India reserves rights to join Russia’s CBAM dispute with EU as third party at WTO
India has reserved its third-party rights at the World Trade Organization (WTO) in a dispute filed by Russia against the European Union's Carbon Border Adjustment Mechanism (CBAM)
The WTO Dispute Settlement Body has agreed to establish a panel to examine Russia's challenge, which alleges that the EU's CBAM package amounts to a disguised trade restriction and involves elements comparable to an export subsidy under the EU's Emissions Trading System
Other major economies — including the United States, United Kingdom, China, Japan, Canada, Brazil and South Korea — have also reserved third-party rights in the same dispute
India has separately raised concerns over the impact of CBAM on Micro, Small and Medium Enterprises (MSMEs) with the EU, both bilaterally and at the WTO
EU's Carbon Border Adjustment Mechanism (CBAM)
CBAM, established under EU Regulation 2023/956, is a carbon pricing tool that requires importers of certain carbon-intensive goods into the European Union to pay a levy corresponding to the carbon emissions embedded in those goods, mirroring the price EU domestic producers pay under the EU Emissions Trading System (EU ETS). Its stated aim is to prevent "carbon leakage" — the relocation of carbon-intensive production to countries with weaker climate regulation.
Key Details
- Transitional (reporting-only) phase ran from October 2023; the definitive phase, requiring purchase and surrender of CBAM certificates, began 1 January 2026
- Covers six sectors: iron and steel, cement, aluminium, fertilisers, hydrogen, and electricity
- A mass-based de minimis threshold (importers of 50 tonnes or less annually of covered goods, excluding hydrogen and electricity) was introduced to ease compliance for smaller importers
- Indian exports most exposed: steel and aluminium, where the EU is a major destination market
Russia's WTO complaint challenges the legality of this mechanism; India's decision to reserve third-party rights lets it present its own legal and economic arguments on CBAM's WTO-compatibility without becoming a principal disputant.
WTO Dispute Settlement — Third-Party Rights (DSU Article 10)
Under Article 10 of the WTO's Dispute Settlement Understanding (DSU), any WTO member with a "substantial interest" in a dispute may notify the Dispute Settlement Body (DSB) and participate as a third party, distinct from the complainant and respondent.
By reserving third-party rights rather than filing its own complaint, India secures a formal voice in the panel proceedings on CBAM's compatibility with WTO rules such as the non-discrimination principles (Most Favoured Nation and National Treatment) and the General Agreement on Tariffs and Trade (GATT).
Carbon Border Measures and Non-Discrimination Principles (GATT/WTO)
A recurring legal question in trade law is whether unilateral carbon border measures like CBAM are consistent with core WTO non-discrimination principles — Most Favoured Nation treatment (GATT Article I) and National Treatment (GATT Article III) — or can be justified under the general exceptions in GATT Article XX (including the environmental exception, Article XX(g)).
Key Details
- Developing countries, including India, have argued CBAM does not adequately account for the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) under the UNFCCC framework
- India's exposure is concentrated in carbon-intensive but MSME-heavy value chains (e.g., downstream steel and aluminium processing units) that lack the capital to decarbonise quickly
- Comparable carbon border measures are also being studied or piloted in the UK and other jurisdictions, raising the prospect of multiple, non-harmonised carbon border regimes
India's MSME-impact concerns and its WTO third-party intervention both stem from the same underlying question — whether CBAM's carbon accounting and cost burden are compatible with WTO trade law and equitable climate burden-sharing.
- EU CBAM legal basis: Regulation (EU) 2023/956
- CBAM definitive phase (certificate purchase/surrender) began: 1 January 2026
- Sectors covered: iron & steel, cement, aluminium, fertilisers, hydrogen, electricity
- WTO DSU third-party notification window: approximately 10 days from panel establishment (DSU Article 10)
- Countries reported to have reserved third-party rights in this dispute include the US, UK, China, Japan, Canada, Brazil, South Korea, alongside India