EU wins arbitration in pharma trade dispute with Turkey

The European Union received a largely favourable ruling in its trade dispute with Turkey on Monday in the first appeal settled by arbitration to circumvent problems at the World Trade Organization (WTO).

Brussels brought the case against Ankara to the WTO in 2019, challenging Turkey’s “localisation requirement”. The EU said this forced foreign pharmaceutical producers to move their production to Turkey in order for Turkish consumers to qualify for reimbursement when buying their products in pharmacies. A WTO panel previously rejected Ankara’s arguments and recommended it bring its measures in line with global trade rules. This prompted an appeal by Turkey in April, although the appeal had to go down an untested route.

The WTO’s Appellate Body, which would normally hear such appeals, has been unable to issue a ruling since 2020 after former U.S. President Donald Trump’s blocked new appointments, a policy the current U.S. administration has not reversed. The Appellate Body’s paralysis means that disputes enter a legal void. To resolve that, the European Union and Turkey agreed to send the case to non-WTO arbitrators and to abide by their findings.

This is the first time an appeal in a WTO dispute has gone down this route. Arbitrators backed some of Turkey’s arguments, but supported the earlier WTO panel finding that the localisation requirement breached global trading rules and advised Turkey to adjust its measure accordingly.

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