Negotiations between Georgia and Russian Federation about the World Trade Organization (WTO): 5 Years After

News | Economics and Social Policy | Publications | Article 25 November 2016


Author: Giorgi Khatiashvili


The World Trade Organization (WTO) consists of 164 member states and was established to harmonize and facilitate trade relations, and act as a dispute settlement body.  Georgia is has been a member of the WTO since July 14, 2000. It took 18 years for the Russia Federation to become a member.


According to the WTO rules, accession of a new country requires the approval of all member states. Georgia was one of the final obstacles for Russia to join the WTO. Georgia and Russian Federation had a disagreement about border checkpoints of Roki and Gantiadi on the Occupied Territories. Georgia demanded clarification of their legal status and right of monitoring. In November 2011, in Geneva, with participation of Switzerland, Georgia and the Russian Federation agreed on having a neutral company monitor the movement of goods. The Swiss Confederation was tasked with selecting a neutral private company in consultation with Georgia and the Russian Federation.


The agreement does not mention any geographic name, only geographic coordinates. The agreement establishes three trade corridors: Adler – Zugdidi; the village of Nar (North Ossetia) – Gori; and Zemo Larsi – Kazbegi. All goods entering and exiting these corridors would be subjected to monitoring by the neutral private company. The parties agreed on creating a mechanism of customs administration and monitoring of trade in goods. The mechanism’s functions included gathering and sharing of information, ensuring transparency, transferring data, preventing crime and smuggling, and examining suspicious cargo. Georgia and the Russian Federation decided that the mechanism would entail both Electronic Data Exchange System (EDES) and International Monitoring System (IMS).


On September 13, 2016, Institute for Development of Freedom of Information (IDFI) requested from the Ministry of Foreign Affairs of Georgia information about annual activities in the period of 2011 – 2016 related to customs administration and monitoring of trade in goods.


According to the Ministry, the Agreement between the Government of Georgia and the Government of the Russian Federation on the Basic Principles for a Mechanism of Customs Administration and Monitoring of Trade in Goods was signed on November 9, 2011. Based on Georgia’s consent, the Russian Federation acceded to WTO and the agreement entered into force on August 22, 2012. As was stipulated by the agreement, the Swiss Confederation selected the neutral company SGS Societe Generale de Surveillance SA for oversight functions. Georgia and Russian had to enter separately into contract with the company.  


The process of elaborating the contract took place in 2013-2014 with involvement of Switzerland. Representatives of SGS arrived in Georgia many times and after holding meetings, the initial version of the contract was determined. In 2015, for the final review of the contract, a trilateral meeting was conducted between the Russian Federation, Georgia, and Switzerland with the participation of SGS representatives.


Apart from the contract, the parties considered two additional documents: Rules of Procedure of a Joint Committee (body set up by the agreement for discussing ongoing issues and settling disputes with involvement of a neutral party) and a trust fund document, based on which a bank account would be opened in Switzerland through which SGS would be compensated. 


In January – February 2016 Georgia finalized the contract with SGS; however, the Russian side still has issues to clarify. Consultations continue. Georgia sent the last diplomatic note on September 20, 2016.


It is obvious that the negotiations are dragging on. After five years from the conclusion of the agreement, the mechanism of monitoring is still not in effect, and the parties continue to debate technical and legal details. Moreover, Switzerland has chosen the company as early as in 2012, and every three years the agreement is subjected to renewal. In 2018, the agreement will either be automatically prolonged or the parties must agree on amendments.



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