The International Trade Law Review: European Union

Introduction

European Union (EU) trade policy finds itself at a time of economic transformation and geopolitical instability. The former aspect appears driven by both necessity and political decision-making. It is necessary because covid-19 continues to disrupt not only working arrangements within the EU but also trade links.2 Politically led disruptions have arisen from the aftermath of Brexit, and will become increasingly complicated as, inter alia, the following begin to take shape: a new form of subsidy control on the 'other' side of the English Channel (see Section II.viii); the European Commission's (the Commission) ambitious climate change policy tools (see Section II.ii); and a seemingly incongruous policy direction of 'open strategic autonomy'.3 At the same time, this new-found leitmotiv of EU trade policy appears poised to tackle some aspects of existing and increasingly unstable trading relations. For example, the new proposal for a foreign subsidies regulation (see Section II.i) is part of a toolbox of instruments with which the EU seeks to horizontally link other domestic policies, such as a free and competitive Single Market and fair working conditions, along the supply chain of products that are consumed in the Union (see Section II.vi). The message is clear: under President Ursula von der Leyen, the EU seeks to strengthen its ability to chart its own course in line with its interests and values.

In other words, there is much to cover in this year's chapter as we take stock of trade policy and legal developments in the EU over the past year.

Trade policy developments

Reflecting the new mantra of 'open strategic autonomy', the Commission has begun to propose initiatives and pursue old tools to take 'a more assertive stance in defending its interests and values'.4 Below, we summarise the most important policy and legal developments of the past year.

i Proposal on foreign subsidies

The EU takes pride in its unique and long-standing state aid regime, which prohibits allegedly distortive subsidies granted by EU Member States. However, the Commission believes that foreign government subsidisation of companies in the EU, which is not subject to the same level of scrutiny as Member State subsidies, jeopardises the 'competitive neutrality' that the EU has pioneered. In line with that idea, on 5 May 2021, the Commission published its much-awaited proposal on foreign subsidies5 (previously known as the White Paper 'on levelling the playing field as regards foreign subsidises' (the White Paper), which we discussed in last year's chapter). Through this, the Commission seeks to establish a new policy tool to address the regulatory gap in respect of the distortive effects that foreign subsidies may have on the EU's internal market. In practice, that means that the funding of foreign undertakings that wish to actively participate in the internal market will be subject to scrutiny, particularly in the context of concentrations and public procurement.

The proposal follows the main principles of the White Paper. In the proposal, the concept of 'foreign subsidy' is defined broadly and must generally be understood as any financial contribution provided, directly or indirectly, by the public authorities of a third country. Notably, this includes foreign central governments, foreign government authorities at all other levels, foreign public entities whose actions can be attributed to the third country and any private entity whose actions can be attributed to the third country. Once the existence of such a subsidy is established, the Commission must assess, by reference to a non-exhaustive list of indicators, whether the foreign subsidy at issue can be deemed to distort the internal market. While this assessment takes place on a case-by-case basis, the proposal increases the minimum threshold below which a foreign subsidy is deemed unlikely to cause such distortion (that threshold is set at €5 million over any consecutive period of three fiscal years).

The proposal also provides for a list of categories of subsidies that are considered most likely to distort the internal market. These include foreign subsidies to ailing undertakings; unlimited guarantees; foreign subsidies that directly facilitate a concentration; and foreign subsidies that enable an advantageous tender. Overall, the proposal introduces three tools for the Commission to investigate foreign subsidies:

  1. ex ante notification requirements for concentrations where the acquired undertaking or at least one of the merging undertakings is established in the EU and generates an aggregate turnover in the EU of €500 million or more, and the foreign financial contribution is at least €50 million;
  2. ex ante notification requirements when participating in public procurement procedures, which allows the Commission to investigate bids in public procurement procedures involving a financial contribution by a non-EU government, where the estimated value of the procurement is €250 million or more; and
  3. for all other market situations, and for smaller concentrations and public procurement procedures, the Commission can ex officio initiate an investigation, relying on information from all available sources, and may request ad hoc notifications. Such reviews are not limited in scope.6

Failure to notify in the first and second instances may lead to the imposition of significant fines. The Commission can then review the transaction as if it had been notified. Thus, practically speaking, if enacted in its current form, the foreign subsidies proposal could have a significant impact on (and potentially even disrupt) deal negotiations, regulatory reviews under M&A deals and public procurement processes. The final regulation adopting this proposal is expected in 2022.

ii Carbon border adjustment mechanism

Striving for Europe to become the first climate-neutral continent, the EU announced the European Green Deal in 2019 to decouple economic growth from resource use, with a just and inclusive transition. With the aim to reduce greenhouse gas emissions by at least 55 per cent by 2030, on 18 February 2021, the Commission announced its 'Open, Sustainable and Assertive Trade Strategy'.7

Further, on 10 March 2021, the European Parliament adopted a resolution towards a carbon border adjustment mechanism (CBAM) compatible with the World Trade Organization (WTO). In its resolution, the European Parliament calls for the new mechanism to be part of a broader EU industrial strategy and to cover all imports of products and commodities considered under the EU's Emission Trading System. In the eyes of this co-legislator, by 2023, the CBAM should cover the power sector and energy-intensive industrial sectors such as cement, steel, aluminium, oil refinery, paper, glass, chemicals and fertilisers, which continue to receive substantial free allocations, and still represent 94 per cent of EU industrial emissions.

On 3 June 2021, a draft proposal for a regulation on the establishment of a CBAM became public.8 It provides for the establishment of a separate authority that would grant authorisations to declarants wishing to import goods falling under the CBAM, accredit verifiers, review CBAM declarations and manage CBAM certificates. Imports of goods covered by the CBAM can only be made by authorised declarants, who will have to lodge CBAM declarations each year (a condition that appears somewhat reminiscent of Authorised Economic Operator declarations under EU customs law). Such declarations will reflect direct and indirect greenhouse gas emissions embedded in the imported goods, and importers will have to surrender a corresponding amount of CBAM certificates.

According to the draft proposal, the carbon border tariff will not apply to countries within the EU Customs Union (which includes Iceland, Liechtenstein, Norway and Switzerland) and to EU overseas territories. However, countries with high climate ambition (e.g., the United States) will not be automatically exempt.

The Commission proposed its CBAM on 14 July 2021. The expected date of the entry into force is 1 January 2026. However, a transitional period of three years is being envisaged, during which a simplified system will apply. Whether the CBAM will live up to its laudable goals remains to be seen.

iii Trade Enforcement Regulation

Last year's edition mentioned the proposed amendments to the Trade Enforcement Regulation that came as a reaction to the blockage of the operations of the WTO Appellate Body. On 13 February 2021, the revised Trade Enforcement Regulation entered into force.9 It introduced the following changes:

  1. ensuring that the EU's right to proper adjudication in the WTO is protected by enabling it to react when the resolution of a trade dispute is blocked despite the EU's good faith effort to follow dispute settlement procedures;
  2. enabling the EU to respond if its partners frustrate recourse to dispute settlement in bilateral trade agreements; and
  3. enlarging the scope of possible trade policy measures beyond goods to services and some aspects of intellectual property.

A review of the scope of this Regulation will be conducted in a year's time and will feature in next year's edition of this chapter.

iv Anti-coercion instrument

During the process of updating the Trade Enforcement Regulation, the European Parliament and Member States raised concerns about coercive practices of non-EU countries. This led to a political agreement on a Joint Declaration of the Commission, the Council and the European Parliament10 to create a new instrument to tackle such coercive practices.

On 23 March 2021, the Commission launched a public consultation to seek input on shaping this new legal instrument. The policy idea underlying this new tool lies in the possibility for the Commission to adopt trade restrictive measures to dissuade or offset actions by third countries that breach international trade rules that affect the EU's commercial interests. Although unclear at present, its application may be linked to other horizontal trade policy initiatives, such as the EU Blocking Statute (and thus counter the use of extraterritorial sanctions)11 or the CBAM and other European Green Deal initiatives (such as those aimed at preventing public export subsidisation of fossil fuel projects).12 So far, the new instrument does not seem intended to target any particular country, but instead seeks to address the problem of coercive actions overall. The Commission is aiming to adopt the proposal on the anti-coercion mechanism by the end of 2021. In the light of the United States Trade Representative's decision to announce and immediately suspend tariffs in its Section 301 investigation into the digital services taxes of EU Member States,13 the EU's anti-coercion instrument may find application sooner rather than later.

v Other elements of the 'enforcement toolbox'

The EU has taken the following steps to strengthen its overall enforcement toolbox:

  1. appointing a Chief Trade Enforcement Officer;
  2. establishing a single entry point for complaints from EU stakeholders on trade barriers in foreign markets and violations of sustainable trade commitments in EU trade agreements under the updated Access2Markets portal; and
  3. concluding two examinations under the Trade Barriers Regulation14 concerning:
    • Mexico's measure affecting tequila exports to the EU;15 and
    • Saudi Arabia's measures affecting market access to EU ceramic tiles.16

In particular, the latter examinations are seen as a sign of what is to come in the light of the creation of an entirely new directorate and the closer oversight of commitments in EU trade agreements by the Chief Trade Enforcement Officer (see last year's chapter).

vi Supply chain due diligence

On 10 March 2021, the European Parliament adopted its Report on Corporate Due Diligence and Accountability.17 This report provides a sense of the final shape of a possible future EU directive. Under the proposed text, companies would be required to carry out due diligence strategies to assess and address the risks related to the operations of their global supply chains. The covered risks are threefold: human rights (e.g., forced labour, worker safety), the environment (e.g., ecosystem degradation, unsafe levels of hazardous products) and good governance (e.g., bribery of public officials in international business transactions).

The new rules cast a wide net, applying across all sectors of economic activity and to all firms that are either registered under the laws of an EU Member State, or that are registered outside the EU but nevertheless maintain operations within the single market. Rather than impose requirements on specific companies above a certain size, the EU law would bind all companies (albeit with more relaxed requirements for smaller enterprises). Companies with cross-border operations will be attributed a duty of vigilance. According to Article 4 of the European Parliament's report – the heart of the proposed legislative text – companies would discharge this duty by conducting risk assessments and publishing the results of these due diligence reviews. Even if the result of the review is that the company does not contribute to human rights, environmental or good governance risks, then it must still publish a positive statement to that effect as well as any risk assessment it may have carried out. The proposed directive would thus introduce a comply and explain principle, rather than a comply or explain principle as currently applied in the Non-Financial Reporting Directive.18 Yearly reports will thus become a mainstay for European companies. 19

The Commission is in the process of drafting a formal legislative proposal, which will be presented in 2021.

vii Global human rights sanctions regime

To give impetus to discussions commenced over two years ago, on 7 December 2020, the Council adopted Decision 2020/199920 and Regulation 2020/1998.21 The system thereby introduced can be used to sanction worldwide violations of human rights committed by particular individuals. Politically, it is considered to be the European version of the United States' Magnitsky Act, which was enacted in the United States after a Russian journalist died in prison after publishing details of corrupt practices by high-level Russian officials. The system introduced seeks to counter human rights abuses, and allows the Council to impose different restrictive measures, including travel bans on individuals, and asset freezes on entities and individuals that are listed as human rights violators by that institution. As such, it closes a gap in the EU's sanctions policy, which was usually deemed 'reactive' (that is, imposed after the occurrence of a particular event, such as the forced grounding of a Ryanair flight by Belarus to arrest a political dissident in May 2021) rather than 'proactive' (such as to outline the EU's red lines on general public policies). Thus far, the system has been used to sanction officials, leaders and entities from Russia, China, North Korea, Sudan, Libya and Eritrea.

viii Brexit, the EU–UK Cooperation Agreement and Northern Ireland

On 24 December 2020, the EU and the United Kingdom (UK) announced the conclusion of their negotiations on a Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, on the one hand, and the United Kingdom of Great Britain and Northern Ireland, on the other, intended to settle their future relationship (the TCA). One particular aspect of the TCA deserves special attention: namely, the obligation, by both sides, to put in place and maintain an 'effective system of subsidy control with independent oversight'.22 This obligation deserves attention because, in the course of the EU–UK trade talks, state aid (i.e., domestic subsidies) had emerged as one of the major areas of disagreement between the two sides, regarding any future relationship. To the EU, strong obligations on state aid were important for two reasons. First, the size and proximity of the UK's economy meant that the risk of UK subsidies harming EU trade was much greater than with other partners. Second, despite claims that it was asking for an 'off-the-shelf agreement', the UK was in fact asking for freer access to EU markets than had been offered to countries such as Canada.23

The resulting compromise is the obligation to ensure a level playing field for open and fair competition and sustainable development (covered in Title XI of the TCA). The rules contained therein create an entirely new subsidy regime in the EU, since the current EU state aid regime only looks at effects within the EU and not those in or with third countries. For the UK, the result similarly means the creation of a new post-Brexit subsidy control system, something that has existed only at the EU level until now. The UK will also set up a new independent authority to assess compliance with subsidy controls. The subsidy control system additionally requires that the courts of both signatories be able to hear claims from interested parties, review subsidy decisions and grant effective remedies, in accordance with each sides' domestic law. Likely inspired by the Commission's amicus intervention powers before national courts in EU state aid matters, the regime also allows either side to intervene in the other's domestic court proceedings if the court permits it to do so.24

If a party considers that a subsidy 'causes, or there is a serious risk that it will cause, a significant negative effect on trade or investment between the Parties', specific remedies are available to the affected Party.25 If a dispute is not solved by consultation, then the affected Party can impose 'remedial measures' if it finds a subsidy to have breached the rules. If this happens, there is an option to request an arbitration tribunal to assess whether there was such a breach. If the panel finds there was a breach, then it can authorise the complainant to suspend parts of the agreement.

The TCA also provides for a rebalancing mechanism. Indeed, according to Article 9 of the TCA, both parties have the right to take countermeasures where either party establishes that the other party's subsidy, labour and social, or climate and environmental policies 'materially impacts on trade or investment between the Parties'. The resulting unilateral measures are then subject to review by an arbitration panel. For the sake of clarity, this mechanism, with the right to take countermeasures, should be distinguished from the remedial measures in the case of incorrect subsidisation.

Finally, the TCA establishes a separate Northern Ireland Protocol. That protocol places Northern Ireland de facto in the EU's single market for goods, for goods to continue to freely circulate between Northern Ireland and the EU. The very existence of a zero tariff, zero quota deal greatly reduces the risk of Northern Ireland being used as a 'back door' to the EU for UK goods (e.g., to avoid tariffs), and thus mitigates the need for pre-emptive charging of tariffs on UK goods entering Northern Ireland. Under Article 10 of the Northern Ireland Protocol, to prevent undue distortion of competition and trade between Northern Ireland and the EU, EU state aid law will continue to apply to the UK with regard to Northern Ireland–EU trade. That is, state aid control will apply to any business support measures that have the potential to affect trade between Northern Ireland and the EU. However, to address concerns of a 'reach-back' of subsidies to a UK company that has a subsidiary in Northern Ireland, the EU issued a unilateral EU declaration stressing that, in its implementation of Article 107 TFEU and Article 10.1 of the Northern Ireland Protocol, it will give 'due regard to Northern Ireland's integral place in the United Kingdom's internal market . . . [meaning that] an effect on trade . . . which is subject to this Protocol cannot be merely hypothetical, presumed, or without a genuine and direct link to Northern Ireland'.

It remains to be seen how the implementation of the TCA, and in particular its subsidy disciplines, will affect the EU's proposed and newly introduced instruments that address the 'spillover' effects of domestic support measures in any forms (e.g., the Foreign Subsidies Proposal and the CBAM). It is clear, however, that any concurrent application of those principles will lead to further discussions, if not legal proceedings, between the EU and the UK.

Trade remedies investigations

The EU's trade defence investigation (TDI) legislation comprises Regulation (EU) 2016/1036 (the Basic Anti-dumping Regulation)26 and Regulation (EU) 2016/1037 (the Basic Anti-subsidy Regulation)27 as well as Regulation (EU) 2015/478,28 which concerns the rules on imports from WTO members, and Regulation (EU) 2015/755,29 which applies to imports from non-WTO members. These regulations were not subject to any changes in the last year.

That being said, 2020 was a particularly busy year for EU TDI practitioners, with an increased level of new casework and reviewing activity as compared with 2019. Statistics show 101 definitive anti-dumping measures, 18 countervailing measures and three safeguard measure in force in 2020. This is an increase of 10 measures as compared with the previous year, when 94 anti-dumping measures and 15 countervailing measures were in force.30

Several noteworthy investigations concluded or under way in 2020 and early 2021 deserve a mention.

i Steel safeguard investigation and reviews

Since last year's edition of this book, the Commission completed its second and third reviews of the steel safeguard measure and initiated the fourth review. Initiated on 14 February 2020, the second review31 took account of possible developments and changed circumstances caused by the covid-19 pandemic. The most important changes concerned: (1) the quarterly management of all country-specific quotas; (2) the introduction of a refined access regime for access to the residual quota of countries benefiting from a country-specific quota; (3) the introduction of a new country-specific quota for hot-rolled flat steel; and (4) an update to the list of developing countries. On 30 October 2020, the Commission also initiated the third review in view of the UK's withdrawal from the EU. To take account of those changes, the Commission recalculated the volume of Tariff Rate Quotas to reflect the exit of the UK from the EU Customs Union.32

Finally, on 26 February 2021, following a request from 12 Member States, the Commission initiated its fourth review, to assess whether the steel safeguard measure in place should be extended beyond 30 June 2021.33

On 11 June 2021, the Commission proposed to extend the safeguard measure for three years from 1 July 2021 to 30 June 2024, with a review of those measures during the first year of prolongation.34 The Commission noted, inter alia, that the economic situation of the Union industry had deteriorated significantly in 2019, and further during 2020, and that 'the COVID-19 pandemic crisis has thus amplified a pre-existing and continuing source of serious injury for the Union industry, which is mainly driven by imports.' Third countries were invited to consultations between 14 and 18 June 2021. On 25 June 2021, the Commission decided to prolong the safeguard measure on imports of certain steel products until 30 June 2024.35

ii Developments in anti-dumping practice

The criteria for selecting the representative country for the application of Article 2(6a) of the basic Anti-Dumping Regulation were covered in the last edition of this book. The investigation into PVA from China36 gave further insight into the Commission's practice under Article 2(6a) of the Basic Anti-Dumping Regulation. First, in the process of selecting the representative country in the case, it was found that none of the suitable countries with a level of economic development similar to China produced the product under investigation. As a solution, the Commission resorted to a product in the same general category. Second, in the course of the investigation, the Commission changed the selected potential representative countries. Usually, the Commission publishes two notes for the file in which the discussion on the representative country is held, and the choice is made early on. However, in PVA from China, due to complications with finding comparable products, Turkey was first added and then selected as a representative country. According to the Commission the choice of the representative country does not have to be made early in the proceedings and can always be refined: '[t]he initial selection of potential representative countries and of suitable companies with publicly available data does not prevent the Commission from the possibility to supplement or refine such selection and its research at a later stage, including by putting forward new suggestions in terms of potential representative country and similar product.'37 Third, the status of the country report concerning China38 was questioned by one interested party, given that it had not been updated for a while; and it was argued that the use of this report would not be in line with Article 2(6a)(c) of the Basic Anti-dumping Regulation. The Commission rejected this argument, noting that the provision does not envisage a specific format for the reports on significant distortions, and does not define a channel for publication or intervals for updating the reports. After the imposition of definitive measure on 20 September 2020, all three sampled Chinese exporters brought actions for annulment against that regulation. These exporters maintain, inter alia, that Article 2(6a) of the Basic Anti-Dumping Regulation creates an approach and an exception not provided for in the WTO Anti-Dumping Agreement.39 The outcome of that case is eagerly awaited and may be covered in the next edition of this book.

Another anti-dumping investigation, SSHR from China and Taiwan,40 for the first time considered the relationship between the general Union interest test under Article 21 of the Basic Anti-Dumping Regulation and the new Union interest test under Article 7(2b) in the context of the lesser duty rule (LDR). The question arose of whether it was in the Union's interest to impose higher duties on the product as an important user accounting for 30 to 40 per cent of EU stainless steel hot-rolled flat products (SSHR) consumption and 60 to 70 per cent of imports demonstrated that the resulting reorganisation of its supply chain would bring about high costs. The Commission found that as the effects on supply chains were very dramatic it was not in the Union's interest to determine the amount of duties in accordance with Article 7(2a), and confirmed that the measures should be set in accordance with Article 7(2) of the Basic Anti-Subsidy Regulation, so that the LDR could be applied.

On 18 August 2020, an anti-dumping investigation into Pins and Staples from China was terminated due to the withdrawal of the complaint by the complainant.41 However, at the same time, the Commission decided to continue the monitoring of the product concerned from China for two years. This was done to enable the Commission to assess the potential need to initiate a new investigation in case of trade diversions from the United States.42

iii Developments in anti-subsidy practice

The investigation into Glass Fibre Fabric from China and Egypt,43 covered in last year's edition of this chapter, for the first time set out the Commission's approach to tackling 'transnational' subsidies. On 27 May 2021, the Commission announced the partial reopening of the initial anti-dumping and anti-subsidy investigations to assess their extension to the EU's continental shelf (offshore wind parks in the continental shelf and exclusive economic zone).44 A few days later, on 31 May 2021, the Commission also initiated parallel anti-dumping and anti-subsidy investigations into the potential circumvention of the initial anti-dumping and anti-subsidy measures by imports of glass fibre fabric (GFF) consigned from Morocco.45 These steps represent the Commission's determination to ensure that the anti-dumping and anti-subsidy measures are effective and that illegal circumventing activities are ceased.

In the investigation Glass Fibre Products from Egypt,46 which immediately followed Glass Fibre Fabric from China and Egypt, the Commission investigated the same companies for producing a product closely related to GFF, and followed the same approach: that is, that the subsidies were granted in the framework of a cooperation between Egypt and China and since the government of Egypt actively sought and agreed to the subsidies made by the government of China, the former government made the financial contributions granted by Chinese public bodies in Egypt its own, and acknowledged and adopted the subsidies.

Thereafter followed SSHR from China and Indonesia. In that investigation, the complainant alleged, inter alia, that some subsidies to producers in Indonesia were directly granted by the government of Indonesia as well as by the government of China.47 However, in November 2020, the case was terminated due to the withdrawal of the complaint.48 The latest development happened on 17 February 2021, when the Commission initiated an investigation into imports of stainless steel cold-rolled flat products from India and Indonesia.49 In that investigation, the complainant alleges, inter alia, that subsides are granted to producers in the context of the cooperation between the governments of Indonesia and China to support investments in an industrial park in Indonesia. These anti-subsidy investigations are closely linked with the Commissions initiatives, such as the EU framework for foreign investment screening and the White Paper, and the Commission's Proposal on foreign subsidies distorting the internal market (see Section II.i).50 Given that an Egyptian exporter has challenged the determination in Glass Fibre Fabric from China and Egypt before the EU courts,51 it may prove interesting to what extent the Commission's practice of addressing foreign subsidies by means of the Basic Anti-Subsidy Regulation will continue.

Trade disputes before the European courts

In this section, it is customary for us to look at practical issues for international trade practitioners that transpire from recent case law of the European courts. We discuss two important developments.

i Secondary sanctions and the EU Blocking Statute

On 12 May 2021, Advocate General Hogan released his long-awaited opinion in Bank Melli Iran v. Telekom Deutschland GmbH.52 In that case, the Court of Justice of the European Union (CJEU), for the first time, had been called upon to interpret the EU Blocking Statute, in particular Article 5. This provision prohibits EU operators from adhering to certain US sanctions that the EU deems extraterritorial, as listed in the Annex to the EU Blocking Statute. The applicant, Bank Melli Iran, invoked the provision to prevent Telekom Deutschland GmbH from complying with a US prohibition on dealings with Iran.

The Advocate General interprets Article 5 of the EU Blocking Statute to have the objective of counteracting any effects flowing from foreign legislation, and not just the application of that legislation by a public administration or a court.53 That means that even the potential application of those extraterritorial sanctions is sufficient to invoke the broad effects of the EU Blocking Statute. Most interestingly, to uphold the effects of Article 5 of the EU Blocking Statute, and to disassociate those from any discretion of the public administration of the Member States,54 the Advocate General reads the imperative language of that provision as conferring a right of enforcement on third parties such as Bank Melli Iran.55 This results in an obligation on the courts of the Member States to order EU operators to maintain contractual relationship that they sought to terminate.56 The consequence of this, as the Advocate General observes, is 'that a foreign entity . . . will collaterally obtain the benefit of this right of action at the expense of a European entity'.57

This reflects part of the dilemma already faced by EU companies. Should one violate the EU Blocking Statute with the possibility of facing criminal or administrative penalties and damage claims, given the direct applicability of Article 5 of that regulation? Or rather, face the wrath of US law, which, under current case law, does not appear to recognise compliance with that regulation as a valid defence under the foreign sovereign compulsion doctrine?58

As per the Advocate General, the only way to successfully deflect a claim of contravening the EU Blocking Statute would be to demonstrate active engagement 'in a coherent and systematic corporate social-responsibility policy (CSR) which requires [the company], inter alia, to refuse to deal with any company having links with the Iranian regime'.59 At the same time, the Advocate General does recognise that ethical reservations about doing business with certain countries, including Iran, could be a reason to terminate or freeze contractual relations without falling within the scope of the EU Blocking Statute.60 However, where a foreign operator has prima facie evidence that the true reason for the termination of contractual relations may instead lie in an attempt to comply with US sanctions, and presents that evidence to a national court, the operator may force – in a reversal of the burden of proof – its counterparty to justify the veracity of the reasons not to continue contractual relations.61

The judgment of the CJEU is expected later in the year. If the Court follows the line of argument of the Advocate General that Article 5 of the EU Blocking Statute confers a collateral 'right of enforcement' on third parties, practitioners should expect more cases surrounding the interplay of EU and third-country sanctions.

ii 'Class actions' in EU anti-dumping law

In another important development, on 19 May 2021, the General Court (in extended composition) handed down its lengthy judgment in China Chamber of Commerce for Import and Export of Machinery and Electronic Products and Others v. Commission (CCCME and Others v. Commission).62 At its procedural heart, that case concerned the question of whether associations of producers-exporters investigated by the Commission for dumping practices could file one collective action on behalf of their affected members. In the realm of trade defence investigation, that question had been considered only once before in P Growth Energy and Renewable Fuels Association v. Council.63 However, that judgment left many practical issues unresolved. In its judgment in CCCME and Others v. Commission, the General Court recognised that the right of action for associations on behalf of their members is based on the procedural reason of the sound administration of justice. This would obviate the need for numerous separate actions against the same acts by the members of the association representing their interests.64 The case law presupposes two conditions in this respect. First, that the association in question must act on behalf of its members (who themselves are entitled to bring proceedings); and, second, that the powers conferred on it in its articles of association permit actions to be initiated.65

As regards the first condition, the General Court explains that the right of an association to bring such proceedings on behalf of its members does not presuppose the association representing its members throughout the entirety of the administrative stage.66 A mere certificate of membership would be sufficient.67 The second condition would comprise a factual assessment. In essence, it requires the articles of association to stipulate that the corporate purpose of that association is to defend the interests of its members in administrative and contentious proceedings.68 This assessment is to take place on a case-by-case basis.

Based on the judgment in P Growth Energy and Renewable Fuels Association v. Council, the General Court also rejected the advancement, by the Commission and the intervener, of a third condition, according to which the common legal tradition of the Member States would require the presence of a right to vote or any other means of reflecting the individual members' views within the association.69 Although unclear, the General Court appears to have linked its rejection of that line of argument to the fact that the EU legislature had laid down different rules for the calculation of the normal value for imports from non-market economy countries, but included no such requirements for assessing the procedural rights of associations.70

The judgment in CCCME and Others v. Commission is likely to bring two practical developments for practitioners: first, greater policing on which associations are admitted as 'representative associations' for the purposes of trade defence proceedings; and, second, the likely bundling of a multitude of claims by producers-exporters through their respective associations.

Trade disputes before the WTO dispute settlement body

One noteworthy dispute involving the EU was resolved last year before the WTO Dispute Settlement Body. On 25 July 2020, the panel issued its report in DS494 EU – Cost Adjustment Methodologies II (Russia). That dispute concerned two aspects of the EU's anti-dumping practice: (1) the adjustment, by the Commission, of input costs (usually gas or electricity in the case of Russia) incurred by investigated producers and exporters, whenever these costs are deemed artificially low or affected by government intervention; and (2) specific determinations made by the EU in two expiry reviews from 2014 and 2015. Of greatest interest will be the former point.

First, the panel rejected Russia's arguments that the second subparagraph of Article 2(3) of the EU's Basic Anti-Dumping Regulation introduced an additional circumstance, not provided for by Article 2.2 of the WTO Anti-Dumping Agreement, allowing authorities to use alternative methods in the determination of the normal value (namely, that 'a particular market situation for the product concerned' exists 'when prices are artificially low').71 Contrary to Russia's assertion, the panel found no sufficient link that the determination was solely limited to the situation described in the second Ad Note (i.e., state-trading monopolies).

Second, the panel found that Russia had not sufficiently proven that the second subparagraph of Article 2(5) of the Basic Anti-Dumping Regulation (which allows the EU to adjust or replace costs not reasonably reflected in the records of an investigated producer or exporter on the basis of the costs of other producers or exporters in the same country or on any other reasonable basis) would be inconsistent with Articles 2.2 and 2.2.1.1 of the WTO Anti-Dumping Agreement.72

Finally, Russia also formulated 'as such' claims regarding the existence of an unwritten 'cost adjustment methodology', by virtue of which the EU systematically rejected: (1) certain costs reflected in the records kept by the export or producer under investigation, if those costs were deemed artificially low or affected by government intervention; and (2) the replacement of those costs with costs associated with the production and sale of the product under investigation if those were reasonably reflected in the records kept by the producer or exporter in question. The panel agreed with Russia. Thus, it found a violation of Articles 2.2 and 2.2.1.1 of the WTO Anti-Dumping Agreement on the part of the EU when making use of out-of-country input price information without establishing whether or explaining how such information is adequate to reflect or represent the costs of production in the country of origin.73

While these findings are noteworthy in their own right, it is important to highlight that the panel did not formulate findings with regard to the compliance of the 'new' Articles 2(6a) and 7(2a) of the Basic Anti-Dumping Regulation. These correspond to the horizontal, non-standard dumping methodology in cases of 'significant distortions' and the criteria for the non-application of the lesser duty rule in such cases. To the panel, these provisions do not relate to whether costs are reasonably reflected in the records of the exporting producer, contrary to the cost adjustment methodology.

Despite the current blockage of the Appellate Body, both the EU and Russia filed their decision to appeal and cross-appeal to the Appellate Body certain issues covered in the panel report. The final resolution of this dispute thus remains pending.

Outlook

Almost over are the years when the EU was seen as weak on trade. The past year has seen a number of policy movements in the European trade sphere that seemingly seek to pursue both an inward-looking reliance (such as the continued protection of 'strategic' production of any type of steel products) as well as an outward-looking de-weaponisation of 'choke points' (be they institutional, such as the demise of the Appellate Body, or business-related, such as the coercion to follow a certain foreign policy line or adhere to extraterritorial sanctions).74

On the face of it, none of these proposals address the vulnerability of the EU's global supply chains. The latter were thrown into the limelight by the plight of Ever Given, a container ship that ran aground in the Suez Canal and disrupted global trade for months. However, the decoupling from block-reliance on certain countries, especially China, appears to be in motion. The Investment Screening Regulation (covered in the 2019 edition of this chapter) and the proposed foreign subsidies regulation (see Section II.i) are just two examples of policy instruments that, in the long term, seek to reduce the EU's vulnerabilities and reliance on the economic goodwill of China as well as other 'unlike-minded' trading partners.

More policy tools targeting the international supply chain of certain 'strategic' goods are therefore likely to follow this year, if not soon thereafter. For instance, in October 2020, the Commissioner for Internal Market, Thierry Breton, announced an Action Plan on Critical Raw Materials that 'proposes actions to reduce Europe's dependency on third countries, diversifying supply from both primary and secondary sources and improving resource efficiency and circularity while promoting responsible sourcing worldwide'.75 Such dependency can be reduced either by way of specific 'grooming' of certain industries or by reducing the trade of such minerals with certain partners (or both). Whichever direction the EU will take, the result will prove to be quite revolutionary for the impacted supply chains. Consequently, while covid-19 arguably continues to pose the greatest threat to a healthy and stable outlook for trade in the short term,76 at least on the European subcontinent, the political tools to manage interdependence – which linger on the horizon – may yet prove far more disruptive in the long run.

Footnotes

1 Nicolaj Kuplewatzky is a référendaire at the Court of Justice of the European Union and Nia Bagaturiya is an associate at V V G B.

2 See European Commission, Eurostat, 'Impact of COVID-19 on international trade by Member State', March 2021, available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=
Impact_of_COVID-19_on_international_trade_by_Member_State [last accessed 8 June 2021], p. 1.

3 European Commission, Trade Policy Review, 'Open Strategic Autonomy', February 2021, available at: https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159434.pdf [last accessed 8 June 2021].

4 See Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Trade Policy Review – An Open, Sustainable and Assertive Trade Policy, 18 February 2021, COM(2021) 66 final, available at: https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159438.pdf [last accessed 8 June 2021].

5 17 June 2020, COM(2020) 253 final.

6 Press release, 'Commission proposes new Regulation to address distortions caused by foreign subsidies in the Single Market', 5 May 2021.

7 Press release, 'Commission sets course for an open, sustainable and assertive EU trade strategy', 18 February 2021.

9 Regulation (EU) 2021/167 of the European Parliament and of the Council of 10 February 2021 amending Regulation (EU) No. 654/2014 concerning the exercise of the Union's rights for the application and enforcement of international trade rules, OJ L 49, 12 February 2021, p. 1.

10 Joint Declaration of the Commission, the Council and the European Parliament on an instrument to deter and counteract coercive actions by third countries (2021/C 49/01), OJ C49, 12 February 2021, p.1.

11 European Parliament, Legislative train, 'Instrument to deter and counteract coercive actions by third countries', May 2021, available at: https://www.europarl.europa.eu/legislative-train/api/stages/report/current/theme/an-economy-that-works-for-people/file/instrument-to-deter-and-counteract-coercive-actions-by-third-countries [last accessed 9 June 2021].

12 Reuters, 'Seven European countries to halt export finance for fossil fuels', 21 April 2021, available at: https://www.reuters.com/business/sustainable-business/seven-european-countries-halt-export-finance-
fossil-fuels-2021-04-14/ [last accessed 9 June 2021].

13 Office of the United States Trade Representative, Press release, 'USTR Announces, and Immediately Suspends, Tariffs in Section 301 Digital Services Taxes Investigation', 2 June 2021, available at: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/june/ustr-announces-and-immediately-
suspends-tariffs-section-301-digital-services-taxes-investigations [last accessed 8 June 2021].

14 Regulation (EU) 2015/1843 of the European Parliament and of the Council of 6 October 2015 laying down Union procedures in the field of the common commercial policy in order to ensure the exercise of the Union's rights under international trade rules, in particular those established under the auspices of the World Trade Organization, OJ L 272, 16 October 2015, p. 1.

15 Report to the Trade Barriers Regulation Committee, Union examination procedure following a complaint on obstacles to trade within the meaning of Regulation (EU) 2015/1843 applied by the United Mexican States consisting of measures affecting the import of 'Tequila', 16 April 2021.

16 Report to the Trade Barriers Regulation Committee, Union examination procedure following a complaint on obstacles to trade within the meaning of Regulation (EU) 2015/1843 applied by the Kingdom of Saudi Arabia consisting of measures affecting the import of ceramic tiles, 27 April 2021.

17 European Parliament, Resolution of 10 March 2021 with recommendations to the Commission on corporate due diligence and corporate accountability (2020/2129(INL)), available at: https://www.europarl.europa.eu/doceo/document/TA-9-2021-0073_EN.html [last accessed 9 June 2021].

18 Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups (OJ L 330, 15 November 2014, p. 1).

19 For more detail, see O. Beghin, E. Vermulst, 'New EU Rules on Supply Chain Due Diligence: A Net Cast Too Wide?', Regulating for Globalization, available at: http://regulatingforglobalization.com/2021/04/15/new-eu-rules-on-supply-chain-due-diligence-a-net-cast-too-wide/ [last accessed 8 June 2021].

20 Council Decision (CFSP) 2020/1999 of 7 December 2020 concerning restrictive measures against serious human rights violations and abuses (OJ L 410I 7 December 2020, p. 13).

21 Council Regulation (EU) 2020/1998 of 7 December 2020 concerning restrictive measures against serious human rights violations and abuses (OJ L 410I 7 December 2020, p. 1).

22 Article 3.4 of the TCA.

23 Statement made by Boris Johnson, UK / EU relations, 3 February 2020, available at:
https://questions-statements.parliament.uk/written-statements/detail/2020-02-03/HCWS86.

24 See Article 3.12.3 of the TCA.

25 ibid.

26 Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (codification), OJ L 176, 30 June 2016, p. 21, as amended.

27 Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (codification), OJ L 176, 30 June 2016, p. 55, as amended.

28 Regulation (EC) 2015/478 of the European Parliament and of the Council of 11 March 2015 on common rules for imports (codification), OJ L 83, 27 March 2015, p. 16.

29 Regulation (EC) 2015/755 of the European Parliament and of the Council of 29 April 2015 on common rules for imports from certain third countries (recast), OJ L 123, 19 May 2015, p. 33.

30 The Commission's Anti-dumping, Anti-Subsidy, Safeguard Statistics covering the full year 2020,
December 2020, p. 2.

31 Commission Implementing Regulation (EU) 2020/894 of 29 June 2020 amending Implementing Regulation (EU) 2019/159 imposing definitive safeguard measures against imports of certain steel products, OJ L 206, 30 June 2020, p. 27.

32 Commission Implementing Regulation (EU) 2020/2037 of 10 December 2020 amending Implementing Regulation (EU) 2019/159 imposing definitive safeguard measures against imports of certain steel products, OJ L 416, 11 December 2020, p. 32.

33 Notice of initiation concerning the possible extension of the safeguard measure applicable to imports of certain steel products (2021/C 66/14), OJ C 66, 26 February 2021, p. 50. In the review, the Commission had to assess whether the safeguard measure continued to be necessary to prevent or remedy serious injury; if the Union industry was adjusting to the measures; and whether it was in the Union's interest to continue the measures.

34 See the European Union's Notification to the WTO pursuant to Article 12.1(c) of the Agreement on Safeguards of 11 June 2021.

35 Commission Implementing Regulation (EU) 2021/1029 of 24 June 2021 amending Commission Implementing Regulation (EU) 2019/159 to prolong the safeguard measure on imports of certain steel products, OJ L 225, 25 June 2021, p. 1.

36 Commission Implementing Regulation (EU) 2020/1336 of 25 September 2020 imposing definitive anti-dumping duties on imports of certain polyvinyl alcohols originating in the People's Republic of China, OJ L 315, 29 September 2020, p. 1.

37 Commission Implementing Regulation (EU) 2020/1336 of 25 September 2020 imposing definitive anti-dumping duties on imports of certain polyvinyl alcohols originating in the People's Republic of China, OJ L 315, 29 September 2020, recital (209).

38 Commission Staff Working Document on Significant Distortions in the Economy of the People's Republic of China for the purposes of Trade Defence Investigations, 20 December 2017, SWD(2017) 483 final/2.

39 Inner Mongolia Shuangxin Environment-Friendly Material v. Commission (Case T-763/20); Sinopec Chongqing SVW Chemical and Others v. Commission (Case T-762/20); Anhui Wanwei Updated High-Tech Material Industry and Inner Mongolia Mengwei Technology v. Commission (Case T-764/20).

40 Commission Implementing Regulation (EU) 2020/1408 of 6 October 2020 imposing a definitive anti-dumping duty and definitively collecting the provisional duty imposed on imports of certain hot rolled stainless steel sheets and coils originating in Indonesia, the People's Republic of China and Taiwan, OJ L 325, 7 October 2020, p. 26.

41 Commission Implementing Regulation (EU) 2020/1202 of 14 August 2020 terminating the anti-dumping proceeding concerning imports of pins and staples originating in the People's Republic of China and subjecting imports of pins and staples originating in the People's Republic of China to surveillance, OJ L296, 17 August 2020, p. 40.

42 Certain Collated Steel Staples From the People's Republic of China: Countervailing and Antidumping Duty Orders, Federal Register, Vol. 85, No. 139, 43813/43815, 20 July 2020.

43 Commission Implementing Regulation (EU) 2020/776 of 12 June 2020 imposing definitive countervailing duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt and amending Commission Implementing Regulation (EU) 2020/492 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt, OJ L 189, 15 June 2020, p. 1.

44 Notice concerning a partial reopening of the investigations leading to the anti-dumping and anti-subsidy measures on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt (2021/C 199/06), OJ C 199, 27 May 2021, p. 6.

45 Commission Implementing Regulation (EU) 2021/863 of 28 May 2021 initiating an investigation concerning possible circumvention of the countervailing measures imposed by Implementing Regulation (EU) 2020/776 on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt by imports of certain woven and/or stitched glass fibre fabrics consigned from Morocco, whether declared as originating in Morocco or not, and making such imports subject to registration, OJ L 190, 31 May 2021, p. 76.

46 Commission Implementing Regulation (EU) 2020/870 of 24 June 2020 imposing a definitive countervailing duty and definitively collecting the provisional countervailing duty imposed on imports of continuous filament glass fibre products originating in Egypt, and levying the definitive countervailing duty on the registered imports of continuous filament glass fibre products originating in Egypt, OJ L 201, 25 June 2020, p. 10.

47 Notice of initiation of an anti-subsidy proceeding concerning imports of certain hot-rolled stainless steel sheets and coils originating in the People's Republic of China and Indonesia, OJ C 348, 10 October 2019, p. 18.

48 Commission Implementing Decision (EU) 2020/1653 of 6 November 2020 terminating the anti-subsidy proceeding concerning imports of certain hot-rolled stainless steel sheets and coils originating in the People's Republic of China and Indonesia, OJ L 372, 9 November 2020, p. 50.

49 Notice of initiation of an anti-subsidy proceeding concerning imports of stainless steel cold-rolled flat products originating in India and Indonesia, OJ C57, 17 February 2021, p. 16.

50 Proposal for a Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market, 5 May 2021 COM(2021) 223 final.

51 Case T-480/20 Hengshi Egypt Fiberglass Fabrics and Jushi Egypt for Fiberglass Industry v. Commission.

52 Opinion of Advocate General Hogan in Bank Melli Iran (C-124/20, EU:C:2021:386).

53 ibid., Paragraphs 60 and 61, and 64 and 65.

54 ibid., Paragraphs 78 to 80.

55 ibid., Paragraph 75.

56 ibid., Paragraph 108.

57 ibid., Paragraph 81.

58 See, in that regard, Societe Nationale Aéronautique v. District Court, 482 US. 522 (1987), at footnote [29].

59 ibid., Paragraph 88.

60 ibid., Paragraph 87.

61 ibid., Paragraphs 95 to 99.

62 Judgment of 19 May 2021, China Chamber of Commerce for Import and Export of Machinery and Electronic Products and Others v. Commission (T-254/18, EU:T:2021:278).

63 Judgment of 9 June 2016, Growth Energy and Renewable Fuels Association v. Council (T-276/13, EU:T:2016:340).

64 Judgment of 19 May 2021, China Chamber of Commerce for Import and Export of Machinery and Electronic Products and Others v. Commission (T-254/18, EU:T:2021:278, Paragraphs 84 and 96).

65 ibid., Paragraph 85.

66 ibid., Paragraph 96.

67 ibid., Paragraph 87.

68 ibid., Paragraphs 88 to 90.

69 ibid., Paragraphs 99 to 101.

70 To that effect, ibid., Paragraphs 102 and 103.

71 ibid., Paragraph 7.201.

72 ibid., Paragraph 7.225.

73 ibid., Paragraphs 7.107 and 7.131.

74 See F. Medunic, 'A glimpse of the future: The Ever Given and the weaponisation of choke-points', European Council on Foreign Relations, 23 April 2021, available at: https://ecfr.eu/article/a-glimpse-of-the
-future-the-ever-given-and-the-weaponisation-of-choke-points/ [last accessed 8 June 2021].

75 Commission, Press release, 'Commission announces actions to make Europe's raw materials supply more secure and sustainable', 3 September 2020, available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_20_1542 [last accessed 8 June 2021].

76 WTO, Press release, 'World trade primed for strong but uneven recovery after COVID-19 pandemic shock', Press/876, 31 March 2021, available at: https://www.wto.org/english/news_e/pres21_e/pr876_e.htm
[last accessed 2 June 2021].

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