Proposal for a Council Decision to refer the dispute regarding the procedure of state registration (renewal of registration) of medicinal products and related fees in Ukraine to the Co-operation Council and to determine the position to be adopted by the Community in the Co-operation Council to settle the dispute
Date: 2000-01-26
Institutions: European Commission
Subjects: Ukraine, cooperation agreement (EU), import, market approval, medicinal product

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 26.01.2000
COM(2000) 24 final

2000/0027 (ACC)

Proposal for a

COUNCIL DECISION

to refer the dispute regarding the procedure of state registration (renewal of
registration) of medicinal products and related fees in Ukraine to the Co-operation
Council and to determine the position to be adopted by the Community in the
Co-operation Council to settle the dispute

(presented by the Commission)

1.

2.

EXPLANATORY MEMORANDUM

the Cabinet of Ministers of Ukraine

A Resolution of
(N° 1666 of
11 September 1999 amending Resolution N° 569 of 27 April 1998) and an Order
of the State Scientific and Expert Centre of medicinal products of the Ministry
of Health of Ukraine of 7 May 1999 established additional specialised expertise
fees for foreign medicinal products up to the amount of 10.000 $ for one product.
This regulation was introduced shortly after a similar one had been removed
following an EC request and to comply with the EU macro-financial assistance
conditionality.
(Cabinet of Ministers of Ukraine's Resolution N° 569 of
27th April 1998 increasing registration charges for imported pharmaceutical products,
providing for discriminatory registration fees for foreign companies in Ukraine : one
hundred times difference, was removed on 22 February 99 by resolution N°241 of
22 February 1999).

The European Commission has identified in the above-mentioned Ukrainian
regulations a number of violations of
the Partnership and Co-operation
Agreement and/or elements incompatible with two rules. In particular these
regulations are contrary to Art. 15 paragraph 1 and 2 of the PCA, according to which
discrimination of European products whether related to charges or to procedures is
prohibited, as well as to Article 16 paragraph 2 of the PCA referring to GATT
Article VIII, according to which fees and charges of whatever character connected
with importation must be limited to the cost of the services rendered. Fees requested
are even higher this time than under the previous legislation (raised from 8500 $ to
10.000 $ compared to 8,5 $ for a Ukrainian product). Nor does it comply with EU
directives according to Government decree N°244 of March 1997 regarding “the
gradual introduction in Ukraine of EU directives”. Ukraine ignores the EU system of
marketing authorisation (i.e. : meaning import licence).

Moreover this current regulation is extremely confusing : “Registration” is only one
out of five separate procedures related to different administrations that govern the
import of pharmaceutical products in Ukraine. This compounds with other separate
procedures for the distribution of pharmaceutical products. Moreover the level of
fees for foreign products is not published. The Commission could only base its
assessment on data provided by companies operating in Ukraine.

3.

The Commission’s position :

The Commission considers that such measures aimed at driving competition out of
the Ukrainian market, are not only contrary to agreements signed by Ukraine and the
policy of Ukraine to join WTO, but also run contrary to the general objective of
Community assistance to Ukraine of supporting the integration of this country into
the world economic order. Moreover, this policy sends a very negative message to
other potential foreign investors and accounts for the low level of foreign investment
recorded so far in Ukraine.

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The Commission considers that this matter needs to be pursued principally for
the following reasons :

• Attention needs

to be drawn to Ukraine’s commitments under the
Partnership and Co-operation Agreement. Ukraine takes insufficient notice of
its international obligations,
leading to a number of violations of the PCA.
Ukraine even reneges previous commitments as was the case in this issue or fails
to implement them.

• This tends to become normal practice : due to the lack of economic and
industrial restructuring in Ukraine, non-competitive state industries cannot stand
up to world market competition, and therefore put pressure on the government to
introduce discriminatory advantages or trade restrictions protecting them from
foreign competition. Over the past months, several trade obstacles have been
added, with the acknowledged aim of protecting ailing industries and
employment. Another dispute settlement procedure is currently pending between
the EC and Ukraine, regarding the law of Ukraine on the stimulation of
automobile production and related regulations regarding the second hand car
market.

Accession to the WTO will be very difficult unless the violations of WTO rules
under this Law are removed. In particular, the internal taxation privileges and
probably also the import duty privileges will need to be extended unconditionally to
all like products from all WTO member countries.

€

• The Trade impact for the EC is substantial, therefore action is needed to
eliminate the harm caused to the exports of EC-manufactured products to the
Ukrainian market. This is one of the EC main export items in Ukraine :
93.2 m
in 1998 (2,7% of total EC exports). The volume of EC exports was
dramatically reduced in 1998 following the economic crisis as well as the
in 1997 = 4% of total EC
introduction of the new legislation (from 128.2 m
exports).

€

4.

Consultations were held in accordance with Art. 97 of the Partnership and
Co-operation Agreement in March 99 and followed with the removal of the
discrimination. As this progress was put in question in June 1999 (new additional
specialised expertise fees for
foreign medicinal products), on 2 July 1999,
Commissioner van den Broek addressed a letter to Vice Prime Minister Tigipko and
Minister Goncharuk to reverse urgently the above-mentioned measures. The
Commission declared at the meeting of the Co-operation Committee of July 28, 1999
that if the Ukrainian Government failed to resolve the issue of the discriminatory fees
within two months after the meeting of the Co-operation Committee, the EC and its
Member States would be forced to refer the dispute to the Co-operation Council in
accordance with Article 96 of the PCA. The Commission requested to hold new
consultations. A round of consultations agreed for October 1999 was postponed sine
die by the Ukrainian authorities. The Commission reminded the Ukrainian authorities
in a letter of 18.10.99 that if no initiative is taken by Ukraine the dispute should be
referred to the Co-operation Council in accordance with Art. 96 of the PCA and as
agreed at the meeting of the Co-operation Committee.

3

The draft position to be adopted by the Community in the Co-operation Council to
settle the dispute sets out the measures Ukraine should take, so as to put
its
legislation in conformity with commitments agreed in the Partnership and
Co-operation Agreement, and with WTO rules in the framework of Ukraine’s
accession procedure to the WTO : registration charges should be levied on a non-
discriminatory basis. The Ukrainian government should reverse urgently on the latest
measures.

The Council is therefore requested :

– to adopt the proposed decision to refer the dispute regarding the procedure of state
registration (renewal of registration) of medicinal products and related fees in
Ukraine to the Co-operation Council and to determine the position to be adopted
by the Community in the Co-operation Council to settle the dispute,

– to sign the draft letter in annex I to the President of the Co-operation Council,

referring the dispute to the Co-operation Council.

4

2000/0027 (ACC)

Proposal for a

COUNCIL DECISION

to refer the dispute regarding the procedure of state registration (renewal of
registration) of medicinal products and related fees in Ukraine to the Co-operation
Council and to determine the position to be adopted by the Community in the
Co-operation Council to settle the dispute

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty, and in particular Article 133 in conjunction with Article 300,
paragraph 2 first sentence and paragraph 3, first sentence thereof,

Having regard to the Council and Commission Decision of 26 January 1998 on the conclusion
of the Partnership and Co-operation Agreement between the European Communities and their
Member states and Ukraine and in particular Article 2.1 thereof1,

Having regard to the Commission’s proposal2,

(1) Whereas Article 96 of the Partnership and Co-operation Agreement provides for the

settlement of disputes,

(2) Whereas the following regulations of Ukraine violate the Partnership and Co-operation
Agreement and consultations under Article 97 of the PCA remained unsuccessful, for
which reason it is now appropriate to refer the dispute to the Co-operation Council :

– Resolution of the Cabinet of Ministers of Ukraine N° 1666 of 11 September 1999
on the introduction of the changes to the procedure of state registration (renewal
of registration) of medicinal products and amount of fees for state registration
(renewal of registration) of medicinal products, amending Resolution of the
Cabinet of Ministers of Ukraine N° 569 of 27 April 1998 on the approval of the
procedure of state registration (renewal of registration) of medicinal products and
amount of the fees for state registration (renewal of registration) of medicinal
products,

– Order of the State Scientific and Expert Centre of medicinal products of the
Ministry of Health of Ukraine of 7 May 1999 establishing additional specialised
expertise fees for foreign medicinal products

1

2

OJ L 49 of 19.2.1998
OJ C, , p.

5

HAS DECIDED AS FOLLOWS:

Sole Article

1.

2.

The Community shall refer the dispute to the Co-operation Council, by means of the
letter attached in annex I, co-signed by the Commission and the Council and
addressed to the President of the Co-operation Council.

The position to be adopted by the Community as regards this dispute shall be in
accordance with the draft recommendation attached in annex II, to be proposed to the
Co-operation Council for its adoption with a view to settle the dispute.

Done at Brussels,

For the Council
The President

6

ANNEX 1

Draft letter from the Community to the President of the Co-operation Council with
Ukraine

Mr President,

Following a discussion regarding discriminatory fees for the expertise of imported
pharmaceutical products at the 26 April 1999 meeting of the Co-operation Council
between the EU and Ukraine, the 28 July meeting of the Co-operation Committee was
informed of the situation that ensued from the Order of the State Scientific and Expert
Centre of medicinal products of the Ministry of Health of Ukraine of 7 May 1999
establishing (again) additional specialised expertise fees for foreign medicinal products.

This compounds with Resolution of the Cabinet of Ministers of Ukraine N° 1666 of
11 September 1999 on the introduction of changes to the procedure of state registration
(renewal of registration) of medicinal products and amount of fees for state registration
(renewal of registration) of medicinal products, amending the Resolution of the Cabinet
of Ministers of Ukraine N° 569 of 27 April 1998.

The Commission emphasised that
these regulations are contrary to Art. 15
paragraph 1 and 2 of the PCA, according to which discrimination of European products
whether related to charges or to procedures is prohibited, as well as to Article 16
paragraph 2 of the PCA referring to GATT Article VIII, according to which fees and
charges of whatever character connected with importation must be limited to the cost of
the services rendered.

Formal consultations (under Article 97 of the PCA) requested by the Commission were
held in March 99 and followed with the removal of the discrimination. As this progress
was put in question in May 1999 (new additional specialised expertise fees for foreign
medicinal products), On 2 July 1999, Commissioner van den Broek addressed a letter to
Vice Prime Minister Tigipko and Minister Goncharuk, asking them to reverse urgently
the above-mentioned measures. The Commission declared at
the meeting of the
Co-operation Committee of July 28, 1999 that if the Ukrainian Government failed to
resolve the issue of the discriminatory fees within two months after the meeting of the
Co-operation Committee, the EC and its Member States would be forced to refer the
dispute to the Co-operation Council in accordance with Article 96 of the PCA. The
Commission requested to hold new consultations. A round of consultations agreed for
October 1999 was postponed sine die by the Ukrainian authorities. The Commission
reminded the Ukrainian authorities in a letter of 18.10.99 that if no initiative is taken by
Ukraine the dispute should be referred to the Co-operation Council in accordance with
Art. 96 of the PCA and as agreed at the meeting of the Co-operation Committee.

No compromise acceptable to the Community and its Member states was agreed with the
Ukrainian authorities.

Therefore in agreement with the above-mentioned decision, I have the honour to refer
this dispute to the Co-operation Council. I enclose a draft recommendation that the
Co-operation Council could adopt pursuant to Article 96 paragraph 2 of the PCA so as to
settle the dispute.

7

I would be grateful
this letter as well as the annexed
recommendation to members of the Co-operation Council as foreseen under Article 6 of
the Rules of Procedure.

if you could transmit

For the Council of the EU

For the Commission

8

ANNEX II

Draft recommendation by the Co-operation Council regarding the procedure of state
registration (renewal of registration) of medicinal products and related fees in Ukraine

THE CO-OPERATION COUNCIL,

Having regard to the Partnership and Co-operation Agreement between the European
Communities and their Member states and Ukraine, signed in Luxembourg on
14 June 1994 and in particular to Art. 96 thereof,

Having taken due account of the consultations undertaken by the parties under Article 97
of the PCA,

Whereas the commitments provided for in the Partnership and Co-operation Agreement
between the European Communities and their Member states and Ukraine, in particular
Art. 15 paragraph 1 and 2 of the PCA, according to which discrimination of European
products whether related to charges or to procedures is prohibited, as well as to
Article 16 paragraph 2 of the PCA referring to GATT Article VIII, according to which
fees and charges of whatever character connected with importation must be limited to the
cost of the services rendered, appear incompatible with some elements of the current
regulations regarding the procedure of state registration (renewal of registration) of
medicinal products and related fees in Ukraine, in particular as regards the following
points :

discriminatory fees for foreign products,

fees non-proportional to the service rendered,

discriminatory registration procedures for foreign products.

RECOMMENDS THAT :

1.

Ukraine should adapt the current legislation according to the above mentioned
elements, namely :

– cancel the Resolution of the Cabinet of Ministers of Ukraine N° 1666 of
11 September 1999 “on the introduction of the changes to the procedure of
state registration (renewal of registration) of medicinal products and amount
of fees for the state registration (renewal of registration) of medicinal
products”, the Resolution of the Cabinet of Ministers of Ukraine N° 569 of
27 April 1998 “on the introduction of the procedure of state registration
(renewal of registration) of medicinal products and amount of the fees for
state registration (renewal of registration) of medicinal products” and the
Resolution of
the Cabinet of Ministers of Ukraine N° 241 of
22 February 1999 “on the introduction of the changes to the procedure of
state registration (renewal of registration) of medicinal products and amount
of fees for state registration (renewal of registration) of medicinal products”;

9

– cancel the Order of the State Scientific and Expert Centre of medicinal
products of the Ministry of Health of Ukraine of 7 May 1999 establishing
additional specialised expertise fees for foreign medicinal products.

Ukraine should simplify its procedures regarding the import of medicinal
products, in particular : subordinate to the National Agency on quality control
and safety of food, medicinal and medical use products of the Ministry of health
all the authorities performing the state registration and licensing of medical
products in Ukraine;

Ukraine should ensure that procedures are similar for Ukrainian and European
products (in conformity with Art. 15.2 of the PCA), and publish the amount of
the fees requested from economic operators,

Ukraine will report to the next meeting of the Co-operation Council on the steps
it has taken to implement this recommendation.

2.

3.

4.

Done at Brussels,

For the Council

The President

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