Is the EU’s Trade Fair… or Can the EU Energy Sanctions Against Russia Protect Public Morals?

Introduction

For most of us, “fair trade” brings to mind the label on a coffee packet or a promise of ethical sourcing. Yet, fairness in trade also has another dimension that extends beyond vertical supply chains to horizontal commitments States owe each other embedded in the legal architecture of the World Trade Organisation (WTO) through a web of rules meant to prevent discrimination and ensure reciprocity. When those rules collide with sanctions and moral imperatives, however, as in the European Union’s trade measures against Russia, the question of what truly counts as “fair” takes on a far more complex meaning. The EU has pledged to engage in fair trade with its trading partners both in vertical and horizontal terms. While having one of the most stringent internal rules and standards for unfair trading practices, it has also vowed to enter “into reciprocal and mutually advantageous arrangements [...] to the elimination of discriminatory treatment in international trade relations” by virtue of its membership to the WTO. Leaving the first set of commitments for another discussion, this article aims at addressing the Union’s obligations under the General Agreement on Tariffs and Trade (GATT), in an effort to uncover whether the recent EU trade relations in the energy sector with Russia are fair, i.e. justified under Art. XX (a) GATT – public morals exception.

Sanctions, Energy Autonomy, and the Question of Legality

Amid growing efforts toward sustainable development and rising geopolitical and economic tensions, the Russian invasion of Ukraine challenged the prevailing understandings and boundaries of international laws and diplomacy. It triggered a global response marked by the imposition of an “unprecedented range of economic and financial sanctions” against it. The European Union, one of the leading advocates for a ceasefire, has been at the forefront of these efforts, adopting multiple sanction packages. As part of its broader strategy towards energy autonomy (REPower EU programme aimed at elimination of Russian fossil fuel imports by 2027), the EU adopted various measures restricting imports of certain types of fossil fuels originating from Russia, a price cap mechanism for sale of Russian oil, and limitations on the transit and provision of services related to Russian-originating energy goods. However, given the nature and scope of the sanctions, they appear prima facie inconsistent with key provisions of the GATT, including the Most-Favoured-Nation principle (Art. I), the Freedom of Transit (Art. V), and the General Prohibition of Quantitative Restrictions (Art. XI:1). The targeted restrictions on goods originating or imported from Russia is in direct violation of the MFN principle, as it, by definition, “creates more favourable competitive opportunities” to the other trading partners of the EU from which it imports the same energy products. Additionally, the 14th package of sanctions targeting LNG imports and the shadow fleet used for circumvention of sanctions violates the free transit of goods in the territories of contracting parties by imposing direct prohibitions on the transfer of Russian LNG, reloading services shipping LNG, and goods related to it and by denying access to ports in the Union for specific vessels. Moreover, packages 5, 6, 14 and 16 would fail to comply with Article XI:1, as they impose clear prohibitions on the import of coal, solid fossil fuels, crude oil, petroleum products, liquified gas, that originate in Russia or are exported from Russia. All these measures go beyond limiting trade flows, as they amount to de jure prohibitions, representing clear violations of the quantitative restriction.

Security Exceptions: Between Law and Geopolitics

In view of the exceptional geopolitical circumstances surrounding the adoption of the EU’s sanctions, it is necessary to look beyond their prima facie inconsistency in consideration of whether and how the EU’s conduct may nonetheless be justified under the available exceptions within the GATT framework. Considering the armed conflict and its geographical and geopolitical proximity to the EU, an invocation of the Security Exceptions (Art. XXI GATT) may seem appropriate. In the relevant part, the Article states:

Article XXI

(Security Exceptions)

Nothing in this Agreement shall be construed (b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests (iii) taken in time of war or other emergency in international relations

Nevertheless, Article XXI has been recognized as highly sensitive ever since its drafting. Given the fact that Members have traditionally refrained from invoking it for about seventy years since its introduction, resort to it in the midst of a crisis of international cooperation in trade relations, would be at the minimum suboptimal for the EU’s image of a supporter and leader of multilateralism, if not completely destructive of it. The decision of the Union not to invoke the exception in the recent EU-Energy Package case that the Russian Federation brought against it, is further indicative of this view, strengthening the point that Security Exceptions should be used in a very limited number of cases when genuine essential security interests of a Member are at stake. Alternatively, regular resort to the article could lead to an overinclusive reading of the provision permitting “anything under the sun” which would bring by itself fire consequences for international trade rules sealing their securitisation.

From a purely legal perspective, the EU would encounter difficulties demonstrating that the sanctions have been necessary to protect its essential security interests given that jurisprudence has clarified that those refer to quintessential functions of a State (organisation in this case), “namely, the protection of its territory and its population from external threats, and the maintenance of law and public order internally.” Legitimate concerns with regards to Russia’s ambitions and strategic plans for invading territories of post-Soviet states, as well as the proximity of the conflict to the EU borders, can be said to constitute a basis for adoption of measures in protection of essential interests of the Union such as its territory and population. However, the observed sanctions relate to the energy sector and do not seem to have any direct connection to said interests: the territory and population of the Union would hardly be safeguarded by restrictions on imports of energy goods.

Given the requirement of good faith in invoking Article XXI, it is highly unlikely that the EU could demonstrate that the sanctions meet the requirement of plausibility in relation to the proffered essential security interests; i.e. they are not so remote from, or unrelated to the war giving rise to the threat of its interests. Therefore, both from a legal and geopolitical standpoint, the Security Exception provides a fragile basis for justification. This article argues that a more appropriate avenue lies in the examination of other exceptions under the GATT, particularly those capable of capturing the moral and normative dimensions of the EU’s response to Russia’s aggression.

Public Morals Exception: Justifiability through Values

A closer examination of the EU sanctions and their objective leads us to consider the possibility of placing them in the context of general exceptions which, inter alia, allow for the adoption of measures necessary for the protection of public morals. Restrictions on imports of Russian fossil fuels, though framed within the EU’s broader energy transition, primarily respond to Russia’s unlawful use of force in condemnation of Russia’s human rights violations and abuses with the ultimate aim of limiting its capacity to wage war. Therefore, these measures reflect a rejection of conduct that conflicts with the standards of right and wrong upheld by the EU and its citizens. By restricting trade, the Union avoids financing the unlawful aggression against Ukraine, an act fundamentally incompatible with European public morals. Alternatively, the continued purchase and use of Russian gas, oil and coal would amount to indirectly funding the war effort and sustaining military operations responsible for grave human rights abuses including the deaths of tens of thousands.

In the relevant part, the provision reads as follows:

Article XX

(General Exceptions)

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 the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(a) necessary to protect public morals

An examination of the article shows that paragraph (a) permits the adoption of measures which are necessary to protect public morals, a term found to be referring to “standards of right and wrong conduct maintained by or on behalf of a community or nation”. Turning to the concrete elements of analysis established in case law, the first step is the assessment of the importance of the interests, followed by an observation of the measures’ contribution to their protection, finally proving that the first two outweigh the trade restrictiveness of the measures. The interests at stake are of paramount importance for the EU, as reflected in their enshrinement in the Union’s primary law, including the Charter of Fundamental Rights, and in the EU’s demonstrated commitment to human rights through membership in numerous international human rights treaties. Secondly, to illustrate how sanctions contribute to this objective, it is crucial to highlight the close link between Russia’s energy sector and its military funding. Gazprom, one of the largest gas exporters with long-term supply contracts with EU states, is over 50 per cent State-owned, meaning most of its revenue flows directly to the State. Moreover, taxes from coal, oil, and gas exports to the EU constitute another major source of financing for Russia’s military. Hence, based on the considerable importance of the pursued interests, and measures’ contribution to reducing the financial capacity of Russia to pursue the war, the sanctions’ trade restrictiveness is outweighed. In line with case law, the greater the importance of the interests, the easier it is to accept the measure as necessary. Accordingly, a higher level of restrictiveness is admissible here, as it serves the desired high level of fulfilment of the policy objective.

Moreover, the sanctions also satisfy the chapeau requirements. The adoption of the measures was carried out in good faith and in pursuit of the stated objectives as demonstrated by their role as one element within a broader policy framework, including the REPowerEU plan, defence initiatives and the Maritime Security Strategy which all indicate the presence of a continuous policy effort aimed at reducing dependence on Russia and curtailing its military capacity. The sanctions are not applied in a manner that arbitrarily or unjustifiably discriminates against Russia. The analysis here is based on the relation between the pursued objectives (the cause or rationale of the discrimination) and the manner in which the measures are applied, which can also be discerned from the design, architecture and revealing structure of the sanctions. Since the sanctions aim to reduce the Union’s financial support for the war and curb Russia’s capacity to commit human rights violations, it is not arbitrary that they target imports and business with Russian operators. Their design and application reflect this objective: Council decisions, such as the 2017 one linking restrictive measures to the Minsk agreements, and repeated statements by EU officials show that sanctions are designed as a tool to end aggression. Moreover, Council decisions and implementing regulations apply time-limited measures with formal review dates to ensure alignment with developments. Hence, the sanctions cannot be said to constitute an abuse or misuse of the exception, or a disguised restriction on trade, and are justifiable under Art. XX (a).

Conclusion

In conclusion, given the prima facie inconsistencies with Articles I, V and XI:1 GATT, the fairness of the EU’s trade conduct toward Russia depends on the available justifications within the WTO framework. While Article XXI GATT may appear the natural refuge in times of war, invoking it here would risk unduly expanding the scope of national security and accelerating the securitisation of trade. By contrast, justification under the public morals exception offers a legally tenable and normatively coherent approach.

The EU’s energy sanctions against Russia pursue a legitimate moral aim: ending financial support for an unlawful war marked by grave human rights violations. Their targeted and proportionate design meets the necessity requirement and complies with the chapeau by avoiding arbitrary or unjustifiable discrimination. In this light, the EU’s measures may be viewed not as a departure from fair trade, but as an effort to redefine it by reconciling the legal discipline of international trade with the moral imperatives of its time. Still, this case exposes the inherent tension between moral reasoning and legal predictability. Fairness in trade cannot rely solely on ethical labels or slogans; it must also safeguard the integrity of the multilateral trading system that enables such fairness to exist. The EU’s experience shows that trading fairly in today’s world requires upholding values without undermining the legal rules that give those values practical and enforceable meaning.

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