Recent EU case-law Annual WTO Conference, 2008 BIICL Prof Piet Eeckhout, King’s College London Ms Elisabetta Righini, Legal Service European Commission Ms Anne Thies, University of Reading

C-351/04 Ikea Wholesale, 27 Sep 2007 Facts EC imposes anti-dumping duties on bed linen from Egypt, India and Pakistan (Regulation 2398/97, Nov 1997) EC imposes anti-dumping duties on bed linen from Egypt, India and Pakistan (Regulation 2398/97, Nov 1997) India wins WTO challenge to the Regulation (Panel – AB – DSB confirmation March 2001) India wins WTO challenge to the Regulation (Panel – AB – DSB confirmation March 2001) Reports focus on ‘zeroing’ and other issues (WT/DS141) Reports focus on ‘zeroing’ and other issues (WT/DS141) EC adopts Regulation 1515/2001 (July 2001) EC adopts Regulation 1515/2001 (July 2001)

Regulation 1515/2001 “on measures... following a report adopted by the WTO DSB concerning anti-dumping and anti- subsidy matters” “on measures... following a report adopted by the WTO DSB concerning anti-dumping and anti- subsidy matters” aim: to bring into conformity aim: to bring into conformity Art 1: Council can repeal or amend disputed measure Art 1: Council can repeal or amend disputed measure Art 2: Council can apply DSB legal interpretations to non-disputed measure Art 2: Council can apply DSB legal interpretations to non-disputed measure Art 3: measures to take effect from entry into force – no basis for reimbursement Art 3: measures to take effect from entry into force – no basis for reimbursement

Ikea Wholesale – Facts (ctd) EC adopts two Regulations on the basis of 1515/2001, effectively discontuining the AD duties on bed linen (Aug 2001 & Jan 2002) EC adopts two Regulations on the basis of 1515/2001, effectively discontuining the AD duties on bed linen (Aug 2001 & Jan 2002) Ikea Wholesale (UK based) seeks repayment of duties paid between March 2000 and Jan 2002 Ikea Wholesale (UK based) seeks repayment of duties paid between March 2000 and Jan 2002 English High Court refers the case to the Court of Justice English High Court refers the case to the Court of Justice

Ikea Wholesale - Questions Whether, in the light of the DSB findings, Regulation 2398/97 is incompatible with Community law as regards zeroing and other issues? Whether, in the light of the DSB findings, Regulation 2398/97 is incompatible with Community law as regards zeroing and other issues?

Opinion Advocate General Léger (April 2006) Validity Regulation must be assessed in light of Anti-Dumping Agreement (see earlier case-law) Validity Regulation must be assessed in light of Anti-Dumping Agreement (see earlier case-law) Is the DSB’s interpretation of the ADA binding on the ECJ? No! Is the DSB’s interpretation of the ADA binding on the ECJ? No! Autonomy Community legal order would be jeopardised Autonomy Community legal order would be jeopardised WTO and EU have different objectives, which affect legal interpretation WTO and EU have different objectives, which affect legal interpretation

Opinion (ctd) Opinion 1/91 on the original EEA Agreement Opinion 1/91 on the original EEA Agreement DSU does not provide for the creation of a body in the nature of a court: “recommendation”; DSB decisions do not constitute binding judicial acts either as to form or as to substance DSU does not provide for the creation of a body in the nature of a court: “recommendation”; DSB decisions do not constitute binding judicial acts either as to form or as to substance Emphasis in DSU on negotiation Emphasis in DSU on negotiation AG nevertheless considers zeroing to be in breach of the basic AD Regulation AG nevertheless considers zeroing to be in breach of the basic AD Regulation

Judgment ECJ Recalls case-law on lack of direct effect of WTO law: it is only where the EC intended to implement a particular WTO obligation that review in the light of WTO rules is possible (Nakajima) Recalls case-law on lack of direct effect of WTO law: it is only where the EC intended to implement a particular WTO obligation that review in the light of WTO rules is possible (Nakajima) Refers to Regulation 1515/2001, which was the basis for the repeal/amendment of the AD duties Refers to Regulation 1515/2001, which was the basis for the repeal/amendment of the AD duties Recalls the provision in 1515/2001 which excludes repayment Recalls the provision in 1515/2001 which excludes repayment

Judgment (ctd) Regulation 2398/97 cannot be reviewed in light of ADA, as interpreted, since by excluding repayment EC did not in any way intend to give effect to a specific WTO obligation Regulation 2398/97 cannot be reviewed in light of ADA, as interpreted, since by excluding repayment EC did not in any way intend to give effect to a specific WTO obligation Zeroing is not allowed under the basic AD Regulation: Regulation 2398/97 is invalid Zeroing is not allowed under the basic AD Regulation: Regulation 2398/97 is invalid Full repayment of duties Full repayment of duties

T-69/00, FIAMM et al., T-135/01, Fedon et al. – Facts EC regime for the importation, distribution and sale of bananas, introduced 1 July 1993 and established by EEC Council Reg. 404/93 EC regime for the importation, distribution and sale of bananas, introduced 1 July 1993 and established by EEC Council Reg. 404/93 Ecuador, Guatemala, Honduras, Mexico and US win challenge to the Regulation (WT/DS27, DSB adoption September 1997) Ecuador, Guatemala, Honduras, Mexico and US win challenge to the Regulation (WT/DS27, DSB adoption September 1997) Reports focus on discrimination of non-ACP countries and other issues; GATT Arts. I, III, X, XIII, GATS Arts. II, XVII Reports focus on discrimination of non-ACP countries and other issues; GATT Arts. I, III, X, XIII, GATS Arts. II, XVII

FIAMM and Fedon – Facts (ctd) Compliance proceedings, Art DSU Compliance proceedings, Art DSU Ecuador wins WTO challenge of EC‘s ongoing incompliance after expiry of implementation period (DSB adoption May 1999) Ecuador wins WTO challenge of EC‘s ongoing incompliance after expiry of implementation period (DSB adoption May 1999) US (US$191.4 million/year) and Ecuador (US$201.6 million/year) authorised to suspend concessions to the EC US (US$191.4 million/year) and Ecuador (US$201.6 million/year) authorised to suspend concessions to the EC

FIAMM and Fedon – Facts (ctd) US include European traders, such as batteries, bed linen, paper boxes and bath products, on retaliation list US include European traders, such as batteries, bed linen, paper boxes and bath products, on retaliation list In 2000 and 2001, some of these „retaliation victims“ bring compensation actions before the CFI under Arts. 235, 288 (2) EC (Beamglow, Cartondruck, FIAMM, Fedon, Fremaux) In 2000 and 2001, some of these „retaliation victims“ bring compensation actions before the CFI under Arts. 235, 288 (2) EC (Beamglow, Cartondruck, FIAMM, Fedon, Fremaux)

FIAMM and Fedon – legal bases for claimed right to compensation Breaches of WTO law Breaches of WTO law Breaches of general principles of Community law Breaches of general principles of Community law Principle of liability in the absence of unlawfulness Principle of liability in the absence of unlawfulness

Judgment CFI, 14/12/2005 Liability for WTO law breach? (-) no direct effect = no „unlawful act“ = no liability no direct effect of (primary) WTO law no direct effect of (primary) WTO law no impact of DSB rulings and expiry of implementation period on liability no impact of DSB rulings and expiry of implementation period on liability no Nakajima/Fediol situation (amending the banana regime the Council “sought to reconcile various divergent objectives”). no Nakajima/Fediol situation (amending the banana regime the Council “sought to reconcile various divergent objectives”).

Judgment CFI, 14/12/2005 (ctd) Liability for breaches of general principles?(-) The applicants‘ complaints “based on breach of [Community law principles] all rest on the premiss that the conduct of which the defendant institutions are accused is contrary to WTO rules” (FIAMM, para 146).

Judgment CFI, 14/12/2005 (ctd) Liability in absence of unlawfulness? (-) In principle yes, if there is Unusual damage: „exceeds the limits of the economic risks inherent in operating in the sector concerned“, Unusual damage: „exceeds the limits of the economic risks inherent in operating in the sector concerned“, Special damage: „affects a particular circle of economic operators in a disproportionate manner by comparison with other traders“, and a Special damage: „affects a particular circle of economic operators in a disproportionate manner by comparison with other traders“, and a Causal link between EC conduct and damage Causal link between EC conduct and damage

Judgment CFI, 14/12/2005 (ctd) Liability in absence of unlawfulness? (-)(ctd) However, retaliatory measures under the WTO system do not cause (compensable) „unusual damage“ since “the risk of this vicissitude [is inherent in international trade and] has to be borne by every operator who decides to sell his products on the market of one of the WTO members” (FIAMM, para. 205).

C-120/06 FIAMM et al. and C-121/06, Fedon et al. (pending) - challenges brought by applicants CFI ruling is defective: fails totally to state any grounds concerning the argument that in the specific factual circumstances, the appellants are entitled to rely on DSB ruling to establish unlawful conduct when claiming compensation CFI ruling is defective: fails totally to state any grounds concerning the argument that in the specific factual circumstances, the appellants are entitled to rely on DSB ruling to establish unlawful conduct when claiming compensation CFI assessment of „unusual“ nature of damage under liability in absence of unlawfulness is wrong CFI assessment of „unusual“ nature of damage under liability in absence of unlawfulness is wrong

Opinion AG Maduro (February 2007) - liability for unlawful conduct Direct effect of WTO law is equally required if the „political freedom“ would be affected through the challenge of EC measures in actions aiming at the declaration of invalidity and compensation actions in actions aiming at the declaration of invalidity and compensation actions before national and Community Courts before national and Community Courts in actions brought by individuals, Member States and Community institutions in actions brought by individuals, Member States and Community institutions

Opinion AG Maduro - liability for unlawful conduct (ctd) Even after the expiry of the implementation period granted by the DSB WTO members have the „political freedom“ to temporarily accept retaliation Even after the expiry of the implementation period granted by the DSB WTO members have the „political freedom“ to temporarily accept retaliation Negotiated solutions to trade dispute must remain possible; Courts cannot conclude „unlawfulness“ in compensation action since this would trigger institutions‘ obligation to withdraw legislation („scope of manoeuvre“ argument) Negotiated solutions to trade dispute must remain possible; Courts cannot conclude „unlawfulness“ in compensation action since this would trigger institutions‘ obligation to withdraw legislation („scope of manoeuvre“ argument)

Opinion AG Maduro - liability in absence of unlawfulness Existence of the principle in Member States/Community based on Existence of the principle in Member States/Community based on Principle of equal treatment (e.g. France) Principle of equal treatment (e.g. France) Fundamental right to property (e.g. Germany, Spain) Fundamental right to property (e.g. Germany, Spain) Gap of judicial protection in the context of international trade disputes due to lack of direct effect of WTO law Gap of judicial protection in the context of international trade disputes due to lack of direct effect of WTO law No restriction of „political freedom“ No restriction of „political freedom“

Opinion AG Maduro - liability in absence of unlawfulness (ctd) Good governance; informed use of discretionary powers (balancing interests/costs) Good governance; informed use of discretionary powers (balancing interests/costs) Community judiciary rather than other WTO members should decide who has to bear the damage caused by WTO law breach Community judiciary rather than other WTO members should decide who has to bear the damage caused by WTO law breach

Opinion AG Maduro - liability in absence of unlawfulness (ctd) Conditions Damage must be unusual: „exceeds the limits of the economic risks inherent in operating in the sector concerned“ and is sufficiently severe („grave“) Damage must be unusual: „exceeds the limits of the economic risks inherent in operating in the sector concerned“ and is sufficiently severe („grave“) Damage must be special: „affects a particular circle of economic operators in a disproportionate manner by comparison with other traders“ Damage must be special: „affects a particular circle of economic operators in a disproportionate manner by comparison with other traders“ Causal link Causal link

Opinion AG Maduro - liability in absence of unlawfulness (ctd) CFI ‘s ruling is defective CFI ‘s ruling is defective not the same market sector was hit by not the same market sector was hit by (cross-) retaliation, so damage is not „normal“ damage was not reasonably foreseeable damage was not reasonably foreseeable no insurance could have been obtained no insurance could have been obtained Conclusion Conclusion realised risk was not inherent in the business realised risk was not inherent in the business ECJ should send cases back to the CFI for decision of whether occurred damage is sufficiently severe to be considered „unusual“ ECJ should send cases back to the CFI for decision of whether occurred damage is sufficiently severe to be considered „unusual“