EAEU Competition Policy as Another Indicator of Institutional Weakness

The future of the Eurasian Economic union largely depends on the bottom-up dynamics, and it is the only process through which the full potential of integration of member states can be realized (Vinokurov 2017). More importantly, it requires the common “rules of the game” within the union, adjusting to which member states are not ready. These rules would be fundamental to ensure that member states can secure some of their interests and at the same time commit themselves to compliance with common rules. Apart from that, the rules would enable member states to establish the single economic constitution of the union and preserve fair competition on the market.

But this goal would be especially challenging to realize considering the idea proposed by the Eurasian Development Bank in its annual report. Pragmatic Eurasianism states that the idea of integration as an end goal is not so appealing to the member states, and instead they seek to use it as a tool to push for economic modernization of their states (Eurasian Development Bank 2013). Possibly, this is the reason member states feel insecure about delegating the managerial process of integration to technocrats and prefer to determine the process and the benefits they gain themselves. Another way to interpret the limited pace of integration, is that member states have already achieved the desired level of integration and received enough benefits from it, so that further integration is no longer deemed as necessary. Kazakhstani scholar Baildinov holds the same opinion about the union. The only area where interests of member states meet is providing security to their economic development, despite the fact that the treaty outlines more ambitious purposes (Karliuk 2015).

Such attitude towards integration was even apparent in the very early stages of institution building within the EAEU. As Dragneva and Wolczuk (2017) mention it, institutions of the union were deliberately made in such a manner so that they would not be able to exert enough power to cause disruption to domestic institutions and policies. This can also be seen as a way to ensure their independence in policy making from the union and from the dominant power of Russia, who is thought to be influencing significant domains of policy of member states. However, this independence has to be sacrificed in order to achieve the level of integration prescribed in the Treaty. Harmonization of competition policy, one of the influential policy areas, was put by the union as one of its main objectives. And according to Dragneva and Wolczuk (2013), success of reaching the union’s objectives depends on inter-state consensus and member states’ commitment. They introduce an example when the Commission had to extend the deadline for establishment of common market for pharmaceuticals, due to inability to overcome political and technical obstacles. So, it is the dominant state-led integrationist policies that decide upon the extent and pace of integration of the region.

Although the major economic benefits that member states would gain from this project will mainly come from removal of non-tariff barriers, there is certainly a lack of profound policy outcomes in this issue area (Dragneva and Wolczuk 2017). The largest number of non-tariff barriers in the EAEU include sanitary and phytosanitary regulations, technical barriers, price control and measures affecting competition (International Institute for Applied Systems Analysis 2016). Therefore, removing these exemptions on the way toward the single market is not only a demonstration of achieving the long-awaited economic benefits for the EAEU countries, but also an essential step for modernization and further cooperation of member states’ economies (Vinokurov 2017).

Proper institutional and enforcement features of competition policy are essential to restrict anticompetitive behavior and ensure compliance to the rules across the union. Competition policy, according to UNCTAD (2010), limits activities that somehow might restrain competition, including prohibition of anticompetitive agreements, control of mergers and acquisitions, and restricting abuse of dominant position. All these activities may adversely affect domestic, international trade and constrain economic development. The European Union, for instance, as the main aim of establishing its competition put to ensure that all customers of the union can access the benefits of a free market system, and provide a stable mechanism for the proper functioning of the market (European Union 2014). Effective functioning of the market, one of the major benefits that competition aims to provide and is one of the prominent goals of establishment of the union.

Member states of Eurasian Economic Union on its way toward establishing a single market for goods and services, encounters the most serious obstacle in the form of non-tariff barriers (Russel 2017). Ensuring uniform competition policy across the union as a part of removing non-tariff barriers would be a stepping stone towards greater integration. The major stumbling block for establishing unified competition policies in the union, however, remain the still prevailing intergovernmental features of the EAEU. Hancock et al. (2014) assert that supranational powers of the union are highly limited, and as Dragneva and Wolczuk (2017) argue, this is done so in order to ensure that no member state is bound to a decision that is somehow against its interests. However, if member states are committed to completing the real integration project, their interests need to be sacrificed. Making it possible depends on the leaders of member states. And while current heads of state and heads of governments, being constrained by the political environment back home, might be tempted to make decisions that would favor them now. In such conditions, they might not see the long-term benefits that adjustments to the common competition policy might bring. The Commission would have very limited power to change the situation.

Supranational features of the Commission of the EAEU, that gained a certain level of competence to draw the rules of competition, are limited in three major ways. Firstly, there are constrains imposed by higher level institutions of the union on the decisions by the Commission through the so called ‘Belarussian elevator’. Secondly, it is member states who decide on the extent of applicability of competition law on national markets. And lastly, it is very uncertain what can be done in case competition laws are not followed on the territory of the union, since neither member states nor the Commission can file a lawsuit against a state for violating the rules. These limitations are the main obstacles in the way to achieve proper economic competition and a higher level of integration.

Although the EAEU was built looking up at the success of the European Union, even the superficial comparison reveals that the Eurasian Economic Union is still far behind the EU in terms of providing an effective platform for policy-making and functioning of the union. This can mostly be attributed to the absence of a powerful supranational institution, ready to provide technical expertise aimed at preserving the long-term interests and aims of the union rather than protecting distinct member state’s interests. The Commission, which was expected to become that supranational body, among its other powers, gained one of the most significant competences – to draw competition rules of the union; as discussed previously, one of the main pillars of establishing the single market. Its first limitation is in the intergovernmental structure of the union. Karliuk (2015) refers to the existing practice, or even a well-established system as the ‘Belarusian elevator’; when any decision made at the lower tier of policy making process can be challenged or even cancelled by the higher level of institutional structure. The higher levels of institutional structure consist of Intergovernmental Council and the Supreme Council (Treaty on the EAEU 2015). These institutions consist of heads of government and heads of state, which basically allows member states to control and cancel any decision which might be costly to them.

The Commission’s power was also explicitly limited to the extent that the member states refused to designate it as a supranational body in the Astana Treaty (Dragneva and Wolczuk 2017) to avoid its potentially autonomous character. Consequently, the departments of the Commission, including the Departments of Competition and Antitrust, work directly with the governments of member states and the authorized bodies on their territories (Treaty on the EAEU 2015). The Commission has specifically outlined the procedures of cooperation with member states on the common principles and rules of competition. These includes, but is not limited to the necessity for cooperation in cases of surveillance of compliance by the Commission, initiation of investigations and consideration of cases of violation of common rules (Decision 96/2012/EAEU of the Commission Council). Karliuk (2015) also points out at a striking difference stipulated in the Treaty on the EAEU which represents the level of intergovernmentalism present in the decision making of the Commission. As stipulated in the Treaty, the Commission shall “ensure mutual benefit, equality, and respect for the national interests of the Member States, rather than interests of the Union” (Karliuk 2015, 8). Which shows a serious preponderance of state interests over the union’s. Even if decisions of the Commission have a direct effect on member states, meaning that these decisions do not need implementation into the national law, and are considered as binding toward all member states (Treaty on the EAEU 2015), the degree of involvement of member states into the decision-making process, completely makes no sense of the functions that the Commission was designated to carry out.

However, even those decisions of the Commission, which survived the ‘Belarusian elevator’, are in question of their effect on member states. While Treaty on the EAEU outlines the common principles and rules of competition of the Union, national laws must adhere to those principles. However, legal orders of member states might not always be compatible with the Union law (Karliuk 2015). This does not allow to fully realize the effect of legal order of the union, including competition law. Atik (2014) argues that in order to achieve the aims of the union and reap the benefits of integration, countries need to put supranational policies above national policies. Just like that full benefits of having common competition law cannot be realized without member states unilaterally adopting them.

Economic cooperation among member states is particularly important in the context of infant project of the Eurasian Economic Union (International Institute for Applied Systems Analysis 2016). To ensure the effective functioning of the union and proper economic coordination, there has to be established a level playing field of the common market. Effective competition policies that enable the efficient functioning of the market could provide benefits as well as for consumers and member states. Vinokurov (2017) for instance, puts elimination or unification of non-tariff barriers, including measures affecting competition, as one of the priorities of the union’s agenda. Unification, however, is highly questionable in the short-term.

Even though the Treaty on the EAEU makes provisions for obligatory norms that member states should follow and that will be considered superior to their national laws, when it comes to regulation of different spheres of economy, member states have different degrees of discretion (National Research University Higher School of Economics 2018). Dragneva and Wolczuk (2017) refer to this as a symbolic binding law, since member states themselves decide on the domestic reach of acts of the Commission. Currently, competition law is being exercised at two levels simultaneously, the EAEU level and national level (Treaty on the EAEU 2015). So, we can see that member states have not delegated full competence over competition policy to the Commission. Instead, competition policy has all three types of competences: exclusive, supportive and shared. The Union obtained exclusive competence only for protecting competition on transboundary markets, supportive for regulating competition on national markets, and shared competence in relation to actions of entities of a member state, that might have an adverse effect on competition on national market. So, in the Eurasian Economic Union member states to the significant extent are free to draft their own competition rules and supervise compliance over them (Treaty on the EAEU 2015).

Considering that the Commission is thought to be a driver of integration, it is an especially weak institution to carry out that mission. For instance, the Commission is no longer able to bring a country before the court in case of non-compliance (Dragneva and Wolczuk 2017). While competition functions through organizational forms, “characterized by agencies that operate at arm’s length from the executive”, and regulatory instruments, which include fines, criminal sanctions and injunctions (Maher 2017), Competition and Antitrust regulation of the union certainly lacks these features. And if these two features of competition policy help policy makers to develop an independent, working system that ensures properly running competition in a market, it is not something that the Commission embodies. If it is possible to refer to the authorized bodies of that member state as agencies that operate at arm’s length from the Commission, prevention of violations of competition rules is performed by these bodies (Treaty on the EAEU 2015), but these entities have their own vested interest in overseeing competition on national markets.

In case violation of common rules of competition has an adverse effect on transboundary markets, the Commission is allowed to intervene, but this intervention is more symbolic rather than substantial. The Commission can initiate and examine cases of violation, request necessary information, and post the adopted decisions on cases of violation on its website (Treaty on the EAEU 2015), however the part of initiating infringement proceedings is missing in the Treaty.

The absence of another essential feature of competition – enforcement instruments – is evident here as well. This shows not only the limitations of the Commission or an undermined concept of supranational institution, but also the lack of incentives for member states to comply with common competition rules or any other decisions by the Commission. This procedure seems to be more costly to the Commission itself rather than to the violator. While establishing uniform application of the competition law and expecting compliance in such circumstances where “‘high politics’ allows states to unilaterally depart from the common regime” (Dragneva and Wolczuk 2017, 15) seems a particularly difficult task.

Despite that, the Commission has been able to fight for at least some of its authority. The case was about the request to clarify the general rules and principles of competition by the Ministry of Justice of the Republic of Belarus (Clarification of 4 April 2017). This case has shown the important implications of decisions of the Commission, which might serve as a promise for further strengthening of supranational features of the Commission. In this case, the Ministry of Justice asked whether member states are allowed to prescribe different criteria for acceptance of vertical agreements in its national legislation. The court identified, that member states are not allowed to change the admissibility criteria of vertical agreements in their national legislations. National legislations in this case can only contain additional prohibitions, requirements and restrictions. The criteria were developed by the Commission to establish the common rules that are related to the protection of competition on transboundary markets, thus representing the exclusive competence that the Commission has over the issue area. The court has also emphasized the importance of general rules of competition, identifying its direct effect on member states.

This case could lay the foundation to the establishment of the Commission as a powerful institution with supranational features that would be able to enforce its decisions. However, throughout this essay it was possible to trace the current limitations the Commission has, which constrains it from pursuing its technocratic agenda on competition policies, and allows to merely follow the political pursuits of the member states. Until the true supranational power is granted to the Commission, the ‘Belarusian elevator’ system will effectively block any decision member states are not in favor of, member states will remain relatively free to decide on the applicability of the Commission decisions on their territories, and non-compliant states and state entities are free to depart from the common rules, without a fear of potential punishment from the union. As for now, such a weak structure of the institution paired with the lack of commitment from member states, does not promise any major advancements in integration of the union.

References

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