para. 528 (referring to Appellate Body Reports, Brazil –
Retreaded Tyres, paras. 151; and EC – Seal Products, para. 5.212.
1991 European Union's first written submission, para. 528.
1992 European Union's first written submission, para. 529 (referring to Appellate Body Reports, Brazil –
1993 European Union's first written submission, para. 529.
1994 Russia's second written submission, para. 315.
1995 Russia's second written submission, paras. 315-316.
1996 Appellate Body Reports, Brazil – Retreaded Tyres, para. 151; China – Publications and Audiovisual
Products, fn 480; and EC – Seal Products, para. 5.212.
1997 European Union's first written submission, para. 528.
1998 European Union's second written submission, para. 209.

7.1220. Russia also criticizes the third -country certification measure for not being designed to
address all threats posed to the European Union's security of energy supply. As examples, Russia
submits that the third-country certification measure would not have prevented "the interruptions in
the flow of Russian gas through Ukraine in 2006 and 2009", which the European Union itself has
relied on "as 'a compelling illustration of how foreign governments may find in their own interest to
disrupt gas supplies to another country in order to advance their foreign policy objectives".1999
7.1221. In this regard, we note that the European Union does not dispute that the interruptions in
gas supplies in 2006 and 2009 would not have been prevented by the third -country certification
measure. Generally, the European Union does not suggest that the third -country certification
measure is necessary to address all potential threats that may be posed to its security of energy
supply, but rather that it is necessary to address the specific thre at pointed to, namely that posed
by foreign control over TSOs. We agree that a measure need not be necessary to prevent all
potential threats to a fundamental interest of society in order to be justified under Article XIV(a) of
the GATS. In particular , we recall the Appellate Body's finding in EC – Seal Products that a
responding Member is not required to address the same or similar public moral concerns in the
same way. 2000 We also recall the European Union's position that the third -country certification
measure forms " part of a comprehensive policy consisting of a multiplicity of interacting
measures". This further supports the conclusion that the third -country certification measure is not
required to address all threats to the European Union's security of en ergy supply in order to be
justified under Article XIV(a) of the GATS.
7.1222. Lastly, Russia criticizes the third-country certification measure for having only an ex ante
effect, arguing that "the threat that the measure addresses by means of an 'ex -ante' assessment
automatically pre-empts the 'certain circumstances' as referred to by the EU from being present "
and that " [c]onsequently, the EU attempts to obtain justification for a measure that does not, in
any way, shape or form, address the threat that arises wh enever these 'certain circumstances' are
in fact present."2001
7.1223. We see no issue with a responding party attempting to justify a measure that is of an ex
ante nature under Article XIV(a) of the GATS and such measures have been accepted in a number
of previous disputes.2002 We also reiterate the point made by the European Union that the third -
country certification measure forms " part of a comprehensive policy consisting of a multiplicity of
interacting measures". Indeed, the European Union has pointed to other prov isions, which provide
EU authorities with the possibility of imposing sanctions should TSOs engage in actions that
threaten the European Union's security of energy supply. 2003 This does, however, not entail that a
measure, which ex ante seeks to prevent such threats from materializing in the first place, should
not be considered as contributing towards the objective of ensuring the European Union's security
of energy supply.
7.1224. In light of the above, we therefore agree with the European Union that the design,
structure and expected operation of the third -country certification measure renders it manifestly
apt to address ex ante the threat to the European Union's security of energy supply posed by
foreign control over TSOs, and that this conclusion is not altered b y the fact that the third-country
certification measure may not address certain other potential threats to the European Union's
security of energy supply.
Trade-restrictiveness of the third-country certification measure
7.1225. The European Union compares the thi rd-country certification measure to a "complete
ban", pointing to the third -country certification measure being "much less restrictive". 2004 More
particularly, the European Union submits that this measure "restricts trade in services to the
extent that it req uires that the competent authorities refuse the certification of any third country

1999 Russia's response to Panel question No. 214(a), para. 275 (quoting the European Union's second
written submission, para. 206).
2000 Appellate Body Reports, EC – Seal Products, para. 5.200.
2001 Russia's comments on the European Union's response to Panel question No. 212, para. 110.
2002 See, e.g. Appellate Body Reports, Korea – Various Measures on Beef, para. 178; and Argentina –
Financial Services, para. 6.231; and Panel Report, Argentina – Financial Services, paras. 7.694, 7.697, 7.709
and 7.716.
2003 European Union's response to Panel question No. 210, paras. 229-230.
2004 European Union's first written submission, para. 531.

controlled TSO which puts at risk the security of supply". 2005 We therefore understand from the
European Union that the degree of trade -restrictiveness depends on the relevant authorities'
application of the rules on third -country certification, which – as acknowledged by both parties –
takes place on a case-by-case basis.2006
7.1226. In the European Union's view, this limits the trade -restrictiveness of the third -country
certification me asure as the authorities will only impose restrictions on foreign controlled TSOs
when they are found to pose a threat to the European Union's security of energy supply. 2007
Contrary to the European Union, Russia submits that this increases the trade -restrictiveness of the
third-country certification measure, arguing that the lack of a "clear standard" for applying
Article 11 of the Directive means that "there are virtually no limitations on the restrictions on
commerce that may be imposed."2008
7.1227. We cannot agree with Russia that the third -country certification measure should be
considered highly trade -restrictive solely because it requires a case -by-case analysis by the
relevant authorities and permit these flexibility or discretion in determining whether a foreig n
controlled TSO poses a threat to the European Union's security of energy supply. At the same
time, we can only agree with what appears to be the underlying sentiment of both parties'
position, namely that the trade -restrictiveness of the third -country ce rtification measure will
ultimately depend on how it is applied by the relevant authorities.
7.1228. In this regard, we find it relevant that, as pointed out by the European Union, all
applications for third-country certification have so far been granted. 2009 In our view, this suggests
that the European Union is correct in stating that the third -country certification measure will only
restrict trade in pipeline transport services when there is found to be a threat against the
European Union's security of energy suppl y, and hence that the trade -restrictiveness of this
measure is limited.
Reasonably available alternative measures
7.1229. The Appellate Body has clarified that a responding party is not require d to "identify the
universe of less trade-restrictive alternative measures and then show that none of those measures
achieves the desired objective". 2010 Instead, as the responding party, the European Union is
required to address alternative measures raised by Russia and demonstrate "why its challenged
measure nevertheless rema ins 'necessary' in light of that alternative or, in other words, why the
proposed alternative is not, in fact, 'reasonably available'", taking into account "the interests or
values being pursued and the party's desired level of protection".2011
7.1230. Russia has po inted to two measures, which, in its view, are reasonably available
alternatives to the third -country certification measure and would achieve the same level of
protection while being less trade restrictive: (a) applying the same certification rules for all TSOs,
i.e. either applying the third -country certification measure under Article 11 of the Directive or the

2005 European Union's first written submission, para. 530.
2006 European Union's first written submission, para. 531; and Russia's second written submission,
para. 319.
2007 European Union's first written submission, para. 530.
2008 Russia's second written submission, para. 319.
2009 European Union's first written submission, para. 532 (referring to Decision of the French
Commission for the Regulation of Energy (CRE) of 4 June 2014 on the certification of Transport et
Infrastructures Gaz France (TIGF), (Decision of the French NRA on the certification of TIGF), (Exhibit EU-67);
Decision of the Greek Regulatory Authority for Energy (RAE) of 25 September 2014 on the certification of the
Hellenic TSO (DESFA), (Decision of the Greek NRA on the certification of DESFA), (Exhibit EU-68); and Decision
of 19 May 2015 of the Polish Energy Regulatory Office (ERO) on the certification of Gazociągów Przesyłowych
Gaz-System Spółka Akcyjna (Gaz-System) in connection with its function as the TSO on the Polish section of
the Yamal-Western Europe pipeline, (Decision of the Polish NRA on the certification of Gaz-System), (Exhibit
EU-69).
2010 Appellate Body Report, US – Gambling, para. 309.
2011 Appellate Body Report, US – Gambling, para. 311.

rules for domestic TSOs under Article 10 to all TSOs regardless of their origin 2012; and (b) a
"blocking statute".2013
7.1231. With respect to the first alternative measure proposed by Russia, applying the same
certification rules for all TSOs, we note that Russia suggests that the European Union should apply
Article 10 of the Directive in respect of all TSOs or, alternatively, that it should apply the thi rd-
country certification measure in Article 11 of the Directive in respect of all TSOs. 2014 As to the
former proposal, we recall that Article 10 calls for certification without any assessment of threats
posed to the European Union's security of energy supply. Applying these rules to domestic as well
as foreign controlled TSOs would therefore, plainly, not achieve the same level of protection in
respect of threats posed by foreign control over TSOs.
7.1232. Turning to the proposed use of the rules on third -country certification with respect to all
TSOs, the European Union argues that this alternative is not reasonably available to the European
Union.2015 In this regard, the European Union points out that this alternative would "make no
contribution whatsoever to the SoS o bjective" and that it would therefore be "manifestly
unreasonable and place an 'undue burden' on both the domestically controlled T [S]Os and the EU
authorities responsible for the administration of the third -country certification measure." 2016 The
European Un ion does not expand on the "undue burden" allegedly placed on domestically
controlled TSOs and EU authorities, but argues that the potential risk that a foreign government
may induce or require domestically controlled TSOs to undermine the European Union's security of
energy supply is "by no means comparable to th e threat addressed by the third country
certification measure and does not require the adoption of similar measures".2017
7.1233. We further note the European Union's argument that the basis for Russia's claim under
Article XVII of the GATS against the third -country certification measure, and hence for our finding
of violation, is the lack of application of this measure to domestically controlled TSOs.2018
7.1234. We agree with the European Union that the justificat ion for not applying the same
treatment to domestically controlled TSOs is more appropriately addressed under the chapeau of
Article XIV of the GATS, an approach that, as pointed out by the European Union, has been
followed in previous disputes. 2019 We therefore do not consider this proposed alternative measure
further but rather address the underlying issues, as appropriate, in the context of our assessment
of whether the third -country certification measure fulfils the requirements of the chapeau of
Article XIV.2020
7.1235. With respect to the second alternative measure proposed by Russia, the "blocking
statute", both parties appear to agree that such a measure would require TSOs not to comply with
certain extra-territorial laws adopted by foreign governments which affect trade with the European
Union.2021 On this basis, Russia argues that a blocking statute would "explicitly prevent these TSOs
from receiving or acting upon instructions from foreign persons or foreign governments in violation
of EU law". 2022 The European Union, on the other hand, does not believe that such a blocking
statute would ensure compliance with existing EU obligations, arguing:

2012 Russia's second written submission, para. 320.
2013 Russia's second written submission, paras. 321-322.
2014 Russia's second written submission, para. 320.
2015 European Union's response to Panel question No. 215(a), para. 259. The European Union also states
that this proposed measure "would maintain the existing burden on foreign controlled TSOs while imposing a
new burden upon the domestically controlled TSOs" and that "Russia has not explained how, in view of this,
the proposed alternative would be less 'restrictive'". (Ibid. para. 258). In this regard, we note that Russia
suggests that the proposed alternative would be less trade restrictive as it would "level the playing field for all
TSOs". (Russia's comments on the European Union's response to Panel question No. 215, para. 217).
2016 European Union's response to Panel question No. 215(a), para. 259.
2017 European Union's response to Panel question No. 214, para. 252.
2018 European Union's response to Panel question No. 215(a), para. 261.
2019 European Union's response to Panel question No. 215(a), para. 261 (referring to Appellate Body
Report, US – Gasoline, pp. 28-29, DSR 1996:I, 3, at pp. 30-31).
2020 See paras. 7.1241-7.1253 below.
2021 European Union's second written submission, paras. 215-216; and Russia's second written
submission, paras. 321-322.
2022 Russia's second written submission, para. 322.

Just like a foreign government can require or induce a third country TSO not to
comply with the obligations of the Third Energy Package aimed at ensuring SoS, it
could do the same with regard to the "blocking statute" proposed by Russia. Indeed,
nothing would prevent the third country concerned from enacting its own "blocking
statute" in order to block compliance with the "blockin g statute" proposed by
Russia.2023
7.1236. When addressing this proposed alternative measure, we recall that we have already
found that there are situations where a foreign government can require or induce foreign
controlled TSOs not to comply with obligations under EU law. As previously explained, it is this
threat that the third-country certification measure addresses.
7.1237. We have difficulties understanding how a blocking statute could achieve the same level of
protection in relation to this threat. More particularly, if a foreign government , in cert ain
circumstances, has the means to require or induce foreign controlled TSOs not to comply with
obligations imposed under EU law, it would presumably also have the means to require or induce
such TSOs not to comply with the proposed blocking statute.
7.1238. In light of this, we do not consider the proposed blocking statute a reasonably available
alternative measure, which would achie ve the same level of protection as the third -country
certification measure.
 Overall assessment
7.1239. We have found that the objective o f ensuring security of energy supply is of fundamental
importance and that the third -country certification measure, although it may not address all
potential threats posed to the European Union's security of energy supply, is manifestly apt to
address the specific threat pointed to by the European Union, namely that posed by foreign control
over TSOs. While the trade-restrictiveness of the third-country certification measure will ultimately
depend on the manner in which it is applied by the relevant authori ties, the evidence submitted by
the European Union on past assessments suggests that the trade-restrictiveness of this measure is
limited. Lastly, we recall that the alternative measures proposed by Russia have either been found
not to achieve the same lev el of protection of the European Union's security of energy supply or
not to be reasonably available alternatives. All of these factors suggest that the third -country
certification measure is necessary within the meaning of Article XIV(a) of the GATS.
7.1240. We therefore conclude that the European Union has made a prima facie case that the
third-country certification measure implemented in the national la ws of Croatia, Hungary and
Lithuania is necessary to address the threat to the European Union's security of en ergy supply
posed by foreign control over TSOs, and therefore necessary to maintain public order. Hence, we
conclude that this measure is provisionally justified under Article XIV(a) of the GATS and therefore
turn to consider whether the European Union has demonstrated that it fulfils the requirements
under the chapeau of Article XIV of the GATS.
7.10.2.3.2.2 Requirements under the chapeau of Article XIV of the GATS
7.1241. We begin our assessment under the chapeau of Article XIV of the GATS by recalling that
this involves an e xamination of whether the challenged measure is "applied in a manner which
would constitute a means of arbitrary or unjustifiable discrimination between countries whe re like
conditions prevail, or a disguised restriction on trade in services".2024
7.1242. The European Union has acknowledged the existence of differential and less favourable
treatment between domestic pipeline transport services and service suppliers and third -country
pipeline transport services and service suppliers. Indeed it is this less favourable treatment that
forms the basis of our finding of violation under Article XVII of the GATS to begin with.2025

2023 European Union's second written submission, para. 217 (referring to Resolution of the Government
of the Russian Federation No. 1017 of 5 October 2012 on measures implementing Decree of the President of
the Russian Federation No. 1285 of 11 September 2012, (Exhibit EU-131)).
2024 See paragraph 7.231 above.
2025 See section 7.10.2.2 above.

7.1243. The European Union, however, argues that the third -country certification measure does
not give rise to arbitrary or unjustifiable discrimination.2026
7.1244. In this regard, we recall that the Appellate Body has clarified, in the context of Article XX
of the GATT 1994, that the nature and quality of the discrimination to be examined under the
chapeau of this provision is different from that found to be inconsist ent with the substantive
obligations.2027 More particularly, the Appellate Body has explained that "[a]nalyzing whether
discrimination is arbitrary or unjustifiable usually involves an analysis that relates primarily to the
cause or the rationale of the discr imination."2028 In our view, these findings are relevant also for
the assessment of arbitrary or unjustifiable discrimination under the chapeau of Article XIV of the
GATS.
7.1245. The European Union contends that the discrimination between domestic and third-country
pipeline transport services and service suppliers is not arbitrary or unjustifiable, arguing that the
threat of foreign governments inducing or requiring domestically controlled TSOs to undermine the
European Union's security of energy supply is "by no mea ns comparable to the threat addressed
by the third-country certification measure".2029
7.1246. More particularly, the European Union points out that a foreign government would "find it
extremely difficult to require or induce a TSO owned or controlled by an EU Member State … to act
in ways that would undermine the interests of that EU Member State or of the European
Union."2030 The European Union also argues that foreign private persons "are much more likely to
have their principal place of business and/or personal and family links in that foreign country than
the nationals of an EU Member State", rendering foreign persons "much more vulnerable to the
requirements and inducements emanating from the government of that foreign country ".2031
Similarly, the European Union argues that "requirements or inducements emanating from a foreign
country could be effectively countered by the requirements or inducements from the EU Member
State of which the persons in question are nationals and where they usually have their main
personal links and business activity."2032
7.1247. We recall that the European Union, when arguing that foreign control over TSOs poses a
genuine and sufficiently serious threat to its security of energy supply, has pointed to foreign
governments having the means to requ ire or induce a foreign controlled TSO to undermine the
European Union's security of energy supply where that foreign government itself controls the TSO
or where the TSO is controlled by foreign private persons.2033 In respect of the latter, the European
Union submits that foreign governments can require or induce TSOs controlled by foreign private
persons to undermine the European Union's security of energy supply by imposing legal obligations
"that make it impossible or more difficult for them to comply with the obligations imposed under
EU law with a view to ensuring SoS" 2034 or by "offering to grant, or threatening to withdraw,
certain benefits in respect of their activities in their home third country" where the foreign private
persons "conduct similar or related economic activities in their country of origin".2035
7.1248. As we explained when addressing this argument above, where a foreign private person is
subject to legal obligations or inducements by foreign governments, which conflict with obligations
imposed under EU law or with its commercial interests in the European Union, the result will
ultimately depend on that foreign private person and the weight or importance of its interests in its
country of origin and in the European Union, respectively.2036
7.1249. In our view, this reasoning applies to domestic persons as well. More particularly, where
a domestic person, who controls a TSO within the European Union and also "conduct[s] similar or
related economic activities" in a foreign country, is subject to legal obligations or inducements by

2026 European Union's first written submission, paras. 535-540.
2027 Appellate Body Report, US – Shrimp, para. 150.
2028 Appellate Body Report, Brazil – Retreaded Tyres, para. 225.
2029 European Union's response to Panel question No. 214, para. 252.
2030 European Union's response to Panel question No. 214, para. 254.
2031 European Union's response to Panel question No. 214, para. 255.
2032 European Union's response to Panel question No. 214, para. 255.
2033 European Union's first written submission, paras. 515-518.
2034 European Union's first written submission, para. 517.
2035 European Union's first written submission, para. 518.
2036 See para. 7.1187 above.

foreign governments, which conflict with obligations imposed under EU law or with its commercial
interests in the European Union, the result will ultimately depend on that domestic private person
and the weight or importance of its intere sts in the European Union and the foreign country in
question.
7.1250. While we do not disagree with the European Union that foreign private persons may be
more likely to have their "principal place of business and/or personal and family links" in its foreign
country of origin and hence be more "vulnerable to the requirements and inducements emanating
from the government of that foreign country "2037, we see no reason to conclude that there is no
risk of domestic persons having commercial interests and/or personal and family links in foreign
countries, which would render them vulnerable to requirements and inducements emanating from
foreign governments. Similarly, while we do not disagree with the European Union that the
European Union may be more likely to "effectivel y counter" requirements or inducements
emanating from a foreign country with requirements or inducements emanating from EU member
States or the European Union itself in respect of domestic private persons 2038, we see no reason to
conclude that the European Un ion would not also be able to do so, in some circumstances, in
respect of foreign private persons controlling a TSO within the EU territory.
7.1251. In other words, while the risk or threat to the European Union's security of energy supply
posed by domestically c ontrolled TSOs may be different or less than that posed by foreign
controlled TSOs, the European Union has not demonstrated that this risk or threat does not exist,
nor that it is entirely speculative or hypothetical. It is undisputed that the third -country
certification measure does nothing to address this risk or threat. More particularly, and as
explained above, Article 10, which generally regulates certification of domestically controlled TSOs,
involves no assessment of threats to the European Union's security of energy supply at all.2039
7.1252. The European Union has itself explained that the design of the third -country certification
measure is such that it operates in an ex ante manner by requiring the relevant authorities to
detect and address, in advance, the risk of foreign controlled TSOs undermining the European
Union's security of energy supply, and to certify the TSO only if it is found not to pose such a
risk.2040 The European Union has further explained that the third -country certification measure will
restrict the supply of pipeline transport services only insofar as the TSO is found to pose a risk to
the European Union's security of energy supply. 2041 Bearing this in mind, we have difficulties
reconciling the lack of any prior assessment of the risk of domestically controlled TSOs
undermining the European Union's security of energy supply with the cause or rationale of
ensuring the European Union's security of energy supply. More particularly, and as explained
above, the E uropean Union has not demonstrated that a foreign government would not, in some
circumstances, be able to require or induce a domestically controlled TSO to undermine the
European Union's security where that domestic person also "conduct[s] similar or related economic
activities" in a foreign country.
7.1253. While we do not mean to imply that the same regulatory scheme should necessarily be
applied with respect to foreign and domestically controlled TSOs, we believe that the European
Union is required to adapt or "calibrate" its measure in a way so it addresses the threats posed by
foreign governments requiring or inducing domestically controlled TSOs to undermine the
European Union's security of energy supply as well. 2042 The lack of any assessment of threats
posed by foreign governments requiring or inducing domestically controlled TSOs to undermine the
European Union's security of energy supply, in our view, is not compatible with the cause or
rationale of the third-country certification measure. Hence , this constit utes arbitrary and
unjustifiable discrimination in violation of the chapeau of Article XIV of the GATS.2043

2037 European Union's response to Panel question No. 214, para. 255.
2038 European Union's response to Panel question No. 214, para. 255.
2039 See para. 7.1231 above.
2040 European Union's second written submission, para. 209.
2041 European Union's first written submission, para. 530.
2042 For a similar approach, see Appellate Body Reports, US – Tuna II (Mexico), para. 286, where the
Appellate Body found that the chapeau of Article XX of the GATT 1994 required the challenged measure to be
"calibrated" to the different risks of adverse effects on dolphins arising under different fishing methods.
2043 Both parties have also submitted arguments concerning alleged arbitrary and unjustifiable
discrimination between pipeline transport services and service suppliers from different third countries, which
does not relate to the discrimination forming the basis of our underlying finding of violation under the national

7.10.2.3.3 Conclusion
7.1254. Having considered the various arguments and evidence provided by the European Union,
and for the reasons explained in paragraphs 7.1241 through 7.1253 above, we conclude that the
European Union has not demonstrated that the third-country certification measure implemented in
the national laws of Croatia, H ungary and Lithuania fulfils the requirements in the chapeau of
Article XIV of the GATS. Hence, we find that the European Union has failed to make a prima facie
case that this measure is justified under this provision.
7.10.2.4 Russia's claims under Articles VI:1 and VI:5(a) of the GATS
7.1255. Russia claims that the third -country certification measure in the national implementing
laws of Croatia, Hungary and Lithuania is also inconsistent with Articles VI:1 and VI:5(a) of the
GATS.2044
7.1256. We have found above that the third -country country certification measure in the national
implementing laws of Croatia, Hungary and Lithuania is inconsistent with the national treatment
obligation in Article XVII of the GATS and is not justified under Article XIV(a) of the GATS.
7.1257. We recall that the principle of judicial economy is recognized in WTO law. Pursuant to that
principle, a panel may decide to address only those claims "which must be addresse d in order to
resolve the matter in issue in the dispute." 2045 Hence, a panel may "refrain from making multiple
findings that the same measure is inconsistent with various provisions when a single, or a certain
number of findings of inconsistency, would suffice to resolve the dispute." 2046 The Appellate Body
also warned against "false judicial economy" whereby a panel would provide only a partial
resolution of the matter at issue. Thus, a panel must address those claims "on which a finding is
necessary in order to enable the DSB to make sufficiently precise recommendations and rulings so
as to allow for prompt compliance by a Member with those recommendations and r ulings 'in order
to ensure effective resolution of disputes to the benefit of all Members.'" 2047 The Appellate Body
has further clarified that "the fact that two provisions have a different 'scope and content' does
not, in and of itself, imply that a panel must address each and every claim under those provisions"
as a panel should rather be guided by "the need to address all of those claims whose resolution is
necessary to resolve the dispute so as to avoid a partial resolution of the dispute."2048

treatment obligation in Article XVII of the GATS. (European Union's first written submission, paras. 541-544;
and second written submission, para. 223; and Russia's second written submission, para. 325). More
particularly, Russia appears to briefly refer to the argumentation advanced for its claims under Articles VI:1
and VI:5(a) of the GATS against the third-country certification measure. (Russia's second written submission,
para. 325). Russia has also submitted certain additional arguments in the context of the chapeau of Article XIV
of the GATS. More particularly, Russia points to Recital (22) of the Directive stating that an assessment of
security of energy supply should take into account "the treatment of both domestic and foreign trade and
investment in energy in a particular third country". (Russia's closing statement at the second meeting of the
Panel, para. 3 (quoting Directive 2009/73/EC, (Exhibit EU-5), Recital (22)). Furthermore, Russia has provided
evidence that the treatment of foreign investment in energy in third countries has in fact been taken into
account when considering whether to grant certification to foreign controlled TSOs. (Russia's closing statement
at the second meeting of the Panel, para. 3 (referring to Commission opinion of 17.10.2014 correcting Opinion
C(2014) 5483 final of 28 July 2014 pursuant to Article 3(1) of Regulation (EC) No. 715/2009 and Article 10(6)
and 11(6) of Directive 2009/73/EC – Greece – Certification of DESFA, (Exhibit RUS-60)). In our view, panels
are not necessarily precluded from addressing, in the context of the chapeau of Article XIV of the GATS,
alleged arbitrary and unjustifiable discrimination that does not relate to the underlying finding of violation.
Having said this, we would tend to agree with Russia that the reference to the treatment of foreign
investments in third countries in Recital (22) of the Directive appears to have little to do with addressing the
risk of foreign governments seeking to induce or require TSOs to undermine the European Union's security of
energy supply, but rather suggests a notion of reciprocity under which the treatment of "investment in energy"
by domestic EU persons in foreign countries could impact the decision on whether or not to grant certification
to foreign controlled TSOs. However, as we have already found that the third-country certification measure in
the Directive does not fulfil the requirements of the chapeau of Article XIV, and in light of the brevity of these
additional arguments by Russia, we do not consider it necessary to address these arguments in further detail.
2044 Russia's first written submission, paras. 519-520; and second written submission, para. 358.
2045 Appellate Body Reports, US – Wool Shirts and Blouses, p. 19, DSR 1997:I, 323, at p. 340; and US –
Tuna II (Mexico), para. 403.
2046 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 133. (emphasis original)
2047 Appellate Body Report, Australia – Salmon, para. 223. (footnotes omitted)
2048 Appellate Body Reports, Argentina – Import Measures, para. 5.194.

7.1258. Article VI:1 o f the GATS 2049 concerns the administration of the measure at issue rather
than its substantive content. 2050 Having found that the measure at issue is inconsistent with the
substantive obligation prescribed in Article XVII of the GATS, the question of whether tha t
measure is administered in a manner inconsistent with Article VI:1 of the GATS becomes
irrelevant.2051
7.1259. Article VI:5(a) of the GATS imposes disciplines with respect to licensing and qualification
requirements and technical standards. 2052 As we have found that the third -country country
certification measure in the national implementing laws of Croatia, Hungary and Lithuania is
inconsistent with the national treatment obligation in Article XVII of the GATS and is not justified
under Article XIV(a) of the GATS, th e European Union will need to take steps to make that
measure WTO-compliant. We therefore consider that our findings above are sufficient to resolve
the matter at issue in this dispute.
7.1260. In light of the above, we decide to exercise judicial economy in respe ct of Russia's claims
under Articles VI:1 and VI:5 of the GATS.
7.11 The TEN-E measure
7.11.1 Introduction
7.1261. In this section we address Russia's claims against the TEN -E measure 2053, described
above in paragraphs 2.52 through 2.60, and the European Union's defence. Russia challenges the
TEN-E measure under both the GATT 1994 and the GATS. The European Union advances a defence
under Article XX(j) of the GATT 1994 in respect of Russia's claims under the GATT 1994, while not
asserting any defence with respect of Russia's claim under the GATS. We first address Rus sia's
claims under the GATT 1994, followed by the examination of the European Union's defence under
Article XX(j) of the GATT 1994. We then proceed to the analysis of Russia's claim under the GATS.
7.11.2 Russia's claims under the GATT 1994
7.11.2.1 Introduction
7.1262. Russia advances two claims against the TEN-E measure under the GATT 1994: one under
Article I:1 and the other under Article III:4. In its submissions to the Panel, Russia does not
always cross-refer to its arguments developed in the context of its claim under Art icle III:4 when

2049 Article VI:1 of the GATS states as follows: "In sectors where specific commitments are undertaken,
each Member shall ensure that all measures of general application affecting trade in services are administered
in a reasonable, objective and impartial manner."
2051 In the same sense, see Panel Reports, Argentina – Import Measures, para. 6.498.
2052 Article VI:5(a) of the GATS states as follows:
In sectors in which a Member has undertaken specific commitments, pending the entry into force
of disciplines developed in these sectors pursuant to paragraph 4, the Member shall not apply
licensing and qualification requirements and technical standards that nullify or impair such
specific commitments in a manner which: (i) does not comply with the criteria outlined in
subparagraphs 4(a), (b) or (c); and (ii) could not reasonably have been expected of that Member
at the time the specific commitments in those sectors were made.
Article VI:4 of the GATS, which is referenced in Article VI:5(a)(i), states as follows:
With a view to ensuring that measures relating to qualification requirements and procedures,
technical standards and licensing requirements do not constitute unnecessary barriers to trade in
services, the Council for Trade in Services shall, through appropriate bodies it may establish,
develop any necessary disciplines. Such disciplines shall aim to ensure that such requirements
are, inter alia: (a) based on objective and transparent criteria, such as competence and the
ability to supply the service; (b) not more burdensome than necessary to ensure the quality of
the service; (c) in the case of licensing procedures, not in themselves a restriction on the supply
of the service.
2053 We recall that we have found Russia's "as applied" claims against the TEN-E measure to fall outside
our terms of reference. See, above paras. 7.147. -7.148. . In this section, we address Russia's remaining
claims against this measure.

advancing its claim under Article I:1. Nevertheless, we understand that the main thrust of its
arguments under both claims is largely the same.2054
7.1263. Russia argues that the TEN -E measure is inconsistent with Articles I:1 and III:4 of the
GATT 1994 because, in its view, the criteria used to select PCIs, which are eligible for certain
benefits under the TEN-E Regulation2055, are discriminatory towards Russian natural gas. According
to Russia, based on the objective s of "diversification of gas supply " and "end[ing] the isolation of
the three Baltic States and Finland and their dependency on a single supplier", these criteria are
designed to reduce the supply and transmission of imported Russian natural gas into and within
the European Union. 2056 In Russia's view, the criteria for PCI designation reduce the competitive
opportunities of Russian natural gas vis-à-vis domestic natural gas , as well as natural gas
imported from any other country.
7.1264. The European Union argues that the criteria for PCI designation under the TEN-E measure
do not discriminate against Russian natural gas within the meaning of either Article I:1 or III:4 of
the GATT 1994. According to the European Union, the TEN-E measure defines the priority corridors
so as to cover in a balanced manne r all the main potential sources of supply of gas within and
around the European Union, as well as the supply needs of all EU member States. 2057 The
European Union also submits that, in order to satisfy one of the specific criteria for PCI
designation, a proj ect does not necessarily have to contribute to the "diversification of supply
sources".2058 In the European Union's view, the sub -criterion "diversification of supply sources"
applies regardless of the origin of the gas in those EU member States that source t heir gas
primarily from Russia, as well as in those EU member States that source their gas from other
countries.2059
7.1265. We understand that the main point of contention between the parties concerns the
references to the objective s of diversification of natural gas supply and "end [ing] the isolation of
the three Baltic States and Finland and their dependency on a single supplier" in the criteria for
PCI designation. Whereas for Russia, these references demonstrate discrimination against Russian
natural gas within the meaning of Article III:4 and I:1 of the GATT 1994, the European Union
maintains that the criteria for PCI designation, including the sub -criterion "diversification of supply
sources", operate regardless of the source of natural gas supply.
7.1266. We recall t he manner in which the parties have developed their arguments concerning
the role of the objective s of diversification of natural gas supply and "end[ing] the isolation of the
three Baltic States and Finland and their dependency on a single supplier" (here inafter collectively
referred to as the objective of diversification of natural gas supply), described above. This
approach does not allow us to clearly distinguish the arguments relevant only for Russia's claim
under Article I:1 from those relevant only f or Russia's claim under Article III:4 of the GATT 1994 .
Thus, in the particular circumstances of this case, w e structure our analysis as follows. First, on
the basis of the design, structure and expected operation of the TEN -E measure, we determine the
meaning and expected operation of the objective of diversification of natural gas supply in the
context of the criteria for PCI designation. Second, we conduct separate analyses of the impact of
the criteria for PCI designation, including the objective of div ersification of natural gas supply
referred to therein, on the competitive opportunities of Russian natural gas under Article I:1 and
Article III:4 of the GATT 1994.

2054 In its response to Panel question No. 5, Russia summarizes its GATT claims against the TEN-E
measure as follows:
Claim 30 concerns GATT Article III:4 and is described in Section XXV of Russia's FWS. Claim 31
concerns GATT Article I:1 and is described in Section XXVI of Russia’s FWS. Both claims also
concern the TEN-E Measure. Like Claim 29, these two claims challenge the TEN-E Regulation, de
facto, by demonstrating that Russian natural gas is provided differential and less favourable
treatment based exclusively on origin than than [ sic] like domestic and other third -country gas;
and alternatively that the TEN -E Measure, " as applied ," treats Russian natural gas less
favourably based on the absence of Russian projects designated as PCIs. (Russia's response to
Panel question No. 5, para. 53). (emphasis original)
See also Russia's response to Panel question No. 112, para. 460.
2055 The benefits available to PCIs are discussed above in paras. 2.58-2.60.
2056 Russia's first written submission, paras. 763–770 and 791-793.
2057 European Union's second written submission, para. 383.
2058 European Union's first written submission, para. 819.
2059 European Union's first written submission, para. 820.

7.11.2.2 Analysis by the Panel
7.11.2.2.1 The objective of diversification of natural gas supply
7.1267. As explained above in section 2.2.8, the TEN -E measure sets forth the criteria for the
selection of PCIs and facilitates the implementation of PCIs by providing a set of administrative,
regulatory and financial incentives. 2060 Infrastructure developed as part of PCIs includes inter alia
transmission pipelines for the transportation of natural gas.2061 In order to be designated as a PCI,
an infrastructure project must satisfy the general criteria and "significantly contribute" to at least
one of the specific criteria. 2062 To satisfy the general criteria, an infrastructure project must be
necessary for at least one of the priority gas corridors defined in Annex I.2 of the TEN -E
Regulation. The relevant specific criteria for PCI designation are set out in Article 4(2)(b). The
definitions of the priority corridors and the text of the specific criteria are provided above in
paragraphs 2.55 through 2.56.
7.1268. Diversification of natural gas supply is one of the European Union's energy policy
objectives pursued by the TEN-E Regulation.2063 References to this objective occur several times in
the definition of the priority corridors, as well as in the specific criteria for PCI designation. In
particular, the definitions of NSI East Gas and SGC corridors refer to infra structure to enhance
"diversification of gas supply", while the definition of the BEMIP Gas corridor mentions
infrastructure to "end the isolation of the three Baltic States and Finland and their dependency on
a single supplier" and to increase "diversific ation and security of supplies in the Baltic Sea
region".2064 Among the specific criteria, "diversification of supply sources" is mentioned, and serves
as a sub-criterion, in the "security of supply" and "competition" criteria.2065
7.1269. The TEN-E Regulation does not define the concept of "diversification of gas supply" and
does not further elaborate on what the objective of diversification of natural gas supply entails.
The ordinary meaning of "diversification" is "the action of diversifying; the process of becoming
diversified; the fact of being diversified; the production of diversity or variety of form or
qualities".2066 "To diversify" means "to render diverse, different, or varied, in form, features, or
qualities; to give variety or diversity to; to variegate, vary, modify".2067
7.1270. We consider that one way of introducing variety or diversity in the supply of natural gas
is to introduce variety or diversity in the sources of natural gas supply. For instance, Recital (5) of
the TEN -E Regulation refers to the diversification of "the Union’s energy supplies, sources and
routes".2068 As already noted, two specific criteria for PCI designation explicitly refer to
"diversification of supply sources".2069 The definition of the BEMIP Gas corridor refers to
infrastructure "to end the isola tion of the three Baltic States and Finland and their dependency on
a single supplier".2070 In our view, the "source" of natural gas supply in this context is synonymous
with the "supplier" of natural gas.

2060 TEN-E Regulation, (Exhibit EU-4), Article 1(2).
2062 See above section 2.2.8.
2063 TEN-E Regulation, (Exhibit EU-4), Recital (5).
2064 TEN-E Regulation, (Exhibit EU-4), Annexes I.2(6), I.2(7) and I.2(8).
2065 TEN-E Regulation, (Exhibit EU-4), Articles 4(2)(b)(ii) and 4(2)(b)(iii). We note that in the course of
the proceedings, Russia provided a document that purports to show the application of the "security of supply"
criterion by one of the Regional Groups in the process of drawing up a list of suitable projects for the
designation as PCIs by the Commission. According to this document, within the "security of supply" criterion,
the sub-criterion "diversification" was accorded the weight of 0.44, with "physical availability" receiving 0.25
and "promotion of IEM" 0.31 (European Commission, PowerPoint Presentation on North-South Interconnections
in Central-Eastern Europe – The South-Eastern European subgroup in electricity and gas (15 February 2012),
(Exhibit RUS-147), p. 12). While the European Union contests the accuracy of this document, according to the
evidence provided by the European Union, [***].
2066 Oxford English Dictionary Online, definition of "diversification, n.a"
http://www.oed.com/view/Entry/56053?redirectedFrom=diversification (accessed 3 August 2017).
2067 Oxford English Dictionary Online, definition of "diversify, v.1.a"
http://www.oed.com/view/Entry/56058?redirectedFrom=diversify (accessed 3 August 2017).
2068 TEN-E Regulation, (Exhibit EU-4), Recital (5). (emphasis added)
2069 See above para. 7.1268.
2070 TEN-E Regulation, (Exhibit EU-4), Annex I.2(8).

7.1271. The Communication of the Commission "Energy infrastr ucture priorities for 2020 and
beyond – A Blueprint for an integrated European energy network" (hereinafter Energy
Infrastructure Blueprint),2071 explicitly mentioned in Recital (3) of the TEN -E Regulation, provides
further context for our understanding of th e concept of "diversification of gas supply". Under
subheading 4.1.2, entitled "Diversified gas supplies to a fully interconnected and flexible EU gas
network", the Energy Infrastructure Blueprint states as follows:
The aim of this priority area is to build the infrastructure needed to allow gas from any
source to be bought and sold anywhere in the EU, regardless of national boundaries.
This would also ensure security of demand by providing for more choice and a bigge r
market for gas producers to sell their products. A number of positive examples in
Member States demonstrate that diversification is key to increased competition and
enhanced security of supply. Whilst on an EU level supplies are diversified along three
corridors — Northern Corridor from Norway, Eastern corridor from Russia,
Mediterranean Corridor from Africa — and through LNG, single source dependency still
prevails in some regions. Every European region should implement infrastructure
allowing physical access to at least two different sources.2072 (emphasis original)
7.1272. We note the concern about "single source dependency" expressed in the above -quoted
excerpt from the Energy Infrastructure Blueprint and the language calling for the implementation
in "[e]very European region" of "infrastructure allowing physical access to at least two different
sources".2073 Moreover, the above -quoted text of the Energy Infrastructure Blueprint explicitly
refers to countries supplying natural gas to the European Union, such as Norw ay and Russia. We
thus understand that the Energy Infrastructure Blueprint treats a "source" of natural gas supply as
synonymous with a country supplying natural gas, which we also understand to be synonymous to
the "supplier" of natural gas.
7.1273. On the basis of our analysis, we thus consider that the concept of "diversification of
natural gas supply" in the context of the TEN-E measure means introducing or increasing variety in
the countries supplying natural gas. Based on the ordinary meaning of the word "diversification",
taking into account pertinent context, we further believe that, in situations where there is only one
gas supplier, or where there is more than one gas supplier but only one of them supplies th e
predominant share of gas, the objective of "diversification of natural gas supply" implies
introducing at least one additional source of natural gas supply.
7.1274. With these considerations in mind, we proceed to the examination of how the objective of
diversification of natural gas supply operates in the context of the criteria for PCI designation. We
first examine the definitions of the BEMIP Gas, NSI East Gas and SGC priority corridors and then
the specific criteria for PCI designation.
7.1275. According to the def inition of the BEMIP Gas corridor, projects falling within the scope of
this corridor include gas infrastructure "to end the isolation of the three Baltic States and Finland
and their dependency on a single supplier". 2074 The relevant part of the Energy Infra structure
Blueprint states that "[t]he Eastern Baltic Sea region (Lithuania, Latvia, Estonia and Finland)
requires urgent action to ensure security of supply through connection to the rest of the EU". 2075 It
continues further to note that "[e]ven though the a nnual gas consumption of the three Baltic
States and Finland together is only about 10 bcm, all the gas they consume comes from
Russia".2076
7.1276. In our view, the reference to a "single supplier" in the definition of the BEMIP Gas
corridor, read in conjunction wi th the Energy Infrastructure Blueprint, sufficiently clearly identifies
Russia as a single source of natural gas supply.2077 We thus understand that projects contributing

2071 Communication from the Commission to the European Parliament, the Council, the European
Economic and Social Committee and the Committee of the Regions, "Energy infrastructure priorities for 2020
and beyond – A Blueprint for an integrated European energy network" COM(2010) 677 (17 November 2010),
(Energy Infrastructure Blueprint), (Exhibit RUS-109).
2072 Energy Infrastructure Blueprint, (Exhibit RUS-109), pp. 13-14.
2073 Energy Infrastructure Blueprint, (Exhibit RUS-109), p. 14. (emphasis original)
2074 TEN-E Regulation, (Exhibit EU-4), Annex I.2(8).
2075 Energy Infrastructure Blueprint, (Exhibit RUS-109), p. 34.
2076 Energy Infrastructure Blueprint, (Exhibit RUS-109), p. 34.
2077 TEN-E Regulation, (Exhibit EU-4), Annex I.2(8).

to the diversification of natural gas supply in the BEMIP corridor will develop infrastr ucture to end
the dependency of Estonia, Finland, Latvia and Lithuania on the supply of Russian natural gas. In
line with our understanding of the concept of "diversification of natural gas supply", articulated
above in paragraph 7.1273, such projects will develop infrastructure aimed at connecting Estonia,
Finland, Latvia and Lithuania with sources of natural gas supply other than Russia.
7.1277. Turning to the definition of the NSI East Gas priority corridor, we observe a reference to
"gas infrastructure for regional connections between and in the Baltic Sea region, the Adriatic and
Aegean Seas, the Eastern Mediterranean Sea and the Black Sea, and for enhancing diversifica tion
and security of gas supply". 2078 The Energy Infrastructure Blueprint states that this would provide
the overall flexibility for the entire Central East European (CEE) region to create a robust, well -
functioning internal market and promote competition. 2079 The relevant part of the Energy
Infrastructure Blueprint also provides as follows:
There is one main supplier in the CEE region; the current linear (from East to West)
and isolated networks are the heritage of the past. While the proportion of gas
imported from Russia constitutes 18% of the EU -15 consumption, in the new Member
States this indicator is 60% (2008). Gazprom deliveries are the overwhelming bulk of
gas imports in the region (Poland: 70%, Slovakia: 100%, Hungary: 80%, certain
Western Balkan countries: 100%).2080
7.1278. We thus understand that the concern cited by the Energy Infrastructure Blueprint is about
"one main supplier in the CEE region", identifying this supplier as Gazprom - the exclusive
exporter of Russian natural gas via pipelines.2081 In our view, similar to the BEMIP Gas corridor,
this evidence is sufficiently clear in identifying Russia as the main source of supply in several EU
member States falling within the geographical reach of this corridor. The Energy Infrastructure
Blueprint mentions Russia as the only natural gas supplier in Slovakia and certain Western Balkan
countries. In 2013 (the year the TEN -E Regulation entered into force), Russia was also the only
natural gas supplier in Bulgaria and Czech Republic. 2082 Furthermore, Russia supplied 95% and
92% of all natural gas consumed in Hungary and Romania, respectively. 2083 In light of our
understanding of the meaning of the concept of "diversification of natural gas supply " articulated
above in paragraph 7.1273, and given the predominance of the supply of Russian natural gas in
these EU member States, projects contributing to "diversification of natural gas supply" in this
priority corridor will develop infrastructure aimed at connecting the mentioned EU member States
with sources of natural gas supply other than Russia.
7.1279. We further note that the definition of the SGC priority corridor contains a reference to
infrastructure for the transmission of natural gas from the Caspian Basin, Central Asia, the Middle
East and the Eastern Mediterranean Basin to the European Union "to enhance diversification of gas
supply".2084 According to the Energy Infrastructure Blueprint , "[t]he aim of the Southern Cor ridor
is to directly link the EU gas market to the largest deposit of gas in the world". 2085 Thus, the
definition of the SGC corridor and the Energy Infrastructure Blueprint explicitly refer to the
geographical regions of natural gas supply – the Caspian Basin, Central Asia, the Middle East and
the Eastern Mediterranean basin.
7.1280. The EU member States falling within the geographical reach of the SGC corridor include
Austria, Bulgaria, Croatia, Cyprus, Czech Republic, France, Germany, Greece, Hungary, Italy,
Poland, Romania, Slovakia and Slovenia. 2086 We note that, in 2013, Russia was the only natural
gas supplier in Bulgaria, Czech Republic and Slovakia, and the predominant natural gas supplier in

2078 TEN-E Regulation, (Exhibit EU-4), Annex I.2(6).
2079 Energy Infrastructure Blueprint, (Exhibit RUS-109), p. 34.
2080 Energy Infrastructure Blueprint, (Exhibit RUS-109), p. 34.
2081 Russia's response to Panel question No. 29, para. 145; and European Union's response to Panel
question No. 29, para. 62.
2082 Eurostat statistics on natural gas supplies to the European Union and member States by partner,
volume and share between 2006 and 2015, and gross inland consumption of natural gas in the EU member
States between 2006 and 2015, (Eurostat statistics on natural gas supplies and consumption), (Exhibit EU-
190), p. 9.
2083 Eurostat statistics on natural gas supplies and consumption, (Exhibit EU-190), p.9.
2084 TEN-E Regulation, (Exhibit EU-4), Annex I.2(7).
2085 Energy Infrastructure Blueprint, (Exhibit RUS-109), p. 32. (footnotes omitted)
2086 TEN-E Regulation, (Exhibit EU-4), Annex I.2(7).

Hungary (95% of all natural gas supply), and Romania (92% of all natural gas supply).2087 In light
of our understanding of the concept of "diversification of natural gas supply" articulated above in
paragraph 7.1273, and given the predominance of the supply of Russian natural gas in these EU
member States, projects contributing to "diversification of natural gas supply" in this priority
corridor will develop infrastructure aimed at connecting the mentioned EU member States with
sources of natural gas supply other than Russia.
7.1281. On the basis of our review of the definitions of the BEMIP Gas, NSI East Gas and SGC
corridors for gas infrastructure conducted above, we consider that the objective of diversification
of natural gas supply will operate to bring within the scope of those corridors projects developing
infrastructure aimed at connecting a number of EU member States with sources of natural gas
supply other than Russia. Such EU member States include those where Russia is the only or
predominant supplier of natural gas.
7.1282. We are of the view that the "diversification of supply sources" sub -criterion within the
specific criteria of "security of supply" and "competition" will operate in a manner similar to the
objective of diversification of natural gas supply in the definitions of priority corridors. As we have
determined above in paragraph 7.1273, the objective of diversification of natural gas supply is
designed to reduce reliance on the predominant natural gas supplier, and as underscored by the
Energy Infrastructure Blueprint, eliminate situations where there is dependency on a single source.
7.1283. Given that Russia is the main natural gas supplier to the European Union, and the only or
predominant supplier in a number of individual EU member States, 2088 meeting the "diversification
of supply" sub -criterion will, in many instances, imply developing infrastructure aimed at
connecting certain EU member States with sources of natural gas supply other than Russia.
7.1284. While we acknowledge that other natural gas suppliers in the European Union, including
domestic, will also be affected by the sub -criterion "diversification of gas suppl y", none of them
would likely be affected to the same extent as Russia. In our view, this is explained by the fact
that, in comparison to external and domestic sources of natural gas supply to the European Union,
Russia is the only or predominant supplier of natural gas i n the highest number of individual EU
member States.2089
7.1285. Our analysis above leads us to conclude that, by virtue of the objective of diversification
of natural gas supply, the criteria for PCI designation include those that in practice condition PCI
designation on projects developing infrastructure aimed at connecting certain EU member States
with sources of natural gas supply other than Russia. This means that some projects will be

2087 Eurostat statistics on natural gas supplies and consumption, (Exhibit EU-190), p. 9.
2088 See, below fn 2089.
2089 According to the evidence provided by Russia, in 2014, the top four external sources of gas supply
to the European Union were as follows: Russia at 37.5%, Norway at 31.6%, Algeria at 12.3% and Qatar at
6.9% (European Commission, EU Energy in Figures: Statistical Pocketbook 2016, pp. 26 and 65, (Exhibit RUS-
214), p. 26). According to the evidence provided by the European Union, in 2013, in terms of the distribution
of shares in the total natural gas supply to individual EU member States, , Russia was the main source of
supply in the following EU member States: Austria (63%), Bulgaria (100%), Czech Republic (100%), Estonia
(100%), Finland (100%), Greece (67%), Hungary (95%), Latvia (100%), Lithuania (100%), Poland (77%),
Romania (92%), Slovenia (58%) and Slovakia (100%). In contrast, in 2013, Norway held the position of the
main supplier of gas only in Luxemburg (64%), the Netherlands (60%) and the United Kingdom (57%). In
2013, Algeria was the main gas supplier only in Spain with the market share of 54%. Qatar was not the main
supplier of gas in any EU member State in 2013. Thus, in 2013, not only was Russia the main gas supplier in
more EU member States than its three closest competitors (Algeria, Norway and Qatar), it also enjoyed a
higher degree of market dominance, being the only supplier in Bulgaria, Czech Republic, Estonia, Finland,
Latvia, Lithuania and Slovakia. In comparison, the highest market share reached by Norway in 2013 was 64%
in Luxemburg, and the highest share reached by Algeria in 2013 was 54% in Spain. Among the domestic
sources of gas supply in the European Union, in 2013, the Netherlands maintained a 46% share in the total
supply of gas to Belgium, while Denmark and the United Kingdom were the only gas suppliers in Sweden and
Ireland, respectively. (Eurostat statistics on natural gas supplies and consumption, (Exhibit EU-190), p. 9).
We note that the Appellate Body in Dominican Republic – Import and Sale of Cigarettes rejected the
argument that the measure at issue imposed a higher per-unit cost of the bonding requirement on the
imported cigarettes due to a relatively small market share of the imported cigarettes. The Appellate Body
considered that the difference between the per-unit costs of the bond requirement alleged by Honduras did not
depend on the foreign origin of the imported cigarettes (Appellate Body Report, Dominican Republic – Import
and Sale of Cigarettes, para. 96). In contrast, we consider that, in the present dispute, the objective of
diversification of gas supply is directly connected to the origin of gas.

designated as PCIs because they develop pipeline infrastructure to transport natural gas of non-
Russian origin.
7.1286. We now turn to provide separate analyses on how the criteria for PCI designation,
including the objective of diversification of natural gas supply referred to therein, impact the
competitive opportunities of Russian natural gas under Articles I:1 and III:4 of the GATT 1994, in
light of the conclusions reached in this subsection. We note that Russia first advances its claim
under Article III:4 and then its claim under Article I:1. We do not consider that there is a
predetermined order of analysis of Russia's claims and see no compelling reason to deviate from
the order in which Russia has presented its claims. Therefore, we first examine Russia's claim
under Article III:4 and then Russia's claim under Article I:1.
7.11.2.2.2 Russia's claim under Article III:4 of the GATT 1994
7.11.2.2.2.1 Introduction
7.1287. Russia submits that the inevitable consequence of the design of the TEN-E measure is the
modification of the conditions of competition to the detriment of Russian natural gas vis-à-vis
domestic natur al gas. 2090 The European Union, on the other hand, maintains that the TEN -E
measure seeks to achieve a broad geographical balance, which would ensure equivalent
competitive opportunities for all suppliers, and does not exclude projects concerning the supply
and transmission of Russian-origin gas from PCI designation.2091
7.11.2.2.2.2 Analysis by the Panel
7.1288. In accordance with the legal standard under Article III:4 of the GATT 1994 , as set out in
paragraphs 7.238 and 7.239 above, we proceed to examine whether Russia has demonstrated the
following elements: (a) the TEN-E measure falls within the scope of Article III:4; (b) the imported
and domestic products at issue are like ; and (c) the TEN -E measur e accords less favourable
treatment to the relevant imported Russian products than the treatment it accords to the relevant
like domestic products.
7.1289. With respect to the first element of the legal standard under Article III:4 of the
GATT 1994, Russia argues that the TEN-E Regulation creates a regulatory framework that governs
the infrastructure used to transport, distribute and sell natural gas, and therefore constitutes a law
or regulation that affects such transportation, distribution and sale. 2092 The European Union does
not contest Russia's argument.
7.1290. We recall that the Appellate Body has found that the term "affecting" has a broad
scope,2093 clarifying at the same time that it is "not any 'laws, regulations and requirements' which
are covered by Article III:4, but only those which 'affect' the specific transactions, activities and
uses mentioned in that provision."2094
7.1291. We observe that the TEN-E measure provides a regulatory framework for PCIs developing
infrastructure concerning transmission pipelines, LNG and natural gas storage facilities. 2095 The
mentioned types of infrastructure may be used for one or several activities cove red by Article III:4
of the GATT 1994, such as the internal transportation, sale or use of imported natural gas in the
European Union. In particular, we note the essential function of transmission pipelines in the
transportation of natural gas. In light of these considerations, we find that the TEN -E measure
"affects" the internal transportation, sale and use of imported natural gas in the European Union,
and therefore, falls within the scope of Article III:4 of the GATT 1994.

2090 Russia's first written submission, para. 794; second written submission, para. 461; and response to
Panel question No. 238(b), paras. 340–346.
2091 European Union's first written submission, paras. 815–817 and 823-825.
2092 Russia's second written submission, para. 462. See also Russia's response to Panel question
No. 113, para. 471.
2093 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 210.
2094 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 208. (emphasis original)

7.1292. With respect to the second element, Russia submits that, in the context of this claim,
domestic and Russian natural gas are like products within the meaning of Article III:4 of the GATT
1994. The European Union agrees with Russia that natural gas of differ ent origin(s) is like, in the
context of the TEN -E measure.2096 We also note that, in advancing this claim, Russia asserts that
"Russian and domestic gas, like natural gas imported from any other country, including LNG, are in
a perfectly competitive relation ship" and thus are "like products" within the meaning of Article
III:4 of the GATT 1994.2097
7.1293. In paragraph 7.855, we have concluded that LNG is not like natural gas w ithin the
meaning of Article I:1 of the GATT 1994. It is well established that the determination of "likeness",
in the context of the MFN and national treatment obligations is the determination about the nature
and extent of the competitive relationship between and among the products at issue.2098
7.1294. In our view, the origin of LNG – whether domestic for the purposes of an Article III:4
claim or imported for the purposes of an Article I:1 claim – has no bearing on the issue of whether
LNG is in a competitive rela tionship with natural gas in the EU market. Therefore, having
concluded that LNG is not like natural gas within the meaning of Article I:1 of the GATT 1994, we
find that LNG and natural gas are not "like products" within the meaning of Article III:4 of the
GATT 1994. Consequently, we do not proceed further with our assessment of the TEN -E measure
concerning its treatment of LNG, or natural gas in comparison to LNG.
7.1295. In paragraph 7.536, we found that Russian and domestic natural gas are like products
within the meaning of Article III:4 of the GATT 1994. On the basis of this finding, we also consider
that Russian and domestic natural gas are like products for the purposes of our assessment of this
claim. Thus, in the next step of our analysis, we focus on the treatment of like Russian and
domestic natural gas under the TEN-E measure.
7.1296. In order to prove that the measure at iss ue is inconsistent with Article III:4 of the
GATT 1994, under the third element of the legal standard articulated above, a complainant must
demonstrate that the measure modifies the conditions of competition to the detriment of imported
products vis-à-vis like domestic products. 2099 The "treatment no less favourable" standard under
Article III:4 thus requires us to assess the impact of the TEN -E measure on the equality of
competitive conditions between Russian and like domestic natural gas. An assessment of th e
impact of the contested measure on the equality of competitive conditions between domestic and
imported products is based on close scrutiny of the measure, including its design, structure, and
expected operation.2100
7.1297. In Russia's view, there is a "genuine r elationship" between the TEN -E measure and the
adverse impact on the competitive opportunities for Russian natural gas in the EU gas market,
because PCI designation makes domestic natural gas more readily available in the market and
potentially less costly, thus incentivizing final customers and other market participants to purchase
domestic rather than Russian natural gas.2101
7.1298. We recall that, under the TEN -E Regulation, projects designated as PCIs receive
administrative, regulatory and financial incentives. 2102 We consider that, as a result of

2096 European Union response to Panel question No. 110(d), para. 288.
2097 Russia's first written submission, para 789. See also Russia's response to Panel question No. 110(d),
para. 448. (emphasis added)
2098 We note that the Appellate Body has employed this approach to the determination of "likeness" in
the context of Articles III:2 and III:4 of the GATT (national treatment), as well as Article 2.1 of the TBT
Agreement involving both the MFN and national treatment obligations. (See Appellate Body Reports, Philippines
Panel Report, US – Tuna II (Mexico), para. 7.225).
2099 Appellate Body Reports, EC – Seal Products, paras. 5.82 and 5.117 (referring to Appellate Body
Reports, US – Clove Cigarettes, para. 176 (referring to GATT Panel Report, US – Section 337 Tariff Act, para.
5.10); China – Publications and Audiovisual Products, para. 305 (referring to Appellate Body Report, Korea –
Various Measures on Beef, paras. 135-136); Thailand – Cigarettes (Philippines), para. 126 (referring to
Appellate Body Report, Japan – Alcoholic Beverages II, p. 16, DSR 1996:I, 97, at p. 109); and Korea –
Alcoholic Beverages, para. 127).
2100 Appellate Body Report, Thailand – Cigarettes (Philippines), paras. 130 and 134.
2101 Russia's first written submission, paras. 801-802.
2102 See above paras. 2.58-2.60.

administrative incentives granted to PCIs in the form of more streamlined administrative
processing of the applications relating to such projects, such projects will be completed faster than
projects not designated as PCIs .2103 We also consider that financial incentives in the form of
applicable financial assistance, as well as regulatory treatment incentives, for instance, in the form
of project-related cost allocation, will make the completion of PCIs less costly than projec ts not
designated as PCIs.2104 In view of such benefits accruing to projects designated as PCIs, economic
actors are thus more likely to invest in the projects that meet the criteria for PCI designation.
7.1299. We also recall our conclusion that, by virtue of the o bjective of diversification of natural
gas supply, the criteria for PCI designation include those that in practice condition PCI designation
on projects developing infrastructure aimed at connecting certain EU member States with sources
of natural gas supply other than Russia.2105 As a consequence, some projects will be designated as
PCIs, and receive benefits associated with their PCI designation, because they develop pipeline
infrastructure to transport natural gas of non-Russian origin.
7.1300. In our view, the TE N-E measure is thus designed to increase the availability of new
projects developing pipeline infrastructure to transport natural gas of non-Russian origin, including
domestic, and decrease the availability of new projects developing pipeline infrastructur e to
transport natural gas of Russian origin. We consider that, by this means, the TEN -E measure
provides more favourable conditions for the transportation of natural gas of any origin other than
Russian, including natural gas of domestic origin. Therefore , for these reasons, we conclude that
the TEN-E measure negatively affects the competitive opportunities of Russian natural gas vis-à-
vis domestic natural gas.
7.11.2.2.2.3 Conclusion
7.1301. In view of the foregoing, we conclude that the TEN -E measu re is inconsistent with
Article III:4 of the GATT 1994.
7.11.2.2.3 Russia's claim under Article I:1 of the GATT 1994
7.11.2.2.3.1 Introduction
7.1302. Russia submits that the TEN -E measure is inconsistent with Article I:1 of the GATT 1994
because the advantages of PCI eligibility and designation extended by th e TEN -E measure to
imported third -country "PCI gas " are denied to Russian natural gas .2106 The European Union
maintains that Russia's claim under Article I:1 of the GATT 1994 is unfounded for the same
reasons as Russia's claim under Article III:4.2107 In the European Union's view, the TEN-E measure
does not distort market opportunities in favour of natural gas from other third countries and to the
detriment of Russian natural gas , but contributes instead to achieving greater equality of
competitive opportunities for natural gas from all potential sources, including Russia.2108
7.11.2.2.3.2 Analysis by the Panel
7.1303. In light of the legal standard under Article I:1 of the GATT 1994 , as set out in
paragraphs 7.236 and 7.237 above, we proceed to examine whether Russia has demonstrated the
following elements: (a) the TEN-E measure falls within the scope of A rticle I:1; (b ) the relevant
imported products are like products; (c ) the TEN -E measure confers an "advantage, favour,
privilege, or immunity" on a product originating in the territory of any country; and (d ) that the
advantage so accorded is not extended "immedia tely" and "unconditionally" to like Russian
products.
7.1304. With respect to the first element, Russia considers that the TEN -E measure falls within
the scope of Article I:1 of the GATT 1994 because it falls within the scope of the "matters" referred

2103 See above para. 2.58.
2104 See above paras. 2.59-2.60.
2105 See above para. 7.1285.
2106 Russia's first written submission, paras. 806–807 and 809. See also Russia's second written
submission, para. 486.
2107 European Union's first written submission, para. 839.
2108 European Union's first written submission, para. 839.

to in Article III:4 of the GATT 1994. 2109 As observed by the Appellat e Body, Article I:1 of the
GATT 1994 "incorporates all matters referred to in paragraphs 2 and 4 of Article III". 2110 Above,
we found that the TEN -E measure falls within the scope of Article III:4 of the GATT 1994. On this
basis, w e find that the TEN -E measure falls within the scope of the " matters" referred to in
Article III:4 and therefore falls within the scope of Article I:1 of the GATT 1994.
7.1305. With respect to the second element, we note that the parties do not disagree that
imported natural gas of different origins is like within the mea ning of Article I:1 of the
GATT 1994.2111 We also recall that, in the context of the unbundling measure, we have already
found that imported Russian natural gas and imported natural gas from other non-EU countries are
like products within the meaning of Article I:1 of the GATT 1994. 2112 Guided by this finding, we
consider that imported Russian natural gas and imported natural gas from other non -EU countries
constitute like products within Article I:1 of the GATT 1994 also in the context of the TEN -E
measure.
7.1306. In what concerns the likeness of LNG and natural gas, we recall that, in the context of the
LNG measure, we found that LNG is not like natural gas within the meaning of Article I:1 of the
GATT 1994.2113 Guided by this finding, we conclude that LNG is not like natural gas also in the
context of the TEN -E measure. Consequently, we do not proceed further with our assessment of
the TEN-E measure concerning its treatment of LNG, or natural gas in comparison t o LNG, and
focus instead on the treatment, under the TEN -E measure, of natural gas imported from Russia
and like natural gas imported from any other non-EU country.
7.1307. Article I:1 of the GATT 1994 prohibits Members from granting an advantage to imported
products that is not "immediately" and "unconditionally" extended to like imported products from
all Members.2114 Thus, under the last two elements of the legal standard under Article I:1 of the
GATT 1994, a complainant must establish that the measure at issue co nfers an "advantage on a
product originating in the territory of any country and that the advantage so accorded is not
extended "immediately" and "unconditionally" to like products originating in the territory of all
Members.
7.1308. Russia argues that the TEN -E measure grants an advantage to natural gas originating in
any third country, except Russia, because the TEN -E measure incentivizes the creation of
infrastructure that is not aimed at importing, transmitting, or distributing Russian natural gas.2115
We recall that, under the TEN -E measure, projects designated as PCIs receive administrative,
regulatory and financial incentives.2116
7.1309. Previous panels considered that a measure grants an advantage within the meaning of
Article I:1 of the GATT 1994 when such a measure c reates "more favourable competitive
opportunities" to products of a particular origin.2117
7.1310. We recall that, under the TEN -E Regulation, projects designated as PCIs receive
administrative, regulatory and financial incentives. 2118 We consider that, as a result of
administrative incentives granted to PCIs in the form of more streamlined administrative
processing of the applications relating to such projects, such projects will be completed faster than

2109 Russia's first written submission, paras. 787-788 and 804.
2110 Appellate Body Reports, EC – Seal Products, para. 5.80.
2111 Russia submits that Russian gas and gas from any other origin are like products for the purposes of
its claim against the TEN-E measure under Article I:1 of the GATT 1994, relying on the arguments developed in
the context of its claims against the unbundling measure. (Russia's first written submission, paras. 343–349
and 804, and fn 1092). The European Union agrees with Russia that natural gas of different origin is like, in the
context of the TEN-E measure. (European Union response to Panel question No. 110(d), para. 288).
2112 See above para. 7.577.
2113 See above para. 7.855.
2114 Appellate Body Reports, EC – Seal Products, para. 5.88.
2115 Russia's response to Panel question No. 238(c), paras. 347–348.
2116 See above paras. 2.58-2.60.
2117 Panel Reports, EC – Bananas III (Guatemala and Honduras), para. 7.239; and Colombia – Ports of
Entry, para. 7.346. The panel in EC – Seal Products considered that the advantage granted by the EU Seal
Regime was in the form of market access. (Panel Reports, EC – Seal Products, para. 7.596).
2118 See above paras. 2.58-2.60.

projects not designated as PCIs. 2119 We also consider that financial incentives in the form of
applicable financial assistance, as well as regulatory treatment incentives, for instance, in the form
of project-related cost allocation, will make the completion of PCIs less costly than projects not
designated as PCIs.2120 In view of such benefits accruing to projects designated as PCIs, economic
actors are thus more likely to invest in the projects that meet the criteria for PCI designation.
7.1311. We also recall our conclusion that, by virtue of the objective of diversification of natural
gas supply, the criteria for PCI designation include those that in practice condition PCI designation
on projects developing infrastructure aimed at connecting certain EU member States with sources
of natural gas supply other than Russia.2121 As a consequence, some projects will be designated as
PCIs, and receive benefits associated with their PCI designation, because they develop pipeline
infrastructure to transport natural gas of non-Russian origin.
7.1312. In our view, the TEN -E measure is thus designed to increase the availability of new
projects developing pipeline infrastructure to transport natural gas of non -Russian origin and
decrease the availability of new projects developing pipeline infrastructure to transport natural gas
of Russian origin. As we have concluded above, by this means, the TEN -E measure provides more
favourable conditions for the transportation of natural gas of any origin other than Russian.
Therefore, we consider that imported natural gas of any origin other than Russian will benefit from
more favourable conditions of transportation, and as a result, from more favourable competitive
opportunities. On this basis, we find that the TEN -E measure grants an advantage to imported
natural gas of any origin other than Russia within the meaning of Article I:1 of the GATT 1994 that
is not "immediately" and "unconditionally" extended to imported natural gas of Russian origin.
7.11.2.2.3.3 Conclusion
7.1313. Based on the foregoing, we find that the TEN -E measure is inconsistent with Article I:1 of
the GATT 1994 by failing to provide "immediately and unconditionally" to natural gas imported
from Russia an advantage accorded to like natural gas imported from any other country.
7.11.2.2.4 Observations on certain additional arguments in respect of Russia's claims
under Articles I:1 and III:4 of the GATT 1994
7.1314. We consider that the analysis that we have conducted above sufficiently supports our
findings that the TEN -E measure i s inconsistent with Articles I:1 and III:4 of the GATT 1994.
However, we consider it appropriate to provide additional observations in response to certain
arguments raised by the European Union. We emphasise that our observations below are intended
to clarify the scope of our findings and do not affect our overall conclusion on the inconsistency of
the TEN-E measure with Articles I:1 and III:4 of the GATT 1994.
7.1315. First, we note the European Union's argument that, in order to meet the specific criteria
for PC I designation, a project does not necessarily have to contribute to the sub -criterion
"diversification of supply sources".2122 We agree with the European Union that this sub -criterion
concerns only two out of four specific criteria for PCI designation. We further observe that, to be
eligible for PCI selection, a project is required to "significantly contribute" only to one of the four
specific criteria stipulated in Article 4(2)(b) of the TEN -E Regulation, in addition to me eting the
general criteria. On this basis, we confirm that projects not contributing to the sub -criterion
"diversification of supply sources" may still be designated as PCIs, provided they meet the general
criteria.
7.1316. However, in our view, the fact that the re are ways for projects to be designated as PCIs
other than by enhancing the diversification of natural gas supply, which we determined to imply
developing infrastructure for the transportation of natural gas of non -Russian origin, does not
change our con clusion that the TEN -E measure modifies the conditions of competition to the
detriment of Russian natural gas. It is well-established that, in situations where a measure creates
a disincentive to use imported products, the overall conclusion that the measu re modified the
conditions of competition to the detriment of imported products is "not nullified by the fact that the

2119 See above para. 2.58.
2120 See above paras. 2.59-2.60.
2121 See above para. 7.1285.
2122 European Union's first written submission, para. 819.

[measure] will not give rise to less favourable treatment for like imported products in each and
every case".2123
7.1317. The facts of the present case are distinct. However, our analysis shows that the TEN -E
measure creates incentives for economic actors to develop transport infrastructure "favouring"
domestic or imported natural gas over Russian natural gas. Thus, deriving guidance from the
approach of the Appellate Body and panels in previous disputes, we consider that the existence of
some criteria that condition PCI designation on projects developing infrastructure for the
transportation of natural gas of non -Russian origin is sufficient for our finding that the TEN -E
measure negatively affects the conditions of competition of Russian natural gas within the meaning
of Articles I:1 and III:4 of the GATT 1994. Conversely, the existence of some possibilities for
projects to be designated as PCIs othe r than by developing infrastructure for the transportation of
natural gas of non-Russian origin does not alter this finding.
7.1318. Second, we note the European Union's contention that the existence of discrimination
cannot be assessed by considering in isolatio n just one of the priority corridors, such as BEMIP
Gas, but should instead be based on an overall assessment of all corridors, as well as of the
already existing infrastructures outside the current priority corridors. 2124 In our scrutiny of the
TEN-E measure , we have holistically assessed its design, structure and expected operation,
including all gas priority corridors and specific criteria for PCI designation. We are, however,
unconvinced by the European Union's argument that we need to assess existing infr astructure
outside the current priority corridors. Our examination is limited to the assessment of the impact
on the competitive opportunities of Russian natural gas attributable to the TEN -E measure
challenged by Russia in these proceedings. 2125 We fail to s ee how the impact of existing
infrastructure outside the current priority corridors can be attributed to the TEN-E measure.
7.1319. Third, we understand the European Union to argue that, because the ultimate goal of the
TEN-E measure is to expose all market parti cipants to increased competition, creating bigger
market opportunities for each of them, the TEN-E measure is not inconsistent with Articles I:1 and
III:4 of the GATT 1994. 2126 According to the European Union, in those EU member States that are
already adequately connected to sources of natural gas supply in Russia, the TEN -E measure will
contribute to achieve "greater" equality of competitive opportunities for natural gas from all
potential sources.2127
7.1320. It appears to us that the European Union's position is pre mised on the proposition that,
under Articles I:1 and III:4 of the GATT 1994, where existing market conditions do not afford
domestic or imported products equality of opportunities to compete with products of a particular
origin, a Member "is permitted, an d indeed required, to take measures in order to ensure such
equality".2128
7.1321. We do not enter into a debate as to whether Article I:1 or III:4 of the GATT 1994
contains an obligation to address a perceived distortion of competition in the domestic market of a
Member. In our view, to the extent the TEN -E measure seeks to address the perceived inequality
of competition between and among domestic and imported natural gas in the EU market by
suppressing the competitive opportunities of natural gas imported from a pa rticular Member, it is
inconsistent with Articles I:1 and III:4 of the GATT 1994.2129

2123 Appellate Body Report, US – FSC (Article 21.5 - EC), paras. 220-221. See also Panel Reports,
2124 European Union's second written submission, para. 383.
2125 See Appellate Body Reports, Korea – Various Measures on Beef, para. 149; US – Tuna II (Mexico),
2126 European Union's first written submission, paras. 823–824 and 839.
2127 European Union's second written submission, para. 384.
2128 European Union's first written submission, para. 823.
2129 Appellate Body Report, Argentina – Financial Services, paras. 6.143–6.145. We note that, in the
context of Article XVII of the GATS, the Appellate Body opined as follows:
 However, ensuring equal competitive conditions, which is required by the legal standard of
"treatment no less fa vourable", is not the same as guaranteeing that one group of services or
products does not have any competitive advantage over another group. As Panama rightly points
out, ensuring equal conditions of competition under the national treatment obligation mea ns "to
guarantee equality of opportunities to compete in the marketplace", rather than to guarantee

7.1322. It is well established that a determination that a measure modifies the conditions of
competition to the detriment of imported products of a particular origin is sufficient to find a
violation of Article I:1 or III:4 of the GATT 1994, without further enquiry into the regulatory
objectives of this measure.2130 Therefore, we consider that the ultimate goal of achieving "greater"
equality of competitive opportunities 2131, allegedly p ursued by the TEN -E measure, does not alter
our conclusion that the TEN-E measure has modified the conditions of competition to the detriment
of Russian natural gas, and is therefore inconsistent with Articles I:1 and III:4 of the GATT 1994.
7.1323. Fourth, the E uropean Union submits that, if upheld, Russia's claim would interfere in a
manifestly unreasonable manner with each Member's sovereign right to plan and develop its
transport infrastructures according to its own needs and resources. 2132 According to the Europ ean
Union, Russia's claim implies that a Member could not build, or support the building of, any
transport infrastructure which, in practice, is used more frequently for the transportation of
domestic products or of imported products from a certain origin. 2133 However, in the European
Union's view, this will often be the unavoidable consequence of geographical factors.2134
7.1324. We do not agree with the European Union's position. We are not deciding, in the abstract,
on the issue of the WTO Members' rights to develop transport infrastructure. The TEN -E measure
provides a legal framework for the development of fixed pipeline infrastructure used specifically for
the transportation of natural gas. 2135 Natural gas is thus the only product transported via these
pipelines. Our finding concerns the consistency of the TEN-E measure with Articles I:1 and III:4 of
the GATT 1994 in light of this and other specific circumstances of this case.
7.11.3 European Union's defence under Article XX(j) of the GATT 1994
7.11.3.1 Introduction
7.1325. In paragraphs 7.1301 and 7.1313 above, we found that the TEN -E measure is
inconsistent with Articles I:1 and III:4 of t he GATT 1994. The European Union submits a single
defence under Article XX(j) of the GATT 1994, in the event we find that the TEN -E measure is
inconsistent with Article I:1 and/or III:4 of the GATT 1994. 2136 We observe that the aspects of the
TEN-E measure that violate both Articles I:1 and III:4 are the criteria for the selection of PCIs that
condition PCI designation on projects developing infrastructure aimed at connecting certain EU
member States with sources of natural gas supply other than Russia.2137 Therefore, we consider it
appropriate to provide a joint analysis of the European Union's defence in respect of both the
inconsistency of the TEN-E measure with Articles I:1 and III:4 of the GATT 1994.
7.1326. The European Union contends that the TEN -E measure is justi fied under Article XX(j) of
the GATT 1994. The European Union argues that natural gas is a product "in general or local short

that all like services and service suppliers are "equally competitive". (emphasis original; footnote
omitted) (Appellate Body Report, Argentina – Financial Services, para. 6.144)
2130 Appellate Body Reports, EC – Seal Products, paras. 5.90 and 5.117. See also Appellate Body
Reports, US – Clove Cigarettes, para. 179 and fn 372 to para. 179; Thailand – Cigarettes (Philippines),
2131 European Union's first written submission, paras. 824 and 839.
2132 European Union's first written submission, para. 825.
2133 European Union's first written submission, para. 825.
2134 European Union's first written submission, para. 825; and second written submission, para. 383.
2136 European Union's second written submission, para. 394. We note that the European Union raised its
defence under Article XX(j) for the first time in its second written submission. Russia objects to the timing of
the European Union's defence, alleging due process concerns. (Russia's response to Panel question No. 149,
para. 32). In its additional questions to the parties after the first meeting, the Panel provided Russia with the
opportunity to comment on the European Union's defence. (Panel question No. 149). Russia had further
opportunity to respond to the European Union's defence in the course of the second meeting of the Panel. We
recall that, in similar circumstances that involved the respondent raising its defence under Article XIV of the
GATS for the first time in its second written submission, the Appellate Body considered that the Panel did not
fail to ensure the complainant's due process rights in deciding to assess the defence, in light of the fact that
the complainant had had the opportunity to respond to that defence. (Appellate Body Report, US – Gambling,
paras. 274–276). In the present case, we acknowledge that the European Union could have raised its defence
earlier in the proceedings. However, given the opportunities provided to Russia to respond to the European
Union's defence, we consider that Russia's due process rights were respected.
2137 See above paras. 7.1299. -7.1300. and 7.1311. -7.1312. .

supply" because of the existence of "genuine and serious risks of disruption of supply of gas". 2138
According to the European Union, the TEN-E measure seeks to develop and improve infrastructure
to connect the European Union with the main potential sources of supply of gas within and around
the European Union in order to ensure security of gas supply, and is therefore "essential" to "th e
acquisition or distribution" of natural gas. 2139 The European Union argues that the TEN -E measure
is applied consistently with the chapeau of Article XX, emphasizing that any difference in treatment
between Russian gas and gas of any other origin, which mig ht result from the application of the
criteria for PCI designation, would not amount to "unjustified" or "arbitrary" discrimination.2140
7.1327. Russia contends that the European Union has not satisfied its burden, under Article XX(j)
of the GATT 1994, to justify the inconsistency of the TEN -E measure with Articles I:1 and III:4 of
the GATT 1994.2141 According to Russia, the European Union failed to demonstrate that natural gas
is a product "in general or local short supply" because the European Union has not established that
the quantity of available gas supply is insufficient to meet demand. 2142 Russia further argues that
the TEN-E measure is not "essential" to "the acquisition or distribution" of natural gas because, in
Russia's view, the TEN-E measure is not aimed at ens uring the security of gas supply but is rather
aimed at decreasing the attractiveness of investing in infrastructure that would facilitate the
importation of Russian natural gas. 2143 Russia submits that, by removing discriminatory incentives
to avoid projects that would facilitate imports of natural gas from Russia, the European Union
could have implemented a less trade restrictive alternative to the TEN -E measure that would
equally contribute to the stated objective of the TEN -E measure. 2144 In Russia's view, th e
discriminatory application of the criteria for PCI designation also results in "arbitrary" and
"unjustifiable" discrimination within the meaning of the chapeau of Article XX of the GATT
1994.2145
7.11.3.2 Analysis by the Panel
7.1328. In accordance with the legal standard u nder Article XX(j) of the GATT 1994, as set out in
paragraphs 7.244 through 7.248 above, in order to justify the TEN -E measure under Article XX(j),
the European Union must demonstrate that the TEN -E measure (i) is provisionally justified under
paragraph (j) of Article XX and (ii) satisfies the requirements of the chapeau of Article XX.
7.1329. As indicated in paragraph 7.246 above, in order to provisionally justify a challenged
measure under paragraph (j) of Article XX, the responding Member must establish the following
elements: (i) the measure is "designed" to address "the acquisition or distribution of products in
general or local short supply"; and (ii) the measure is "essential" to the acquisition or distribution
of products in general or local short supply. 2146 Thus, the first step in our analysis of whether the
TEN-E measure is provisionally justified under paragraph (j) of Article XX consists of determining
whether the European Union ha s demonstrated that this measure is "designed" to address "the
acquisition or distribution of products in general or local short supply". We proceed to this analysis
immediately below.
7.11.3.2.1 Designed to address "the acquisition or distribution of products in ge neral or
local short supply"
7.1330. In order for a measure to be "designed" to address "the acquisition or distribution of
products in general or local short supply", the respondent must first establish that the product in

2138 European Union's second written submission, paras. 419–421; and opening statement at the second
meeting of the Panel, paras. 117–119.
2139 European Union's second written submission, paras. 422–434; and opening statement at the second
meeting of the Panel, paras. 121–125.
2140 European Union's second written submission, paras. 435–436.
2141 Russia's response to Panel question No. 149, para. 32.
2142 Russia's response to Panel question No. 149, paras. 37–40; and opening statement at the second
2143 Russia's response to Panel question No. 149, paras. 41–48; and opening statement at the second
2144 Russia's response to Panel question No. 149, paras. 49–53.
2145 Russia's response to Panel question No. 149, paras. 54–58; and opening statement at the second
2146 See also above para. 7.247.

question is "in general or local short s upply".2147 In the present case, we need to determine
whether the European Union has demonstrated that natural gas is a product "in general or local
short supply".
7.11.3.2.1.1 Products "in general or local short supply"
7.1331. The Appellate Body in India – Solar Cells has provided extensive guidance for panels in
their assessment of whether products are "in general or local short supply" in the context of Article
XX(j) of the GATT 1994. We therefore find it useful to briefly recall this guidance here.
7.1332. Having considered how the different terms used in Article XX(j) of the GATT 1994 inform
one other, the Appellate Body found that products can be said to be "in short supply" when the
"quantity" of a product that is "available" does not meet "demand" for that product. 2148 The
Appellate Body further observed that the phrase "products in general or local short supply" is
focused on products for which a situation of short supply exists within the territory of the Member
invoking Article XX(j), while acknowledging that a situation of "general" short supply may also
extend beyond the boundaries of that territory, as long as it also occurs within that territory. 2149 In
the Appellate Body's view, the terms "general" and "local", together with the disjunctive "or",
suggest that there is no requirement for a Member to demonstrate that the shortage extends to all
parts of its territory, but that, depending on the circumstances, it may be sufficient to demonstrate
that the existence of such a situation of shortage occurs locally, or is limite d to certain parts of its
territory.2150
7.1333. Having recalled that Article XX(j) stipulates that any measures taken under paragraph (j)
"shall be discontinued as soon as the conditions giving rise to them have ceased to exist", the
Appellate Body considered that Article XX(j) contemplates situations of "short supply" that may
continue over time, but are nonetheless expected not to last indefinitely.2151 Therefore, an analysis
of whether a respondent has identified "products in general or local short supply" is not sa tisfied
by considering only whether there is a mathematical difference at a single point in time between
demand and the quantity of supply that is "available" for purchase in a particular geographical
area or market. 2152 According to the Appellate Body, Artic le XX(j) requires, instead, a careful
scrutiny of the relationship between supply and demand based on a holistic consideration of trends
in supply and demand as they evolve over time, as well as whether the conditions giving rise to
short supply have ceased to exist.2153
7.1334. The Appellate Body thus determined that an assessment of whether products are "in
general or local short supply" involves an examination of the extent to which a particular product
is "available" for purchase in a particular geographical area or market, and whether this is
sufficient to meet demand in the relevant area or market. 2154 The Appellate Body further identified
a number of factors that, depending on the particularities of each case, may be relevant for this
analysis. These factors inclu de the following: the level of domestic production of a particular
product and the nature of the product that is alleged to be "in general or local short supply"; the
relevant product and geographic market; potential price fluctuations in the relevant mark et; the
purchasing power of foreign and domestic consumers; the role that foreign and domestic
producers play in a particular market, including the extent to which domestic producers sell their
production abroad; the total quantity of imports that may be " available" to meet demand in a
particular geographical area or market; the extent to which international supply of a product is
stable and accessible, including by examining factors such as the distance between a particular
geographical area or market and production sites, as well as the reliability of local or transnational
supply chains; the level of economic development of the relevant Members. 2155 We further note

2147 See Appellate Body Report, India – Solar Cells, para. 5.60; and Panel Report, India – Solar Cells,
para. 7.199.
2148 Appellate Body Report, India – Solar Cells, paras. 5.64-5.66.
2149 Appellate Body Report, India – Solar Cells, para. 5.67.
2150 Appellate Body Report, India – Solar Cells, para. 5.67.
2151 Appellate Body Report, India – Solar Cells, para. 5.70.
2152 Appellate Body Report, India – Solar Cells, para. 5.70.
2153 Appellate Body Report, India – Solar Cells, para. 5.70.
2154 Appellate Body Report, India – Solar Cells, para. 5.71.
2155 Appellate Body Report, India – Solar Cells, paras. 5.71-5.72 and 5.89.

that the Appellate Body recognized that a consideration of potential risks of disruption in su pply of
a given product may also inform the question of whether a situation of "short supply" exists.2156
7.1335. According to the Appellate Body, in all cases, the responding party has the burden of
demonstrating that the quantity of "available" supply from both domestic and international sources
in the relevant geographical market is insufficient to meet demand.2157
7.1336. The European Union argues that natural gas is a product "in general or local short supply"
because of the existence of "genuine and serious risks of disru ption of supply of gas". 2158 The
European Union observes that the supply of gas from any given source, or through any given
route, may be disrupted by events such as infrastructure breakdowns, commercial disputes,
natural disasters, social unrest, political actions or terrorism.2159 The European Union explains that,
as the transmission of gas requires especially dedicated fixed infrastructure that is costly and time-
consuming to build, in the event of disruption of gas supply, it is not possible to resort to an
alternative source or route of supply unless the required infrastructure is already in place.2160
7.1337. The European Union points to two additional factors that, in its view, aggravate further
the risks of disruptions of gas supply in the European Union. The first factor is the European
Union's dependency on a relatively limited number of sources of supply. 2161 The European Union
asserts that it imports 66% of the natural gas it consumes and that several EU member States
import all 2162 or almost all 2163 their gas from one si ngle external source of supply. 2164 For the
European Union, this makes it vulnerable to disruptions of supply of gas resulting from the events
in its own territory, as well as those events that take place in the country of origin of gas or transit
countries and are beyond the control of the EU authorities.2165 The second factor referred to by the
European Union is the inadequacy of the infrastructure interconnecting the transmission networks
of the various EU member States.2166
7.1338. The European Union contends that the a bove factors expose it to genuine and serious
risks of disruption of supply of gas, adding that such risks materialised in the past. 2167 The
European Union submits that such disruptions may seriously compromise the stability and
reliability of the existing "local and transnational chains" for the supply of gas into, and within, the
European Union.2168 In the European Union's view, due to the identified risks of disruption of gas
supply in the European Union, natural gas is thus a product in "short supply" in the European
Union within the meaning of Article XX (j) GATT.2169
7.1339. Russia argues that the European Union failed to establish that natural gas is a product "in
short supply" in the European Union. 2170. Russia submits that, in order to demonstrate that a
product is "i n general or local short supply", the respondent must show that the quantity of
available supply from both domestic and international sources in the relevant geographical market
is insufficient to meet demand. 2171 In Russia's view, this requires the respondent to quantify the
available supply.2172

2156 Appellate Body Report, India – Solar Cells, para. 5.76.
2157 Appellate Body Report, India – Solar Cells, para. 5.71.
2158 European Union's second written submission, paras. 419 and 420-421; and opening statement at
the second meeting of the Panel, paras. 117-119.
2159 European Union's second written submission, para. 414.
2160 European Union's second written submission, para. 415.
2161 European Union's second written submission, para. 417.
2162 European Union's second written submission, para. 417 (referring to Bulgaria, Finland and
Slovakia).
2163 European Union's second written submission, para., 417 (referring to Estonia, Latvia and Lithuania).
2164 European Union's second written submission, para. 417.
2165 European Union's second written submission, para. 417.
2166 European Union's second written submission, para. 418.
2167 European Union's second written submission, para. 419 (referring to disruptions of gas supply from
Russia to the European Union via Ukraine in 2006 and 2009).
2168 European Union's second written submission, paras. 420-421.
2169 European Union's second written submission, para. 421.
2170 Russia's response to Panel question No. 149, para. 37.
2171 Russia's response to Panel question No. 149, para. 36 (referring to Appellate Body Report, India –
Solar Cells, para. 5.71); and opening statement at the second meeting of the Panel, para. 200.
2172 Russia's response to Panel question No. 149, paras. 37–38.

7.1340. Russia further submits that, instead of addressing all the factors relevant for the
assessment of whether a product is "in general or local short supply", as follows from t he
clarifications of the Appellate Body in India – Solar Cells, the European Union focuses only on one
factor – the extent to which international supply of a product is stable and accessible, including the
reliability of local or transnational supply chains.2173 According to Russia, the European Union rests
its entire argument on the assertions relating to the disruptions of gas supply in 2006 and
2009.2174 In Russia's view, however, these assertions are not sufficient to establish that local or
transnational sup ply chains are unstable or inaccessible, or that gas is in short supply in the
European Union.2175 Russia contends that accepting the European Union's position – that, as long
as the risks of a major disruption of supply of gas in the European Union persist, natural gas will
be in short supply in the European Union – "would hollow out the 'short supply' test into an empty
shell".2176
7.1341. We understand the positions of the parties as follows. On the one hand, the European
Union maintains that, due to the alleged "gen uine and serious risks" of disruption of supply of
natural gas, which in its view, may seriously compromise the stability and reliability of the existing
"local and transnational chains" for the supply of natural gas into and within the European Union,
natural gas is "in short supply" in the European Union. On the other hand, we understand Russia's
arguments as implying that the demonstration that natural gas is a product in "short supply"
requires the European Union to quantify the available gas supply in order to show that it is
insufficient to meet the demand in the European Union. 2177 We further understand Russia to argue
that such demonstration should be based on the consideration of all the relevant factors identified
by the Appellate Body in India – Solar Cells, and not just the factor addressed by the European
Union.
7.1342. We recall that the Appellate Body in India - Solar Cells determined that an assessment of
whether products are "in general or local short supply" involves an examination of the extent to
which a particular product is "available" for purchase in a particular geographical area or market,
and whether this is sufficient to meet demand in the relevant area or market. 2178 The Appellate
Body further considered that this assessment requires a case -by-case analysis of the relationship
between supply and demand based on a holistic consideration of all relevant factors. 2179 The
Appellate Body stressed that whether and which factors are relevant will necessarily depend on the
particularities of each case.2180
7.1343. It is our understanding that, in setting out the factors that may be relevant in an
assessment of whether products are "in general or local short supply", the Appellate Body did not
focus solely on quantitative factors. The Appellate Body underscored inter a lia the potential
relevance of such factors as the role that foreign and domestic producers play in a particular
market, the nature of the products that are alleged to be "in general or local short supply", the
extent to which international supply of a pro duct is stable and accessible, and different levels of
economic development of the relevant Members.2181 These factors are rather more qualitative than
quantitative in nature. We thus do not see any support for a proposition that the demonstration
that a product is "in general or local short supply" requires the respondent to necessarily quantify,
at any given point in time or over any given period, the available supply in order to show that it is
insufficient to meet demand in the relevant geographical market . In our view, an assessment of
whether a product is "in general or local short supply" in the context of Article XX(j) is not limited
only to the quantitative analysis, and depending on the circumstances of a particular case, may
also be based on certain qualitative elements.
7.1344. Therefore, we disagree with Russia that the demonstration that natural gas is a product
"in short supply" requires the European Union to quantify the available gas supply in order to show

2173 Russia's response to Panel question No. 149, paras. 38-39 (referring to Appellate Body Report, India
– Solar Cells, para. 5.74).
2174 Russia's response to Panel question No. 149, para. 40.
2175 Russia's response to Panel question No. 149, para. 40.
2176 Russia's response to Panel question No. 149, para. 40.
2177 See Russia's response to Panel question No. 149, paras. 37-38; and opening statement at the
second meeting of the Panel, para. 200.
2178 Appellate Body Report, India – Solar Cells, para. 5.71.
2179 Appellate Body Report, India – Solar Cells, para. 5.74.
2180 Appellate Body Report, India – Solar Cells, paras. 5.71 and 5.89.
2181 Appellate Body Report, India – Solar Cells, paras. 5.71 and 5.89.

that it is insufficient to meet demand in the European Union. Bearing this consideration in mind,
we now turn to the analysis of whether the European Union has demonstrated that natural gas is
"in short supply" in the European Union.
7.1345. We observe that the European Union bases its argument that natural gas is "in short
supply" in the European Union on the alleged existence of "genuine and serious risks" of disruption
of supply of natural gas , which in the European Union's view, may seriously compromise the
stability and reliability of the existing "loca l and transnational chains" for the supply of natural gas
into and within the European Union. We note that, in the context of the European Union's defence
under Article XX(j), Russia does not contest the European Union's arguments with respect to the
existence of risks that natural gas supply to the European Union may be disrupted. Similarly,
Russia does not contest the European Union's characterization of such risks as "genuine and
serious".
7.1346. We recall that, in the context of our assessment of the Europea n Union's defence under
Article XIV(a) of the GATS, we have found that certain risks of natural gas supply disruptions that
may be caused by foreign controlled TSOs, identified by the European Union, are not merely
hypothetical and the occurrence of an act ual disruption in natural gas supply may entail serious
consequences for the European Union. 2182 We consider that, taking into account the essential role
of fixed pipeline infrastructure for the transportation of natural gas, such disruptions may
compromise the reliability of the local or transnational chains of natural gas supply to the
European Union.
7.1347. We note that the extent to which international supply of a product is stable and
accessible, including the reliability of local or transnational supply chain s, is one of the factors the
Appellate Body in India – Solar Cells found relevant in an assessment of whether a product is "in
general or local short supply". 2183 We understand that for the European Union, the existence of
"genuine and serious" risks that the international supply of natural gas to the European Union may
become unstable or inaccessible is sufficient to establish that natural gas is a product "in short
supply". We disagree with this proposition.
7.1348. In our view, the European Union's position implies that the existence of risks of disruption
in the supply of a product necessarily means that this product is in "general or local short supply"
within the meaning of Article XX(j) of the GATT 1994. We observe that the plain reading of the
terms "products in … short supply" indicates that the products referred to in Article XX(j) of the
GATT 1994 are those products that are presently in short supply. This indicates that Article XX(j)
does not cover products that are currently not in short supply but that ma y become "products in …
short supply" in the future.
7.1349. We recall that in considering whether Article XX(j) covers products at risk of being in
short supply, t he panel in India – Solar Cells concluded that Article XX(j) does not cover such
products.2184 The findings of the panel in India – Solar Cells based on its conclusions regarding the
meaning of the terms "products in general or local short supply" were upheld by the Appellate
Body.2185

2182 See above paras. 7.1174-7.1199.
2183 Appellate Body Report, India – Solar Cells, paras. 5.71 and 5.89.
2184 Panel Report, India – Solar Cells, para 7.250. On the basis of the interpretation of Article XX(j) "in
accordance with customary rules of interpretation of public international law", as required by Article 3.2 of the
DSU, the panel concluded that the ordinary meaning of the terms "products in general or local short supply"
refers to a situation in which the quantity of available supply of a product does not meet demand in the
relevant geographical area or market. The panel then considered, "in light of Articles 31 and 32 of the Vienna
Convention", the issue of whether the concept of "products in general or local short supply" may cover
products at risk of being in short supply. (Panel Report, India – Solar Cells, paras. 7.202–7.218 and 7.243–
7.250).
2185 Appellate Body Report, India – Solar Cells, para. 5.90. The Appellate Body upheld the panel's
findings in paragraph 7.265 of its report, in which the panel stated that "[f]or the reasons set forth above, we
find that solar cells and modules are not 'products in general or local short supply' in India within the meaning
of Article XX(j) of the GATT 1994". We understand that "the reasons set forth above" include the panel's
conclusion in para. 7.250 of its report that the terms "products in general or local short supply" do not cover
products at risk of becoming in short supply. (Appellate Body Report, India – Solar Cells, para. 5.90; and Panel
Report, India – Solar Cells, paras. 7.250 and 7.265).

7.1350. It is well established that the legal interpretation embodied in adopted panel and
Appellate Body reports becomes "part and parcel of the acquis of the WTO dispute settlement
system"; and ensuring "security and predictability" in the dispute settlement system, as
contemplated in Article 3.2 of the DSU, implies that absent "cogent reasons", an adjudicatory body
will resolve the same legal question in the same way in a subsequent case. 2186 We find no cogent
reason to disagree with the legal interpretation of the panel in India – Solar Cells . Thus, we
consider that the terms "products in general or local short supply" do not cover products at risk of
being in short supply.
7.1351. We consider that the European Union has demonstrated that , due to certain risks of
natural gas supply disruptions, natural gas may become a product "in short su pply". However, the
European Union has provided neither arguments nor evidence that natural gas is currently "in
short supply" in the European Union. We are mindful that an analysis of whether a respondent has
identified "products in general or local short supply" is not satisfied by considering only whether
there is a mathematical difference at a single point in time between demand and the quantity of
supply that is "available" for purchase in a particular geographical area or market.2187
7.1352. As indicated by the Appellate Body, Article XX(j) requires a careful scrutiny of the
relationship between supply and demand based on a holistic consideration of trends in supply and
demand as they evolve over time. 2188 However, to the extent the European Union seeks to
demonstrate a shortage of natural gas supply in the European Union over a certain period of time,
taking into account the inherent risks of supply disruptions, the European Union bears the burden
of introducing evidence that would allow us to conduct a holistic co nsideration of trends in supply
and demand as they evolve over time. The European Union has not provided such evidence.2189
7.1353. In vi ew of the foregoing, we find that the European Union has not demonstrated that
natural gas is a product "in short supply" in the European Union.
7.1354. This finding is sufficient for us to conclude that the European Union has not demonstrated
that the TEN -E measure is justified under Article XX(j) of the GATT 1994. However, we observe
that if our finding were modified or reversed on appea l, then the Appellate Body could be called
upon to examine whether the TEN-E measure fulfils the other elements of the legal standard under
Article XX(j) of the GATT 1994, in particular, whether the TEN -E measure is "essential" to the
"acquisition or distribution" of natural gas. Therefore, we consider it useful to follow the approach
of certain previous panels in conducting a limited analysis and review so that the Appellate Body
may have the benefit of our factual findings related to these elements.2190

2186 Appellate Body Report, US – Stainless Steel (Mexico), para. 160.
2187 Appellate Body Report, India – Solar Cells, para. 5.70.
2188 Appellate Body Report, India – Solar Cells, para. 5.70.
2189 We requested the parties to provide statistical data on the annual demand/consumption of natural
gas in the European Union and each EU member State (Panel question No. 246(c)). However, neither party
provided such data. In its response, the European Union refers to Table 246 c) contained in Exhibit EU-190.
(European Union's response to Panel question No. 246(c), para. 336). Table 246 c) in Exhibit EU-190 provides
gross inland consumption of natural gas (bcm) in the EU member States for the period of 2006 through 2015,
but contains no data on the annual demand for natural gas. The other tables contained in Exhibit EU-190
provide data on the natural gas supply to the European Union and individual EU member States for the period
of 2006 through 2015, by partner, volume, share and year. In response to our request, Russia refers to its
response to the previous question, which does not contain the requested data. (Russia's response to Panel
question No. 246(c), para. 370).
However, we observe that the European Union has provided statistical data on production, imports,
exports and consumption of gas in the European Union between 2011 and 2015. According to these data, there
was more natural gas available for consumption than natural gas consumed in the European Union during the
mentioned period. We understand that the volume of natural gas available for consumption in the European
Union would be determined by subtracting the volume of exported natural gas from the combined volumes of
domestically produced and imported natural gas. Based on this methodology, we have determined as follows:
in 2011, there were 496.2 bcm of gas available for consumption and 496.7 bcm of gas consumed; in 2012, the
numbers were 459.8 bcm and 448.1 bcm respectively; in 2013 – 439.4 bcm and 437.1 bcm; in 2014 – 411.4
bcm and 430.4 bcm; in 2015 – 409.1 bcm and 381.7 bcm. Overall, for the period of 2011 through 2015, there
were 2215.9 bcm of natural gas available for consumption and 2194.0 bcm of natural gas consumed in the
European Union. (Eurostat statistics on production, imports, exports and consumption of gas in the European
Union between 2011 and 2015, (Exhibit EU-146)).
2190 See Panel Reports, India – Solar Cells, paras. 7.334–7.336; and US – COOL (Article 21.5 – Canada
and Mexico), para. 7.672.

7.1355. Our limited analysis and review is provided below. It will involve identifying the different
issues that would need to be considered, the parties' positions on those different issues, and our
factual findings on those issues.
7.11.3.2.1.2 Whether the TEN -E measure is desi gned to address "the acquisition or
distribution" of natural gas
7.1356. A measure considered to be "designed" to "address the particular interest specified"2191 in
one of the paragraphs of Article XX of the GATT 1994 must, at a minimum, not be "incapable" of
addressing this interest. 2192 The European Union does not provide any arguments with respect to
this aspect of its defence under Article XX(j) of the GATT 1994. As Article XX(j) covers measures
"essential to the acquisition or distribution" of products in short supply, a measure "design ed" to
address the interest specified in this provision must be the one that is not "incapable" of
addressing "the acquisition or distribution of products in general or local short supply".2193
7.1357. As explained above, the TEN -E measure facilitates the developmen t of inter alia natural
gas transport infrastructure , which includes transmission pipelines .2194 This infrastructure can be
used in the course of the "acquisition" of natural gas from external sources, as well as for the
transportation of natural gas within t he European Union, for the purposes of its "distribution"
between the different parts of the European Union. Thus, the TEN -E measure is responsible for
developing gas transport infrastructure that may serve both the "acquisition" and "distribution" of
natural gas. Provided that it is established that natural gas is a product in short supply, the TEN -E
measure would therefore not be "incapable" of addressing the "acquisition or distribution of
products in general or local short supply". In our view, this wou ld provide a sufficient basis for the
conclusion that the TEN -E measure is "designed" to address the particular interest specified in
Article XX(j).
7.11.3.2.2 Essential to "the acquisition or distribution" of natural gas
7.1358. As indicated in paragraph 7.246 above, the second element to be established by the
respondent in order to demonstrate that a challenged measure is provisionally justified under
paragraph (j) of Article XX of the GATT 1994 is that the measure is "essential" to the acquisition or
distribution of products in general or local short supply.
7.1359. The Appellate Body India – Solar Cells opined that the "plain meaning" of the word
"essential" suggests that this word is loc ated at least as close to the "indispensable" end of the
continuum as the word "necessary". 2195 The Appellate Body further clarified that the process of
weighing and balancing employed to determine whether the measure is "necessary" is relevant in
assessing whether a measure is "essential" within the meaning of Article XX(j). 2196 In particular,
the Appellate Body considered that the following factors are relevant in assessing whether a
measure is "essential": (a) the extent to which the measure sought to be justi fied contributes to
"the acquisition or distribution of products in general or local short supply"; (b) the relative
importance of the societal interests or values that the measure is intended to protect; and (c) the
trade-restrictiveness of the challenged measure.2197 In most cases, a comparison between the
challenged measure and reasonably available alternative measures would also be undertaken.2198
Contribution to "the acquisition or distribution" of natural gas
7.1360. We begin our assessment by determining the extent to which the measure sought to be
justified contributes to "the acquisition or distribution of products in general or local short supply".
As the Appellate Body has explained, "a contribution exists when there is a genuine relationship of

2191 Appellate Body Reports, EC – Seal Products, para. 5.169 (quoting Appellate Body Report, US –
Gambling, para. 292).
2192 Appellate Body Reports, India – Solar Cells, para. 5.58.
2193 Appellate Body Report, India – Solar Cells, para. 5.60.
2195 Appellate Body Report, India – Solar Cells, para. 5.62.
2196 Appellate Body Report, India – Solar Cells, para. 5.63.
2197 Appellate Body Report, India – Solar Cells, para. 5.63.
2198 Appellate Body Report, India – Solar Cells, para. 5.63 (referring to Appellate Body Reports, EC –
Seal Products, para. 5.169 (referring to Appellate Body Report, US – Gambling, para. 307, in turn referring to
Appellate Body Report, Korea – Various Measures on Beef, para. 166)).

ends and means between the objective pursued and the measure at issue". 2199 The selection of a
methodology to assess a measure's contribution "depends on the nature, quantity, and quality of
evidence existing at the time the analysis is made". 2200 The contribution of a measure to the
fulfilment of an objective can be demonstrated by way of "quantitative projections in the future, or
qualitative reasoning based on a set of hypotheses that are tested and supported by sufficient
evidence".2201
7.1361. The European Union argues that the TEN-E measure facilitates building infrastructure that
would enable switching promptly to alternative sources or routes of gas supply in case of
disruption, thereby ensuring the "continued" "acquisition" and "distribution" of gas and hence the
security of gas supply. 2202 The European Union submits that the criteria for PCI designation are
necessary in order to ensure that the resources made available under the TEN–E measure are used
to fill infrastructure gaps, rather than in order to promote infrastructu re that would merely
duplicate already existing infrastructure.2203
7.1362. We note that Russia does not disagree with the European Union that building new and
additional infrastructure may contribute to the acquisition and distribution of natural gas. 2204
However, Russia considers that, due to the PCI selection criteria aimed at the exclusion of projects
that would result in developing infrastructure that could be used to import Russian natural gas, the
contribution of the TEN -E measure to its stated objective – ensuring the acquisition and
distribution of natural gas – is severely diminished.2205
7.1363. We re call our analysis above in section 7.11.2.2.1, which led us to conclude that th e
criteria for PCI designation implement the objective of diversification of natural gas supply. Given
that the transportation of natural gas to, as well as within, the European Union from a particular
source of natural gas supply often requires specifical ly dedicated pipelines, a diversification of
natural gas supply sources will often also entail a diversification of natural gas supply routes. In
addition, we note that two specific criteria for PCI designation include the diversification of supply
"routes".2206 In our view, this shows that the criteria for PCI designation implement the objective
of diversification of sources and routes of natural gas supply.
7.1364. The European Union submits that the diversification of sources and routes of natural gas
supply contributes to the "continued" acquisition and distribution of gas, "and hence the SoS of
gas", by mitigating the risks of natural gas supply disruptions.2207 We thus understand that, for the
European Union, the mitigation of the risks of natural gas supply disrup tions is the medium
through which the TEN -E measure contributes to the objective of "acquisition or distribution" of
natural gas.
7.1365. We consider that the diversification of sources and routes of natural gas supply can
mitigate the risks of natural gas supply disruptions by providing alternative routes and sources of
natural gas supply to those that may be affected by a disruption. However, the degree to which
the diversification of sources and routes of natural gas supply contributes to the "acquisition or
distribution" of natural gas depends on the extent to which the "acquisition or distribution" of
natural gas is affected by the risks of natural gas supply disruptions. We note that the European
Union does not offer any explanation of how its ability to take measures for the "acquisition or
distribution" of natural gas is affected by natural gas supply disruptions.
7.1366. We acknowledge that the words "acquisition or distribution", when read outside of the
context of Article XX(j), may be interpreted as having a br oad coverage. Any "acquisition or
distribution" of any product could potentially fall within their scope. However, in our view, these
words should be read in the specific context of Article XX(j), which covers measures "essential to
the acquisition or distribution of products in general or local short supply". Thus, Article XX(j) does

2199 Appellate Body Report, Brazil – Retreaded Tyres, para. 145.
2200 Appellate Body Report, Brazil – Retreaded Tyres, para. 145.
2201 Appellate Body Report, Brazil – Retreaded Tyres, para. 151.
2202 European Union's second written submission, para. 425.
2203 European Union's second written submission, para. 426.
2204 Russia's response to Panel question No. 149, para. 48.
2205 Russia's response to Panel question No. 149, para. 48.
2206 TEN-E Regulation, (Exhibit EU-4), Articles 4(2)(b)(ii) and 4(2)(b) (iii).
2207 European Union's second written submission, para. 425; and opening statement at the second

not cover measures "essential to the acquisition or distribution" of any products but only those
that are "essential to the acquisition or distribution" of " products in general or local short supply ".
We consider that the wording of Article XX(j) indicates that there is an already existing situation of
shortage of supply of a particular product and that a Member is addressing this situation by taking
measures "essential to the acquisition or distribution" of this product. In other words, Article XX(j)
implicitly points to the situation that the measures covered by this provision are to address (a
general or local shortage in the supply of a particular product) and the means by w hich this
situation is to be addressed (measures "essential to the acquisition or distribution" of this
product).
7.1367. We consider that, in arguing that the diversification of natural gas supply sources and
routes contributes to the "acquisition or distributio n" of natural gas because it reduces the risks of
natural gas supply disruptions, the European Union attempts to substitute the means of addressing
the shortage of natural gas supply with the circumstances that may cause this shortage. We recall
that the c entral premise of the European Union's argumentation that natural gas is a product "in
general or local short supply" is that there are serious risks of natural gas supply disruptions. 2208
Thus, to the extent that the European Union argues that the risks of natural gas supply disruptions
cause a shortage of natural gas supply, these arguments pertain to whether natural gas is a
product in short supply. The means of addressing this shortage covered by Article XX(j) would be
measures "essential to the acquisition or distribution" of natural gas. While the risks of natural gas
supply disruptions may affect the product itself (i.e. they risk causing a shortage in natural gas
supply), they may not equally affect the European Union's ability to take measures seeking to
address this shortage (measures "essential to the acquisition or distribution" of natural gas).
7.1368. In arguing that the diversification of sources and routes of natural gas supply contributes
to the "continued" acquisition and distribution of natural gas, "and hence the SoS of gas", by
mitigating the risks of natural gas supply disruptions, 2209 the European Union also attempts to
substitute the means of addressing a shortage of natural gas supply covered by Article XX(j)
(measures "essential to the acquisition or distribution" of natural gas) with other measures that
may contribute to addressing a shortage of natural gas supply (measures necessary for the
security of energy supply). However , the text of Article XX(j) is unequivocal that the only
measures seeking to address a shortage of supply of a particular product covered by this provision
are those that are "essential to the acquisition or distribution" of this product. Therefore, a
respondent arguing that its measure is provisionally justified under Article XX(j) needs to
demonstrate the contribution of its measure to the "acquisition or distribution" of a product found
to be in short supply, and not merely that its measure contributes t o addressing a shortage of
supply of this product.
7.1369. We have concluded, in the context of our assessment of the European Union's defence
under Article XIV(a) of the GATS, that the European Union has demonstrated that certain natural
gas supply disruptions t hat may be caused by foreign controlled TSOs pose "a genuine and
sufficiently serious threat" to the security of energy supply in the European Union. 2210 We have
also noted in paragraph 7.1365 above that the diversification of sources and routes of natural gas
supply can mitigate the risks of natural gas supply disruptions by providing alternative routes and
sources of natural gas supply to those that may be affected b y a disruption. In our view, the
diversification of natural gas supply sources and routes can thus contribute to the security of
energy supply in the European Union.
7.1370. However, we observe that the security of energy supply is a broad concept defined as the
"availability of usable energy supplies, at the point of final consumption, at economic price levels
and in sufficient quantities and timeliness, so that, given due regard to encouraging energy
efficiency, the economic and social development of a country i s not materially constrained". 2211
The European Union explains that security of energy supply has a short -term and a long -term
dimension. The former focuses on "the ability to respond promptly to sudden changes within the
supply-demand balance" 2212 caused by, e. g. "infrastructure breakdown, natural disasters, social

2208 We have addressed these arguments above in section 7.11.3.2.1.1.
2209 European Union's second written submission, para. 425; and opening statement at the second
2210 See above paras. 7.1174-7.1199.
2211 European Union's first written submission, para. 482 (quoting United Nations Economic Commission
for Europe, Emerging Global Energy Security Risks, No. 36 (2007), pp. 8-9, (Exhibit EU-71), p. 8).
2212 European Union's first written submission, para. 483.

unrest, political action or terrorism". 2213 The latter focuses on the need for "adequate investments
in the production and distribution of energy and efficient energy markets" 2214 and includes
obstacles rel ated to the "traditional" fragmentation of the EU market for natural gas and the
"relatively limited" number of foreign sources of supply.2215
7.1371. As follows from the definition of the concept of "security of energy supply", the means of
addressing the security o f energy supply may encompass a broad range of measures, including
those that address a shortage of natural gas supply. However, not all such measures will be
"essential to the acquisition or distribution" of natural gas. For this reason, measures that mitigate
the risks of natural gas supply disruptions, and thus contribute to the security of energy supply, do
not necessarily contribute to the "acquisition or distribution" of natural gas.
7.1372. Therefore, in our view, the fact that the European Union has demons trated that, due to
the risks of natural gas supply disruptions, there is a threat to the security of energy supply does
not establish that natural gas supply disruptions, or a risk of such disruptions, affect the European
Union's ability to take measures "essential to the acquisition or distribution" of natural gas.
Conversely, a demonstration that the diversification of natural gas supply and routes contributes
to the security of energy supply does not establish that the diversification of natural gas supply
and routes also contributes to the "acquisition or distribution" of natural gas.
Relative importance of the societal interests or values that the TEN -E measure is
intended to protect
7.1373. The next factor in our assessment is the relative importance of the societal interests or
values that the TEN -E measure is intended to protect. The Appellate Body has clarified , in the
context of Article XX(d) of the GATT 1994, that:
[A]ssessing a measure claimed to be necessary to secure compliance of a WTO -
consistent law or regulation may, in appropriate cases, take into account the relative
importance of the common interests or values that the law or regulation to be
enforced is intended to protect. The more vital or important those common interests
or values are, the e asier it would be to accept as "necessary" a measure designed as
an enforcement instrument.2216
7.1374. The European Union submits that a particular interest that the TEN -E measure seeks to
protect is the security of natural gas supply, which according to the European Union, is a matter of
fundamental importance.2217 We note that, according to Recital (17) of the TEN-E Regulation,
This Regulation lays down rules for the timely development and interoperability of
trans-European energy networks in order to achieve the energy policy objectives of
the Treaty on the Functioning of the European Union (TFEU) to ensure the functioning
of the internal energy market and security of supply in the Union, to promote energy
efficiency and energy saving and the development of new and renewable forms of
energy, and to promote the interconnection of energy networks. By pursuing these
objectives, this Regulation contributes to smart, sustainable and inclusive growth and
brings benefits to the entire Union in terms of competitiveness and economic, social
and territorial cohesion.2218
7.1375. We observe that, in the context of our assessment of the European Union's defence under
Article XIV(a) of the GATS, we have concluded that disru ptions in the supply of natural gas may
lead to similar disruptions in the overall energy balance in the European Union. 2219 Therefore, the
security of natural gas supply can be understood as an integral component of the broader concept
of security of energy supply, which we have found to constitute a fundamental interest of society

2213 European Union's first written submission, para. 487.
2214 European Union's first written submission, para. 483.
2215 European Union's first written submission, paras. 488-489.
2216 Appellate Body Report, Korea – Various Measures on Beef, para. 162.
2217 European Union's second written submission, para. 422.
2218 TEN-E Regulation, (Exhibit EU-4), Recital (17). (emphasis added)
2219 See above paras. 7.1196. -7.1198. .

in the European Union. In light of this finding, it would appear that the TEN -E measure seeks to
protect a societal interest of a high importance.
Trade-restrictiveness of the TEN-E measure
7.1376. The third factor in our analysis is the trade -restrictiveness of the TEN -E measure. The
Appellate Body has clarified that the necessity analysis may include consideration of "the extent to
which the compliance measure produces restrictive effects on intern ational commerce, that is, in
respect of a measure inconsistent with Article III:4, restrictive effects on imported goods ", and
stated that "[a] measure with a relatively slight impact upon imported products might more easily
be considered as 'necessary' than a measure with intense or broader restrictive effects". 2220 In our
view, this consideration is equally valid for the "essentiality" analysis under Article XX(j) of the
GATT 1994.
7.1377. The European Union argues that the TEN -E measure places no restriction on t he
importation or sale of gas from Russia or from any other country and instead facilitates and
promotes trade in natural gas.2221 The European Union contends that, in order to contribute to this
goal, the TEN -E measure provides certain regulatory and financi al incentives for building missing
infrastructure or improving inadequate existing infrastructure. 2222 According to the European
Union, to the extent that the benefits provided under the TEN -E measure to certain infrastructure
distorted competition between gas from different sources, such distortion would be, having regard
to the nature of the benefits involved, minimal and temporary. 2223 In Russia's view, however, the
trade restrictive effect of the TEN-E measure on Russian gas is severe.2224
7.1378. We note that the TEN-E measure certainly does not introduce a ban on the importation of
natural gas of any origin or prohibit the development of infrastructure to transport natural gas of
any origin. As we have already established, the trade -restrictive impact of the TEN -E meas ure
stems from the criteria of PCI designation that make it more burdensome to build infrastructure to
transport Russian natural gas than natural gas of any other origin.2225
Reasonably available alternative measures
7.1379. The final step in our analysis of whether the measure is "essential" within the meaning of
Article XX(j) is the enquiry as to whether a less trade -restrictive alternative measure, which the
Member concerned could "reasonably be expected to employ", is available.2226 Russia submits that,
in light of the discriminatory criteria for PCI designation, the only significantly less trade restrictive
measure, equally contributing to the objective of acquisition and distribution of natural gas, is the
elimination of the discriminatory elements serving to incen tivize projects that will not improve the
competitive opportunities of Russian natural gas on the EU market.2227
7.1380. The European Union disagrees with the alternative measure proposed by Russia, pointing
out that, in the absence of the selection criteria to which Russia objects, the European Union would
have to accord equal priority to projects that duplicate already existing infrastructure. 2228
According to the European Union, such duplicate infrastructure would not contribute to reducing
the risks of shortage resu lting from the disruption of a source of supply because it would be
vulnerable to the very same risks of disruption as the existing infrastructure, and would, at the
same time, consume resources that could otherwise be used to support infrastructure to bri ng
natural gas from alternative sources of supply. 2229 The European Union thus concludes that the

2220 Appellate Body Report, Korea – Various Measures on Beef, para. 163. (emphasis original)
2221 European Union's second written submission, para. 427.
2222 European Union's second written submission, para. 428.
2223 European Union's second written submission, para. 429.
2224 Russia's response to Panel question No. 149, para. 49.
2225 See our analysis above in sections 7.11.2.2.2 and 7.11.2.2.3.
2226 Appellate Body Reports, EC – Seal Products, para. 5.261 (referring to Appellate Body Report, Korea
2227 Russia's response to Panel question No. 149, para. 49.
2228 European Union's opening statement at the second meeting of the Panel, para. 122.
2229 European Union's opening statement at the second meeting of the Panel, para. 122.

alternative measure proposed by Russia would diminish the overall contribution of the TEN -E
measure to the objective of ensuring security of gas supply.2230
7.1381. We consider that, if the diversification of sources and routes of natural gas supply, as
reflected in the criteria for PCI designation, contributes to the "acquisition" or "distribution" of
natural gas, the removal of the criteria for PCI designation that require such diversification will
indeed diminish the contribution of the TEN -E measure to the "acquisition or distribution" of
natural gas. The extent to which the removal of these criteria will diminish the contribution of the
TEN-E measure to the "acquisition or distribution" of natural gas (in case there is such
contribution) is determined by the degree of contribution these criteria make in the first place. We
recall our observation above in paragraph 7.1372 that a demonstration that the diversification of
natural gas supply and routes contributes to the security of energy supply does not establish that
the diversification of natural gas supply and routes also contributes to the "acquisition or
distribution" of natural gas.
7.11.3.2.3 Conclusion
7.1382. We have found that the European Union has not demonstrated that natural gas is a
product "in short supply" in the European Union, which is sufficient for us to conclude that the
European Union defence unde r Article XX(j) cannot succeed. Having made this finding, we,
nevertheless, decided to proceed with a limited analysis and review of whether the TEN-E measure
fulfils the other elements of the legal standard under Article XX(j) of the GATT 1994, in particular,
whether it is "essential" to the "acquisition or distribution" of natural gas. The primary purpose of
our limited analysis and review was to provide factual findings on the issues relevant for the
Appellate Body's analysis in the event our finding that the European Union has not demonstrated
that natural gas is a product "in general or local short supply" were modified or reversed on
appeal. In light of this purpose, we do not see any compelling reason for us to reach an overal l
conclusion, or make any finding, on whether the TEN -E measure is "essential to the acquisition or
distribution" of natural gas.
7.11.4 Russia's claim under Article II:1 of the GATS
7.1383. Russia submits that the TEN -E measure modifies the conditions of competition t o the
detriment of Russian services and service suppliers. In Russia's view, the criteria for PCI
designation under the TEN -E measure are inherently biased against Russian services and service
suppliers.2231 According to Russia, while projects of other Members are eligible for PCI designation,
"and the services and service suppliers promoting and supplying those services are actually
receiving the administrative, regulatory and financial benefits available under the TEN-E measure",
"Russian gas projects" are excluded from PCI eligibility.2232
7.1384. Russia further contends that the references in the text of the TEN -E Regulation to
reducing dependency on "a single supplier", "diversification of gas supply" and "diversification of
supply sources, supplying counterparts an d routes", read in light of relevant policy documents,
show that the TEN-E measure targets Russian services and service suppliers.2233
7.1385. Russia also argues that the TEN -E measure modifies the conditions of competition to the
detriment of Russian services and s ervice suppliers because projects that are likely to reduce
reliance on Russian natural gas are eligible for PCI designation, whilst projects that are unlikely to
reduce such reliance are unable to obtain PCI designation. 2234 In support of its contention that the
TEN-E measure is inconsistent with Article II:1 of the GATS, Russia also invokes the "internal
organization of Gazprom" and refers to the [*** ] project as the specific instance of the
discriminatory application of the TEN-E measure.2235

2230 European Union's opening statement at the second meeting of the Panel, para. 122.
2231 Russia's second written submission, para. 456.
2232 Russia's first written submission, para. 781. See also Russia's response to Panel question No. 48,
para. 240.
2233 Russia's first written submission, paras. 763–770; and second written submission, paras. 452–453.
2234 Russia's second written submission, para. 456.
2235 Russia's second written submission, paras 448 and 458; and response to Panel Question No. 48,
paras. 239 and 243.

7.1386. The European Uni on considers Russia's claim to be without merit. 2236 According to the
European Union, Article II:1 of the GATS is not concerned with discrimination between
infrastructures or "projects" but with discrimination between services and service suppliers. 2237 In
the European Union's view, Russia has not established that the benefits provided by the TEN -E
measure to certain infrastructures or projects result in less favourable treatment being accorded to
Russian service suppliers or services than to like service supplie rs or services of other
Members.2238
7.1387. The European Union further considers that the reference in the definition of the BEMIP
Gas Corridor to the objective of ending dependency on a "single supplier" is a reference to a
supplier of natural gas rather than a sup plier of transmission services. 2239 Therefore, in the
European Union's view, the definition of the BEMIP Corridor would not translate into discrimination
against Russian services or service suppliers.2240
7.1388. The European Union submits that even if Russia's premise that the TEN -E measure
discriminates against imports of Russian gas were correct, it would not follow that the TEN -E
measure discriminates against Russian service suppliers or services. 2241 The European Union also
contests Russia's arguments regarding the [* **] project, submitting that non -designation of this
project was the result of the impartial application of objective selection criteria that did not involve
discrimination against Russian gas or against Russian service suppliers or services.2242
7.11.4.1 Analysis by the Panel
7.1389. Pursuant to the legal standard under Article II:1 of the GATS, as set out in
paragraphs 7.226 and 7.227 above, we shall examine whether Russia has demonstrated that: (a )
the TEN -E measure falls w ithin the scope of the GATS; (b ) the relevant services and service
suppliers are like ; and (c ) the T EN-E measure accords less favourable treatment to Russian
services and service suppliers than that accorded to like services and service suppliers of any other
country.
7.11.4.1.1 Scope of the GATS
7.1390. In order to establish that a measure falls within the scope of the G ATS, a complainant
must show that: (a) "there is 'trade in services' in the sense of Article I:2"; and (b) the measure at
issue "'affects' such trade in services within the meaning of Article I:1".2243
7.1391. "[T]rade in services" within the meaning of Article I:2 o f the GATS is defined as "the
supply of a service" through the four modes of supply mentioned in paragraphs (a) through (d) of
Article I:2. We note that Russia has identified "natural gas pipeline transport services" as the
relevant services sector 2244, and m ode 3 (commercial presence) as the relevant mode of supply
with respect to all of the measures at issue in the dispute. 2245 We also note that the European
Union has not denied that there are suppliers of pipeline transport services, including from Russia,
which are established through commercial presence in the territory of the European Union. Thus,
we consider that Russia has demonstrated that there is trade in services within the meaning of
Article I:2 of the GATS.
7.1392. With respect to the second element, Russia asserts that the TEN-E measure affects trade
in services because it affects infrastructure projects related to natural gas. 2246 The European Union

2236 European Union's first written submission, para. 807.
2237 European Union's first written submission, para. 807; and second written submission, paras. 358
and 362.
2238 European Union's first written submission, para. 807; and response to Panel question No. 76,
para. 173.
2239 European Union's second written submission, para. 365.
2240 European Union's second written submission, paras. 365 and 367.
2241 European Union's second written submission, para. 367.
2242 European Union's second written submission, para. 371.
2243 Appellate Body Report, Canada – Autos, para. 155.
2244 Russia's panel request, page 1; Russia's first written submission, paras. 93 and 754; and Russia's
second written submission, para. 75.
2245 Russia's response to Panel question No. 56, para. 285.
2246 Russia's first written submission, para. 754.

does not contest Russia's argument.2247 The Appellate Body and previous panels have consistently
held that the use of the term "affecting" in Article I:1 means that the GATS covers not only
measures that directly govern or regulate trade in services but also measures that, even though
they may regulate other matters, nevertheless "affect" trade in services.2248
7.1393. The TEN-E measure provides a regulatory framework for PCIs. 2249 Infrastructure projects
that may qualify as PCIs include inter alia those that develop transmission pipelines for the
transport of natural gas. 2250 Thus, the TEN -E measure does not directly govern trade in services,
but regulates other matters, namely infrastructure projects developing inter alia transmission
pipelines. Given the essential function of transmission pipelines in the supply of pipeline transport
services, we believe that the regulatory framework of infrastructure projects that develop
transmission pipelines may have an "effect on" 2251 the supply of pipeline transport services.
Therefore, we consider that the TEN -E measure affects trade in s ervices within the meaning of
Article I:1 of the GATS.
7.1394. Having determined that Russia has demonstrated that there is "trade in services" within
the meaning of Article I:2 of the GATS and that the TEN -E measure "affects trade in services"
within the meaning of Article I:1 of the GATS, we find therefore that the TEN -E measure falls
within the scope of the GATS.
7.11.4.1.2 Like services and service suppliers
7.11.4.1.2.1 Introduction
7.1395. Russia argues that Russian pipeline transport services and service suppliers are like
pipeline transport services and service suppliers of other third countries, including LNG services
and service suppliers, within the meaning of Article II:1 of the GATS. In Russia's view, "the
'likeness' requirement under Article II:1 of the GATS is satisfied" because t he TEN -E measure
distinguishes exclusively on the basis of origin between Russian services and service suppliers, on
the one hand, and domestic and other third -country services and service suppliers, on the
other.2252 Russia further submits that, to the exten t we disagree that the TEN -E measure
distinguishes between Russian and other third -country pipeline transport services and service
suppliers exclusively on the basis of origin, Russian and other third -country pipeline transport
services and service supplie rs, including LNG services and service suppliers, are in a competitive
relationship with each other and therefore satisfy the likeness requirement on this basis within the
meaning of Article II:1 of the GATS.2253
7.1396. The European Union does not contest that Russ ian pipeline transport services and service
suppliers are like within the meaning of Article II:1 of the GATS but opposes Russia's inclusion of
LNG services within the scope of pipeline transport services. 2254 The European Union further
contests Russia's argu ments that pipeline transport services and service suppliers are like LNG
services and service suppliers within the meaning of Article II:1 of the GATS.2255
7.1397. We recall that, in para graph 7.284 above, we have established that pipeline transport
services do not encompass LNG services. However, we have also found that, as far as pipeline

2247 In Panel question No. 76, we asked the European Union whether the European Union was arguing
that the TEN-E measure is not "covered by the GATS" within the meaning of Article II:1 of the GATS. In its
response, the European Union indicated that Article II:1 of the GATS is not concerned with the treatment of
infrastructures, and that, in its view, Russia has not demonstrated how the treatment of certain infrastructures
under the TEN-E measure results in less favourable treatment being accorded to Russian service suppliers or
services than to like service suppliers or services of other Members (European Union's response to Panel
question No. 76, paras. 172–173).
2248 Appellate Body Report, EC – Bananas III, para. 220. See also Panel Reports, Argentina – Financial
Services, para. 7.103; and China – Publications and Audiovisual Products, paras. 7.970–7.971.
2249 See above section 2.2.8.
2250 Annex II.(2)(a) of the TEN-E Regulation refers specifically to transmission pipelines for the transport
of natural gas. (TEN-E Regulation, (Exhibit EU-4), Annex II.2(a))
2251 Appellate Body Report, EC – Bananas III, para. 220.
2252 Russia's first written submission, para. 756.
2253 Russia's first written submission, para. 757.
2254 European Union's first written submission, paras. 80 and 282.
2255 European Union's first written submission, para. 283.

transport services and service suppliers are concerned, such services and service sup pliers are like
within the meaning of Article II:1 of the GATS. 2256 Given that we have already reached a
conclusion that pipeline transport services and service suppliers are like under Article II:1 of the
GATS, we do not find it necessary to address Russia's arguments that the likeness of pipeline
transport services and service suppliers can be presumed. Therefore, we now turn to the question
of whether LNG services and service suppliers are like pipeline transport services and service
suppliers within the meaning of Article II:1 of the GATS.2257
7.11.4.1.2.2 Likeness of LNG and pipeline transport services and service suppliers
7.1398. Russia contends that LNG services and p ipeline transport services are like within the
meaning of Article II of the GATS. 2258 According to Russia, "LNG services and service suppliers are
'essentially or generally the same in competitive terms' and thus in a competitive relationship with
other pipeline transport services and service suppliers in the EU market". 2259 Russia further argues
that LNG services and pipeline transport services are substitutable. 2260 In Russia's view, these
services are supplied for the same purpose and their users/consumers, as well as nature and
characteristics, are essentially the same. 2261 Russia also submits that LNG services are "presu med
to be included" in pipeline transport services on the basis of the UN Central Product Classification
(CPC) and Services Sectoral Classification (W/120).2262
7.1399. The European Union contests Russia's arguments that LNG services and pipeline transport
services are like within the meaning of Article II of the GATS.2263 In the European Union's view, the
nature and characteristics of LNG services and service suppliers are different from pipeline
transport services and service suppliers. 2264 The European Union further con siders that the
different nature and characteristics of LNG services and pipeline transport services mean that
consumers will not consider these services to be interchangeable, since they serve a different end -
use.2265 According to the European Union, the CPC also places LNG services and pipeline transport
services under a different classification.2266
7.1400. The Appellate Body observed that the analysis of likeness in the context of both trade in
goods and trade in services is aimed at determining whether the products or services and service
suppliers, respectively, are in a competitive relationship with each other. 2267 On this basis, the
Appellate Body considered that the criteria traditionally developed in the context of trade in goods
may be relevant for determining lik eness of services and service suppliers, provided that they are
adapted as appropriate to account for the specific characteristics of trade in services. 2268 The
Appellate Body noted that the criteria traditionally developed in the context of trade in goods ar e
the following: (i) the properties, nature, and quality of the products; (ii) the end -uses of the
products; (iii) consumers' tastes and habits or consumers' perceptions and behaviour in respect of
the products; and (iv) the tariff classification of the products.2269 The Appellate Body also indicated
that the determination of likeness is a holistic analysis and further clarified that no evidence should

2256 See above para. 7.422.
2257 We observe that, according to Annex II.2(c) of the TEN-E Regulation, the energy infrastructure
categories concerning gas include reception, storage and regasification facilities for LNG. (TEN-E Regulation,
(Exhibit EU-4), Annex II.2(c)) Infrastructure projects for the construction of such facilities may thus be
designated as PCIs under the TEN-E Regulation. Therefore, in contrast to the unbundling, third-country
certification and the public body measures, the treatment of LNG service suppliers may be relevant for our
assessment of Russia's GATS claim against the TEN-E measure. However, we note that Russia has not
developed any specific arguments that its pipeline transport services and service suppliers are treated less
favourably than LNG services and service suppliers of other third countries.
2258 Russia's first written submission, para. 261.
2259 Russia's response to Panel question No. 94, para. 403.
2260 Russia's first written submission, paras. 260-261.
2261 Russia's second written submission, para. 93; and response to Panel question No. 53(a), para. 271.
2262 Russia's responses to Panel question No. 53(b), paras. 275–277, and No. 60, para. 286; and second
written submission, paras. 83-85.
2263 European Union's first written submission, para. 283.
2264 European Union's first written submission, paras. 285 and 428-434.
2265 European Union's first written submission, para. 286.
2266 European Union's first written submission, para. 287.
2267 Appellate Body Report, Argentina – Financial Services, para. 6.31.
2268 Appellate Body Report, Argentina – Financial Services, para. 6.31.
2269 Appellate Body Report, Argentina – Financial Services, para. 6.30.

be a priori excluded from a panel's analysis of likeness. 2270 The likeness of services and service
suppliers can only be determined on a case -by-case basis, taking into account the specific
circumstances of the particular case.2271
7.1401. Thus, based on the clarifications of the Appellate Body, in the specific circumstances of
this case, we will conduct a holistic analysis of likeness, taking into account the following criteria:
(a) the nature and characteristics of the relevant services; (b) the end -uses of the relevant
services; (c) the preferences of the consumers with respect to the relevant services; and (d) the
classification and description of the relevant services under the CPC.2272 We will also consider
Russia's arguments that LNG services and pipeline transport services are substitutable.
7.1402. We recall that we have determined that pipeline transport services concern the
transmission of natural gas via pipelines, while LNG services primarily concern the liquefaction of
natural gas and regasification of LNG.2273 Bearing this understanding in mind, we turn to our
analysis of whether LNG services and pipeline transport services are like on the basis of the
analytical framework set out above.
 Nature and characteristics of services
7.1403. Russia is of the opinion that the nature and characteristics of LNG services and pipeline
transport services are "essentially" the same. 2274 In the Europea n Union's view, however, the
nature and characteristics of LNG services differ from those of pipeline transport services, due to
the differences in the activities, infrastructure and infrastructure operators involved in the supply
of these services.2275 We consider that one of the factors informing our analysis of the nature and
characteristics of the services in question is the core activities involved in the supply of these
services.2276 As noted above, the core activity involved in the supply of pipeline trans port services
is the conveyance of natural gas from one point to another through a pipeline. In contrast, the
core activities involved in the supply of LNG services are the liquefaction of natural gas and
regasification of LNG.
7.1404. According to industry definitions, liquefaction "consists of chilling natural gas to the point
where it becomes liquid, at an average temperature of –160º C ( –260º F)", while regasification
"consists of returning LNG to its regular gaseous phase at about 5º C using heat exchang ers".2277
As evident from these definitions, both liquefaction of natural gas and regasification of LNG entail
changing the physical state of natural gas and LNG, respectively . Thus, while pipeline transport
services concern the conveyance of natural gas from one point to another through a pipeline, LNG
services primarily concern changing the physical state of natural gas and LNG. This means that the
supply of pipeline transport services, on the one hand, and LNG services, on the other, involve

2270 Appellate Body Report, Argentina – Financial Services, paras. 6.29-6.30 and 6.32.
2271 Appellate Body Report, Argentina – Financial Services, para. 6.26.
2272 Appellate Body Report, Argentina – Financial Services, paras. 6.30–6.32.
2273 See above paras. 7.281. -7.283. .
2274 Russia's second written submission, para. 93.
2275 European Union's first written submission, paras. 286 and 431;
2276 The panel in EC – Bananas III (Ecuador) applied this criterion in the following manner:
Fourth, in our view, the nature and the characteristics of wholesale transactions as such, as
well as of each of the different subordinated services mentioned in the headnote to section 6 of
the CPC, are "like" when supplied in connection with wholesale services, irrespective of whether
these services are supplied with respect to bananas of EC and traditional ACP origin, on the one
hand, or with respect to bananas of third -country or non -traditional ACP origin, on the other.
Indeed, it seems th at each of the different service activities taken individually is virtually the
same and can only be distinguished by referring to the origin of the bananas in respect of which
the service activity is being performed. Similarly, in our view, to the extent that entities provide
these like services, they are like service suppliers. (Panel Report, EC – Bananas III (Ecuador ),
para. 7.322) (emphasis added)
2277 United Nations Economic Commission for Europe, Study on Current Status and Perspectives for LNG
in the UNECE Region (UN 2013), (Exhibit RUS-32), pp. 5-6; and UNECE LNG Study, (Exhibit RUS-271),
Chapter 2, p. 2. See also Gas Strategies industry glossary, (Exhibit RUS-268), definition of "LNG (Liquefied
Natural Gas)".

different core activities.2278 Therefore, in our view, LNG services and pipeline transport services do
not share the same nature and characteristics.
End-uses and consumer preferences
7.1405. We observe that, in the context of trade in goods, the Appellate Body described end -uses
as "the extent to which products are capable of performing the same, or similar, functions" and
consumer tastes and habits as "the extent to which consumers are willing to use the products to
perform these functions". 2279 In our view, adapted to trade in serv ices, the end -uses criterion
would refer to the extent to which services are capable of performing the same or similar
functions, while the consumer preferences criterion would concern the extent to which the relevant
consumers use the services to perform these functions.2280
7.1406. We understand Russia to argue that the ultimate consumers of both pipeline transport
services and LNG services are the same.2281 Russia also appears to imply that the end-uses of LNG
services and pipeline transport services are the same because, in its view, the end-uses of LNG are
the same as the end-uses of natural gas.2282
7.1407. The European Union considers that pipeline transport services and LNG services serve
different end -uses and therefore the consumers will not consider them as interchangea ble.2283
According to the European Union, LNG services involve the liquefaction of natural gas and
regasification of LNG and do not involve transport, whereas pipeline transport services carry
natural gas from one point (the processing plant, or the LNG facil ity) to another point (the place
where the transmission pipeline connects to the distribution pipeline network). 2284 The European
Union further submits that the users of LNG services will be gas producers who want to have their
gas transported by ships or tru cks, traders of LNG, or operators of LNG ships. 2285 We thus

2278 We also note the European Union's arguments, uncontested by Russia, that the supply of LNG
services and pipeline transport services involve technically different types of infrastructure – LNG terminals in
case of the former and transmission pipelines in case of the latter (European Union's first written submission,
para. 431).
2279 Appellate Body Report, US – Clove Cigarettes, para. 125 (referring to Appellate Body Report, EC –
Asbestos, para. 117). (emphasis original)
2280 According to Article XXVIII(i) of the GATS, "service consumer" means any person that receives or
uses a service.
2281 In its response to Panel question No. 53(a), Russia argues that:
[T]he users/consumers of LNG services are no different than the users/cons umers of other
pipeline transport services. Virtually all natural gas imported in the form of LNG is necessarily
regasified and placed in the transmission system. The users/consumers of the services necessary
to supply this reconverted LNG are, at the out set, the TSOs receiving that gas via pipelines form
the LNG facility – just as TSOs are supplied gas from an overland pipeline, along with the
services necessary to supply that gas. Once reconverted LNG -gas enters the transmission
system, it blends indistinguishably with all other gas and is supplied to downstream consumers,
including large utilities and distribution system operators and ultimately smaller commercial and
private consumers. Given that the natural gas cannot be distinguished, these ultimate consumers
are also the users/consumers of LNG services. (Russia's response to Panel question No. 53(a),
para. 271).
2282 Russia's second written submission, paras.93–94. In its second written submission, Russia asserts
that "the EU itself makes explicit in the Directive and elsewhere that it views … LNG services as equivalent to
and supplied for the same purpose as all other pipeline transport services". (Russia's second written
submission, para. 93) Russia continues as follows:
Likewise, and again contrary to the EU's unsupported claim, the end -uses of the products are
exactly the same. Similarly, "consumers' tastes and habits or consumers' perceptions and
behavior in respect of" LNG services and all other pipeline transport services are the same. LNG
and all other natural gas are perfectly substitutable, or 100% interchangeable, as Russia has
explained. LNG is imported and re-gasified only to be reconverted into its natural gaseous state;
this reconversion takes place only so that natural gas can be placed into the transmission system
and transported via pipeline to downstream consumers. Those consumers do not demand or
purchase LNG, which is indistinguishable from, and exactly the same as, any other natural gas.
Rather, the consumers demand and purchase nat ural gas, some of which just happens to have
once been condensed in the form of LNG at one point in the transmission process. These
consumers do not know or care that some of the natural gas they purchase may have once been
LNG. (Russia's second written submission, para. 94).
2283 European Union's first written submission, para. 286.
2284 European Union's first written submission, para. 286.
2285 European Union's response to Panel question No. 53(a), para. 145.

understand the European Union to imply that the consumers of pipeline transport services are
different from the consumers of LNG services.
7.1408. It is undisputed that regasified LNG injected into a transm ission system will be ultimately
delivered to the same final customer and will serve the same end -uses as natural gas that has
never been liquefied. We note that the parties do not disagree that, following regasification, a
certain amount of reconverted LN G will be transported via pipelines in the European Union with a
view to its subsequent delivery to the final customer. 2286 However, in our view, these
circumstances relate to the consumers and end-uses of natural gas as a product, and do not relate
to the co nsumers and end-uses of services. We do not consider that services that concern
products with allegedly the same end -uses will necessarily constitute services with the same end -
uses.
7.1409. As we have established above in paragraph 7.263, pipeline transport services for the
purposes of this dispute cover the transmission of natural gas via pipelines. The function of
transmission pipelines is to deliver natural gas to the distribution system for its subsequent
delivery to the final customer. The liquefaction of natural gas and regasification of LNG, in
contrast, change the physical state of natural gas and LNG, respectively, in order to facilitate and
enable their transportation. The regasification of LNG is a step that precedes the transmission of
regasified LNG via pipelines. In a similar manner, the liquefaction of natural gas would precede its
transportation by seagoing vessels. Thus, we consider that the function performed by LNG services
is the change of the physical state of natural gas and LNG for the purposes of their transportation,
either via transmission pipelines or via seagoing vessels, while the function performed by pipeline
transport services is the delivery of natural gas to the distribution system. On this basis, we
conclude that the end-uses of pipeline transport services and LNG services are different.
7.1410. Russia has not provided any evidence regarding consumer preferences, and therefore we
do not make any findings regarding this criterion.
Classification and description under the CPC
7.1411. The parties disagree with respect to the version of the CPC that we should take into
account for the purposes of our likeness analysis. Russia insists that only CPC prov . is relevant
because it formed the basis for the S ervices Sectoral Classification (W/120) used by the Members
in drafting their services schedules.2287 The European Union, on the other hand, relies on the latest
version of the CPC, namely CPC 2.1, issued in 2015.2288
7.1412. We recall that the Appellate Body in Argentina – Financial Services observed that the
classification and description of services under, for instance, the CPC could be relevant in the
determination of whether the services at issue are like. 2289 While t he Appellate Body did not
specify which version of the CPC a panel should take into conside ration, it noted the existence of
the most recent version of the CPC.2290 For the purposes of our analysis, we will consider the latest
version of the CPC, namely CPC 2.1.
7.1413. We observe that, in CPC 2.1, the transportation of natural gas via pipelines is included in
subclass 65131 ("Transport services via pipeline of petroleum and natural gas"). 2291 An

2286 See above para 7.842.
2287 Russia's response to Panel question No. 60, para. 286.
2288 European Union's first written submission, paras. 75 and 79; and response to Panel question No. 60,
paras. 165-166.
2289 Appellate Body Report, Argentina – Financial Services, para. 6.32.
2290 The Appellate Body made the following observation:
We note that, with regard to the national treatment obligation, Members' Schedules of
Commitments define the scope of service transactions and sector s that are subject to the
obligation. We further note that, in trade in services, the classification and description of services
is based mainly on two instruments: (i) the Services Sectoral Classification List , established by
the WTO Secretariat in 1991; and (ii) the UN Central Product Classification (CPC). The Services
Sectoral Classification List was based on the 1991 provisional UN CPC. The most recent UN CPC
(Ver.2.1) was released on 11 August 2015, and is available at:
<http://unstats.un.org/unsd/cr/registry/cpc-21.asp>.
(Appellate Body Report, Argentina – Financial Services, fn 185 to para. 6.27)
2291 CPC 2.1 code 65131, (Exhibit EU-34).

explanatory note to this subclass provides that it does not include liquefaction and regasification
services, which belong to subclass 67990 ("Other supporting transport services n.e.c."). 2292 Thus,
according to CPC 2.1, pipeline transport services and LNG services fall within different subclasses.
They also belong to differe nt broader groups of services, referred to in CPC 2.1 as "divisions".
While pipeline transport services belong to division 65 ("Freight transport services"), LNG services
are found in division 67 ("Supporting transport services").2293
Substitutability of services
7.1414. We observe that Russia also submits that services supplied at an LNG facility and t hose
supplied via pipeline are like because they are "responsive to the same market dynamics of supply
and demand". 2294 In Russia's view, this "substitutability results i n cross -price elasticity, i.e. the
demand for one is impacted by a change in demand for the other".2295
7.1415. We do not find Russia's arguments convincing. Regasified LNG can be transported via
transmission pipelines only after LNG has been regasified. The service of LNG regasification
precedes, and in fact enables, pipeline transport services in relation to regasified LNG. 2296 Pipeline
transport services in relation to regasified LNG depend on, and therefore cannot substitute, LNG
regasification services. For these r easons, we reject Russia's arguments that LNG services and
pipeline transport services are substitutable.
Conclusion
7.1416. Based on the foregoing analysis, we conclude that LNG services and pipeline transport
services do not share the same nature and character istics and serve different end -uses. We have
also established that LNG services and pipeline transport services are not only found in different
subclasses of the latest version of the CPC, namely CPC 2.1, but also belong to different divisions –
"Supporting transport services" and "Freight transport services", respectively. We have,
furthermore, rejected Russia's argument that LNG services and pipeline transport services are
substitutable. In light of these conclusions, we consider that Russia has not demon strated that
LNG services and pipeline transport services are like within the meaning of Article II of the GATS.
7.11.4.1.2.3 Conclusion
7.1417. In view of the foregoing, we conclude that, as far as pipeline transport services and
service suppliers are concerned, we consider that such serv ices and service suppliers are like
within the meaning of Article II:1 of the GATS. As concerns the likeness of LNG services and
service suppliers and pipeline transport services and service suppliers, we conclude that Russia has
not demonstrated that LNG services and pipeline transport services are like within the meaning of
Article II:1 of the GATS. Therefore, we continue our examination of Russia's claim against the
TEN-E measure under Article II:1 of the GATS focusing on pipeline transport services and service
suppliers.
7.11.4.1.3 Less favourable treatment
7.1418. In line with the Appellate Body jurisprudence, the "less favourable treatment" standard
under Article II:1 of the GATS calls for an examination of whether a measure modifies the

2292 CPC 2.1 code 65131, (Exhibit EU-34); and CPC 2.1 code 67990, (Exhibit EU-37). The acronym
"n.e.c." stands for "not elsewhere classified".
2293 CPC 2.1 code 65131, (Exhibit EU-34); and CPC 2.1 code 67990, (Exhibit EU-37). In addition, we
recall that sector 11.G in the Schedules of Croatia, Hungary and Lithuania corresponds to Group 713 of CPC
prov., entitled "Pipeline transport services" (see para. 7.321 above). Moreover, we also found that sector 11.G,
"Pipeline Transport [Services]", in the Schedules of Croatia, Hungary and Lithuania does not cover LNG
services (see paras. 7.332. -7.333. ). Hence, in our view, Group 713 of CPC prov., "Pipeline transport
services", does not cover LNG services.
2294 Russia's first written submission, paras. 260-261. We note that Russia indicated that no commercial
liquefaction takes place in the European Union, and therefore, "liquefaction is not among the services in a
direct competitive relationship with other pipeline transport services in the EU". (Russia's response to Panel
question No. 63, para. 297).
2295 Russia's first written submission, para. 260.
2296 See above paras. 7.281. -7.283. .

conditions of competition to the detriment of services or service suppliers of a ny Member, in
comparison to like services or service suppliers of any other country.2297
7.1419. Russia argues that by excluding gas projects concerning Russian pipeline transport
services and service suppliers from eligibility for PCI designation, the TEN -E measure modifies the
conditions of competition to the detriment of Russian pipeline transport services and service
suppliers.2298 In Russia's view, the projects of other Members are eligible for PCI designation, "and
the services and service suppliers promoting and supplying those services are actually receiving
the administrative, regulatory and financial benefits available under the TEN -E measure". 2299
Russia submits that, in contrast, "Russian gas projects" are excluded from PCI eligibility.2300 Russia
thus concludes th at service suppliers of other Members are thereby better positioned to compete
in the European Union market, including against like Russian services and service suppliers.2301
7.1420. The European Union considers that arguments concerning "Russian projects" submitted
by Russia in the context of this claim are irrelevant 2302, as the provisions of the GATS invoked by
Russia are not concerned with discrimination between "infrastructures" or "projects" but with
discrimination between services and service suppliers.2303 According to the European Union, Russia
has neither explained nor proven how the benefits provided by the TEN -E measure to certain
infrastructure result in less favourable treatment being accorded to Russian service suppliers or
services than to like service suppliers or services of other Members.2304
7.1421. We understand Russia to argue that the TEN -E measure discriminates against "Russian
projects", which, in Russia's view, necessarily implies discrimination against Russian services and
service suppliers. 2305 The European Uni on responds that Russia has not demonstrated that the
alleged discriminatory treatment of infrastructure or infrastructure projects results in
discrimination against Russian services or service suppliers. We note that, while referring to
"Russian projects", Russia has not provided a consistent definition of this phrase. 2306 In any event,
we understand Russia's references to a "project", in the context of this claim, as references to an
infrastructure project within the meaning of the TEN -E Regulation. The addi tion of the adjective
"Russian" does not, in our view, change this conclusion.

2297 Appellate Body Report, Argentina – Financial Services, paras. 6.103–6.106 (referring to Appellate
Body Report, EC – Bananas III, paras. 240-248).
2298 Russia's first written submission, paras. 760, 779 and 781.
2299 Russia's first written submission, para. 781.
2300 Russia's first written submission, para. 781.
2301 Russia's first written submission, para. 781.
2302 European Union's second written submission, para. 358.
2303 European Union's first written submission, para. 807; and second written submission, paras. 358
and 362.
2304 European Union's first written submission, para. 807; and response to Panel question No. 76,
para. 173.
2305 It appears that, throughout its submissions to the Panel, Russia at times uses the concepts of
"service" and "service suppliers" interchangeably with the concept of "Russian projects". For instance, in its
first written submission, Russia makes the following allegations in respect of the treatment of "Russian
projects": "[b]y excluding Russian gas projects from PCI eligibility, the TEN-E measure provides formally
different treatment to Russian pipeline transport services and service suppliers than to those of other
Members" (Russia's first written submission, para. 770); "[t]he TEN-E measure excludes Russian gas projects,
de jure, from eligibility for PCI designation" (Russia's first written submission, para. 771); "[e]ven if the Panel
disagrees with this conclusion, it cannot be denied that Russian projects have been de facto entirely excluded
from PCI designation" (Russia's first written submission, para. 784). In its second written submission, Russia
asserts as follows:
Second, should the Panel find itself unable to agree with the preceding argument, a specific
instance of application by the EU of the TEN -E measure evidences the inability of Russian
projects to be designated as PCIs. This constitutes further evidence of the de facto discrimination
that the TEN-E measure results in. (Russia's second written submission, para. 454)
2306 In its response to Panel question No. 49, Russia explains that "Russian projects" refers to "projects
that would maintain the presence of Russian natural gas, and Russian services and service suppliers on the EU
market" (Russia's response to Panel question No. 49(a), para. 246); "projects that would maintain the
competitive position of Russian natural gas on the EU market" (Russia's response to Panel question No. 49(b),
para. 250); projects that "are designed to facilitate or promote the transmission or storage of Russian natural
gas" (Russia's response to Panel question No. 49(c), para. 252; "projects that would likely, but not necessarily,
be operated by Russian pipeline transport service suppliers, and which would involve Russian supplied
transport services" (Russia's response to Panel question No. 49(c), para. 252).

7.1422. In light of the arguments of the parties, we examine whether Russia has demonstrated
that the alleged discriminatory treatment, under the TEN -E measure, of "Russian projects" r esults
in discrimination against Russian pipeline transport services and service suppliers within the
meaning of Article II:1 of the GATS. In our analysis, we shall first determine what an infrastructure
"project" covered by the TEN-E Regulation entails. Then, we will examine any relationship between
infrastructure "projects" covered by the TEN -E Regulation and pipeline transport services and
service suppliers covered by the GATS. If we conclude that Russia has established a sufficiently
close connection be tween infrastructure "projects" covered by the TEN -E Regulation and pipeline
transport services and service suppliers covered by the GATS such that the alleged discriminatory
treatment of "Russian" infrastructure projects will necessarily result in discrim ination against
Russian pipeline transport services or service suppliers, we will examine whether Russia has
demonstrated discrimination against "Russian" infrastructure "projects".
7.1423. The TEN -E Regulation provides a regulatory framework for infrastructure p rojects and
does not regulate the supply of pipeline transport services. 2307 A "project" is defined in Article 2(3)
of the TEN -E Regulation as "one or several lines, pipelines, facilities, equipment or installations
falling under the energy infrastructure categories". A "project of common interest" is defined as "a
project necessary to implement the energy infrastructure priority corridors and areas set out in
Annex I and which is part of the Union list of projects of common interest referred to in Article
3".2308 It is clear from these definitions that the concept of infrastructure project under the TEN -E
Regulation does not coincide with the concept of pipeline transport service or service supplier.
7.1424. We further note that the TEN -E Regulation provides the definit ion of such notions as
"studies", "works" and "commissioning", which in our view, could constitute distinct stages in the
execution of an infrastructure project designated as a PCI. Pursuant to Article 2(9) of the TEN -E
Regulation, "studies" means "activit ies needed to prepare project implementation, such as
preparatory, feasibility, evaluation, testing and validation studies, including software, and any
other technical support measure including prior action to define and develop a project and decide
on its financing, such as reconnaissance of the sites concerned and preparation of the financial
package". According to Article 2(8) of the TEN -E Regulation, "works" means "the purchase, supply
and deployment of components, systems and services including softwar e, the carrying out of
development and construction and installation activities relating to a project, the acceptance of
installations and the launching of a project". "Commissioning" means "the process of bringing a
project into operation once it has been constructed".2309 We observe that none of these activities,
performed as part of the execution of a project designated as a PCI, involves the supply of pipeline
transport services.

2307 We note that the regulatory ambit of the TEN-E Regulation is defined in Article 1 of the TEN-E
Regulation as follows:
Article 1

Subject matter and scope

1. This Regulation lays down guidelines for the timely development and interoperability of priority
corridors and areas of trans -European energy infrastructure set out in Annex I ("energy
infrastructure priority corridors and areas").

2. In particular, this Regulation:

(a) addresses the identification of projects of common interest necessary to implement priority
corridors and areas falling under th e energy infrastructure categories in electricity, gas, oil,
and carbon dioxide set out in Annex II ("energy infrastructure categories");

(b) facilitates the timely implementation of projects of common interest by streamlining,
coordinating more closely, and accelerating permit granting processes and by enhancing
public participation;

(c) provides rules and guidance for the cross -border allocation of costs and risk -related
incentives for projects of common interest;

(d) determines the conditions for eligibility of projects of common interest for Union financial
assistance. (TEN-E Regulation, (Exhibit EU-4), Article 1)

2308 TEN-E Regulation, (Exhibit EU-4), Article 2(4).
2309 TEN-E Regulation, (Exhibit EU-4), Article 2(11).

7.1425. Thus, we consider that the concept of infrastructure project under the TEN -E Regulation
does not coincide with the concept of pipeline transport service or service supplier and the
activities regulated by the TEN-E measure do not involve the supply of pipeline transport services.
7.1426. In its response to a question by the Panel, Russia explains that, for the purposes of its
GATS claim, "Russian projects" are to be understood as "projects that would likely, but not
necessarily, be operated by Russian pipeline transport service suppliers, and which would involve
Russian supplied transport services".2310 We thus understand Russia to imply that an infrastructure
project would involve the supply of pipeline transport services or "be operated" by a pipeline
transport service supplier. We cannot agree with Russia. We acknowledge that, once the pip eline
infrastructure developed by an infrastructure project has been put in operation, it will involve the
supply of gas pipeline transport services. However, a project to develop infrastructure precedes
the use of such infrastructure, and therefore does not itself involve the supply of pipeline transport
services.
7.1427. In our view, infrastructure projects ma y conceivably have an effect on the supply of
pipeline transport services because they lead to the construction of infrastructure that will be used
in the supply of such services. 2311 However, we do not read Russia's assertion that "Russian"
infrastructure "projects" would involve the supp ly of "Russian" pipeline transport services or "be
operated" by "Russian" pipeline transport service suppliers as relating to the impact of the TEN -E
measure on the supply of pipeline transport services in the future. To our mind, this assertion
reflects R ussia's understanding of the relationship between infrastructure projects and pipeline
transport services and service suppliers. As we have already determined, the activities regulated
by the TEN -E measure concern infrastructure projects that develop pipel ine infrastructure, which
will be used to supply pipeline transport services only after the infrastructure becomes operational.
Thus, we see no basis for the proposition that infrastructure projects would "involve" the supply of
pipeline transport services or be "operated" by service suppliers in the course of supplying pipeline
transport services. Consequently, we reject Russia's understanding of the relationship between
infrastructure projects and pipeline transport services and service suppliers reflecte d in its
assertion referred to above.
7.1428. We note that a supplier of pipeline transport services may, in certain cases, be a "project
promoter" under the TEN -E measure.2312 Thus, assuming arguendo that the TEN-E measure were
distinguishing between project promot ers on the basis of origin, it could be then argued, on this
basis, that the TEN -E measure is inconsistent with Article II:1 of the GATS. However, Russia has
advanced no argument to the effect that the TEN -E measure distinguishes between project
promoters on the basis of origin. 2313 We observe that the text of the TEN -E measure contains no
reference to the origin of a project promoter. In the absence of specific arguments and evidentiary
support from Russia, we do not see a compelling reason, nor do we have su fficient information on
the record, to make any other findings on this issue. We emphasi ze, nevertheless, that the
regulatory treatment by the TEN -E measure of a TSO promoting an infrastructure project would
concern this TSO in its capacity as project prom oter rather than as supplier of pipeline transport
services. The burden is on Russia to provide arguments and evidence to demonstrate that the
regulatory treatment of a project promoter, which may be a TSO, results in the modification of the
conditions of competition to the detriment of Russian suppliers of pipeline transport services.
7.1429. Based on the foregoing analysis, we conclude that Russia has not established that there is
a sufficiently close connection between infrastructure projects covered by the TEN -E Regulation

2310 Russia's response to Panel question No. 49(c), para. 252.
2311 See also our conclusion in paragraph 7.1393.
2312 According to Article 2(6)(a) of the TEN-E Regulation, a "project promoter" may be a TSO,
distribution system operator or other operator or investor developing a project of common interest. (TEN-E
Regulation, (Exhibit EU-4), Article 2(6)(a)) A TSO is a natural or legal person who carries out the function of
transmission of gas. (TEN-E Regulation, (Exhibit EU-4), Article 2(6)(a); and Directive 2009/73/EC, (Exhibit EU-
5), Article 2(4)). According to Article XXVIII(g) of the GATS, "service supplier" means "any person that supplies
a service". (footnote omitted) A TSO owned or controlled by a non-EU person could thus fall within a definition
of a service supplier contained in Article XXVIII(g) of the GATS. It follows that a supplier of pipeline transport
services may, but will not always, be a promoter of an infrastructure project under the TEN-E Regulation.
2313 We note that the European Union contends that the origin of the promoter of an infrastructure
project is not among the selection criteria prescribed by the TEN-E Regulation and plays no role in the
designation of PCIs under the TEN-E measure. (European Union's response to Panel question No. 77(a)).
Russia does not make any argument in this regard.

and pipeline transport services and service suppliers covered by the GATS such that the alleged
discriminatory treatment of "Russian" infrastructure projects will necessarily result in
discrimination against Russian pipeline transport service s or service suppliers. Therefore, Russia
cannot establish that the alleged discrimination against Russian infrastructure projects results in
discrimination against Russian pipeline transport services and service suppliers within the meaning
of Article II:1 of the GATS. Thus, we find that, to the extent Russia claims that the TEN -E measure
is inconsistent with Article II:1 of the GATS because of the alleged discrimination against Russian
infrastructure projects, its claim cannot succeed.
7.1430. In light of our fi nding that Russia has not established that there is a sufficiently close
connection between infrastructure projects covered by the TEN-E Regulation and pipeline transport
services and service suppliers covered by the GATS such that the alleged discriminato ry treatment
of "Russian" infrastructure projects will necessarily result in discrimination against Russian pipeline
transport services or service suppliers, we do not consider it necessary to make a separate finding
on whether the TEN -E measure discrimina tes against Russian infrastructure projects. This being
said, we find it useful to address Russia's other arguments that the TEN -E measure is inconsistent
with Article II:1 of the GATS, to the extent such arguments may be understood as not being
premised on the allegedly discriminatory treatment of Russian infrastructure projects.
7.1431. Russia submits that the language of the TEN -E measure, and the policy documents that
support it, constitutes evidence of de jure discrimination.2314 In Russia's view, the reference t o
reducing dependency on "a single supplier" – and the clear identification of that supplier as Russia
in policy documents supporting the Regulation – makes clear that the text of the Regulation
targets Russian services and service suppliers. 2315 As we have d etermined above in section
7.11.2.2.1, the references to "single supplier", "diversification of gas supply" and "diversification of
supply sources, supplying counterparts and routes" concern suppliers, and sources of supply, of
natural gas. Russia has not demonstrated that these references ma y also encompass pipeline
transport services or service suppliers. Therefore, we do not consider that these references
support Russia's argument that the TEN -E measure results in a de jure discrimination within the
meaning of Article II:1 of the GATS.
7.1432. Russia contends that private actors are likely to invest in projects reducing reliance on
Russian natural gas because such projects are eligible for PCI designation. 2316 Russia thus infers
that the TEN -E measure modifies the conditions of competition to the d etriment of like Russian
services and service suppliers within the meaning of Article II:1 of the GATS. 2317 We understand
Russia to claim that by allegedly discriminating against Russian natural gas, the TEN -E measure
also discriminates against Russian pipeline transport services and service suppliers.
7.1433. We refer to our analysis of Russia's claims under the GATT 1994, where we have
concluded that the TEN-E measure discriminates against Russian natural gas within the meaning of
Articles I:1 and III:4 of the GATT .2318 However, we do not consider that, in and of itself, our
finding of violation under the GATT is automatically transposable to the GATS. We recall the
findings of the Appellate Body in EC – Bananas III that the GATT 1994 and the GATS may apply to
the same measure concurrently.2319 Nonetheless, the Appellate Body clarified that, 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 services or service supplier.2320
7.1434. In sections 7.11.2.2.2 and 7.11.2.2.3 above, we have examined the effect of the TEN -E
measure on the competitive opportunities of Russian natural gas, focusing on the pertinent aspects
of this measure. In this section, we must focus our analysis on the effect of the TEN -E measure on
Russian pipeline transport services and service suppliers. Aside from referring to the aspects of the
TEN-E measure that we have already found to be inconsistent with Articles I:1 and III:4 of the

2314 Russia's second written submission, para. 451.
2315 Russia's second written submission, para. 453.
2316 Russia's second written submission, para. 456.
2317 Russia's second written submission, para. 456.
2318 See above paras. 7.1301 and 7.1313.
2319 Appellate Body Report, EC – Bananas III, para. 221.
2320 Appellate Body Report, EC – Bananas III, para. 221.

GATT, Russia does not point to any other aspect of the TEN -E measure that, in its view, is
inconsistent with Article II:1 of the GATS. As we have stated above, we do not consider that our
finding of inconsistency under Articles I:1 and III:4 of the GATT in respect of the TEN -E measure
leads to a violation of Article II:1 of the GATS.
7.1435. Russia also appears to argue that, in our assessment of the impact of the TEN -E measure
on Russian pipeline transport servi ce suppliers, we should take into account the "internal
organization" of Gazprom. 2321 According to Russia, due to Gazprom's internal organization, which
also includes the sale of Russian natural gas, Gazprom will have an interest in developing
infrastructure that can contribute to such sale. 2322 Thus, we understand Russia to argue that, in
view of Gazprom's "internal organization", the TEN -E measure operates in a manner that
diminishes Gazprom's opportunities to develop projects eligible for PCI designation.
7.1436. We recall that Article II:1 of the GATS requires the equality of competitive opportunities
for service suppliers as concerns their activities in "supplying" the services at issue. 2323 In the
present case, the focus of our analysis is on the competitive opportuni ties of Russian service
suppliers regarding their ability to supply pipeline transport services in the European Union via
mode 3.2324 We understand Russia's argument to imply that it would be contrary to Gazprom's
commercial interests to promote infrastructur e projects that reduce the European Union's
dependence on Russian natural gas, while projects that contribute to the sale of Russian natural
gas would not be eligible for PCI designation. However, Russia offers no explanation – even less
evidence – as to h ow and why Gazprom's alleged consequential inability to promote, under the
TEN-E measure, PCIs that contribute to the sale of Russian natural gas negatively affects the
competitive opportunities of Gazprom as a supplier of pipeline transport services in th e European
Union. Consequently, we find that Russia has not demonstrated that the competitive opportunities
of Gazprom to supply pipeline transport services in the European Union, as opposed to developing
infrastructure that can contribute to the sale of R ussian natural gas, are hindered by the TEN -E
measure.
7.1437. Russia further refers to the [*** ] project as evidence of the alleged discrimination by the
TEN-E measure against Russian services and service suppliers. 2325 In Russia's view, this
discrimination is evid enced by the low score obtained by this project, because it would have
transported Russian natural gas .2326 The European Union contests Russia's allegation that the
[***] project failed because of the European Union's decision "to score the project so low as to
make it unable to ever obtain PCI designation", pointing out that the promoters of this project
cancelled it more than one year after the first Union list of PCIs had been adopted.2327
7.1438. We do not consider it necessary to resolve this issue. Even assuming arguendo that the
failure of the [*** ] project may be attributed to the European Union and that it was the result of
discrimination against this infrastructure project, it would still, in our view, be insufficient to
establish a violation of Article II:1 of the GATS. As we have already concluded, Russia has not
demonstrated that the alleged discriminatory treatment of infrastructure projects leads to a
modification of competitive opportunities to the detriment of Russian pipeline transport services or
service suppliers. Thus, the allegedly discriminatory treatment of the [***] project would not
establish an inconsistency of the TEN-E measure with Article II:1 of the GATS.
7.11.4.2 Conclusion
7.1439. In view of the foregoing , we conclude that Russia has not demonstrated that the TEN-E
measure is inconsistent with Article II:1 of the GATS.

2321 Russia's second written submission, para. 458.
2322 Russia's second written submission, para. 458.
2323 According to Article XXVIII(b) of the GATS, "'supply of a service' includes the production,
distribution, marketing, sale and delivery of a service".
2324 Russia indicated that mode 3 is the only relevant mode of supply in connection with each of Russia’s
claims under the GATS. (Russia's response to Panel question No. 56, para. 285).
2325 Russia's response to Panel question No. 48, paras. 239 and 243. See also Russia's second written
submission, para. 448.
2326 Russia's response to Panel question No. 48, para 243, and No. 74, paras. 325–327.
2327 European Union's second written submission, para. 379.

8 CONCLUSIONS AND RECOMMENDATION
8.1. Recalling our terms of reference , as set out in Russia's panel request and as clarified in our
findings on the contours of these terms of reference 2328, and for t he reasons set forth in this
Report, the Panel concludes that:
a. With respect to the unbundling measure:
i. Russia has not demonstrated that the unbundling measure in the Directive is
inconsistent with Article II:1 of the GATS, or with Ar ticles I:1 or III:4 of the
GATT 1994.
ii. Russia has not demonstrated that the unbundling measure in the national
implementing laws of Croatia and Lithuania is inconsistent with Article XVI:2(a) of
the GATS. As we have not found an inconsistency with Article XVI:2(a) of the GATS,
we do not consider it necessary to rule on the European Union's defences under
Articles XIV(a) or (c) of the GATS.
iii. Russia has not demonstrated that the unbundling measure in the national
implementing laws of Croatia, Hungary and Lithuania is inconsistent wit h
Articles XVI:2(e) or (f) of the GATS . As we have not found an inconsistency with
Articles XVI:2(e) or (f) of the GATS, we do not consider it necessary to rule on the
European Union's defences under Articles XIV(a) or (c) of the GATS.
b. With respect to the public body measure:
i. Russia has not demonstrated that the public body measure in the national
implementing laws of Croatia, Hungary and Lithuania is inconsistent with Article XVII
of the GATS. As we have not found an inconsistency with Article XVII of the GATS,
we do not consider it necessary to rule on the European Union's defence under
Article XIV(c) of the GATS.
c. With respect to the LNG measure:
i. Russia has not demonstrated that the LNG measure is inconsistent with Article I:1 of
the GATT 1994.
d. With respect to the infrastructure exemption measure:
i. Russia has not demonstrated that the European Union has administered Article 36 of
the Directive inconsistently with Article X:3(a) of the GATT 1994.
ii. Russia has not demonstrated that the European Union applied or implemented
Article 36 in an "inconsistent" or "discriminatory" manner for the purposes of its
claims under Article II:1 of the GATS or Article I:1 of the GATT 1994.
iii. Russia has demonstrated that the two challenged OPAL conditions , that is, the 50%
capacity cap and 3 bcm/year gas re lease programme, are inconsistent with
Article XI:1 of the GATT 1994.
e. With respect to the upstream pipeline networks measure:
i. Russia has not demonstrated that the upstream pipeline networks measure is
inconsistent with Articles I:1 or III:4 of the GATT 1994.
f. With respect to the third-country certification measure:
i. Russia has not demonstrated that the third -country certification measure in the
Directive is inconsistent with Article II:1 of the GATS.

2328 See section 7.2 above.

ii. Russia has demonstrated that the third-country certification measure implemented in
Article 24 of Croatia's Gas Market Act, Section 128/A of Hungary's Gas Act and
Article 29 of Lithuania's Law on Natural Gas2329 is inconsistent with Article XVII of the
GATS and the European Union has not demonstrated that it is justified under the
general exception in Article XIV(a) of the GATS. Furthermore, Russia has
demonstrated that the third -country certification measure implemented in
Sections 123(5) and 123(6) of Hungary's Gas Act is inconsistent with Article XVII of
the GATS.
iii. we exercise judicial economy in respect of Russia's claims under Articles VI:1 and
VI:5(a) of the GATS.
g. With respect to the TEN-E measure:
i. Russia has demonstrated that the TEN -E measure is inconsisten t with Articles I:1
and III:4 of the GATT 1994 and the European Union has not demonstrated that it is
justified under the general exception in Article XX(j) of the GATT 1994.
ii. Russia has not demonstrated that the TEN-E measure is inconsistent with Article II:1
of the GATS.
8.2. Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations
assumed under a covered agreement, the action is considered prima facie to constitute a case of
nullification or impairment. We conclude that, to th e extent that the measures at issue are
inconsistent with Article XVII of the GATS and Articles I:1, III:4 and XI:1 of the GATT 1994, they
have nullified or impaired benefits accruing to Russia under those agreements.
8.3. Pursuant to Article 19.1 of the DSU, we recommend that the European Union and its member
States bring the measures into conformity with their obligati ons under the GATS and the
GATT 1994.

2329 With the exception of Article 29(4)(3), which we have found to fall outside our terms of reference.
See section 7.2.2.3.2.3 above.