October 3-5, 2025
“We again note that neither the analysis in which we engage nor the findings that we reach in evaluating this claim express any opinion regarding whether the term “subsidy” that appears in Article 1 of the SCM Agreement may be interpreted to encompass a financial contribution that may be provided by one WTO Member in the territory of another WTO Member” (Panel Report, footnote 135)
The report
In a long-awaited report, issued on October 2, 2025, the WTO Panel in EU – CVD/AD on Steel Products (Indonesia) has not really decided – at least in clear wording – whether WTO subsidy laws regulate transnational subsidies.
In a carefully-crafted decision, the Panel has eventually determined that the EU had acted incorrectly by attributing the Chinese financial contributions at issue to Indonesia. The EU Commission had argued that Indonesia had “induced” the government of China to grant the subsidy. The Panel swiftly and simply said this test cannot be found anywhere in the definition of subsidy, and in particular in the expression “by the government”.
Let’s rehearse the key passages of the Panel’s reasoning briefly.
The Panel made it immediately clear that they “need not address, in the abstract, whether either the SCM Agreement writ large or Article 1.1(a)(1) of the SCM Agreement in particular permits state-to-state attribution in general.” (para. 7.59) Crucially, they did not exclude “the possibility that such attribution may be permissible in some factual circumstances” (and they repeated this point twice in the space of few lines in para. 7.59) but they hastened to underline (once again) that they did not have to answer this question to give a “positive resolution” to the case (that clarification was rehearsed again – twice – at the end of the reasoning in paras. 7.86 and 7.90).
They thus made it clear the interpretative question for them to answer was as follows:
Whether the phrase “by a government” in Article 1.1(a)(1) of the SCM Agreement may be interpreted to permit the Commission to have attributed the Chinese-origin financial contributions to the GOID based on the Commission’s finding that the GOID “induced” the GOC to provide those contributions (para 7.60).
After begging to clarify (“to emphasise”) in para 7.61 that they did not express any opinion on “whether the conduct of one state that a second state ‘adopts as its own’ may or may not, under any circumstances, be attributed to the second state” (which is the specific language used by Article 11 of the 2001 ILC Draft Articles on State Responsibility), and that they were concentrating on the specific conduct that the EU Commission considered “inducement’, without expressing any characterisation of that conduct as inducement (!?!), they eventually moved to give their response.
What then follows is a standard interpretation of Article 1.1(a), in its ordinary meaning, context and in the light of the object and purpose of the SCM Agreement (!?!?). The key language refers to the existence of a financial contribution “by a government”
The examination of the full provision of Article 1.1(a)(1) clearly shows that,
[g]iven this, the text of Article 1.1(a)(1) suggests that government conduct that falls outside the conduct listed in subparagraphs (i) to (iv) does not constitute a “financial contribution by a government”. This in turn suggests that government conduct other than that captured in subparagraphs (i) to (iv) falls outside of the scope of Article 1.1(a)(1) and so is not considered to be a subsidy for the purposes of the SCM Agreement. (para. 7.67).
This is the orthodox interpretation of the definition of subsidy, and in particular of the financial contribution, since the seminal Panel Report in US – Export Restraints in 2001 up to more recent Appellate Body’s decisions. The justification for having a specific requirement of financial contribution is exactly to pinpoint the specific forms of governmental action that may (and by negative implication exclude those that may not) constitute a subsidy. This was the most difficult issue to negotiate during the Uruguay Round, against those (i.e. the US) that wanted to have a broad and open-ended definition of subsidy (this point was specifically made by the EU in answering one question of the Panel, as reported in para 7.76).
Then, the Panel crucially notes that
Notably, conduct whereby the government of one WTO Member “induces” the government of another WTO Member to carry out one or more of the functions referred to in the subparagraphs of Article 1.1(a)(1) of the SCM Agreement does not appear to be captured among the range of conduct listed in subparagraphs (i) to (iv) (para. 7.69).
In paras. 7.72 to 7.74 the Panel then considers letter iv) of Article 1.1(a)(1) as relevant context and notes that, while (via the interpretation of the Appellate Body in US – DRAMs) the definition of subsidy may cower those cases where the government induces a private body to carry out one of the said forms of financial contribution, the same cannot be said more generally in Article 1.1(a)(1) for a government that induces another government to carry out a financial contribution.
This reasoning leads to the conclusion in para 7.75:
we consider that government-to-government inducement does not constitute a financial contribution for purposes of the SCM Agreement not simply because government-to-government inducement does not expressly appear in the list of government conduct that constitutes a financial contribution in Article 1.1(a)(1)(i)–(iv) but also because: (a) the use of the words “i.e. where” in the chapeau suggests to us that this list is a “closed” list; and (b) that closed list includes subparagraph (iv) of Article 1.1(a)(1), the text of which indicates that the “inducement” of certain entities (government-to-private body inducement) does, in fact, constitute a financial contribution.
The Panel underlines the “closed nature” of the text of Article 1.1(a)(1) and in particular of the forms of financial contribution covered. In particular:
Article 1.1(a)(1) of the SCM Agreement does not allow us to ‘open’ what the plain text of the provision indicates is a “closed” list of government conduct that constitutes “financial contribution by the government” by reading additional types of government conduct into the provision, based on the phrase “by a government” (para. 7.76).
It then notes that also the “list of entities” performing a financial contribution is “closed” and that in fact there are no separate lists, one for the financial contributions and one for the entities. Instead:
the provision contains, in a single “list”, a definition of government conduct that constitutes financial contribution by a government. This list describes both the “type of functions” that constitute a “financial contribution by a government” within the meaning of the provision (subparagraphs (i) to (iii)), as well as the circumstances in which the conduct of certain entities other than a government, namely certain funding mechanisms, and private bodies, will be considered to be conduct of the relevant WTO Member. For the reasons set out in paragraphs 7.66-7.67 above, we are of the view that this list is a closed list (para 7.80).
The meaning of the word “government” in the chapeau (both in its singular an in its collective sense (which, as known from previous case-law, would refer to the concepts of authority and power to regulate) would specifically exclude entities that do not share these characteristics. Most importantly, this assessment would not coincide with that that would enquire whether the entities under examination are “induced” by the government to provide a financial contribution (paras. 7.83-7.84).
The reasoning is concluded with few paragraphs dealing with the fundamental argument used by the EU Commission in regulating transnational subsidies, i.e. the use of Article 11 of the Draft Articles on State Responsibility). The Panel crucially finds
we express no opinion on the extent to which Article 11 of the ILC Articles on State Responsibility provides guidance on whether Article 1.1(a)(1) of the SCM Agreement can be interpreted to permit state-to-state attribution in general. Our assessment is confined to examining the extent to which Article 11 sheds light on whether Article 1.1(a)(1) permits state-to-state attribution through the specific manner in which the Commission sought to establish the attribution at issue, namely on the basis of alleged government-to-government inducement (para. 7.101).
Hence, importantly, the Panel seems to be acknowledging the use of Article 11 of the ILC Article to construe Article 1.1(a)(1) (to be fully precise, it is not fully clear from reading this statement a) whether the Panel is simply arguendo, i.e. accepting, for the sake of the argument, that the reference scenario is that of Article 11 ILC, or b) whether this is a firm premise of the reasoning which would leave an important trace in the jurisprudence).
While it is not the first time the ILC Articles are used by the WTO dispute settlement (the most famous and infamous used was made by the Appellate Body in the US – AD/CVD dispute to construe the specific terms “government”, “public body” and “private body”), the explicit recognition of the utility of these rules in this context is innovative.
What is at issue is not simply the construction of specific entities within the jurisdiction of the granting government (which is delicate enough because it may well affect the scope of the definition) but more importantly of actors outside the jurisdiction (which, as seen below in the analysis, may have an even more fundamental impact on WTO subsidy rules by significantly broadening their scope).
Analysis
Caution exercised
First, from reading the report, even the very first time, it is adamantly clear that the Panellists were fully aware that they were dealing with magmatic matter and wanted to be extra-cautious in what they were saying. This unfortunately resulted in a highly repetitive style which go at lengths in explaining the pressure posed by this case. This comes out clearly in all statements in which the Panel made it clear that they were not expressing an opinion on X or Y (we have counted at least 8 of such statements).
All in all, this is good judicial strategy, in particular considering the limited constitutional position of dispute settlement in the WTO context, and of Panels in particular, especially after the demise of the Appellate Body. They are the only judges in town now. They don’t want to have – and should not be given – too much responsibility. They need to solve disputes, not repair the constitution.
What remains to be seen is whether, despite all possible qualifications, they really stayed large from answering those questions.
Caution asked for
Secondly, some parties explicitly called the Panel on being cautious and limiting its responses only to what is strictly necessary to answer the claim rather than providing a fully-fledged interpretation of Article 1.1(a)(1) ASCM (see footnotes 133 and 134). The issue of the possibility of extending the coverage of the definition of subsidy and hence subsidy disciplines is highly contentious and would arguably go well beyond what the Membership thought of in the 1990s when they adopted the ASCM. (Some) members now wants to have their hands free.
Who are these parties calling for restraint in limiting the scope of the rules? Those that may potentially feel the harm of Chinese cross-border subsidisation. It is obvious that those benefiting from China’s support along the Belt and Road Initiative may not be so amenable.
The elephant in the room: the pending question about the relevance of the public international law rules on responsibility
Thirdly, while one can appreciate this caution (it is in the end for the Membership to provide an authoritative interpretation or change the rules), it is difficult to evaluate positively large part of the reasoning of the Panel because it ambiguously deals with the fundamental argument that governments could use the rules of attribution under international law (whether customary or whether codified in the ILC Draft Articles) to attribute financial contributions of country A to country B under WTO subsidy laws.
After shying away for the whole reasoning from explicitly endorsing the possibility of generally using the (secondary) rules of responsibility to fundamentally reshape the (primary) rules defining the rights and obligations of WTO governments in the field of subsidies (but keeping this option open), towards the end of the reasoning, at para 7.101, it explicitly says it is referring to Article 11 of the ILC Draft Articles to answer the specific question of whether the specific attribution test used by the EU Commission vis-à-vis Indonesia is in line or not with Article 1.1(a)(1).
Arguendo analysis? Slip of the pen? Firm premise of the following reasoning? In any event, we consider this the most serious error in the report (and, inasmuch as it simply follows a jurisprudential trend, in the jurisprudence).
The fact itself of resorting (though for testing a specific question) to the ILC Draft Articles goes blatantly against the repeated statements by the Panel and many parties to the dispute that Article 1.1(a)(1) is essentially about limiting to a closed list the forms of financial contribution that should matter under WTO subsidy laws. Despite all rhetorical niceties, what is happening is that the Panel is giving with one hand what it has only apparently taken away from the other.
As said, this is what many parties specifically asked to keep open (and, importantly, what others, i.e. the EU and the US, specifically pleaded to be the case, the former for obvious reasons – its measures were subject to litigation – the other for equally obvious reasons – it changed its CVD laws last year to now permit to countervail transnational subsidies).
Whatever it may be, this is, in our humble view, a serious mistake which may come to haunt the future case-law in point.
We consider it a legal fact that WTO subsidy rules are self-contained, in particular with respect to the definition of their scope and of their obligations. In other words, you cannot use general international law (and even less so the rules on State responsibility) to re-open and re-shape them. On this score see Pauwelyn (2013), Evenett, Sud and Vermulst (2020), Zhou and Crochet (2024).
This reading is supported also by James Crawford that, in the introductory note to the ILC Articles, explicitly says:
Already with the work of Special Rapporteur Ago, and more markedly with regard to the 1996 draft Articles as well as their final version, the rules on State responsibility may be described as “secondary rules”. Whereas the law relating to the content and the duration of substantive State obligations is determined by primary rules contained in a multitude of different instruments and in customary law, the Articles provide an overarching, general framework which sets the consequences of a breach of an applicable primary obligation. Otherwise the Articles would constantly risk trying to do too much, telling States what kinds of obligations they can have. (emphasis added)
Object and purpose do not matter in subsidy law
Fourthly, I find two different arguments interesting.
All arguments that, one way or the other, are relying on the presumed object and purpose of the ASCM are not really found useful. While it may be accepted that the object and purpose of the ASCM is to discipline only certain forms of subsidies (Indonesia is right in this respect, but in doing so it is simply restating what we have listened to in the case-law for various decades now), all arguments whereby we would need to cover government-to-government attribution and transnational subsidies are completely wrong.
In particular, it cannot be said that we need to do this because otherwise governments would circumvent the rules.
Whether this is empirically correct or not, it is not relevant from an interpretative point of view.
The broadening of subsidy rules is not something that can be done via interpretation by a Panel or, for what this matters, unilaterally. We have already underlined the difficult negotiations and the balance that was reached in the Uruguay Round. If that deal is not good anymore, you Members need to go back to the negotiating rule and do something. You cannot roll this constitutional responsibility on part-time arbitrators (and then chastise them if their rulings are not pleasing you). (Incidentally, as I have already written and said various times, this type of arguments – we need to tackle circumvention in subsidies – is not new: in the EU the Commission put forward this argument in the famous PreussenElektra case before the European Court of Justice suggesting that, aside the notion of State aid – the counterpart of subsidy in the EU system – you also had a notion of “measure equivalent to State aid” – this was roundly rejected by the Court).
The broad picture: Pax Panelista?
Fifthly, we broaden now the analysis, to consider the bigger picture on the regulation of the “unsaid” (Australia candidly noted that the ASCM is “silent” on transnational subsidies).
There was a lot of expectation on this WTO Panel decision.
From a legal policy perspective, the Panel has perhaps done the best it could possibly do. It has provided a positive resolution to the case (long are the time when WTO dispute settlement was accused of creating law and not limiting itself to provide a positive solution to disputes).
At the same time, it has managed to respect the policy space that many Members are suggesting they should have. Cleverly, however, the door is only half-open. The Panel has not taken the responsibility of giving a clear green-light. They decided not to decide – and they said so explicitly – and they were asked to do so.
This means relieving pressure, for the moment, from those jurisdiction that have shaped their domestic laws (and, sometimes, naughtily interpreted WTO law too) to enable countervailing transnational subsidies.
This has notably happened in the EU, with the Commission taking the lead, and the Courts in Luxembourg obligingly approving of both ends and means (but importantly dodging the hot issue of the applicability of Article 11 of the Draft Articles). Few years afterwords, the US followed suit and changed their CVD rule last year and lifting the prohibition to countervail transnational subsidies which dated back to the early 1980s when the issue first came out – but obviously in a completely different geo-political context. Other countries now may follow suit.
Those countries that have benefited from cross-border support may be concerned but, as the EU and US (and others) are starting to invest beyond their jurisdictions, the end result may soon become a generalisation not only of cross-border public financing along Global-Value-Chains (GVCs) but also of their regulation through the unilateral imposition of trade remedies.
All this, under the benign non liquet of the WTO. A veritable Pax Panelista.
In the end
In the end, after re-reading this momentous report few times, one is left wondering whether the Panel, despite its continuous qualifications, has in fact decided the issues it said it was not deciding.
I am really wondering whether, through the apparent recognition that Article 11 ILC (and more generally the ILC Draft Articles) may matter in answering the question, what the Panel has actually done is to recognise, at least in principle and surreptitiously, that transnational subsidies may indeed be regulated by WTO subsidy law. In doing so, while not providing a conclusive answer, it has importantly indicated that any enlargement of the scope of WTO subsidy laws cannot pass through the four corners of Article 1.1 ASCM itself but only through the use of the external rules of general international law.
Whether this is warranted or not (and you have my views on this) remains to be seen – and fully debated.
References
Joost Pauwelyn, “Treaty Interpretation or Activism? Comment on the AB Report on United States – ADs and CVDs on Certain Products from China” (2013) 12(2) World Trade Review 235-241
Simon Evenett, Juhi Dion Sud and Edwin Vermulst, “The European Union’s New Move Against China: Countervailing Chinese Outward Foreign Direct Investment”(2020) 15(9) Global Trade and Customs Journal 413-422
Weihuan Zhou and Victor Crochet, “Attribution to the State: A Critique of Cross–Border Subsidies” (2024) Melbourne Journal of International Law 407 – 435
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