Posts Tagged Regulatory autonomy
Do the newly negotiated EU rules on endocrine disruptors illustrate regulatory chill /the ‘freezing effect’ of international trade law?
The new European Commission proposals on endoctrine disruptors are, of course’ ‘science based’. It has been reported (EurActiv, 12 December 2016 and last consulted by me on 13 December) that publication of the proposals was followed by a closed door meeting (minutes of which were released only after a freedom of information request) between the EC and a select number of countries (US, Canada, Argentina, Brazil and Uruguay on 13 July this year). Discussion centered around the potential WTO incompatibility of parts of the EC proposal, particularly those surrounding the tolerance levels for endocrine disruptors present in imported substances (food and feed in particularly). The EC reportedly are prepared to replace “negligible exposure” with “negligible risk from exposure”. The EC defend the latter, arguing it might even ban more, rather than less imported substances: for even if there is only negligible exposure, that exposure may still be a risk. Opponents suggest that the insertion of a risk approach has sacrified precaution on the altar of science.
A few comments.
Firstly, the report (and potentially even the EC itself) repeats the misleading assertion that the debate concerns either science or precaution. Precaution is NOT unscientific. The very trigger of the precautionary approach is science.
Next, the case is reported at a time a lot of people are getting jittery about the regulatory co-operation mechanisms in free trade agreements such as CETA and TTIP. The meeting and the subsequent EC reaction to our trading partners’ comments, would then represent an example of the ‘freezing effect’ in international trade: with our trading partners flying the flag of WTO incompatibility, the EU would then have caved in to threats of litigation in Geneva. Yet in reality WTO input by fellow WTO Members is at least as old as the WTO itself, indeed it predates it. The 1978 Tokyo Standards Code already obliged the then GATT Contracting Parties to notify their draft standards to the GATT Secretariat. The very point of notification and transparency is that the issues raised are being discussed and may indeed lead to the draft standard being adopted. Changes made to REACH, to name but one example, reflected concerns of fellow WTO Members and REACH can hardly be said to pander to industry’s demands.
However there needs to be one core appreciation in this process: just as notification serves transparency (anyone can consult the TBT notification gateway to review draft measures that have been notified), so too should the process of review after reception of the comments, be conducted in a transparent manner. This clearly has not happened here. By conducting these meetings in private, and by refusing to release the minutes until prompted to do so, EC services have given the impression that there is more than meets the eye. In times where even CETA has not yet been ratified, that is most definitely the wrong approach.
Neither extraterritoriality questions nor WTO concerns unsettle the CJEU. Animal testing ban applies outside EU.
The last part of this title is a bit of a stretch, apologies: soundbite beats nuance. I reported earlier on the High Court’s referral to the CJEU in the Cosmetics Regulation case, C-592/14 . The Court held last week, 21 September. Much like in C-366/10, the emissions trading /aviation case, the Court was unimpressed with accusations of extraterritoriality (‘territory’ is not discussed in the judgment) and does not even flag WTO concerns (Bobek AG had, and simply suggested this is an issue that solely lies with the WTO itself to resolve).
Referring to the need to interpret the Regulation with a view to its object and purpose, the Court insists that in particular to avoid easy circumvention of the Regulation, data obtained from animal testing carried out outside the EU, cannot be employed for the marketing of cosmetics in the EU, even if those tests had to be performed so as to meet the regulatory requirements of third countries.
Of course in WTO jargon, this recalls the discussion of non-product incorporated production processes and -methods (n-PR PPMs) however the Court is more concerned with regulatory efficiency.
Cheers to that! The CJEU on excise duties, alcohol, packaging and regulatory autonomy in Valev Visnapuu.
Postscript 10 December 2015 For a similar exercise, see Sharpston AG in C-472/14 Canadian Oil.
Less is sometimes more so I shall not attempt to summarise all issues in Case C-198/14 Valev Visnapuu. The case makes for sometimes condensed reading however it perfectly illustrates the way to go about dealing with obstacles to trade put in place for environmental, public health or, as in this case, both reasons.
Mr Visnapuu essentially forum shops Estonia’s lower prices on alcohol by offering Finnish clients home delivery of alcoholic beverages purchased there. No declaration of import is made to Finish customs and excise, thereby circumventing (accusation of course is that this is illegal) a variety of excise duties imposed for public health and environmental reasons, as well as a number of requirements relating to retail licenses and container requirements (essentially a deposit-return system) for beverages.
Confronted with a demand to settle various tax debts, as well as with a suspended prison sentence, Mr Visnapuu turns to EU law as his defence in a criminal proceeding. The CJEU then had to settle a variety of classic trade and environment /public health questions: whether the packaging and packaging waste Directive is exhaustive on the issue of deposit-return system (answer: no and hence the system additionally needs to be assessed vis-a-vis EU primary law: Article 34 ff TFEU or Article 110 TFEU); whether in the context of that Directive excise duties on packaging may be imposed (yes) and packaging integrated into a functioning return system exempt (yes; in the absence of indications that imported systems are less likely to enjoy the exemption); whether the relevant excise duties fall under Article 34 ff TFEU or Article 110 TFEU (answer: it is part of an internal system of taxation hence needs to be judged vis-a-vis Article 110 TFEU); and finally whether the retail licence requirement needs to be judged viz Article 34 or Article 37 TFEU (answer: mixed, given the various requirements at stake). Final judgment on proportionality is down to the Finnish courts.
Readers in need of a tipple would be advised to postpone until after reading the judgment. Again though the case shows that if one keeps a clear head, classic structures of applying EU law go a long way in untangling even complex matters of law and fact.
In Orgacom v Vlaamse Landmaatschappij, Case C-254/13, the ECJ sent out its regular reminder of the core foundation of EU law: namely it being a customs union.
Upon receiving instruction to challenge a national tax, it is useful intuition first of all to assess whether what client is complaining about, is not actually a customs duty (or charge having equivalent effect) per Article 30 TFEU (previously 25 EC), rather than an internal tax. If it is, a win is signed, sealed, delivered. That is because contrary to the possibility for Member States to argue an exception to a trade-restrictive national tax (Article 110 TFEU, previously Article 90 EC), per the ECJ’s case-law (Vinal v Orbat, Case 46/80, was the pivotal kick-off case), there is no room for manoeuvre whatsoever which could ever justify a customs duty.
Qualifying a charge as a customs duty or an equivalent charge, renders this charge contrary to the Treaty by its very nature. Charges which fall under Article 110, on the other hand, are only incompatible with the Treaty where they are discriminatory or protective.
What distinguishes both? Any pecuniary charge, whatever its designation or mode of application, which is imposed unilaterally on goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, constitutes a charge having an effect equivalent to a customs duty. The only exception is where the charge in question represents payment for a service rendered to the importer, of a sum in proportion to the service, or if it forms part of a general system of internal taxation, applied systematically in accordance with the same criteria to both national products and imported or exported products: such charges on importation fall under Article 110 TFEU where they form part of a general system applicable systematically to categories of products in accordance with objective criteria, irrespective of the origin of the products.
Orgacom is a classic tutorial in the application of Article 30 TFEU. In the case at issue, the levy in question affects the importers of surplus livestock manure on import. The trigger for the levy is simply the amount of importation in the preceding year. That there is a similar levy imposed on fertilisers produced in the Flanders Region, is not sufficient to have it qualify as a tax under Article 110: it is the frontier crossing which is the trigger; the duty is not imposed at the same marketing stage (the disputed levy is imposed on importers; while the same levy in the Flemish Region affects producers); and the two levies are calculated using different methods.
The Court therefore also dismisses first hand the argument that the levy was needed to control the stocks of manure in Flanders and to protect domestic production against external measures that distort competition and impose an additional environmental burden on Flanders: because, as noted, once the measure is qualified as a charge having equivalent effect as a customs duty, wriggle room is out of the question.
(Of note is that the Belgian Constitutional Court had previously held the levy incompatible with Belgium’s internal Economic and Monetary Union).
Never ever underestimate the power of Article 30 TFEU.
I have previously referred to the display ban case which Philip Morris took to the EFTA Court. I have only just recently stumbled across the eventual holding of the court which had referred the case to Luxembourg. (The Norwegian court held a year after EFTA’s judgment). Not GAVClaw style to report close to 2 years after date of issue: blame the inadequate (read lack of) system by which EFTA and indeed EU Member States report back on their eventual findings in preliminary review.
The District Court had been instructed by the EFTA Court to review whether the display ban actually affects the sale of domestic products and sale of goods from other EEA States equally. If there is de facto equal treatment, the law surfs on Keck & Mithouard’s exception for ‘selling arrangements’: no infringement of the core prohibition on quantitative restrictions to trade in the first place. (See Alberto Alemanno’s analysis of the EFTA ruling for background).
The national court suggested that the EFTA Court had not been entirely clear on how that test had to be constructed: not at any rate, it held, as a market hindrance test: i.e. that new products’ chances of entering the Norwegian tobacco market should be decisive for the question of whether a restriction exists. It referred inter alia (at p.35 of the copy referred to above) to the fact that the Norwegian Government in its submission to the EFTA Court had suggested that even though such hindrance for new products at the time did not actually exist, it could be expected indeed hoped that this would be the case. The District Court held that in the light of this acknowledgement by the Government, had the EFTA Court found this problematic, it would and should have said so explicitly. (This in some ways might be seen as a risk for the EFTA Court’s tradition, in line with the ECJ’s approach, to practice judicial economy).
The District Court in the end decided to continue the case on the basis of whether national products have a more favourable position due to local habits and customs linked to tobacco use (at p.35): the burden of proof whether the ban actually and not just potentially affects the marketing of imported tobacco products differently than domestic tobacco products lies with PMI, the Court held. That, it said, was not established with clarity: the de facto discriminatory effect of the display ban was found to be too uncertain to be considered a trade barrier.
The Court then somewhat inconsistently (do Norwegian courts practice wide obiter?) did review suitability and proportionality (not needed if Keck & Mithouard applied). Here, without naming the precautionary principle, the Court applies an important consequence often associated with it: the reversal of burden of proof. The Court essentially wanted PMI to show clear evidence for the display ban not being suitable for restricting the consumption of tobacco in Norway, at any rate in the long term (p.48). The Court essentially relies on previous case-law on tobacco advertising and equates suitability of the display ban with relevant studies and case-law on advertising restrictions. This was bound to (although the court took some length to establish it) lead to a finding of suitability.
Finally, as for proportionality proper, the court (with cross-reference i.a. on the effect of these bans elsewhere) did not find less trade restrictive alternatives (within the context of access to information or branding at point of sale).
This judgment just has to be staple fodder for risk classes and the interaction between risk analysis and trade law.
Consultancy Ecologic have released a report which they have prepared for the European Parliament. It reviews the impact which the Transatlantic Trade and Investment Partnership (TTIP) might have on the environmental ‘acquis’ of the European Union (the collected body of EU environmental law). A wide range of issues are discussed – best have a look at the report for all the details. Included are the risks associated with standing for private companies under classic BITs, which as I reported earlier, the EC have recently defended.
The report downplays the impact which the TTIP might have on ECJ case-law [‘The Court of Justice of the European Union (ECJ) has consistently held that international trade and investment agreements only have direct effect within the EU in very limited circumstances. Thus, in past ECJ cases, private companies have not normally been able to rely on e.g. WTO law for invalidating an EU action or claiming damages from the EU. This is likely to apply to TTIP as well.’] That I believe is a touch incautious. The ECJ might qualify its case-law, in particular given that the extent of integration of a trade agreement, is part of the reason for the ECJ to reject direct effect. If the TTIP eventually will include the type of deep(ish) integration forecast, the Court might well find it to have direct effect in certain circumstances.
The report suggests the EP keep a close eye on the provisions in the agreement with an impact on environmental law. This includes the type of regulatory co-operation which the TTIP might yield: a focus on process or on outcome, as neatly summarised by Simon Lester. It makes me wonder whether the Agreement might do with an Article 193 TFEU-type ‘environmental guarantee’.
Know your biomass from your biomass! The ECJ allows less favourable treatment of wood and wood waste in Industrie du bois de Vielsalm
In Industrie du bois de Vielsalm, Case C-195/12, the ECJ yesterday held in favour of the Walloon Region of Belgium, finding that a regional support scheme providing for the grant of ‘green certificates’ to cogeneration plants, which grants a larger number of green certificates to cogeneration plants processing principally forms of biomass other than wood or wood waste, does not infringe the principle of equality and non-discrimination.
The Court found first of all that Directive 2004/8 on the promotion of co-generation does not exhaustively regulate national support schemes for cogeneration and electricity production from renewable energy sources: Member States are given wide discretion.
It then argued that there are sound environmental reasons for discriminating against wood and wood waste in co-generation support schemes:
‘ (…) even at the level of the renewable nature of the resource, and hence from the point of view of its availability, as also from the point of view of sustainable development, prudent and rational utilisation of natural resources, and security of supply, wood, which is a resource whose renewal requires a long period, may be distinguished from agricultural products or household and industrial waste, whose production takes place in a much shorter space of time. (at 74)
‘Furthermore, it is common ground that the overall environmental impact produced by the increased use of biomass for energy production likely to follow from support measures differs according to the particular characteristics of the type of biomass used. As regards the environmental impact that could follow from enhanced support measures for the use of wood and/or wood waste for energy production, it may thus prove necessary to take into account that any excessive or premature deforestation which may be encouraged by such support measures is liable to contribute to an increased presence of carbon dioxide in the atmosphere and adverse effects on biodiversity or water quality.
Increased development of agricultural products intended for energy production is liable for its part to increase various forms of pollution specifically linked with agricultural activities, in particular with the use of fertilisers and pesticides, such as adverse effects on the water supply. (at 75 ff)
‘Finally, factors such as the quantities in which the various renewable energy sources are present in the territory of the Member State concerned, or the level of development that may already have been achieved there as regards recourse to one or other renewable energy source for cogeneration or electricity production, are also capable of influencing the choices to be made with respect to the renewable energy sources to be promoted in that Member State for the purposes of environmental protection and security and diversification of the energy supply. (at 79)
‘Having regard to all the foregoing, it must be considered that, in the light in particular of the objectives pursued by Directives 2001/77 and 2004/8 and the aims of the European Union in the field of the environment, and of the broad margin of discretion allowed to the Member States by those directives for the adoption and implementation of support schemes intended to promote cogeneration and electricity production from renewable energy sources, and having regard to the individual characteristics of the various categories of biomass capable of use in a cogeneration process, those categories must not be regarded in the context of such support schemes as being in a comparable situation for the purposes of the possible application of the principle of equal treatment, observance of which is ensured by European Union law.
The need to be able to treat those various categories of biomass differently and, in particular, in the light of various environmental considerations, to make choices as to the types of substances to benefit from support and to draw distinctions as regards the specific details of that support, including the amount of the support, must on the contrary be regarded as inherent in that context, without it being possible to consider, in the present state of European Union law, that by taking the view that those various categories of biomass are not in the same situation the Member States manifestly exceeded the limits of their broad discretion in the matter (see, by analogy, Luxembourg v Parliament and Council, paragraphs 50 and 51). ‘(at 80-81)
This last para is a textbook application of the principle of non-discrimination: treating different situations like, may also constitute a violation of the principle of equal treatment. Here, the difference in circumstance is entirely explained by the ECJ by recourse to the environmental qualities of different types of fuel.
As reported earlier, India’s compulsory license against Bayer, for the sale of its drug Sorafenib Tosylate (marketed as Nexavar), brought the possibilities for compulsory license under the spotlight. It also highlighted the complex web of intellectual property, and international trade law rules applicable to the case. Bayer’s application for a stay of that license, with the Intellectual Property Appellate Board was dismissed (link courtesy of SpicyIP), however the Appeal on substance is, I understand, still pending, and other possibilities for review with the courts in ordinary exist, too.
WHO, WTO and WIPO have now issued a rare joint report, in which the intersections between public health, intellectual property and trade are clarified. It does not contain a roadmap for the Indian courts to settle the case at issue, however there are quite a lot of sections in the report which one suspects might be invoked by either side in the various appeals.
Alberto Alemanno reports on some crucial developments in the development of international SPS standards. Prof Alemanno links to recent EU Agriculture Council conclusions which are a treasure trove of issues linked to the WTO’s room for domestic regulatory autonomy.
In brief, the FAO/WHO’s Codex Alimentarius Committee adopted limits for the use of ractopamine (a veterinary drug used to pimp pigs) which are more lenient than the EU’s (albeit stricter than those of the US). While the WTO Agreement on Sanitary and Phytosanitary Standards – SPS, encourages WTO Members to apply standards which conform with international standards, it also allows for recourse to the precautionary principle in the case of scientific uncertainty (Article 5.7).
The EU Ministers have decided to continue employing its own, stricter standard, and have instructed the European Commission to ensure that exporters to the EU that employ a weaker standard, set in place a parallel system for export to the EU (one which guarantees that the EU’s stricter standard is being abided by in export to the EU).
The EU’s resolve on this issue is firm. The likelihood of a challenge under the WTO Dispute Settlement very high. As Alberto points out, even in Beef Hormones, Article 5.7 was not employed. Before a WTO Panel would come to that, it would also have to assess the qualities of the relevant Codex decision as an international standard, given the slim majority with which it was adopted (which brings back memories of EC Sardines).
Risk management never fails to pop up on time for first term exam questions.