November 26, 2024
In two days only, the ECJ will pass judgment in the “Fibreglass case” (Joined cases C-269/23 P and C-272/23 P).
This decision will be very important for both a specific reason and a more general reason. I have already expressed my views on this saga on many other occasions, especially on the legal plane,1 and I will not rehearse my position here.
What I am interested in now is (a) to highlight once again the importance of this decision and (b) to speculate on the consequences of the decision.
In specific terms, it will tell us whether the EU legal system has eventually decided to reshape its countervailing duty (“CVD”) laws to counteract so-called “transnational” or “Cross-border” subsidies, i.e. subsidies where the financial contribution of a government goes to companies outside its territory or jurisdiction. This is a “new” form of subsidy which gained prominence with the emergence of China and its global investment policy within the Belt and Road Initiative.
If that is the direction that ECJ follows, essentially confirming both Advocate General Tamara Capeta and the previous decisions of the General Court and the European Commission, the legal and political statement will be momentous. Arguably, this is one of biggest reshaping (and broadening) of CVD laws, carried out through legal interpretation, in the EU. And, crucially, since EU CVD laws intentionally reflect WTO CVD laws, the EU legal system will offer its final take on what the global rule-book should say about this topic.
In more general terms, this decision will be the latest chapter in the saga on unilateral actions to tackle new forms of subsidies – and one important piece in the large jigsaw on the current economic actions of the EU.
The US DOC has been following the EU re-interpretation closely and has recently come out with a new rule interpreting its CVD laws in a way that transnational subsidies can (contrary to what was explicitly denied in the past) be countervailed.
Even more interested will be the three WTO panelists currently hearing a compliant by Indonesia against the EU for a similar decision (WTO DS 616).
Their report is expected to come out in early 2025.
And theirs is not an easy position.
In the end, CVD requirements are defined globally at the WTO level (this is indeed one of the biggest contributions of the GATT/WTO). There are strong indications, coming from various sources, that the drafters of WTO rules did not want to cover transnational subsidies, and we all know that the signature feature of WTO subsidy rules was to limit action only against “certain” forms of subsidies. In other words, large part of the Uruguay Round negotiators’ effort was to provide limits to the otherwise limitless concept of subsidy.
Will the Panel follow orthodoxy? And, consequently, indicate the WTO-illegality of EU (and US) re-interpretations? Or will it rather come out with an “evolutive” interpretation of the WTO definition of subsidy (such as the laconic one of the EU General Court that re-interpreted WTO law in two paragraphs without any supporting reference of any type) in order to include also transnational subsidies?
Either way the consequences for the system and their ramification may be massive.
Either way, we are once again witnessing a typical phenomenon of our age where, lacking action at the level of norm creation and reform, it is up for judicial or quasi-judicial bodies to validate (or otherwise) new takes of the law. As the ill-fated story of the WTO Appellate Body has shown, it is not wise to put too much pressure on courts, especially in presence of a frail constitutional settlement. Ultimately, should the system in practice continue to rely on deliberation through judicial litigation, it may exacerbate the tensions inherent in international relations and do serious harms to the institutions that host these courts at large.
Importantly, this does not really depend on the direction taken by the courts – you will always have winners and losers in litigation. The issue is with the delegation of key decisions itself.
- “Are transnational subsidies regulated by EU and WTO law? The General Court has spoken. Case T-480/20 and T-540/20, EUI, RSC, Policy Paper, 2023/09, Global Governance Programme, https://cadmus.eui.eu/handle/1814/75894; “Time to regulate cross-border subsidies: who decides?”, May 17, 2024, International Economic Law and Policy Blog, https://ielp.worldtradelaw.net/2024/05/guest-post-time-to-regulate-cross-border-subsidies-who-decides.html ↩︎
lucaslaws 