November 28, 2024
The judgement has come out. My two cents (not worth much) here:
“No retreat, no surrender, all united“
1. The ECJ played its part and followed the trajectory firmly indicated by the EC, then validated by the General Court and the Advocate General.
No retreat, no surrender (The Boss would say.).
No significant variations (but a couple of interesting additions).
2. Whether you agree or not with the interpretation of the Court (of course, since we are talking of judgments, the focus should be on the legal interpretation), it is to say the least *surprising* that such a controversial issue (and one which has significant origin and relevance beyond the EU and its laws) managed to garner such a consensus, even in terms of legal reasoning.
All united on this (objectively thorny) legal issue.
3. I will write on the legal reasoning later on, in a more comprehensive way. My eyebrows were, however, raised when reading few specific paragraphs.
Two examples.
Example 1: the object and purpose of WTO subsidy rules
At para. 97 the ECJ ventures into exploring the “object and purpose” of the WTO rules which is very very very tricky indeed.
The ECJ does acknowledge that there is no preamble at all to the subsidy agreement which, we must add, is for a reason. The whole subject matter was so controversial that the negotiators could not agree even on the most basic points of what subsidies are about and what rules governing them should be about.
That circumstance only, hugely documented in the negotiating history and in the literature come out in three decades, should have been sufficient to inspire circumspection.
Referring to frankly irrelevant WTO AB precedents, the ECJ surprisingly comes to the conclusion that the main goal of WTO subsidy rules is to “increase and improve GATT disciplines”. As WTO lawyers know, this does not mean much, quite simply that the parties wanted to improve the rules. But, and this is the important point, they did not necessarily want to make them stronger and in any possible respect and, importantly, in an expansive and evolutive way!
The ECJ, however, begs to differ. If the goal is to have strong subsidy disciplines, surely the rules should allow the EC to countervail transnational subsidies.
Para 97 is a clear logical leap, and one which completely negates the essence and core of the Uruguay Round negotiations on subsidies which was to lay down the idea that not every subsidy-like measure could have been countervailed but it was necessary to draw a line, perhaps an imperfect one, but a line nonetheless (this meant for example that US attempts to consider export restrictions as a countervailable subsidy were rejected by a WTO Panel in the early days of dispute settlement).
WTO subsidy rules are about drawing boundaries. That is why we have Articles 1 (definition) and 2 (specificity).
PS: note for EU lawyers! Teleology in trade law does not work as it does in the EU! For reference, see me, The definition of subsidy and State aid, page 9 ff.
Example 2: re-interpreting the notion of “adverse effects”
Para. 94 includes a fascinating interpretation of Article 5 of the WTO ASCM. That provisions says that no Member should cause adverse effects on the interests of other Members through the use of subsidies.
Note that the notion of “adverse effects” is then specifically spelled out in detail in the same and other provisions explaining what “adverse effects” are and how you establish them. In three decades, disputes and controversies have focused on the nitty gritty and complex technical legal and economic questions raised by these specific requirements.
The ECJ tells us that there is something more …
“That article may also be interpreted as meaning that such a member is prohibited from acting in that manner not only by granting such as subsidy, but also by conduct allowing one or more undertakings established in its territory or within its jurisdiction to benefit from a subsidy originating with, in whole or in part, another Member of the WTO”.
This interpretation is beyond … imagination. It is as such difficult to comment on it. On a legal plane, it is plainly wrong. It is evolutive interpretation on testosterone.
PS: note for EU lawyers! Teleology in trade law does not work as it does in the EU! For reference, see me, The definition of subsidy and State aid, page 9 ff.
Simply a matter of legal interpretation?
4. The EU transnational subsidy saga, of which the ECJ decision somewhat concludes an important chapter, has been mostly played, at least superficially, as a simple matter of legal interpretation, which is clearly not.
In other words, the issue is not whether legal language allows to include certain subsidies or not. The real issue is a matter of policy, legal policy, which is based on political choices.
A political choice – to exclude transnational subsidies from WTO law – was allegedly made in the 1980s/1990s when WTO rules were created.
This can certainly be reversed now – nothing cannot be changed! – but it cannot be done “unilaterally”, and, if we may add, in a surreptitious way, suggesting that it is just a matter of legal interpretation.
Politics and legislators should speak on these issues, not courts.
The American way
In this respect, the US approach to the issue is perhaps better. Why? Because it firmly rooted the problem to the policy level.
They had a rule specifically prohibiting CVDs on transnational subsidies. The US DOC changed, i.e. reversed, the rule and it can now countervail transnational subsidies. Importantly, there was a policy process, with a consultation on whether the prohibition should be lifted and the results of the consultation and of the process are publicly available.
Granted that the final outcome (transnational subsidies can be countervailed) may still be illegal under WTO law, what is interesting for the purposes of this brief discussion is that the process is framed as a “policy” issue, not a “legal interpretation” one.
By contrast, what happened in the EU is that the practice itself changed with no clear and transparent policy process involved. This created the false impression that the whole issue boils down to legal interpretation, which unfortunately is not the case.
lucaslaws 